SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30,1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------------------- -----------------------------
Commission file number 001-14037
THE DUN & BRADSTREET CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3998945
- - ----------------------------------- -------------------------------------
- - ----------------------------------- -------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
One Diamond Hill Road, Murray Hill, NJ 07974
- - -------------------------------------- --------------------------------------
- - -------------------------------------- --------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 665-5000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X_ No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Title of Class Shares Outstanding
Common Stock, at June 30, 1999
par value $0.01 per share 161,009,499
<PAGE>
THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended June 30, 1999 and 1998 3
Consolidated Balance Sheets (Unaudited)
June 30, 1999 and December 31, 1998 4
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements (Unaudited) 6-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------
Amounts in millions, except per share data 1999 1998 1999 1998
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues $ 497.3 $ 484.0 $ 988.2 $ 955.1
- - ------------------------------------------------------------------ ------------- ------------ ----------- -----------
Operating Costs:
Operating Expenses 151.8 145.6 297.9 289.7
Selling and Administrative Expenses 193.8 197.0 398.6 395.2
Depreciation and Amortization 36.2 35.4 71.6 70.9
Reorganization Costs - 27.5 - 28.0
- - ------------------------------------------------------------------ ------------- ------------ ----------- -----------
Operating Costs 381.8 405.5 768.1 783.8
- - ------------------------------------------------------------------ ------------- ------------ ----------- -----------
Operating Income 115.5 78.5 220.1 171.3
- - ------------------------------------------------------------------ ------------- ------------ ----------- -----------
Non-Operating Income (Expense) - Net:
Interest Income 0.5 1.8 1.0 2.7
Interest Expense (1.2) (4.2) (2.0) (11.6)
Minority Interest Expense (5.6) (5.7) (11.2) (11.3)
Other Expense - Net (1.2) 0.3 (1.7) (0.5)
- - ------------------------------------------------------------------ ------------- ------------ ----------- -----------
Non-Operating Expense - Net (7.5) (7.8) (13.9) (20.7)
- - ------------------------------------------------------------------ ------------- ------------ ----------- -----------
Income from Continuing Operations before Provision for
Income Taxes 108.0 70.7 206.2 150.6
Provision for Income Taxes 41.6 31.1 79.4 59.5
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
Income from Continuing Operations 66.4 39.6 126.8 91.1
Income from Discontinued Operations, Net of Income
Taxes of $14.4 and $22.5 for the quarter and
year-to-date respectively in 1998 - 21.7 - 33.7
- - ----------------------------------------------------------------- ------------- ------------- ----------- ----------
Net Income $ 66.4 $ 61.3 $ 126.8 $ 124.8
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
Basic Earnings Per Share of Common Stock:
Continuing Operations $ 0.41 $ 0.23 $ 0.77 $ 0.53
Discontinued Operations - 0.13 - 0.20
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
Basic Earnings Per Share of Common Stock $ 0.41 $ 0.36 $ 0.77 $ 0.73
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
Diluted Earnings Per Share of Common Stock:
Continuing Operations $ 0.40 $ 0.23 $ 0.76 $ 0.52
Discontinued Operations - 0.12 - 0.20
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
Diluted Earnings Per Share of Common Stock $ 0.40 $ 0.35 $ 0.76 $ 0.72
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
- - ------------------------------------------------------------------ ------------- ------------ ----------- ----------
Dividends Paid Per Share of Common Stock $ 0.185 $ 0.220 $ 0.370 $ 0.440
- - ------------------------------------------------------------------ ------------- ------------ ---------- ----------
- - ------------------------------------------------------------------ ------------- ------------ ---------- ----------
Weighted Average Number of Shares Outstanding:
Basic 162.2 171.5 163.6 171.3
- - ------------------------------------------------------------------ ------------- ------------ ---------- ----------
Diluted 164.8 174.5 166.2 174.2
- - ------------------------------------------------------------------ ------------- ------------ ---------- ----------
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<CAPTION>
June 30, December 31,
Dollar amounts in millions, except per share data 1999 1998
- - ------------------------------------------------------------------------------ ----------------- ------------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 76.4 $ 90.6
Accounts Receivable---Net of Allowance of $42.0 in 1999 and $39.0 in 1998 441.4 445.2
Other Current Assets 188.0 228.2
----------------- ------------------
Total Current Assets 705.8 764.0
- - ------------------------------------------------------------------------------ ----------------- ------------------
Non-Current Assets
Property, Plant and Equipment 285.4 298.3
Prepaid Pension Costs 241.9 224.3
Computer Software 153.8 148.6
Goodwill 171.1 191.8
Other Non-Current Assets 162.0 162.2
----------------- ------------------
Total Non-Current Assets 1,014.2 1,025.2
- - ------------------------------------------------------------------------------ ----------------- ------------------
Total Assets $ 1,720.0 $ 1,789.2
- - ------------------------------------------------------------------------------ ----------------- ------------------
- - ------------------------------------------------------------------------------ ----------------- ------------------
Liabilities and Shareholders' Equity
Current Liabilities
Notes Payable $ 129.2 $ 36.9
Accrued Income Taxes 334.4 326.3
Other Accrued and Current Liabilities 414.6 529.9
Unearned Subscription Income 485.5 459.6
----------------- ------------------
Total Current Liabilities 1,363.7 1,352.7
Pension and Postretirement Benefits 374.6 372.7
Other Non-Current Liabilities 141.5 133.1
Contingencies (Note 6)
Minority Interest 302.1 301.7
Shareholders' Equity
Preferred Stock, authorized---10,000,000 shares;
$.01 par value per share--- outstanding---none
Series Common Stock, authorized---10,000,000 shares;
$.01 par value per share--- outstanding---none
Common Stock, authorized---400,000,000 shares;
$.01 par value per share---1999 and 1998, issued---171,451,136 shares 1.7 1.7
Capital Surplus 235.9 251.1
Retained Earnings (144.9) (240.9)
Treasury Stock, at cost, 10,441,637 and 6,396,924 shares
for 1999 and 1998, respectively (326.7) (168.1)
Cumulative Translation Adjustment (183.3) (170.2)
Minimum Pension Liability (44.6) (44.6)
- - ------------------------------------------------------------------------------ ----------------- ------------------
