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, 1994
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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 1-7155
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THE DUN & BRADSTREET CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2740040
(State of Incorporation) (I.R.S. Employer Identification No.)
200 Nyala Farms, Westport, CT 06880
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 222-4200
-------------
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:
Shares Outstanding
Title of Class at July 29, 1994
-------------- ------------------
Common Stock,
par value $1 per share 169,890,985
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THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
<CAPTION>
<S> <C>
Condensed Consolidated Statement of Income (Unaudited)
Three Months Ended June 30, 1994 and 1993 3
Six Months Ended June 30, 1994 and 1993 4
Condensed Consolidated Statement of Cash Flows (Unaudited)
Six Months Ended June 30, 1994 and 1993 5
Condensed Consolidated Statement of Financial Position (Unaudited)
June 30, 1994 and December 31, 1993 6
Notes to Condensed Consolidated Financial Statements (Unaudited) 7-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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PART l. FINANCIAL INFORMATION
- - ------------------------------
Item l. FINANCIAL STATEMENTS
THE DUN & BRADSTREET CORPORATION
Condensed Consolidated Statement of Income (Unaudited)
(In thousands except per share amounts)
<CAPTION>
Three Months Ended
June 30
________________________
1994 1993
________________________
<S> <C> <C>
Operating Revenue $1,184,703 $1,161,580
Operating Costs, Selling and
Administrative Expenses 970,612 969,989
__________ __________
Operating Income 214,091 191,591
Interest (Expense) Income - Net (3,852) 5,442
Other Expense - Net (8,312) (3,248)
__________ __________
Non-Operating (Expense) Income - Net (12,164) 2,194
Income Before Provision for Income Taxes 201,927 193,785
Provision for Income Taxes 57,347 55,035
__________ __________
Net Income $144,580 $138,750
========== ==========
Earnings Per Share Of Common Stock $0.85 $0.78
========== ==========
Dividends Paid Per Share of Common Stock $0.65 $0.61
========== ==========
Average Number of Shares Outstanding 170,082 178,286
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
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THE DUN & BRADSTREET CORPORATION
Condensed Consolidated Statement of Income (Unaudited)
(In thousands except per share amounts)
<CAPTION>
Six Months Ended
June 30
________________________
1994 1993
________________________
<S> <C> <C>
Operating Revenue $2,283,928 $2,232,985
Operating Costs, Selling and
Administrative Expenses 1,910,018 1,900,906
__________ __________
Operating Income 373,910 332,079
Interest Income - Net 118 11,022
Other Expense - Net (20,271) (2,424)
__________ __________
Non-Operating (Expense) Income - Net (20,153) 8,598
Income Before Provision for Taxes and Cumulative
Effect of Changes in Accounting Principles 353,757 340,677
Provision for Income Taxes 100,467 96,752
__________ __________
Income Before Cumulative Effect of Changes in
Accounting Principles 253,290 243,925
Cumulative Effect to January 1, 1993, of Changes
in Accounting Principles:
-SFAS No. 106, "Employers' Accounting for
Postretirement Benefits," Net of Income
Tax Benefits of $93,730 - (140,596)
-SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," Net of Income
Tax Benefits of $150,000 - (250,000)
__________ __________
Net Income (Loss) $253,290 $(146,671)
========== ==========
Earnings Per Share of Common Stock:
Before Cumulative Effect of Changes in
Accounting Principles: $1.49 $1.37
-SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" - (0.79)
-SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" - (1.40)
__________ __________
Net Income (Loss) $1.49 $(0.82)
========== ==========
Dividends Paid Per Share of Common Stock $1.26 $1.18
========== ==========
Average Number of Shares Outstanding 170,082 178,286
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
-4-
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The Dun & Bradstreet Corporation
Condensed Consolidated Statement
of Cash Flows (Unaudited)
Six Months Ended June 30
1994 1993
(Amounts in thousands)
_________________________________________________________________________
<CAPTION>
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income(Loss) $253,290 $(146,671)
Reconciliation of Net Income(Loss) to Net Cash
Provided by Operating Activities:
Cumulative Effect of Changes in Accounting Principles:
Postretirement benefits other than pensions 0 140,596
Postemployment benefits 0 250,000
Depreciation and Amortization 202,597 183,534
Restructuring Gain from Sale of Business (56,327) (13,616)
Restructuring Provisions 56,327 13,616
Restructuring Payments (50,108) (41,188)
Postemployment Benefit Payments (79,400) 0
Net Decrease in Accounts Receivable 25,102 81,930
Income Taxes Paid- Net of Refunds (104,042) (148,703)
Unearned Subscription Income 89,908 97,793
Net Changes in Other Working Capital Items (71,758) 55,519
___________________________________________________________________________
Net Cash Provided by Operating Activities 265,589 472,810
___________________________________________________________________________
Cash Flows from Investing Activities:
(Payments for)Proceeds from Marketable
Securities - Net (99,370) 227
Payments for Acquisition of Businesses (excluding cash
and cash equivalents acquired of $1,926 and
$6,548 in 1994 and 1993, respectively) (42,749) (98,187)
Proceeds from Sale of Businesses 72,648 42,511
Capital Expenditures (134,258) (101,003)
Computer Software and Other Intangibles Additions(79,575) (79,161)
Increase in Other Investments and
Notes Receivable (22,648) (13,599)
Other 2,119 10,791
___________________________________________________________________________
Net Cash Used in Investing Activities (303,833) (238,421)
___________________________________________________________________________
Cash Flows from Financing Activities:
Payment of Dividends (214,372) (210,401)
Payments for Purchase of Treasury Shares (44,083) (23,745)
Net Proceeds from Exercise of Stock Options 10,405 17,304
Increase (Decrease) in Domestic
Short-term Borrowings 257,947 (24,010)
Payment of Alaska Native Corp. Obligations (166,208) 0
Other 16,497 (4,211)
___________________________________________________________________________
Net Cash Used in Financing Activities (139,814) (245,063)
___________________________________________________________________________
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 5,894 (4,278)
___________________________________________________________________________
Decrease in Cash and Cash Equivalents (172,164) (14,952)
Cash and Cash Equivalents, Beginning of Period 650,909 494,520
___________________________________________________________________________
Cash and Cash Equivalents, End of Period $478,745 $479,568
___________________________________________________________________________
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
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The Dun & Bradstreet Corporation
Condensed Consolidated Statement of Financial Position (Unaudited)
(Amounts in thousands)
<CAPTION>
___________________________________________________________________________
June 30 December 31
1994 1993
___________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $478,745 $650,909
Marketable Securities, interest-bearing 128,190 17,749
Accounts Receivable - Net 1,069,278 1,078,943
Other Current Assets 380,389 374,828
--------- ---------
Total Current Assets 2,056,602 2,122,429
___________________________________________________________________________
Investments
Marketable Securities, interest-bearing 122,425 106,219
Other Investments and Notes Receivable 327,229 310,585
--------- ---------
Total Investments 449,654 416,804
___________________________________________________________________________
Property, Plant and Equipment - Net 902,204 861,065
___________________________________________________________________________
Other Assets-Net
Deferred Charges $327,701 $318,469
Computer Software 291,148 294,474
Other Intangibles 216,588 214,743
Goodwill 977,297 942,378
--------- ---------
Total Other Assets-Net 1,812,734 1,770,064
___________________________________________________________________________
TOTAL ASSETS $5,221,194 $5,170,362
___________________________________________________________________________
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<CAPTION>
Liabilities and Shareowners' Equity
<S> <C> <C>
Current Liabilities
Accounts and Notes Payable $651,542 $371,776
Accrued and Other Current Liabilities 1,273,440 1,561,509
Accrued Income Taxes 111,130 110,759
--------- ---------
Total Current Liabilities 2,036,112 2,044,044
___________________________________________________________________________
Unearned Subscription Income 357,272 263,686
Postretirement and Postemployment Benefits 441,390 545,661
Deferred Income Taxes 84,532 85,850
Other Liabilities and Minority Interests 1,171,891 1,119,805
___________________________________________________________________________
TOTAL LIABILITIES $4,091,197 $4,059,046
___________________________________________________________________________
Shareowners' Equity $1,129,997 $1,111,316
___________________________________________________________________________
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $5,221,194 $5,170,362
___________________________________________________________________________
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
-6-
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THE DUN & BRADSTREET CORPORATION
NOTES TO CONDENSED 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 (the "Company" or "D&B")
1993 Annual Report on Form 10-K. 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.
Note 2 - Change in Accounting for Marketable Securities
Effective January 1, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
This Statement expands the use of fair value accounting for certain
marketable securities and requires additional financial statement
disclosures. At January 1, 1994, all marketable securities were
classified as "available for sale" and, therefore, are reported at
fair value, with net unrealized gains and losses reported in
shareowners' equity. Prior to January 1, 1994, marketable
securities, consisting principally of fixed income securities, were
carried at amortized cost. Adoption of SFAS No. 115 did not have a
material effect on the Company's consolidated financial statements.
