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, 2000
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, 2000
par value $0.01 per share 162,099,357
<PAGE>
THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
<TABLE>
PART I. FINANCIAL INFORMATION PAGE
<CAPTION>
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended June 30, 2000 and 1999 3
Consolidated Balance Sheets (Unaudited)
June 30, 2000 and December 31, 1999 4
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements (Unaudited) 6-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15-25
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 4. Submission of Matters to a Vote of Security Holders 26-27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
</TABLE>
<PAGE>
<TABLE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
<CAPTION>
Quarter Ended Year-to-Date
June 30, June 30,
-------------------------------- -----------------------
Amounts in millions, except per share data 2000 1999 2000 1999
---------------------------------------------------------------- ------------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Operating Revenues $ 347.8 $ 349.8 $ 704.3 $ 703.8
--------------------------------------------------------------- ------------- -------------- --------- --------------
Operating Costs:
Operating Expenses 132.9 140.7 267.8 272.2
Selling and Administrative Expenses 140.4 134.8 279.0 285.7
Depreciation and Amortization 26.3 33.0 56.4 65.1
Reorganization Costs 2.2 - 2.2 -
---------------------------------------------------------------- ------------- -------------- --------- --------------
Operating Costs 301.8 308.5 605.4 623.0
---------------------------------------------------------------- ------------- -------------- ---------- --------------
Operating Income 46.0 41.3 98.9 80.8
---------------------------------------------------------------- ------------- -------------- ---------- --------------
Non-Operating Expense - Net:
Interest Income 1.0 0.5 1.8 1.0
Interest Expense (2.9) (1.2) (4.0) (2.0)
Minority Interest Expense (5.6) (5.6) (11.2) (11.2)
Other Expense - Net (0.2) (1.2) (1.0) (1.7)
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Non-Operating Expense - Net (7.7) (7.5) (14.4) (13.9)
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Income before Provision for Income Taxes 38.3 33.8 84.5 66.9
Provision for Income Taxes 17.2 13.9 36.4 27.6
------------------------------------------------------------------ ------------- -------------- ---------- -------------
Income from Continuing Operations 21.1 19.9 48.1 39.3
Income from Discontinued Operations, Net of Income
Taxes of $30.1 and $56.6 in 2000 and $27.6 and
$51.8 in 1999 46.8 46.5 87.6 87.5
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Net Income $ 67.9 $ 66.4 $ 135.7 $ 126.8
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Basic Earnings Per Share of Common Stock:
Continuing Operations $ 0.13 $ 0.12 $ 0.30 $ 0.24
Discontinued Operations 0.29 0.29 0.54 0.53
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Basic Earnings Per Share of Common Stock $ 0.42 $ 0.41 $ 0.84 $ 0.77
----------------------------------------------------------------- ------------- -------------- ---------- --------------
Diluted Earnings Per Share of Common Stock:
Continuing Operations $ 0.13 $ 0.12 $ 0.30 $ 0.24
Discontinued Operations 0.29 0.28 0.53 0.52
------------------------------------------------------------------ ------------- ------------- ---------- --------------
Diluted Earnings Per Share of Common Stock $ 0.42 $ 0.40 $ 0.83 $ 0.76
------------------------------------------------------------------ ------------- -------------- ---------- --------------
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Dividends Paid Per Share of Common Stock $ 0.185 $ 0.185 $ 0.370 $ 0.370
------------------------------------------------------------------ ------------- -------------- ---------- --------------
---------------------------------------------------------------- ------------- -------------- ---------- --------------
Weighted Average Number of Shares Outstanding:
Basic 161.9 162.2 161.5 163.6
------------------------------------------------------------------ ------------- -------------- ---------- --------------
Diluted 163.3 164.8 162.8 166.2
------------------------------------------------------------------ ------------- -------------- ----------- --------------
<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 2000 1999
------------------------------------------------------------------------------ ----------------- ------------------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 54.8 $ 109.4
Accounts Receivable---Net of Allowance of $18.3 in 2000 and $17.4 in 1999 332.2 363.7
Other Current Assets 108.6 133.6
----------------- ------------------
Total Current Assets 495.6 606.7
------------------------------------------------------------------------------ ----------------- ------------------
Non-Current Assets
Property, Plant and Equipment, Net 221.4 240.3
Prepaid Pension Costs 242.9 217.2
Computer Software, Net 135.1 149.8
Goodwill, Net 148.8 166.6
Other Non-Current Assets 184.6 194.2
----------------- ------------------
Total Non-Current Assets 932.8 968.1
------------------------------------------------------------------------------ ----------------- ------------------
Total Assets $ 1,428.4 $ 1,574.8
------------------------------------------------------------------------------ ----------------- ------------------
------------------------------------------------------------------------------ ----------------- ------------------
Current Liabilities
Notes Payable $ 291.9 $ 126.2
Accrued Income Taxes - 175.4
Other Accrued and Current Liabilities 305.9 382.2
Unearned Subscription Income 375.5 353.2
----------------- ------------------
Total Current Liabilities 973.3 1,037.0
----------------- ------------------
Pension and Postretirement Benefits 362.3 365.0
Net Liabilities of Discontinued Operations 35.8 222.8
Other Non-Current Liabilities 57.1 64.7
Contingencies (Note 7)
Minority Interest 302.5 301.9
Shareholders' Equity
Preferred Stock, $.01 par value per share, authorized---10,000,000 shares;
--- outstanding---none
Series Common Stock, $.01 par value per share, authorized---10,000,000
shares;
--- outstanding---none
Common Stock, $.01 par value per share, authorized---400,000,000 shares;
--- issued---171,451,136 shares 1.7 1.7
Capital Surplus 226.5 237.3
Retained Earnings (0.1) (105.9)
Treasury Stock, at cost, 9,351,779 and 10,627,327 shares
at June 30, 2000 and December 31, 1999, respectively (291.4) (330.2)
Cumulative Translation Adjustment (200.9) (181.1)
Minimum Pension Liability (38.4) (38.4)
------------------------------------------------------------------------------ ----------------- ------------------
Total Shareholders' Equity (302.6) (416.6)
------------------------------------------------------------------------------ ----------------- ------------------
Total Liabilities and Shareholders' Equity $ 1,428.4 $ 1,574.8
------------------------------------------------------------------------------ ----------------- ------------------
<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)
Six Months Ended June 30,
Dollar amounts in millions 2000 1999
------------------------------------------------------------------------------------------------------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 135.7 $126.8
Less:
Net Income from Discontinued Operations 87.6 87.5
------------------------------------------------------------------------------------------------------------ ------------
Income from Continuing Operations 48.1 39.3
Reconciliation of Net Income to Net Cash (Used In)
Provided by Operating Activities:
Depreciation and Amortization 56.4 65.1
Restructuring Payments (11.7) -
Postemployment Benefit Payments (2.3) (6.5)
Net Decrease in Accounts Receivable 18.0 2.1
Deferred Income Taxes (4.6) (6.0)
Accrued Income Taxes (174.7) 3.0
(Decrease) Increase in Long Term Liabilities (7.3) 6.5
Increase in Other Long Term Assets (19.9) (5.7)
Net Decrease (Increase) in Other Working Capital Items 44.7 (14.1)
Other 6.8 9.4
------------- ------------
Net Cash (Used in) Provided by Operating Activities:
Continuing Operations (46.5) 93.1
Discontinued Operations (75.8) 100.4
------------------------------------------------------------------------------------------------------------ ------------
Net Cash (Used in) Provided by Operating Activities (122.3) 193.5
------------------------------------------------------------------------------------------------------------ ------------
Cash Flows from Investing Activities:
Proceeds from Sales of Marketable Securities 1.2 13.4
Payments for Marketable Securities (1.1) (13.6)
Capital Expenditures (15.2) (18.4)
Additions to Computer Software and Other Intangibles (22.5) (42.4)
Net Cash Used in Investing Activities of Discontinued Operations (23.7) (3.4)
Other 5.5 4.5
------------------------------------------------------------------------------------------------------------ ------------
Net Cash Used in Investing Activities (55.8) (59.9)
------------------------------------------------------------------------------------------------------------ ------------
Cash Flows from Financing Activities:
Payment of Dividends (59.8) (60.5)
Payments for Purchase of Treasury Shares (3.5) (215.6)
Net Proceeds from Stock Plans 22.9 36.8
Increase in Commercial Paper Borrowings 167.1 92.8
Decrease in Other Short-Term Borrowings - (1.0)
Other (1.5) 1.0
----------------------------------------------------------------------------------------------------------- ------------
Net Cash Provided by (Used in) Financing Activities 125.2 (146.5)
------------------------------------------------------------------------------------------------------------ ------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (1.7) (0.9)
------------------------------------------------------------------------------------------------------------ ------------
Decrease in Cash and Cash Equivalents (54.6) (13.8)
Cash and Cash Equivalents, Beginning of Year 109.4 86.7
------------------------------------------------------------------------------------------------------------ ------------
Cash and Cash Equivalents, Six Months Ended $ 54.8 $ 72.9
------------------------------------------------------------------------------------------------------------ ------------
<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 in the 1999 Annual Report on
Form 10-K of The Dun & Bradstreet Corporation's (the "Company" or "D&B"). 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 of cash flows at the dates and for the periods presented have been included.