Total Shareholders' Equity (461.9) (371.0)
- - ------------------------------------------------------------------------------ ----------------- ------------------
Total Liabilities and Shareholders' Equity $ 1,720.0 $ 1,789.2
- - ------------------------------------------------------------------------------ ----------------- ------------------
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six Months
Ended
June 30,
------------------------------
Dollar amounts in millions 1999 1998
- - ---------------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 126.8 $ 124.8
Less:
Income from Discontinued Operations - 33.7
- - ---------------------------------------------------------------------------- ------------- ------------
Income from Continuing Operations 126.8 91.1
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 71.6 70.9
Postretirement Benefit Payments (7.4) (9.3)
Net (Increase) Decrease in Accounts Receivable (3.8) 23.5
Increase (Decrease) in Accrued Income Taxes 8.1 (5.8)
Net (Increase) Decrease in Other Working Capital Items (7.7) 70.1
Other 5.4 16.6
------------- ------------
Net Cash Provided by Operating Activities:
Continuing Operations 193.0 257.1
Discontinued Operations - 21.7
- - ---------------------------------------------------------------------------- ------------- ------------
Net Cash Provided by Operating Activities 193.0 278.8
- - ---------------------------------------------------------------------------- ------------- ------------
Cash Flows from Investing Activities:
Proceeds from Sales of Marketable Securities 13.5 21.6
Payments for Marketable Securities (13.6) (21.0)
Capital Expenditures (21.5) (23.5)
Additions to Computer Software and Other Intangibles (42.7) (38.0)
Net Cash Used in Investing Activities of Discontinued Operations - (3.1)
Other 4.9 (13.3)
- - ---------------------------------------------------------------------------- ------------- ------------
Net Cash Used in Investing Activities (59.4) (77.3)
- - ---------------------------------------------------------------------------- ------------- ------------
Cash Flows from Financing Activities:
Payment of Dividends (60.5) (75.5)
Payments for Purchase of Treasury Shares (215.6) (27.9)
Net Proceeds from Stock Plans 36.8 18.7
Increase (Decrease) in Commercial Paper Borrowings 92.8 (421.6)
Decrease in Other Short-term Borrowings (1.0) (29.1)
Proceeds from Debt Assumed by R.H. Donnelley - 500.0
Other 0.6 0.4
- - ---------------------------------------------------------------------------- ------------- ------------
Net Cash Used in Financing Activities (146.9) (35.0)
- - ---------------------------------------------------------------------------- ------------- ------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (0.9) (0.4)
- - ---------------------------------------------------------------------------- ------------- ------------
(Decrease) Increase in Cash and Cash Equivalents (14.2) 166.1
Cash and Cash Equivalents, Beginning of Year 90.6 81.8
- - ---------------------------------------------------------------------------- ------------- ------------
Cash and Cash Equivalents, End of Quarter $ 76.4 $ 247.9
- - ---------------------------------------------------------------------------- ------------- ------------
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
THE DUN & BRADSTREET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and should be read in conjunction with the
consolidated financial statements and related notes of The Dun & Bradstreet
Corporation's (the "Company") 1998 Annual Report on Form 10-K. The consolidated
results for interim periods are not necessarily indicative of results for the
full year or any subsequent period. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of financial position, results of operations and cash flows at
the dates and for the periods presented have been included. Certain prior-year
amounts have been reclassified to conform to the 1999 presentation.
Note 2 - Reorganization and Discontinued Operations
On June 30, 1998, The Dun & Bradstreet Corporation ("Old D&B") separated into
two publicly traded companies - The New Dun & Bradstreet Corporation ("New D&B"
or the "Company") and R.H. Donnelley Corporation. The separation (the
"Distribution") of the two companies was accomplished through a tax-free
dividend by Old D&B of the Company, which is a new entity comprised of Moody's
Investors Service ("Moody's") and Dun & Bradstreet, the operating company
("D&B"). The new entity is now known as "The Dun & Bradstreet Corporation" and
the continuing entity (i.e., Old D&B), consisting of R.H. Donnelley Inc., the
operating company, and the DonTech partnership, changed its name to "R.H.
Donnelley Corporation" ("Donnelley"). Due to the relative significance of the
new entity, the transaction has been accounted for as a reverse spin-off, and as
such Moody's and D&B have been classified as continuing operations and Donnelley
and DonTech have been classified as discontinued operations. The Distribution
was effected on June 30, 1998 and resulted in an increase to shareholders'
equity of $183.5 million.
For purposes of governing certain of the ongoing relationships between the
Company and Donnelley following the 1998 Distribution, the companies entered
into various agreements, including a Distribution Agreement, Tax Allocation
Agreement, Employee Benefits Agreement, Intellectual Property Agreement, Shared
Transaction Services Agreement, Data Services Agreement and Transition Services
Agreements.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
net operating results of Donnelley have been reported in the caption "Income
from Discontinued Operations, Net of Income Taxes" in the consolidated
statements of operations. For the quarter and six months ended June 30, 1998,
operating revenues of Donnelley were $66.3 million and $107.8 million,
respectively.
<PAGE>
Note 3 - Reconciliation of Weighted Average Shares
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(share data in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares-basic 162,150 171,470 163,627 171,313
Dilutive effect of shares issuable under stock options,
restricted stock and performance share plans 2,551 2,855 2,294 2,693
Adjustment of shares applicable to stock options exercised
during the period and performance share plans 121 153 265 180
--- --- --- ---
Weighted average number of shares-diluted 164,822 174,478 166,186 174,186
======= ======= ======= =======
<FN>
As required by Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share," the Company has provided a reconciliation of basic
weighted average shares to diluted weighted average shares within the tables
outlined above. The conversion of diluted shares has no impact on the Company's
operating results. Options to purchase approximately 100,000 and 50,000 shares
of common stock which were outstanding at June 30, 1999 and 1998, respectively
were not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price of the
Company's common stock. The Company's options generally expire 10 years after
the initial grant date.