The fair value of current and non-current marketable securities (and
interest rate swap agreements and foreign exchange forward contracts
discussed in Note 3 below) were estimated based on quoted market
prices whenever available. When quoted market prices were not
available, the Company used standard pricing models for various
types of financial instruments which take into account the present
value of estimated future cash flows.
Disclosures below include amounts classified in the condensed
consolidated statement of financial condition as marketable
securities, as well as assets of grantor trusts established to pay
benefits for U.S. supplemental pension plans and certain marketable
securities included in other investments and notes receivable.
Cash equivalents of $102.4 million and $149.2 million at June 30,
1994 and December 31, 1993, respectively, represent marketable
securities purchased within 90 days of maturity date, for which
book value, including accrued interest, approximates fair value.
Cash equivalents have been excluded from these disclosures.
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A summary of cost (amortized cost of debt instruments) and fair values
follows (in millions of dollars):
June 30, 1994 December 31, 1993
Fair Fair
Cost Value Cost Value
---- ----- ---- -----
Equity securities $25.3 $24.4 $11.6 $11.7
Debt securities of the U.S.
Government and its agencies 66.2 65.9 63.2 67.4
Debt securities of states and
other sub-divisions of the
U.S. Government 96.0 95.8 85.8 89.6
Debt securities of foreign
governments 29.8 29.6 9.9 10.3
Corporate debt securities 95.4 95.0 19.6 19.7
Other 10.4 9.1 0.2 0.2
______ ______ ______ ______
$323.1 $319.8 $190.3 $198.9
====== ====== ====== ======
At June 30, 1994, gross unrealized gains and losses were $4.3 million
and $7.6 million, respectively. At December 31, 1993, gross
unrealized gains and losses were $9.1 million and $0.5 million,
respectively.
At June 30, 1994, cost and fair values of debt securities by
contractual maturity were as follows (in millions of dollars):
Cost Fair Value
______ __________
Due in one year or less $121.5 $121.5
Due after one year through five years 62.4 62.8
Due after five years through ten years 98.7 96.8
Due after ten years 5.8 6.1
Mortgage-backed securities 7.4 6.5
______ _______
$295.8 $293.7
====== ======
For the six months ended June 30, 1994 and 1993, proceeds from the
sale of marketable securities and gross realized gains and losses
were not material.
Note 3 - Financial Instruments with Off-Balance-Sheet Risk and Fair
Value of Financial Instruments
The Company is a party to financial instruments with off-balance-
sheet-risk, which are entered into in the normal course of business
to reduce exposure to fluctuations in interest and foreign exchange
rates. The counterparties to these instruments are major
international financial institutions. The Company is exposed to
interest and exchange rate risk in the event of nonperformance by the
counterparties to the financial instruments; however, the Company does
not anticipate such nonperformance.
-8-
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Interest rate swap agreements are entered into primarily as hedges
against variable interest rate exposures. During the first quarter of
1994, the Company entered into swap agreements which effectively fixed
interest rates on $300 million of variable rate debt, from 1994 through
fiscal 2005. The weighted average fixed rate payable under these
agreements is 6.84%. The differential interest to be paid or received
under these agreements is included in interest expense over the life of
the debt.
Foreign exchange forward contracts are entered into to hedge the
effects of exchange rate changes on certain of the Company's non-U.S.
investments. At June 30, 1994, the Company had approximately $232
million in foreign exchange forward contracts outstanding with various
expiration dates through November 1994, which have been designated as
hedges of non-U.S. net investments. Gains and losses on these
contracts are included in the cumulative translation adjustment
component of shareowners' equity.
At June 30, 1994, the fair value of the interest rate swaps and
foreign exchange forward contracts was $18.2 million and $227 million,
respectively.
Note 4 - Restructuring Actions
In the second quarter, the Company divested two non-strategic
businesses--Thomson Directories and the Machinery Information
Division of Dataquest--and initiated other actions to restructure
certain operations and businesses, and to reduce costs and increase
operating efficiencies. These restructuring actions included office
consolidations and relocations, the closedown of Sales Technologies'
European operations, the discontinuance of certain production and
data-collection systems and products, as well as additional steps to
complete certain actions initiated in the fourth quarter of 1993. The
pre-tax costs associated with these restructuring actions essentially
offset a pre-tax gain of $55 million on the two divestitures.
Note 5 - Investment Partnerships
During 1993, three of the Company's subsidiaries contributed assets
and third-party investors contributed cash ($125 million) to a limited
partnership. One of the Company's subsidiaries serves as general
partner. All of the other partners, including the third-party
investors, hold limited partner interests. The partnership, which is
a separate and distinct legal entity, is in the business of licensing
database assets and computer software.