Effective January 1, 2000, responsibility for the management of the D&B
operating company's Canadian business was moved from its Asia Pacific and Latin
America segment ("D&B APLA") to its U.S. segment (now called "D&B North
America") to take advantage of marketing synergies between the U.S. and Canada.
As such, in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
prior year's segment information has been restated to reflect the change.
Certain other prior-year amounts have been reclassified to conform to the 2000
presentation.
Note 2 - Reorganization Plan
On December 15, 1999, D&B announced a plan to separate into two independent,
publicly traded companies - The New D&B Corporation ("New D&B") and Moody's
Corporation ("Moody's"). The separation will be accomplished through a tax-free
distribution to shareholders of D&B (the "Distribution") of all of the shares of
common stock of a newly formed, wholly owned subsidiary corporation (New D&B)
comprising the business of the D&B operating company. In connection with the
Distribution, D&B will complete an internal reorganization so that, at the time
of the Distribution, the business of New D&B will consist solely of the business
of supplying business, purchasing, credit and marketing information products and
services as well as receivable management services (the "New D&B Business") and
the business of D&B will consist solely of the business of providing ratings and
related research and risk management services (the "Moody's Business"). At the
time of the Distribution, D&B will be renamed "Moody's Corporation" and New D&B
will succeed to the name "The Dun & Bradstreet Corporation." Shares of common
stock of D&B will represent a continuing interest in the Moody's Business. D&B
expects to complete the Distribution by the end of the third quarter of 2000.
D&B received a ruling letter from the Internal Revenue Service (the "IRS") on
June 15, 2000, that the receipt by D&B shareholders of the New D&B Common Stock
in the Distribution would be tax-free to such stockholders and D&B for Federal
income tax purposes, except to the extent that cash is received in lieu of
fractional shares of New D&B Common Stock.
For purposes of, among other things, governing certain of the ongoing relations
between New D&B and Moody's as a result of the Distribution as well as to
allocate certain tax, employee benefit and other liabilities arising prior to
the Distribution, the companies will enter into various agreements, including a
Distribution Agreement, Tax Allocation Agreement, Employee Benefits Agreement,
Intellectual Property Assignment, Shared Transaction Services Agreement,
Insurance and Risk Management Services Agreement, Data Services Agreement and
Transition Services Agreement.
In general, pursuant to the terms of the Distribution Agreement, all of the
assets of the New D&B Business will be allocated to New D&B and all of the
assets of the Moody's Business will be allocated to Moody's. The Distribution
Agreement also provides for assumptions of liabilities and cross-indemnities
designed to allocate generally, effective as of the Distribution Date, financial
responsibility for (i) all liabilities arising out of or in connection with the
New D&B Business to New D&B, (ii) all liabilities arising out of or in
connection with the Moody's Business to Moody's and (iii) substantially all
other liabilities equally between New D&B and Moody's. The liabilities so
allocated include liabilities arising out of or in connection with former
businesses of D&B and its predecessor as well as certain other transactions
involving D&B and its predecessor.
Pursuant to the terms of a distribution agreement, dated as of June 30, 1998
(the "1998 Distribution Agreement"), between D&B (then known as "The New Dun &
Bradstreet Corporation") and R.H. Donnelley Corporation (then known as "The Dun
& Bradstreet Corporation" and herein referred to as "Donnelley"), as a condition
to the Distribution, New D&B is required to undertake to be jointly and
severally liable with D&B to Donnelley for any liabilities arising thereunder.
The Distribution Agreement generally allocates the financial responsibility for
liabilities of D&B under the 1998 Distribution Agreement equally between New D&B
and Moody's, except that any such liabilities that relate primarily to the New
D&B Business will be New D&B liabilities and any such liabilities that relate
primarily to the Moody's Business will be Moody's liabilities. Among other
things, New D&B and Moody's will agree that, as between themselves, they will
each be responsible for 50% of any payments to be made under the 1998
Distribution Agreement in respect of the action by IRI (as described below in
Note 7), including any legal fees and expenses related thereto.
The Distribution Agreement provides that, immediately prior to the Distribution,
a portion of D&B's indebtedness (including the minority interest financing) and
a portion of D&B's cash will be allocated to New D&B in amounts such that, at
the time of the Distribution, the net indebtedness of New D&B (which will
include the minority interest financing) will approximate the net indebtedness
of Moody's (before giving effect to payments of cash in connection with the
allocation of certain corporate liabilities of D&B between New D&B and Moody's
that may result in the net indebtedness of one company exceeding that of the
other).
Due to the relative significance of New D&B as compared to Moody's, the
transaction will be accounted for as a reverse spin-off. As such, New D&B has
been classified as continuing operations and Moody's as discontinued operations.
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 the Moody's segment as discontinued operations.