</FN>
</TABLE>
Note 4 - Comprehensive Income
The Company's total comprehensive income for the three and six month periods
ended June 30 was as follows (Amounts in millions)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $66.4 $61.3 $126.8 $124.8
Other comprehensive loss - foreign currency
translation adjustment (14.9) (2.3) (13.1) (6.8)
------ ----- ------ -----
Total comprehensive income $51.5 $59.0 $113.7 $118.0
===== ===== ====== ======
</TABLE>
Note 5 - Notes Payable
In June 1999, the Company renewed its $300 million 364-day revolving credit
facility. Under this facility the Company has the ability to borrow at
prevailing short-term interest rates. The Company has had no borrowings
outstanding under this facility since it was established in June 1998.
<PAGE>
Note 6- Contingencies
The Company and its subsidiaries are involved in legal proceedings, claims,
litigation and tax matters, arising in the ordinary course of business. In the
opinion of management, the outcome of such current legal proceedings, claims,
litigation and tax matters could have a material effect on quarterly or annual
operating results or cash flows when resolved in a future period. However, in
the opinion of management these matters will not materially affect the Company's
financial position.
In addition, the Company also has certain other contingencies discussed below.
Information Resources
On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the
United States District Court for the Southern District of New York, naming as
defendants Old D&B, A.C. Nielsen Company (a subsidiary of ACNielsen Corporation,
("ACNielsen")) and IMS International, Inc. (a subsidiary of the company then
known as Cognizant Corporation).
The complaint alleges various violations of United States antitrust laws,
including alleged violations of Section 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement.
On October 15, 1996, defendants moved for an order dismissing all claims in the
complaint. On May 6, 1997, the United States District Court for the Southern
District of New York issued a decision dismissing IRI's claim of attempted
monopolization in the United States, with leave to replead within sixty days.
The Court denied defendants' motion with respect to the remaining claims in the
complaint. On June 3, 1997, defendants filed an answer denying the material
allegations in IRI's complaint, and A.C. Nielsen Company filed a counterclaim
alleging that IRI had made false and misleading statements about its services
and commercial activities. On July 7, 1997, IRI filed an Amended and Restated
Complaint repleading its alleged claim of monopolization in the United States
and realleging its other claims. By notice of motion dated August 18, 1997,
defendants moved for an order dismissing the amended claim. On December 1, 1997,
the Court denied the motion and, on December 16, 1997, defendants filed a
supplemental answer denying the remaining material allegations of the amended
complaint.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
asked to be trebled under antitrust laws. IRI also seeks punitive damages in an
unspecified amount.
In connection with the IRI action, on October 28, 1996, Cognizant Corporation
("Cognizant"), ACNielsen and Old D&B entered into an Indemnity and Joint Defense
Agreement (the "Indemnity and Joint Defense Agreement") pursuant to which they
have agreed (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of such action. In particular, the Indemnity and
Joint Defense Agreement provides that ACNielsen will assume exclusive liability
for IRI Liabilities up to a maximum amount to be calculated at such time such
liabilities, if any, become payable (the "ACN Maximum Amount"), and that Old D&B
and Cognizant will share liability equally for any amounts in excess of the ACN
Maximum Amount. The ACN Maximum Amount will be determined by an investment
banking firm as the maximum amount which ACNielsen is able to pay after giving
effect to (i) any plan submitted by such investment bank which is designed to
maximize the claims paying ability of ACNielsen without impairing the investment
banking firm's ability to deliver a viability opinion (but which will not
require any action requiring stockholder approval), and (ii) payment of related
fees and expenses. For these purposes, financial viability means the ability of
ACNielsen, after giving effect to such plan, the payment of related fees and
expenses, and the payment of the ACN Maximum Amount, to pay its debts as they
become due and to finance the current and anticipated operating and capital
requirements of its business, as reconstituted by such plan, for two years from
the date any such plan is expected to be implemented.
In connection with the Distribution, the Company and Donnelley entered into an
agreement whereby the Company has assumed all potential liabilities of Donnelley
arising from the IRI Action and agreed to indemnify Donnelley in connection with
such potential liabilities.
During 1998, Cognizant separated into two new companies, IMS Health Incorporated
("IMS") and Nielsen Media Research, Inc. ("NMR"). IMS and NMR are each jointly
and severally liable for all Cognizant liabilities under the Indemnity and Joint
Defense Agreement.
Management is unable to predict at this time the final outcome of the IRI Action
or whether the resolution of this matter could materially affect the Company's
results of operations, cash flows or financial position.
Tax Matters
The Company enters into global tax planning initiatives in the normal course of
business. These initiatives are subject to review by tax authorities. As a
result of the review process, uncertainties exist and it is possible that some
of these matters could be resolved unfavorably to the Company.
The Internal Revenue Service ("IRS"), as part of its audit process, is currently
reviewing the Company's utilization of certain capital losses generated during
1989 and 1990. While the Company has not received a formal assessment with
respect to these transactions, the Company expects that the IRS will challenge
the Company's utilization of certain capital losses. At the present time, if
assessed, the Company intends to defend its position vigorously. If an
assessment is made and the IRS prevails in its view, the total cash obligation
to the IRS at June 30, 1999 would approximate $525 million for taxes and accrued
interest. Pursuant to a series of agreements, IMS and NMR are jointly and
severally liable to pay one-half and the Company the other half, of any payments
for taxes and accrued interest arising from this matter and certain other
potential tax liabilities after the Company pays the first $137 million.
In connection with the 1998 Distribution, the Company and Donnelley entered into
an agreement whereby the Company has assumed all potential liabilities of
Donnelley from these tax matters and agreed to indemnify Donnelley in connection
with such potential liabilities.
As of June 30, 1999, the Company has accrued its anticipated share of the
probable liability (approximately $330 million, including $170 million of
tax-deductible interest) arising from the Company's utilization of these capital
losses in 1989 and 1990. Therefore, the final resolution of this matter is not
expected to have a material effect on the results of operations, but could have
a material effect on cash flows and financial position.
<PAGE>
<TABLE>
Note 7 - Segment Information
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
Amounts in millions 1999 1998 1999 1998
- - ------------------------------------------------------------- ------------- ------------- ------------- -------------
Operating Revenues:
<S> <C> <C> <C> <C>
Dun & Bradstreet U.S. $ 219.6 $ 213.0 $ 454.6 $ 438.5
Dun & Bradstreet Europe 105.7 106.6 204.5 199.0
Dun & Bradstreet Asia Pacific/Canada/Latin America 24.5 23.4 44.7 43.5
------------- ------------- ------------- -------------
Total Dun & Bradstreet Operating Company 349.8 343.0 703.8 681.0
Moody's Investors Service 147.5 133.1 284.4 256.4
All Other (1) - 7.9 - 17.7
------------- ------------- ------------- -------------
Consolidated Operating Revenues $ 497.3 $ 484.0 $ 988.2 $ 955.1
------------- ------------- ------------- -------------
Operating Income (Loss):
Dun & Bradstreet U.S. $ 55.7 $ 52.7 $ 127.6 $ 122.6
Dun & Bradstreet Europe (2.6) (2.8) (17.7) (18.0)
Dun & Bradstreet Asia Pacific/Canada/Latin America (2.0) (1.0) (5.8) (6.1)
------------- ------------- ------------- -------------
Total Dun & Bradstreet Operating Company 51.1 48.9 104.1 98.5
Moody's Investors Service 72.8 62.3 136.5 118.1
All Other (1) (8.4) (32.7) (20.5) (45.3)
------------- ------------- ------------- -------------
Consolidated Operating Income $ 115.5 $ 78.5 $ 220.1 $ 171.3
------------- ------------- ------------- -------------
Notes:
(1) The tables below itemize the "All Other" for Operating Revenue and
Operating Income (Loss):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
Operating Revenues 1999 1998 1999 1998
-------------------------------------------------------- ------------- ------------- ------------- -------------
Divested Operations - Financial Information Services $ - $ 7.6 $ - $ 16.8
Other Revenues - 0.3 - 0.9
------------- ------------- ------------- -------------
Total Revenues $ - $ 7.9 $ - $ 17.7
------------- ------------- ------------- -------------
Operating Income (Loss)
Divested Operations - Financial Information Services $ - $ 1.1 $ - $ 3.9
Corporate and Other (8.4) (6.3) (20.5) (21.2)
Reorganization Costs - (27.5) - (28.0)
------------- ------------- ------------- -------------
Total Operating Loss $ (8.4) $ (32.7) $ (20.5) $ (45.3)
------------- ------------- ------------- -------------
Supplemental Geographic and Product Line Information:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
Geographic Revenue 1999 1998 1999 1998
-------------------------------------------------------- ------------- ------------- ------------- -------------
United States $ 330.0 $ 324.3 $ 674.3 $ 661.9
International 167.3 159.7 313.9 293.2
------------- ------------- ------------- -------------
Consolidated Operating Revenues $ 497.3 $ 484.0 $ 988.2 $ 955.1
------------- ------------- ------------- -------------
Product Line Revenues 1999 1998 1999 1998
-------------------------------------------------------- ------------- ------------- ------------- -------------
Credit Information Services $ 239.3 $ 244.2 $ 479.4 $ 486.7
Marketing Information Services 67.7 61.1 143.0 122.3
Purchasing Information Services 7.2 5.3 11.5 9.4
Receivables Management Services 35.6 32.4 69.9 62.6
------------- ------------- ------------- -------------
Total Dun & Bradstreet Operating Company $ 349.8 $ 343.0 $ 703.8 $ 681.0
------------- ------------- ------------- -------------
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
On June 30, 1998, The Dun & Bradstreet Corporation ("Old D&B") separated into
two publicly traded companies - The New Dun & Bradstreet Corporation ("New D&B"
or the "Company") and R.H. Donnelley Corporation. The separation (the
"Distribution") of the two companies was accomplished through a tax-free
dividend by Old D&B of the Company, which is a new entity comprised of Moody's
Investors Service ("Moody's") and Dun & Bradstreet, the operating company
("D&B"). The new entity is now known as "The Dun & Bradstreet Corporation" and
the continuing entity (i.e., Old D&B), consisting of R.H. Donnelley Inc., the
operating company, and the DonTech partnership, changed its name to "R.H.
Donnelley Corporation" ("Donnelley"). Due to the relative significance of the
new entity, the transaction has been accounted for as a reverse spin-off, and as
such Moody's and D&B have been classified as continuing operations and Donnelley
and DonTech have been classified as discontinued operations. The Distribution
was effected on June 30, 1998 and resulted in an increase to shareholders'
equity of $183.5 million.
For purposes of governing certain of the ongoing relationships between the
Company and Donnelley following the Distribution, the companies entered into
various agreements, including a Distribution Agreement, Tax Allocation
Agreement, Employee Benefits Agreement, Intellectual Property Agreement, Shared
Transaction Services Agreement, Data Services Agreement and Transition Services
Agreements.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of the Company have been reclassified to
reflect Donnelley as discontinued operations. The net operating results of
Donnelley have been reported in the caption "Income from Discontinued
Operations, Net of Income Taxes" in the consolidated statements of operations.
Results of Operations
Consolidated Results
The Company's second quarter 1999 net income was $66.4 million and earnings per
share were $.41 basic and $.40 diluted. This compared to second quarter 1998
income from continuing operations of $39.6 million and earnings per share from
continuing operations of $.23, basic and diluted. The Company's second quarter
1998 income from continuing operations included $27.5 million pre-tax ($22.7
million after-tax) of reorganization costs incurred during the quarter in
connection with the separation of Donnelley. Excluding the reorganization costs,
income from continuing operations increased 7% and both basic and diluted
earnings per share from continuing operations increased 11% in the second
quarter of 1999 compared to the same period in 1998. Earnings per share growth
in 1999 was benefited by the completion in the second quarter of 1999 of the
Company's $300 million stock repurchase program (see more discussion following.)
Second quarter 1998 net income of $61.3 million included income from
discontinued operations of $21.7 million. Second quarter 1998 earnings per share
of $.36 basic and $.35 diluted included earnings per share from discontinued
operations of $.13 basic and $.12 diluted.