For financial reporting purposes, the assets and liabilities of Moody's have
been separately classified on the balance sheet as "Net Liabilities of
Discontinued Operations." A summary of these assets and liabilities at June 30,
2000 and December 31, 1999 follows:
<TABLE>
<CAPTION>
(amounts in millions) June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Current assets $163.9 $178.3
Total assets 214.4 211.0
Current liabilities 198.4 377.8
Total liabilities 250.2 433.8
Net liabilities of discontinued operations
35.8 222.8
</TABLE>
<TABLE>
<CAPTION>
The net operating results of Moody's have been reported in the caption "Income
from Discontinued Operations, Net of Income Taxes" in the consolidated
statements of operations. Summarized operating results for Moody's were as
follows:
Three months ended Six months ended
(amounts in millions) June 30, June 30,
-------------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues $149.4 $147.5 $288.6 $284.4
Income before provision for income taxes 76.9 74.1 144.2 139.3
Net income 46.8 46.5 87.6 87.5
</TABLE>
Note 3 - Reconciliation of Weighted Average Shares
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(share data in thousands) 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of shares-basic 161,884 162,150 161,541 163,627
Dilutive effect of shares issuable under stock options,
restricted stock and performance share plans 1,306 2,551 1,053 2,294
Adjustment of shares applicable to stock options exercised during
the period and performance share plans 140 121 199 265
------- ------- ------- -------
Weighted average number of shares-diluted 163,330 164,822 162,793 166,186
======= ======= ======= =======
<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 6.3 million and 100,000
shares of the Company's common stock which were outstanding at June 30, 2000 and
1999, respectively but 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>
<PAGE>
Note 4 - Comprehensive Income
The Company's total comprehensive income for the three and six month periods
ended June 30, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(amounts in millions) June 30, June 30,
------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $67.9 $66.4 $135.7 $126.8
Other comprehensive loss - foreign currency
translation adjustment (15.3) (14.9) (19.8) (13.2)
------ ------ ------ ------
Total comprehensive income $52.6 $51.5 $115.9 $113.6
===== ===== ====== ======
</TABLE>
Note 5 - Restructuring
During the fourth quarter of 1999, the Company recorded a restructuring charge
of $41.2 million, comprised of severance costs of $32.7 million, write off of
certain assets made obsolete or redundant and abandoned of $3.9 million and
leasehold termination obligations of $4.6 million. The restructuring includes:
(1) office consolidations and organization changes in both Europe and other
international locations and improvements in sales and data collection operations
in Europe; (2) realigning and streamlining the Company's global technology
organization and outsourcing certain software and product development to
resources outside the United States and Europe; and (3) migrating data
collection in the U.S. to telephonic data collection and closing 15 U.S. field
data collection offices.
The following chart summarizes the activity with respect to the components of
these restructuring actions during the three and six months ended June 30, 2000:
<TABLE>
<CAPTION>
Lease termination
obligations
(amounts in millions) Severance costs Total
--------------- ------------------ -----
<S> <C> <C> <C>
December 31, 1999 $30.2 $4.5 $34.7
Payments made during the three months ended
March 31, 2000 (7.5) (.4) (7.9)
------- ----- -----
March 31, 2000 22.7 4.1 26.8
Payments made during the three months
ended June 30, 2000 (3.7) (.1) (3.8)
------- ----- -------
June 30, 2000 $19.0 $4.0 $23.0
======== ====== ======
<FN>
As of June 30, 2000, the Company has terminated 359 associates and anticipates
completion of the restructuring actions by the end of 2000.
</FN>
</TABLE>
Note 6 - Notes Payable and Other Indebtedness
In June 2000, the Company renewed its $300 million 364-day revolving credit
facility. The Company has an additional $300 million facility maturing in June
2003. Under these facilities the Company has the ability to borrow at prevailing
short-term interest rates. The Company has had no borrowings outstanding under
these facilities since they were established in June 1998. These facilities are
expected to be terminated at or around the time of the Distribution. In
connection with the Distribution, New D&B is expected to enter into new
facilities that will remain in effect after the Distribution.
In connection with the Distribution, D&B will borrow funds in order to repay in
full D&B's commercial paper obligations. Also in connection with the
Distribution, responsibility for D&B's obligation to repay principal and
interest under the minority interest financing will be allocated to New D&B. It
is anticipated that New D&B will also assume a portion of the indebtedness of
D&B and receive a portion of the cash of D&B in amounts such that, at the time
of Distribution, the net indebtedness of New D&B (which will include the
minority interest financing) will approximate the net indebtedness of Moody's
(before giving effect to payments of cash in connection with the allocation of
certain corporate liabilities of D&B between New D&B and Moody's that may result
in the net indebtedness of one company exceeding that of the other). New D&B
expects to repay in full any indebtedness so assumed (other than the minority
interest financing) shortly after the Distribution by raising funds in the
commercial paper market.
Note 7- Contingencies
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Although the outcome of
such matters cannot be predicted with certainty, in the opinion of management,
the ultimate liability of D&B in connection with such matters will not have a
material effect on D&B's operating results, cash flows or 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 Donnelley, A.C. Nielsen Company (a subsidiary of ACNielsen
Corporation) and IMS International, Inc. (a subsidiary of the company then known
as Cognizant Corporation). At the time of the filing of the compliant, each of
the other defendants was a wholly owned subsidiary of Donnelley.
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.
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 November 1996, Donnelley completed a distribution to its shareholders (the
"1996 Distribution") of the capital stock of ACNielsen Corporation ("ACNielsen")
and Cognizant Corporation ("Cognizant"). On October 28, 1996, in connection with
the 1996 Distribution, Cognizant, ACNielsen and Donnelley 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 Donnelley 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 June 1998, Donnelley completed a distribution to its shareholders (the "1998
Distribution") of the capital stock of D&B and changed its name to R.H.
Donnelley Corporation. In connection with the 1998 Distribution, D&B and
Donnelley entered into an agreement (the "1998 Distribution Agreement") whereby
D&B 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.
Pursuant to the terms of the 1998 Distribution Agreement, as a condition to the
Distribution, New D&B will undertake to be jointly and severally liable with
Moody's for D&B's obligations to Donnelley under the 1998 Distribution
Agreement, including any liabilities arising under the Indemnity and Joint
Defense Agreement. However, as between themselves, each of New D&B and Moody's
will be responsible for 50% of any payments to be made with respect to the IRI
action pursuant to the 1998 Distribution Agreement, including legal fees or
expenses related thereto.
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
D&B 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. At this time, management is
unable to predict the final outcome of these matters or whether the resolution
of these matters could materially affect D&B's results of operations, cash flows
or financial position. Pursuant to the Distribution Agreement, New D&B and
Moody's will each agree to be financially responsible for 50% of any liabilities
that may arise with respect to such matters.
The IRS, has completed its review of D&B's utilization of certain capital losses
generated during 1989 and 1990. On June 26, 2000, the IRS, as part of its audit
process, issued a formal assessment with respect to the utilization of these
capital losses. Pursuant to a series of agreements, IMS Health and NMR are
jointly and severally liable to pay one-half, and Donnelley the other half, of
any payments for taxes and accrued interest arising from this matter and certain
other potential tax liabilities after Donnelley pays the first $137 million.
In connection with the 1998 Distribution, D&B and Donnelley entered into an
agreement whereby D&B has assumed all potential liabilities of Donnelley arising
from these tax matters and has agreed to indemnify Donnelley in connection with
such potential liabilities.
On May 12, 2000, an amended tax return was filed for the 1989 and 1990 tax
periods, which reflects $561.6 million of tax and interest due. D&B paid the IRS
approximately $349.3 million of this amount on May 12, 2000, which D&B funded
with short-term borrowings. IMS Health has informed D&B that it paid to the IRS
approximately $212.3 million on May 17, 2000. The payments were made to the IRS
to stop further interest from accruing. Notwithstanding the filing and payment,
D&B intends to contest the IRS's formal assessment and would also contest the
assessment of amounts, if any, in excess of the amounts paid. D&B had accrued
its anticipated share of the probable liability arising from the utilization of
these capital losses.