Through the first half of 1999, the Company reported net income of $126.8
million, or $.77 per share basic and $.76 per share diluted. This compares with
a 1998 first half income from continuing operations of $91.1 million and
earnings per share from continuing operations of $.53 basic and $.52 diluted. As
noted above, 1998 first half results included reorganization costs of $28.0
million pre-tax ($23.2 million after-tax) associated with the separation from
Donnelley. Excluding the reorganization costs, income from continuing operations
increased 11% and basic and diluted earnings per share from continuing
operations increased 15% during the first half of 1999 from the first half of
1998. First half 1998 results include income from discontinued operations of
$33.7 million. 1998 first half earnings per share of $.73 basic and $.72 diluted
include earning per share from discontinued operations of $.20 basic and
diluted.
Operating revenues for the second quarter were up 3% to $497.3 million in 1999
from $484.0 million in the second quarter of 1998. Excluding the second quarter
1998 results of Financial Information Services ("FIS") (the financial publishing
unit of Moody's Investors Service ("Moody's") which was sold in July 1998) and
the impact of foreign currency translation, revenue growth would have increased
5%. Revenue growth reflects continued strong growth at Moody's and modest growth
at the D&B operating company. The lower than expected growth at the D&B
operating company resulted from lower usage of traditional credit services
products and slower than expected growth in value-added products. On a
year-to-date basis, operating revenues of $988.2 million in 1999 were up 3% from
the same period in the prior year. Excluding the results of FIS in the first
half of 1998 and the impact of foreign currency translation, operating revenues
increased 5% in 1999 compared to 1998, again fueled by strong growth at Moody's.
Operating expenses increased 4% to $151.8 million in the second quarter of 1999
compared to the same period in 1998. This increase is attributable to revenue
growth and the Company's investment in value-added products and partnerships
with providers of enterprise software solutions, partially offset by expense
control initiative worldwide. Selling and administrative expenses decreased 2%
to $193.8 million in the second quarter of 1999 compared to the same period in
1998, resulting from the Company's expense control initiatives worldwide. For
the first half of 1999, operating expenses increased 3% to $297.9 million and
selling and administrative expenses increased 1% to $398.6 million from the same
period in 1998. Also included in operating costs in 1998 were $27.5 million in
the second quarter and $28.0 million in the first half of reorganization costs
associated with the separation from Donnelley.
Operating income for the second quarter of 1999 was $115.5 million, up 47%
compared to $78.5 million during the second quarter of 1998. However, excluding
reorganization costs of $27.5 million related to the separation of Donnelley and
the operating results of FIS, operating income for the second quarter of 1999
grew 10% compared to the same period in 1998. This growth reflects the strong
revenue results for Moody's and the impact of expense control initiatives
worldwide. On a year to date basis, operating income grew 28% to $220.1 million
in 1999. Excluding the reorganization costs and results of FIS, operating income
grew 13% in the first half of 1999 compared to the same period in 1998.
Non-operating expense-net was $7.5 million for the second quarter of 1999
compared to $7.8 million in the second quarter of 1998. On a year-to-date basis,
non-operating expense-net was $13.9 million in the first half of 1999, compared
to $20.7 million from the first half of 1998. This significant decrease was a
result of sharply lower interest expense, driven by lower debt levels in 1999
compared to 1998 (see further discussion in the Liquidity and Financial Position
section.)
The Company's effective tax rate for the second quarter of 1999 was 38.5%
compared to 44% in the second quarter of 1998. The second quarter of 1998 rate
reflects an underlying tax rate of 36.7% and the non-deductibility of certain
reorganization costs. On a year to date basis the effective tax rate was 38.5%
for the first half of 1999 compared to 39.5% for the first half of 1998, which
was higher than the underlying rate as a result of the non-deductibility of
certain reorganization costs.
Income from discontinued operations, net of income taxes, was $21.7 million and
$33.7 million for the second quarter and year-to-date periods, respectively, of
1998.
Segment Results
D&B U.S. revenues were $219.6 million in the second quarter of 1999, up 3% from
1998 second quarter revenues. In comparing the second quarter of 1999 revenues
with the second quarter of 1998 revenues, Credit Information Services ("Credit")
decreased 3% to $145.3 million, Marketing Information Services ("Marketing")
increased 17% to $48.7 million, Purchasing Information Services ("Purchasing")
increased 22% to $6.5 million and Receivables Management Services ("RMS")
increased 21% to $19.1 million. The decline in U.S. Credit revenues resulted
from a number of factors including a focus on new products (versus traditional
credit products) by the sales force, the continued softness in the Asian, Latin
American and certain European economies which impacted cross border sales of
credit services and lower than expected performance in the small customer
segment. The growth rates in Marketing, Purchasing and RMS are largely
attributable to the growth in revenues from value-added products and
partnerships with providers of enterprise software solutions. For the first half
of 1999, D&B U.S. revenues of $454.6 million were up 4% from the same period in
the prior year. Revenues on a year-to-date basis decreased 3% for Credit to
$299.9 million and increased 20% to $106.2 million for Marketing, 15% to
$10.8 million for Purchasing and 20% to $37.7 million for RMS in comparison with
the first half of the prior year. Credit revenues for the first half of 1999
were negatively impacted by the factors noted above.
D&B U.S. operating income was $55.7 million in the second quarter of 1999, up 6%
from the prior year, driven by the modest increase in revenues and the impact of
expense control initiatives. For the first half of 1999, operating income was
$127.6 million, up 4% from 1998 first half-operating income of $122.6 million.
D&B Europe's revenues were $105.7 million in the second quarter of 1999, down 1%
when compared to 1998 second quarter revenues of $106.6 million. D&B Europe's
revenue growth was impacted by unfavorable movements in foreign exchange rates
which offset the positive impact of two acquisitions made during the second half
of 1998. In comparing the second quarter of 1999 with the second quarter of
1998, European Credit revenues decreased 3% to $77.3 million, while Marketing
revenues increased 3% to $15.4 million and RMS revenues increased 2% to $12.3
million. D&B Europe also reported revenues from Purchasing of $.7 million during
the second quarter of 1999. The decline in European Credit revenues resulted
from ongoing price competition in the local credit markets and sporadic
service interruptions in customer access systems that are being remedied
by the installation of more sophisticated monitoring tools and migration to new
vendors. Marketing revenue growth was negatively impacted by a one-time shift in
1998 of certain revenues from the first to the second quarter. For the first
half of 1999, operating revenues increased 3% to $204.5 million from the first
half of 1998. In comparing the first half of 1999 with the same period in 1998,
European Credit revenues decreased 1% to $148.8 million, as a consequence
of the previously noted factors, while Marketing revenues increased 19% to
$30.7 million, Purchasing revenues increased 100% to $.7 million and RMS
revenues increased 7% to $24.3 million.
D&B Europe reported an operating loss of $2.6 million in the second quarter of
1999, compared to a loss of $2.8 million in the same period of the prior year.
On a year-to-date basis, D&B Europe reported an operating loss of $17.7 million
in the first half of 1999 compared to $18.0 million in 1998, reflecting the
favorable impact of cost control initiatives implemented during 1999 partially
offset by initiatives to support and accelerate the focus on value-added
products and enterprise software solutions and the continued investments in new
technology and systems in Europe.
D&B APCLA reported operating revenues of $24.5 million in the second quarter of
1999, up 5% from the same period in 1998. Favorable movements in foreign
exchange rates positively impacted D&B APCLA revenue growth. Excluding foreign
exchange, revenue growth would have been up 3%. In comparing the second quarter
of 1999 with the second quarter of 1998, APCLA Credit revenues increased 17% to
$16.7 million, Marketing revenues decreased 22% to $3.6 million and RMS revenues
decreased 6% to $4.2 million. For the first half of the year, D&B APCLA reported
operating revenues of $44.7 million in 1999, up 3% when compared to $43.5
million in 1998. In comparing the first half of 1999 with the same period in
1998, Credit revenues increased 12% to $30.7 million, while Marketing revenues
decreased 20% to $6.1 million and RMS revenues decreased 5% to $7.9 million.
D&B APCLA reported an operating loss of $2.0 million in the second quarter of
1999, compared to an operating loss of $1.0 million in the same period of 1998,
primarily as a result of the timing of expenses. For the first half of the year,
D&B APCLA reported an operating loss of $5.8 million in 1999, compared to $6.1
million in 1998.
Moody's revenues (excluding the second quarter 1998 results of FIS) of $147.5
million in the second quarter of 1999 were up 11% from the second quarter of
1998, driven by strong European and structured finance issuances. Overall
issuance remained ahead of second quarter 1998 levels, despite declines in the
high yield and public finance markets. Also contributing to the strong results
was growth in one of Moody's new products, syndicated bank loan ratings and
growth in its credit research and risk management products. On a year-to-date
basis, Moody's revenues of $284.4 million for the first half of 1999 were up 11%
from the same period in the prior year (excluding 1998 FIS results), with year
to date issuance and ratings activity in line with that of the second quarter.
Moody's operating income of $72.8 million in the second quarter of 1999 was up
17% from second quarter 1998, reflecting strong revenue growth. For the first
half of 1999, Moody's operating income was $136.5 million, up 16% from the same
period in 1998.
Adoption of Statements of Financial Accounting Standards ("SFAS")
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet and measurement
of those instruments at fair value. If certain conditions are met, a derivative
may be designated specifically as: (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm commitment
(a fair value hedge); (b) a hedge of the exposure to variable cash flows of a
forecasted transaction (a cash flow hedge); or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The Company currently
hedges foreign-currency-denominated transactions and will comply with the
requirements of SFAS No. 133 when adopted. In June, the Financial Accounting
Standards Board issued SFAS 137 delaying the effective date of SFAS 133. The
provisions of SFAS No. 133 are effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The Company expects to adopt SFAS No. 133
beginning January 1, 2001. The effect of adopting SFAS No. 133 is not expected
to be material.
Liquidity and Financial Position
At June 30, 1999, cash and cash equivalents totaled $76.4 million, a decrease of
$14.2 million from $90.6 million held at December 31, 1998. During the first
half of 1999, the Company's share repurchase program and the increase in
commercial paper borrowings needed to support the repurchase program impacted
cash flows. During the first half of 1998, cash and cash equivalents increased
by $166.1 million, largely attributable to the assumption of $500 million of
debt by Donnelley in connection with the separation (see further details below)
offset by the paydown of short-term borrowings outstanding at the time of the
Distribution of $287.1 million. Also during the first half of 1998, a tax refund
received and the cash generated by discontinued operations impacted cash flows.
Operating activities generated net cash of $193.0 million during the first half
of 1999 compared to $257.1 million from continuing operations in 1998. Cash flow
from operations in the first half of 1999 was impacted by the increase in
accounts receivable which resulted from higher contract sales during the first
half of 1999 in comparison to the same period in the prior year. Additionally,
in the first half of 1998, tax refunds received positively impacted cash
flow from operations as reflected by the large decrease in Other Working Capital
Items in 1998.
Net cash used in investing activities was $59.4 million for the first half of
1999 compared to $77.3 million in 1998. In the first half of 1999 the Company
invested $64.2 million for capital expenditures and additions to computer
software and other intangibles compared to $61.5 million in the comparable
period in 1998. During the first half of 1998, discontinued operations used $3.1
million for investing activities.
Net cash used in financing activities was $146.9 million during the first half
of 1999 compared to $35.0 million in the first half of 1998. Payments of
dividends accounted for $60.5 million in the first half of 1999 compared to
$75.5 million in the first half of 1998.
During the first half of 1999, the Company completed its special stock
repurchase program, authorized by its Board of Directors in June 1998, by
purchasing 4.2 million shares for $150.0 million. During the first half of 1999,
the Company also repurchased 1.8 million shares for $65.6 million in connection
with the Company's Employee Stock Purchase Plan and to offset awards made under
incentive plans. Shares issued for company stock plans totaled 2.0 million
shares during the first half of 1999. Proceeds received in connection with the
Company's stock plans were $36.8 million for the first half of 1999 compared to
$18.7 million in 1998.