Note 8 - Summary of Recent Accounting Pronouncements
In March 2000, the Financial Standards Board issued Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion No. 25" ("FIN No. 44"). The interpretation
provided guidance for certain issues relating to stock compensation involving
employees that arose in applying Opinion 25. Among other issues, FIN No. 44
clarifies (a) the definition of an employee for purposes of applying Opinion 25,
(b) the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. The provisions of FIN
No. 44 are effective July 1, 2000, except for the provisions regarding
modifications to fixed stock option awards which reduce the exercise price of an
award, which apply to modifications made after December 15, 1998. Provisions
regarding modifications to fixed stock option awards to add reload features
apply to modifications made after January 12, 2000. The Company believes it is
in compliance with the provisions of FIN No. 44.
In December 1999, the staff of the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 summarizes some of the staff's interpretations
of the application of generally accepted accounting principles to revenue
recognition. The staff provided this guidance due, in part, to the large number
of revenue-recognition issues that it has encountered in registrant filings. In
June 2000, SAB 101B, "Second Amendment: Revenue Recognition in Financial
Statements," was issued, which defers the effective date of SAB 101 until the
fourth quarter of 2000. The Company believes it is in compliance with this
guidance.
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. In June 1999, the Financial
Accounting Standards Board issued SFAS No. 137 delaying the effective date of
SFAS No. 133. The provisions of SFAS No. 133, as amended, are effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Company
currently hedges foreign-currency-denominated transactions and expects to adopt
SFAS No. 133 beginning January 1, 2001. The effect of adopting SFAS No. 133 is
not expected to have a material effect on the Company.
<PAGE>
<TABLE>
Note 9 - Segment Information
<CAPTION>
Quarter Ended Year-to-Date
June 30, June 30,
-------------------------------- --------------------------------
Amounts in millions 2000 1999 2000 1999
----------------------------------------------------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating Revenues:
Dun & Bradstreet North America $ 232.5 $ 226.6 $ 485.7 $ 468.2
Dun & Bradstreet Europe 99.1 105.7 187.9 204.5
Dun & Bradstreet Asia Pacific / Latin America 16.2 17.5 30.7 31.1
------------- -------------- -------------- --------------
Consolidated Operating Revenues $ 347.8 $ 349.8 $ 704.3 $ 703.8
------------- -------------- -------------- --------------
Operating Income (Loss):
Dun & Bradstreet North America $ 61.6 $ 54.5 $ 140.8 $ 125.0
Dun & Bradstreet Europe (2.3) (2.6) (15.6) (17.7)
Dun & Bradstreet Asia Pacific / Latin America (2.2) (2.3) (5.9) (6.1)
------------- -------------- -------------- --------------
Total Dun & Bradstreet Operating Company 57.1 49.6 119.3 101.2
Corporate and Other (11.1) (8.3) (20.4) (20.4)
------------- -------------- -------------- --------------
Consolidated Operating Income $ 46.0 $ 41.3 $ 98.9 $ 80.8
------------- -------------- -------------- --------------
Supplemental Geographic and Product Line Information:
Quarter Ended Year-to-Date
June 30, June 30,
-------------------------------- --------------------------------
Geographic Revenue 2000 1999 2000 1999
------------------------------------------------------------ -------------- -------------- ------------- --------------
United States $ 225.1 $ 219.6 $ 471.0 $ 454.6
International 122.7 130.2 233.3 249.2
------------- -------------- -------------- --------------
Consolidated Operating Revenues $ 347.8 $ 349.8 $ 704.3 $ 703.8
------------- -------------- -------------- --------------
Product Line Revenues
----------------------------------------------------- ------------- -------------- -------------- --------------
Credit Information Solutions $ 225.7 $ 239.3 $ 460.7 $ 479.4
Marketing Information Solutions 74.2 67.7 152.3 143.0
Purchasing Information Solutions 7.1 7.2 11.8 11.5
Receivables Management Services 40.8 35.6 79.5 69.9
------------- -------------- -------------- --------------
Total Dun & Bradstreet Operating Company $ 347.8 $ 349.8 $ 704.3 $ 703.8
------------- -------------- -------------- --------------
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
To facilitate an analysis of the Company's operating results, certain
significant events should be considered.
2000 Distribution
On December 15, 1999, the D&B announced a plan to separate into two independent,
publicly traded companies - The New D&B Corporation ("New D&B") and Moody's
Corporation ("Moody's"). The separation will be accomplished through a tax-free
distribution to shareholders of D&B (the "Distribution") of all of the shares of
common stock of a newly formed, wholly owned subsidiary corporation ("New D&B")
comprising the business of the D&B operating company. In connection with the
Distribution, D&B will complete an internal reorganization so that, at the time
of the Distribution, the business of New D&B will consist solely of the business
of supplying business, purchasing, credit and marketing information products and
services as well as receivable management services (the "New D&B Business") and
the business of D&B will consist solely of the business of providing ratings and
related research and risk management services (the "Moody's Business"). At the
time of the Distribution, D&B will be renamed "Moody's Corporation" and New D&B
will succeed to the name "The Dun & Bradstreet Corporation." Shares of common
stock of D&B will represent a continuing interest in the Moody's Business. D&B
expects to complete the Distribution by the end of the third quarter of 2000.
D&B received a ruling letter from the Internal Revenue Service (the "IRS") on
June 15, 2000, that the receipt by D&B shareholders of the New D&B Common Stock
in the Distribution would be tax-free to such stockholders and D&B for Federal
income tax purposes, except to the extent that cash is received in lieu of
fractional shares of New D&B Common Stock.
For purposes of, among other things, governing certain of the ongoing relations
between New D&B and Moody's as a result of the Distribution as well as to
allocate certain tax, employee benefit and other liabilities arising prior to
the Distribution, the companies will enter into various agreements, including a
Distribution Agreement, Tax Allocation Agreement, Employee Benefits Agreement,
Intellectual Property Assignment, Shared Transaction Services Agreement,
Insurance and Risk Management Services Agreement, Data Services Agreement and
Transition Services Agreement.
In general, pursuant to the terms of the Distribution Agreement, all of the
assets of the New D&B Business will be allocated to New D&B and all of the
assets of the Moody's Business will be allocated to Moody's. The Distribution
Agreement also provides for assumptions of liabilities and cross-indemnities
designed to allocate generally, effective as of the date of the Distribution,
financial responsibility for (i) all liabilities arising out of or in connection
with the New D&B Business to New D&B, (ii) all liabilities arising out of or in
connection with the Moody's Business to Moody's and (iii) substantially all
other liabilities equally between New D&B and Moody's. The liabilities so
allocated include liabilities arising out of or in connection with former
businesses of D&B and its predecessor as well as certain other transactions
involving D&B and its predecessor.
Pursuant to the terms of a distribution agreement, dated as of June 30, 1998
(the "1998 Distribution Agreement"), between D&B (then known as "The New Dun &
Bradstreet Corporation") and R.H. Donnelley Corporation (then known as "The Dun
& Bradstreet Corporation" and herein referred to as "Donnelley"), as a condition
to the Distribution, New D&B is required to undertake to be jointly and
severally liable with D&B to Donnelley for any liabilities arising thereunder.
The Distribution Agreement generally allocates the financial responsibility for
liabilities of D&B under the 1998 Distribution Agreement equally between New D&B
and Moody's, except that any such liabilities that relate primarily to the New
D&B Business will be New D&B liabilities and any such liabilities that relate
primarily to the Moody's Business will be Moody's liabilities. Among other
things, New D&B and Moody's will agree that, as between themselves, they will
each be responsible for 50% of any payments to be made under the 1998
Distribution Agreement in respect of the action by IRI (as described in Note 7
to the consolidated financial statements), including any legal fees and expenses
related thereto.
The Distribution Agreement provides that, immediately prior to the Distribution,
a portion of D&B's indebtedness (including the minority interest financing) and
a portion of D&B's cash will be allocated to New D&B in amounts such that, at
the time of the Distribution, the net indebtedness of New D&B (including the
minority interest financing) will approximate the net indebtedness of Moody's
(before giving effect to payments of cash in connection with the allocation of
certain corporate liabilities of D&B between New D&B and Moody's that may result
in the net indebtedness of one company exceeding that of the other).
Due to the relative significance of New D&B as compared to Moody's, the
transaction has been accounted for as a reverse spin-off. As such, New D&B has
been classified as continuing operations and Moody's as discontinued operations.
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 the Moody's segment as discontinued operations. Accordingly, revenues,
costs and expenses, assets and liabilities, and cash flows of Moody's have been
excluded from the respective captions in the Consolidated Statements of
Operations, Consolidated Balance Sheets and Consolidated Statements of Cash
Flows. The net operating results have been reported, net of applicable income
taxes, as "Income from Discontinued Operations, Net of Income Taxes", the net
liabilities have been reported as "Net Liabilities of Discontinued Operations"
and the net cash flows have been reported as "Net Cash (Used in) Provided by
Discontinued Operations."
1999 Restructuring Charge
During the fourth quarter of 1999, the Company's Board of Directors approved
plans to restructure the D&B operating company. The restructuring comprised
three major components:
o Realigning and streamlining international operations through a series of
office consolidations and organizational changes. To reduce the cost
infrastructure in Europe, actions have been taken to improve efficiencies
in sales and data collection operations.
o Increasing the level of software and product development outsourced to
resources outside the United States and Europe.
o Reengineering the data collection process so that data is collected
telephonically rather than through field centers (15 field data collection
centers have been closed since the restructuring was announced).
As a result of these actions, a pre-tax restructuring charge of $41.2 million
($27.9 million after-tax, $.17 per share basic and diluted) was included in
operating income in 1999. Employee severance costs from planned terminations of
approximately 700 employees totaled $32.7 million (including severance for two
former corporate executives). The balance of the charge related to the write-off
of certain assets made obsolete or redundant and abandoned by the restructuring
and leasehold termination obligations arising from office closures. The
restructuring actions were designed to strengthen customer service worldwide,
improve operating efficiencies and lower structural costs.
During the first half of 2000, the Company made payments of $11.7 million
related to this restructuring. As of June 30, 2000, the Company has terminated
359 of the 700 contemplated in the plan. The Company anticipates completion of
this restructuring by the end of 2000, including the payment of the majority of
the associated costs.
During the second quarter of 2000, the Company appointed a new chairman and
chief executive officer for the Dun & Bradstreet operating company, who will
become the chairman and chief executive officer of New D&B following the
Distribution. Under his direction, a team is currently in the process of
reviewing and further developing New D&B's business strategy. The goal
of this strategy will be to transform New D&B into a growth company with an
important presence on the Internet. As the plan develops, it is possible that
additional restructuring charges may become necessary.
Results of Operations
Consolidated Results
For the second quarter of 2000, the Company reported income from continuing
operations of $21.1 million, up 6.0% from prior year's second quarter income
from continuing operations of $19.9 million. Earnings per share from continuing
operations for the second quarter of 2000 of $.13 per share, basic and diluted,
were up 8.3% from 1999 second quarter earnings per share of $.12 per share basic
and diluted. Second quarter 2000 results of continuing operations included
one-time pre-tax reorganization costs, in connection with the Distribution, of
$2.2 million ($.01 per share basic and diluted). For the second quarter of 2000,
excluding these reorganization costs, income from continuing operations would
have increased 17.1% and earnings per share from continuing operations, basic
and diluted, would have increased 16.7% from prior year's results. For the first
half of 2000, income from continuing operations of $48.1 million was up 22.4%
from prior year's first half income from continuing operations of $39.3 million.
Earnings per share from continuing operations for the first half of 2000 of $.30
per share, basic and diluted, were up 25.0% from 1999 first half earnings per
share from continuing operations of $.24 per share, basic and diluted. For the
first half of 2000, excluding the reorganization costs noted above, income from
continuing operations would have increased 28.0% and earnings per share, basic
and diluted, would have increased 29.2% from prior year's results.
For the second quarter 2000, the Company reported net income of $67.9 million,
up 2.2% from 1999 second quarter net income of $66.4 million. The Company's net
income includes income from discontinued operations of $46.8 million in the
second quarter of 2000 and $46.5 million in the second quarter of 1999. Earnings
per share for the second quarter of 2000 of $.42, basic and diluted, included
earnings per share from discontinued operations of $.29 per share, basic and
diluted. These results compared to earnings per share for the second quarter of
1999 of $.41 basic and $.40 diluted which included earning per share from
discontinued operations of $.29 basic and $.28 diluted.
Net income was $135.7 million for the first six months of 2000, up 7.0% from
$126.8 million for the same period in 1999. Income from discontinued operations
were $87.6 million in the first half of 2000 and $87.5 million in the first half
of 1999. Earnings per share for the first six months of 2000 were $.84 basic and
$.83 diluted, including earnings per share from discontinued operations of $.54
basic and $.53 diluted. Earnings per share for the first six months of 1999 were
$.77 basic and $.76 diluted, including earnings per share from discontinued
operations of $.53 basic and $.52 diluted.
Operating revenues for the second quarter were $347.8 million in 2000 compared
with $349.8 million in the second quarter of 1999. Revenue growth in D&B North
America of 2.6% was offset by declines in D&B Europe of 6.3% and D&B APLA of
7.6%. Excluding the impact of foreign currency translation, operating revenues
in the second quarter of 2000 increased 2.1% compared to the same period in
1999. On a year-to-date basis, operating revenues were $704.3 million in 2000
and $703.8 million in 1999, driven by growth in D&B North America, offset by
declines in D&B Europe and D&B APLA. Excluding the impact of foreign currency
translation, operating revenues increased 2.6% in 2000 compared to 1999. For
both the quarter and year to date periods, results reflect a decline in revenues
from traditional credit information solution products. This decline is offset by
growth in revenues from value added products including revenues from alliances
with providers of enterprise software solutions.
Operating expenses decreased 5.6% to $132.9 million in the second quarter of
2000 as compared to the same period in 1999, resulting from cost reductions
attributable to the restructuring actions implemented in the fourth quarter of
1999 and the positive impact of foreign currency translation on expenses, which
were partially offset by increased spending on the infrastructure necessary to
offer new products and services. Selling and administrative expenses increased
4.1% to $140.4 million in the second quarter of 2000 compared to the same period
in 1999, resulting from certain investments in the infrastructure necessary to
offer new products and services and costs associated with the appointment of the
new chairman and chief executive officer of the Dun & Bradstreet operating
company, which offset cost reductions and the positive impact of foreign
exchange. Depreciation and amortization decreased 20.4% in the second quarter of
2000 as compared to the same period in 1999 as a result of lower capitalization
in 2000, the write-off of certain assets as a result of the restructuring
actions and the positive impact of foreign exchange on expenses. During the
second quarter of 2000, the Company incurred $2.2 million of costs in connection
with the Distribution. Operating expenses decreased 1.7% to $267.8 million,
selling and administrative expenses decreased 2.3% to $279.0 million and
depreciation and amortization decreased 13.4% to $56.4 million for the first six
months of 2000 as compared to the same period in 1999, largely resulting from
the same factors impacting the second quarter.