In June 1999, the Company renewed its $300 million 364-day revolving credit
facility. Under this facility the Company has the ability to borrow at
prevailing short-term interest rates. The Company has had no borrowings
outstanding under this facility since it was established in June 1998. During
the first half of 1999, the Company increased its net commercial paper
borrowings by $92.8 million in order to support its share repurchase program,
discussed below. At June 30, 1999, the Company had $128.7 million of commercial
paper borrowings outstanding.
In connection with the 1998 Distribution, during June 1998, R.H. Donnelley Inc.
borrowed $500 million under two facilities. The proceeds of these borrowings
were used to repay existing indebtedness of Old D&B in the amount of $287.1
million at the time of the Distribution; the Company used the excess for general
corporate purposes, including the payment of reorganization costs. Prior to the
Distribution, during the first half of 1998 the Company had reduced short-term
borrowings by $163.6 million. The $500 million of debt became an obligation of
Donnelley upon the Distribution.
The Internal Revenue Service (IRS) is continuing its review of the utilization
of certain capital losses during 1989 and 1990 and the Company expects that the
IRS will challenge the Company's treatment of certain of these losses. If an
assessment is made and should the IRS prevail, the total cash obligation to the
IRS would approximate $525 million for taxes and accrued interest as of June 30,
1999. Pursuant to a series of agreements, IMS and NMR are jointly and severally
liable to pay one-half, and the Company the other half, of any payments for
taxes and accrued interest arising from this matter and certain other potential
tax liabilities after the Company pays the first $137 million. If assessed, the
Company will consider available alternatives to vigorously defend its position.
Certain alternatives would require making a payment to the IRS for its share of
the taxes and accrued interest (approximately $330 million, of which $170
million represents tax-deductible interest), which would be repaid to the
Company if it prevails in its position. The funds that would be needed to make
the Company's share of such payment are expected to come from external
borrowings.
Year 2000
General
The Company relies on computer hardware, software and related information
technology ("IT Systems"). IT Systems are used in the creation and delivery of
the Company's products and services, and are also used in the Company's internal
operations, such as billing and accounting. IT Systems include systems that use
information provided by third-party data suppliers to update the Company's
databases. The Company also relies on other systems, such as elevators, and on
utilities, such as telecommunications and power, to operate ("Non-IT Systems").
The Company has recognized the potential impact of the year 2000 on its business
since 1996, when it began actively addressing the information-technology-related
components of the Year 2000 issue in its European and U.S. operations. In 1997,
the Company created a Corporate Year 2000 Program Office to manage overall risks
and to facilitate activities across the Company. The Corporate Year 2000 Program
Office reports directly to the Company's Year 2000 Executive Committee
(comprised of the Company's Chief Executive Officer, Chief Financial Officer,
Chief Technology Officer and Chief Legal Counsel), which sets overall priorities
and monitors progress. Since 1997, each operating unit has had business and
technology executives and project teams in place to plan and carry out all Year
2000 efforts within their units. The Company has used the services of outside
consultants and subject-area specialists working with the Corporate Year 2000
Program Office to assess the progress of its Year 2000 program.
The most important areas of focus of the Company's Year 2000 program are the
Company's products and services (including its databases, software that
manipulates these databases and software provided to customers); billing,
ordering and tracking systems; technical infrastructure (such as LANs, WANs,
voice and e-mail systems and web sites); desktop computers; suppliers; business
operation support systems (such as payroll); facilities and equipment; and
contingency planning.
State of Readiness
The Company has focused its efforts on becoming "Year 2000 Ready." The Company
defines this term to mean that a process will continue to run in the same manner
when dealing with dates on or after January 1, 2000, as it did before January 1,
2000.
With respect to IT Systems, the Company's Year 2000 program includes the
following phases: Inventory, Assessment, Remediation, Year 2000 Ready Testing
and Transaction-based testing.
Year 2000 Ready Testing involves two major tests. A "system test" checks the
system's functions in a Year 2000 test environment that uses simulated or
forward-dated system clocks and a variety of other simulated forward-dated data
or systems interfaces as required. A "production integration" test confirms that
the system will continue to perform its current-date processes when put into
production. Transaction-Based Testing further tests the Company's most critical
work flows at regional and global levels.
Early in its Year 2000 program, the Company categorized its IT Systems in terms
of criticality to allow the work to be phased consistent with its importance to
the Company. Criticality 1 systems are defined as those systems that are most
critical to the Company's business and revenue. Criticality 2 systems are
defined as those systems that are very important to the Company and would have a
severe impact on business and revenue if not made Year 2000 Ready. Criticality 3
systems are not essential but would have some impact on business and revenue if
not made Year 2000 Ready. Criticality 4 systems have little or no impact on
business and revenue and are scheduled to be decommissioned prior to the year
2000.
As of June 30, 1999, substantially all of the Company's more than 2000
Criticality 1 and Criticality 2 systems were Year 2000 Ready. Transaction-Based
Testing of the Company's most critical work flows has been completed at global
and regional levels. Further testing will continue throughout the remainder of
1999.
Remediation of the Company's Criticality 3 systems is progressing according to
schedule and is expected to be substantially complete by September 30, 1999.
Decommissioning of Criticality 4 IT Systems is well under way and will continue
through 1999. In order to maintain the integrity of the Company's Year 2000
Ready systems, a system change freeze will begin in late September of 1999. A
process has been designed to allow for exceptions to the freeze.
The Company has addressed Year 2000 Readiness issues regarding its Non-IT
Systems.
All of the Company's material suppliers have been identified and assessed, and
proactive corrective actions have been taken, where necessary. Where suppliers
were assessed to be sufficiently Year 2000 Ready, appropriate contact
information has been gathered for contingency planning purposes. Where the
assessment raised concerns about a supplier's Year 2000 program, the Company has
switched to an alternate supplier or product. Where a supplier was assessed to
have some issues but with whom it is most prudent for the Company to continue
its relationship, the Company has created contingency plans to deal with
potential issues.
Costs
External and internal costs associated with modifying software for Year 2000
Readiness are expensed as incurred and are funded through operating cash flow.