Operating income for the second quarter of 2000 was $46.0 million, up 11.3%
compared to $41.3 million during the second quarter of 1999. This growth results
from higher revenues generated by D&B North America and cost reductions
attributable to the Company's fourth quarter 1999 restructuring actions. On a
year to date basis, operating income grew 22.3% to $98.9 million in 2000,
largely resulting from the cost reductions and higher D&B North America
revenues.
Non-operating expense-net was $7.7 million for the second quarter of 2000
compared to $7.5 million for the second quarter of 1999. An increase in interest
expense (resulting from an increase in commercial paper borrowing) for the
quarter was offset by a decrease in other expense-net and an increase in
interest income. On a year-to-date basis, non-operating expense-net was $14.4
million in the first half of 2000, compared to $13.9 million from the first half
of 1999.
The Company's effective tax rate for the second quarter of 2000 was 44.8% and
its underlying rate was 42.0%. The difference is attributable to the
non-deductibility of certain reorganization costs incurred in the second quarter
of 2000. The effective and underlying tax rate for the second quarter of 1999
was 41.3%. On a year to date basis the effective tax rate was 43.1% and the
underlying rate was 42.0% for 2000 compared to 41.3% for 1999.
Income from discontinued operations, net of income taxes, was $46.8 million for
the second quarter of 2000, compared with $46.5 million in the second quarter of
1999. For the first half of 2000, income from discontinued operations, net of
income taxes, was $87.6 million compared with $87.5 million in the same period
of 1999.
Segment Results
D&B North America revenues were $232.5 million in the second quarter of 2000, up
2.6% from 1999 second quarter revenues. In comparing the second quarter of 2000
revenues with the second quarter of 1999 revenues, D&B North America's revenues
from credit information solutions decreased 3.9% to $144.6 million, marketing
information solutions increased 13.4% to $56.2 million, purchasing information
solutions increased 2.7% to $6.7 million and receivables management services
increased 25.3% to $25.0 million. For the first half of 2000, D&B North America
revenues of $485.7 million were up 3.7% from the same period in the prior year.
Revenues on a year-to-date basis decreased 1.1% to $306.8 million for credit
information solutions, increased 10.2% to $118.9 million for marketing
information solutions, increased 2.0% to $11.0 million for purchasing
information solutions and increased 24.4% to $49.0 million for receivables
management services in comparison with the first half of the prior year.
For both the quarter and year to date, the decline in North American revenues
from credit information solutions is attributable to lower usage of traditional
products. Increased competition, including free or lower-cost information
available from online vendors and other Internet sources, the higher risk
tolerance of customers in the strong economy and the difficulty in stimulating
usage in customers utilizing monthly contract plans have negatively impacted
usage. In addition, certain customers have been utilizing lower priced data in
their automated credit evaluation systems. The growth in revenues from marketing
information solutions and receivables management services was largely driven by
revenues from value added products.
D&B North America operating income was $61.6 million in the second quarter of
2000, up 13.0% from the prior year, driven by the modest increase in revenues
and the impact of data collection cost reductions achieved as part of the 1999
fourth quarter restructuring actions. Consistent with the trend for the quarter,
for the first half of 2000, operating income was $140.8 million, up 12.6% from
1999 first half-operating income of $125.0 million.
D&B Europe's revenues were $99.1 million in the second quarter of 2000, down
6.3% when compared to 1999 second quarter revenues of $105.7 million. However,
excluding the impact of foreign exchange, revenues would have increased by 3.0%.
In comparing the European reported revenues for second quarter of 2000 with the
second quarter of 1999, revenues from credit information solutions decreased
7.6% to $71.5 million, revenues from marketing information solutions decreased
.5% to $15.4 million, revenues from purchasing information solutions decreased
30.8% to $.4 million and revenues from receivables management services decreased
4.2% to $11.8 million. Excluding the impact of foreign exchange, D&B Europe
would have reported in the second quarter of 2000 an increase in revenues from
credit information solutions of 1.7%, an increase in revenues from marketing
information solutions of 7.4% and an increase in revenues from receivables
management services of 6.9%, while revenues from purchasing information
solutions would have been down 25.2%, in each case in comparison to the second
quarter of 1999.
For the first half of 2000, D&B Europe's operating revenues decreased 8.1% to
$187.9 million from the first half of 1999. However, excluding the impact of
foreign exchange, revenues would have increased by 1.1%. In comparing D&B
Europe's revenues for the first half of 2000 with the same period in 1999,
revenues from credit information solutions decreased 9.3% to $135.0 million,
revenues from marketing information solutions decreased 6.2% to $28.9 million,
revenues from purchasing information solutions increased 25.4% to $.8 million
and receivables management services revenues decreased 4.2% to $23.2 million.
Excluding the impact of foreign exchange, D&B Europe would have reported for the
first half of 2000 flat revenues from credit information solutions, an increase
in revenues from marketing information solutions of 1.2%, an increase in
revenues from purchasing information solutions of 31.6% and an increase in
revenues from receivables management services of 7.1%, in each case in
comparison to the first half of 1999.
For both the quarter and year to date, European revenues from credit information
solutions products have been negatively impacted by ongoing price erosion in the
local markets, as well as continued competition, including availability of free
or lower-cost information from online vendors and other Internet sources.
However, the high growth in revenues from value added products in Europe has
resulted in the overall improvement in revenues, excluding the negative impact
of foreign currency translation.
D&B Europe reported an operating loss of $2.3 million in the second quarter of
2000, compared to a loss of $2.6 million in the same period of the prior year.
On a year-to-date basis, D&B Europe reported an operating loss of $15.6 million
in the first half of 2000 compared to $17.7 million in 1999. D&B Europe achieved
modest improvements in profitability, while still investing in the
infrastructure necessary to offer new products and services, as a result of
significant cost reductions realized from the restructuring actions implemented
in the fourth quarter of 1999.
D&B APLA reported operating revenues of $16.2 million in the second quarter of
2000, down 7.6% from the same period in 1999. Excluding the impact of foreign
exchange, revenue growth would have been down 9.2%. In comparing the second
quarter of 2000 with the second quarter of 1999, APLA credit information
solutions revenues decreased 15.9% to $9.6 million, marketing information
solutions revenues decreased 3.3% to $2.6 million and receivables management
services revenues increased 17.0% to $4.0 million. Excluding the impact of
foreign exchange, D&B APLA would have reported for the second quarter of 2000 a
decrease in revenues from credit information solutions of 19.0%, a decrease in
revenues from marketing information solutions of .6% and an increase in revenues
from receivables management services of 18.8%, in each case in comparison to the
second quarter of 1999.
For the first half of the year, D&B APLA reported operating revenues of $30.7
million in 2000, down 1.3% when compared to $31.1 million in 1999. Excluding the
impact of foreign exchange, D&B APLA revenues would have decreased by 3.9%. In
comparing the first half of 2000 with the same period in 1999, credit
information solutions revenues decreased 7.6% to $18.9 million, while marketing
information solutions revenues increased 2.4% to $4.5 million and receivables
management services revenues increased 15.7% to $7.3 million. Excluding the
impact of foreign exchange, D&B APLA would have reported for the first half of
2000 a decrease in revenues from credit information solutions of 11.1%, an
increase in revenues from marketing information solutions of 2.5% and an
increase in revenues from receivables management services of 15.6%, in each case
in comparison to the first half of 1999.
D&B APLA reported an operating loss of $2.2 million in the second quarter of
2000, compared to an operating loss of $2.3 million in the same period of 1999.
For the first half of the year, D&B APLA reported an operating loss of $5.9
million in 2000, compared to an operating loss of $6.1 million in 1999. The
modest improvement in profitability is attributable to cost reductions.
Adoption of Statements of Financial Accounting Standards ("SFAS")
In March 2000, the Financial Standards Board issued Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock Compensation, an
interpretation of APB Opinion No. 25" ("FIN No. 44"). The interpretation
provided guidance for certain issues relating to stock compensation involving
employees that arose in applying Opinion 25. Among other issues, FIN No. 44
clarifies (a) the definition of an employee for purposes of applying Opinion 25,
(b) the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. The provisions of FIN
No. 44 are effective July 1, 2000, except for the provisions regarding
modifications to fixed stock option awards which reduce the exercise price of an
award, which apply to modifications made after December 15, 1998. Provisions
regarding modifications to fixed stock option awards to add reload features
apply to modifications made after January 12, 2000. The Company is in compliance
with the provisions included in FIN No. 44.
In December 1999, the staff of the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 summarizes some of the staff's interpretations
of the application of generally accepted accounting principles to revenue
recognition. The staff provided this guidance due, in part, to the large number
of revenue-recognition issues that it has encountered in registrant filings. In
June 2000, SAB 101B, "Second Amendment: Revenue Recognition in Financial
Statements," was issued, which defers the effective date of SAB 101 until the
fourth quarter of 2000. The Company believes it is in compliance with this
guidance.
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. In June 1999, the Financial
Accounting Standards Board issued SFAS No. 137 delaying the effective date of
SFAS No. 133. The provisions of SFAS No. 133 are effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The Company
currently hedges foreign-currency-denominated transactions and expects to adopt
SFAS No. 133, as amended, beginning January 1, 2001. The effect of adopting SFAS
No. 133 is not expected to have a material effect on the Company.
Liquidity and Financial Position
Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999
At June 30, 2000, cash and cash equivalents totaled $54.8 million, a decrease of
$54.6 million from $109.4 million held at December 31, 1999. During the first
half of 2000, the Company's payment of $349.3 million to the IRS, as discussed
below under "Other," and the resulting increase in commercial paper borrowings
needed to fund the payment, impacted cash flows.
Operating activities used net cash of $122.3 million during the first half of
2000 compared to generating net cash of $193.5 million during the same period in
1999. The $349.3 million payment to the IRS is reflected as a reduction in
continuing operations' accrued income taxes of $174.7 and as a $174.6 million
offset to cash provided by discontinued operations for the six months ended June
30, 2000. Excluding the impact of the payment, cash generated by operating
activities for the six months ended June 30, 2000 would have been $227.0
million, with continuing operations providing $128.2 million and discontinued
operations providing $98.8 million. Cash generated by operating activities for
the six months ended June 30, 1999 was $193.5 million, with continuing
operations providing $93.1 million and discontinued operations providing $100.4
million. The improvement in cash generated by operating activities of continuing
operations results from increased operating income and higher sales and accounts
receivable collections during the first half of 2000 compared with the first
half of 1999.
During the first half of 2000, the Company made payments of $11.7 million
related to the restructuring actions implemented during the fourth quarter of
1999. As of June 30, 2000, the Company has terminated 359 of the 700
contemplated in the plan. The Company anticipates completion of the
restructuring actions by the end of 2000, including the payment of the majority
of the associated costs.
Net cash used in investing activities was $55.8 million for the first half of
2000 compared to $59.9 million in 1999, including net cash used in investing
activities of discontinued operations of $23.7 million in the first half of 2000
and $3.4 million in the same period of 1999. Net cash used by discontinued
operations in the first half of 2000 included an acquisition by Moody's of a
financial software products company for $17.4 million. In the first half of
2000, the Company invested $37.7 million for capital expenditures and additions
to computer software and other intangibles compared to $60.8 million in the
comparable period in 1999, due primarily to higher expenditures in the prior
year on systems implemented in 1999.
Net cash provided by financing activities was $125.2 million during the first
half of 2000, compared to net cash used in financing activities of $146.5
million during the first half of 1999. Payments of dividends accounted for $59.8
million in the first half of 2000 compared to $60.5 million in the first half of
1999. As discussed below, D&B's stock repurchases and commercial paper
borrowings also affected the net cash provided by or used for financing
activities.
Financing Arrangements
In June 2000, the Company renewed its $300 million 364-day revolving credit
facility. The Company has an additional $300 million facility maturing in June
2003. Under these facilities the Company has the ability to borrow at prevailing
short-term interest rates. The Company has had no borrowings outstanding under
these facilities since they were established in June 1998. These facilities are
expected to be terminated at or around the time of the Distribution. In
connection with the Distribution, New D&B is expected to enter into new
facilities that will remain in effect after the Distribution. During the first
half of 2000, the Company increased its net commercial paper borrowings by
$167.1 million largely as a result of the payment to the IRS discussed below.
The Company had commercial paper borrowings outstanding of $291.9 million and
$124.7 million at June 30, 2000 and December 31, 1999, respectively.
In connection with the Distribution, D&B will borrow funds in order to repay in
full D&B's commercial paper obligations. Also in connection with the
Distribution, responsibility for D&B's obligation to repay principal and
interest under the minority interest financing will be allocated to New D&B. It
is anticipated that New D&B will also assume a portion of the indebtedness of
D&B and receive a portion of the cash of D&B in amounts such that, at the time
of Distribution, the net indebtedness of New D&B (including the minority
interest financing) will approximate the net indebtedness of Moody's (before
giving effect to payments of cash in connection with the allocation of certain
corporate liabilities of D&B between New D&B and Moody's that may result in the
net indebtedness of one company exceeding that of the other). New D&B expects to
repay in full any indebtedness so assumed (other than the minority interest
financing) shortly after the Distribution by raising funds in the commercial
paper market.
Stock Repurchase
In the first half of 2000, the Company repurchased 125,000 shares for $3.5
million in connection with the D&B Employee Stock Purchase Plan and to offset a
portion of the shares issued under incentive plans. 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. Proceeds received
in connection with the Company's stock plans were $22.9 million for the first
half of 2000 compared to $36.8 million in 1999.
Other
D&B 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. At this time, management is
unable to predict the final outcome of these matters or whether the resolution
of these matters could materially affect D&B's results of operations, cash flows
or financial position. Pursuant to the Distribution Agreement, New D&B and
Moody's will each agree to be financially responsible for 50% of any liabilities
that may arise with respect to such matters.
The IRS has completed its review of D&B's utilization of certain capital losses
generated during 1989 and 1990. On June 26, 2000, the IRS, as part of its audit
process, issued a formal assessment with respect to the utilization of these
capital losses.
Pursuant to a series of agreements, IMS Health and NMR are jointly and severally
liable to pay one-half, and Donnelley the other half, of any payments for taxes
and accrued interest arising from this matter and certain other potential tax
liabilities after Donnelley pays the first $137 million.