It is currently estimated that the aggregate cost of the Company's Year 2000
program will be approximately $80 million. Through June 30, 1999, the Company
had incurred approximately $68 million ($11 million in 1997, $43 million in
1998 and $14 million in the first half of 1999) and expects to incur
approximately $9 million in the second half of 1999 and $3 million in 2000.
These estimates do not include the costs of software and systems that are being
replaced or upgraded in the normal course of business.
Risks and Contingency Plans
The Company believes that it will substantially complete the implementation of
its Year 2000 program prior to the commencement of the year 2000. If the Company
does not complete its Year 2000 program prior to the commencement of the year
2000, if it fails to identify and remediate all critical Year 2000 problems, or
if suppliers or customers which are individually or in the aggregate material to
the Company experience Year 2000 issues, or are diverted from making purchases
while dealing with their Year 2000 issues, the Company's results of operations
or financial condition could be materially affected.
The Company's global contingency plan, addressing the most likely remaining
impacts on the Company from external risks, was completed as scheduled on June
30, 1999. The plan provides detailed guidelines for the Company's operations
worldwide regarding the planned backup, testing and re-starting of the Company's
systems throughout the millennium weekend. In addition, the plan details
procedures for addressing problems should they arise.
In addition to supplier-related activities, contingency plans have been
developed for facilities and equipment, telecommunications infrastructure,
product development and fulfillment, internal administrative processes, human
resources, communications and employee benefits.
New European Currency
On January 1, 1999, eleven of the countries in the European Union began a
three-year transition to a single European currency ("euro") to replace the
national currency of each participating country. The Company intends to phase in
the transition to the euro over the next three years. The Company has
established a task force to address issues related to the euro. The Company
believes that the euro conversion may have a material impact on its operations
and financial condition if it fails to successfully address such issues. The
task force has prepared a project plan and is proceeding with the implementation
of that plan. The Company's project plan includes the following: ensuring that
the Company's information technology systems that process data for inclusion in
the Company's products and services can appropriately handle amounts denominated
in euro contained in data provided to the Company by third-party data suppliers;
modification of the Company's products and services to deal with euro-related
issues; and modification of the Company's internal systems (such as payroll,
accounting and financial reporting) to deal with euro-related issues. The
Company does not believe that the cost of such modifications will have a
material effect on the Company's results of operations or financial condition.
There is no guarantee that all problems will be foreseen and corrected, or that
no material disruption of the Company's business will occur. The conversion to
the euro may have competitive implications for the Company's pricing and
marketing strategies, which could be material in nature; however, any such
impact is not known at this time.
Dividends
On July 20, 1999, the Board of Directors approved a third quarter 1999 dividend
of $.185 per share, payable September 10, 1999 to shareholders of record at the
close of business August 20, 1999.
Forward-Looking Statements
Certain statements in Management's Discussion and Analysis of Financial
Condition and Results of Operations are forward looking. These may be identified
by the use of forward-looking words or phrases, such as "believe," "expect,"
"anticipate," "should," "planned," "estimated," "potential," "target" and
"goal," among others. All such forward-looking statements are based on the
Company's reasonable expectations at the time they are made. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for such
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in such forward-looking statements. The risks
and uncertainties that may affect the operations, performance, development and
results of the Company's businesses include: (1) complexity and uncertainty
regarding the development of new high-technology products; (2) possible loss of
market share through competition; (3) introduction of competing products or
technologies by other companies; (4) pricing pressures from competitors and/or
customers; (5) changes in the business information and risk management
industries and markets; (6) the Company's ability to protect proprietary
information and technology or to obtain necessary licenses on commercially
reasonable terms; (7) the Company's ability to complete the implementation of
its Year 2000 and euro plans on a timely basis; (8) a reduction in demand for
the Company's products and services resulting from its customers' Year 2000
issues; (9) the possible loss of key employees to investment or commercial
banks, or elsewhere; (10) fluctuations in foreign currency exchange rates; (11)
changes in the interest-rate environment; and (12) the outcome of the IRS's
review of the Company's utilization of capital losses described above under
"Liquidity and Financial Position" and the associated cash flow implications.
The risks and uncertainties that may affect the Company's assessment of Year
2000 issues and new European currency issues include: (1) the complexity
involved in ascertaining all situations in which Year 2000 or new European
currency issues may arise; (2) the inability of the Company to obtain the
services of sufficient personnel to implement the programs; (3) possible
increases in the cost of personnel required to implement the programs; (4)
delays in scheduled deliveries of new hardware and software from third-party
suppliers; (5) unreliability of responses from suppliers and others to whom
inquiries are being made; (6) inability of the Company to meet the scheduled
dates for completion of the programs; and (7) unforeseen events that could delay
timely implementation of the programs.
The Company undertakes no obligation to publicly release any revision to any
forward-looking statement to reflect any future events or circumstances.
The Company may from time to time make oral forward-looking statements. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying important
factors that could cause actual results to differ materially from those
contained in any such forward-looking statements made by or on behalf of the
Company. Any such statement is qualified by reference to the factors set forth
above.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information in response to this item is set forth in Note 6 - Contingencies on
Pages 8-9 in Part I. Item 1 of this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DUN & BRADSTREET CORPORATION
Date: July 21,1999 By: FRANK S. SOWINSKI
----------------------------------------------
Frank S. Sowinski
Senior Vice President - Chief Financial Officer
Date: July 21,1999 By: CHESTER J. GEVEDA
----------------------------------------------
Chester J. Geveda, Jr.
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 76410
<SECURITIES> 764
<RECEIVABLES> 441399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187193
<PP&E> 727967
<DEPRECIATION> 442525
<TOTAL-ASSETS> 1720019
<CURRENT-LIABILITIES> 1363748
<BONDS> 0
0
0
<COMMON> 1714
<OTHER-SE> (463576)
<TOTAL-LIABILITY-AND-EQUITY> 1720019
<SALES> 0
<TOTAL-REVENUES> 988233
<CGS> 0
<TOTAL-COSTS> 768167
<OTHER-EXPENSES> 12865
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1034
<INCOME-PRETAX> 206167
<INCOME-TAX> 79373
<INCOME-CONTINUING> 126794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126794
<EPS-BASIC> 0.77
<EPS-DILUTED> 0.76
</TABLE>