In connection with the 1998 Distribution, D&B and Donnelley entered into an
agreement whereby D&B has assumed all potential liabilities of Donnelley arising
from these tax matters and has agreed to indemnify Donnelley in connection with
such potential liabilities.
On May 12, 2000, an amended tax return was filed for the 1989 and 1990 tax
periods which reflects $561.6 million of tax and interest due. D&B paid the IRS
approximately $349.3 million of this amount on May 12, 2000, which D&B funded
with short-term borrowings. IMS Health has informed D&B that it paid to the IRS
approximately $212.3 million on May 17, 2000. The payments were made to the IRS
to stop further interest from accruing. Notwithstanding the filing and payment,
D&B intends to contest the IRS's formal assessment and would also contest the
assessment of amounts, if any, in excess of the amounts paid. D&B had accrued
its anticipated share of the probable liability arising from the utilization of
these capital losses.
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Although the outcome of
such matters cannot be predicted with certainty, in the opinion of management,
the ultimate liability of D&B in connection with such matters will not have a
material effect on D&B's operating results, cash flows or financial position.
Year 2000
The Company initiated a Year 2000 preparation program in 1996, when it began
identifying Year 2000 related technology risks and developing plans for
appropriate remediation and testing activities. D&B's program was substantially
completed during 1999. As a result of the program, D&B made a smooth transition
to the Year 2000, and its systems are operating in a business-as-usual manner.
D&B does not expect to encounter any significant Y2K- related disruptions in the
future. External and internal costs associated with D&B's Year 2000 program were
expensed as incurred. The aggregate cost of the Company's Year 2000 program was
approximately $78 million. These figures do not include the costs of software
and systems that were replaced or upgraded in the normal course of business.
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 two 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 19, 2000, the Board of Directors declared a third quarter 2000 dividend
of $.185 per share, payable September 10, 2000 to shareholders of record at the
close of business August 20, 2000.
Forward-Looking Statements
Certain statements in this report 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 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 euro plans on a
timely basis and the competitive implication that the conversion to the euro may
have on its pricing and marketing strategies; (8) the ability to complete
pending restructuring actions at the Dun & Bradstreet operating company in a
timely fashion without adverse effects on operations; (9) the possible loss of
key employees to investment or commercial banks, or elsewhere; (10) fluctuations
in foreign currency exchange rates; (11) changes in interest rates and other
volatility in financial markets; (12) the outcome of any review by applicable
tax authorities of the Company's global tax planning initiatives; (13) the
ability to implement the Distribution on a timely basis without adverse impact
on the conduct of the Company's business and (14) the final allocation of assets
and liabilities in connection with the Distribution.
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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's market risks primarily consist of the impact of changes in
currency exchange rates on assets and liabilities of non-U.S. operations and the
impact of changes in interest rates. The Company's 1999 Annual Report on Form
10-K provides a more detailed discussion of the market risks affecting
operations. As of June 30, 2000, no material change had occurred in the
Company's market risks, as compared to the disclosure in its Form 10-K for the
year ending December 31, 1999.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information in response to this item is set forth in Note 7 - Contingencies on
Pages 10-12 in Part I. Item 1 of this Form 10-Q. Reference is made to such Note
and to Part I, Item 3, of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 for information relating to the IRI case. On December
22, 1999, defendants filed a motion for partial summary judgement seeking to
dismiss IRI's non-U.S. antitrust claims. On July 12, 2000, the court granted the
motion dismissing claims of injury suffered from activities in foreign markets
where IRI operates through subsidiaries or companies owned by joint ventures or
"relationships" with local companies.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on April 20, 2000.
(c) The matters voted upon and the results of the vote are as follows:
<TABLE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
----------------------------------------- ----------------------------------------------------------------------------
<CAPTION>
NUMBER OF SHARES
----------------------------------------- ----------------------------------------------------------------------------
----------------------------------------- -------------------------------------- -------------------------------------
NOMINEE FOR WITHHELD
<S> <C> <C>
----------------------------------------- -------------------------------------- -------------------------------------
----------------------------------------- -------------------------------------- -------------------------------------
Hall Adams, Jr. 140,335,513 7,574,208
----------------------------------------- -------------------------------------- -------------------------------------
----------------------------------------- -------------------------------------- -------------------------------------
Ronald Kuehn, Jr. 144,536,526 3,373,195
----------------------------------------- -------------------------------------- -------------------------------------
----------------------------------------- -------------------------------------- -------------------------------------
Michael R. Quinlan 140,834,205 7,075,516
----------------------------------------- -------------------------------------- -------------------------------------
----------------------------------------- -------------------------------------- -------------------------------------
Naomi O. Seligman 144,531,796 3,377,925
----------------------------------------- -------------------------------------- -------------------------------------
</TABLE>
<TABLE>
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
------------------------------------------------ ---------------------------------------------------
<CAPTION>
NUMBER OF SHARES
------------------------------------------------ ---------------------------------------------------
------------------------------------------------ ---------------- ----------------- ----------------
FOR AGAINST ABSTAIN
------------------------------------------------ ---------------- ----------------- ----------------
------------------------------------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C>
PricewaterhouseCoopers LLP 147,134,881 228,762 486,078
------------------------------------------------ ---------------- ----------------- ----------------
</TABLE>
<PAGE>
<TABLE>
PROPOSAL NO. 3
SHAREHOLDER PROPOSAL CONCERNING BOARD SIZE AND CLASSIFICATION
------------------------------------------------ ---------------------------------------------------------------------
<CAPTION>
NUMBER OF SHARES
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
FOR AGAINST ABSTAIN BROKER NON-VOTES
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Board Size and Classification 83,168,249 53,485,358 1,040,004 10,216,110
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
</TABLE>
<TABLE>
PROPOSAL NO. 4
SHAREHOLDER PROPOSAL CONCERNING RIGHTS AGREEMENT
------------------------------------------------ ---------------------------------------------------------------------
<CAPTION>
NUMBER OF SHARES
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
FOR AGAINST ABSTAIN BROKER NON-VOTES
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Rights Agreement 83,509,300 53,040,307 1,144,004 10,216,110
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
</TABLE>
<TABLE>
PROPOSAL NO. 5
SHAREHOLDER PROPOSAL ON IMPLEMENTATION OF THE MACBRIDE PRINCIPLES
<CAPTION>
------------------------------------------------ ---------------------------------------------------------------------
NUMBER OF SHARES
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
FOR AGAINST ABSTAIN BROKER NON-VOTES
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
MacBride Principles 15,536,918 108,986,477 13,173,215 10,213,111
------------------------------------------------ ---------------- ----------------- ---------------- -----------------
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4) Amended and Restated Credit Agreement, dated as of June 2,
2000, among the Company, the Borrowing Subsidiaries parties
thereto, the Lenders parties thereto, The Chase Manhattan Bank,
Citibank, N.A., and The Bank of New York.
(10) Employment Agreement dated May 15, 2000, by and between the Company and
Allan Z. Loren.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
Current report on Form 8-K was filed on May 24, 2000 pursuant to Item 5
- Other Events.
<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: August 14 2000, By: /s/ CHESTER J. GEVEDA, JR.
----------------------------------
Chester J. Geveda, Jr.
Vice President and Controller and Acting
Chief Financial Officer
(principal financial officer)