In addition, during 1993, the Company participated in the formation of
a limited partnership to invest in various securities including those
of the Company. One of the Company's subsidiaries serves as managing
general partner. Third-party investors hold limited partner and
special investors interests totaling $500 million. The special
investors are entitled to a specified return on their investments.
Funds raised by the partnership provided a source of the financing
for the Company's repurchase in 1993 of 8.3 million shares of its
common stock.
For financial reporting purposes, the assets, liabilities, results of
operations and cash flow of the partnerships described above are
included in the Company's consolidated financial statements. The
third-parties investments in these partnerships at June 30, 1994 and
December 31, 1993 totaled approximately $625 million, and are
reflected in other liabilities and minority interests. Third-
parties share of partnerships results of operations, including
specified returns, is reflected in other income and expense-net.
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Note 6 - Litigation
The Company and its subsidiaries are involved in legal proceedings,
claims and litigation arising in the ordinary course of business.
In addition, in March and April 1989, five purported class actions
were commenced by certain shareowners (the "Shareowner Class Actions")
against the Company and up to three members of its Board of Directors
(two of whom are also officers) in various United States District
Courts, each alleging violations of the federal securities laws and
seeking unspecified damages arising out of an asserted failure to make
public disclosure of information relating to allegedly improper
practices (the "alleged practices") of the Company's wholly owned
subsidiary, Dun & Bradstreet, Inc., in connection with the selling of
commercial-credit information services. The Shareowner Class Actions
were later consolidated in the United States District Court for the
Southern District of New York.
In February 1990, an amended consolidated Shareowner Class Action
complaint was served on the defendants, alleging additional violations
of the securities laws arising out of an asserted failure to make
public disclosure of the effect that the alleged practices would have
on the Company's future sales and income, and in September 1992, the
District Judge granted a motion to permit this Action to be maintained
as a class action.
On April 16, 1993, attorneys for the defendants and attorneys for the
plaintiffs entered into a memorandum of intent to settle the
Shareowner Class Action for an amount between $15 million and $20
million. On January 14, 1994, a judgment was entered by the Court
approving the proposed settlement. The exact amount of the settlement
will depend on the monetary amount of claims filed by shareowners who
are part of the class.
As a result of contribution to the settlement by the Company's
insurance carrier and provisions previously recorded by the Company,
the amount of the settlement did not materially affect the Company's
earnings.
On June 9, 1993, American Credit Indemnity ("ACI"), a company of
which the Company owns 95% of the outstanding common stock, received
a summons and a consolidated amended class action complaint (the
"Amended Complaint") in a purported class action pending in the
United States District Court for the Southern District of New York
captioned "In re Towers Financial Corporation Noteholders Litigation.
" The Amended Complaint names 17 defendants, including Towers
Financial Corporation ("Towers") and various subsidiaries and
controlling persons of Towers, as well as ACI, in addition to a
"Broker-Dealer Defendant Class," alleged to consist of more than 75
members. The Amended Complaint is brought by an alleged class of
persons who bought promissory notes issued by Towers between February
15, 1989 and February 9, 1993. It alleges that Towers, now operating
under Chapter 11 of the Bankruptcy Code, sold nearly $215 million of
such notes to more than 2,800 investors and seeks damages from all the
defendants in at least that amount, as well as punitive damages. The
claims against ACI assert negligent misrepresentation, negligence and
fraud under common law and violations of Section 10(b) (and Rule 10b-5
thereunder) of the Securities Exchange Act of 1934. The Amended
Complaint alleges that offering documents for the notes
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<PAGE>
mischaracterized insurance policies issued by ACI to Towers with
respect to accounts receivable securing or backing the notes. It
further alleges that ACI issued policies with limited scope of coverage
and for exorbitant premiums with knowledge that they would be used by
Towers to fraudulently market the notes. ACI answered the Amended
Complaint, denying its material terms, and moved for judgment on the
pleadings. While ACI's motion was pending, the Supreme Court of the
United States decided the case of Central Bank of Denver, N.A. v. First
Interstate Bank of Denver, N.A., holding that a private plaintiff may
not maintain an aiding and abetting suit under Section 10(b) of the
Exchange Act. Thereafter, plaintiffs filed a Second Consolidated
Amended Class Action Complaint, in which they seek to assert a primary
liability claim against ACI and others under the Exchange Act, and
certain common law claims. ACI has moved to dismiss this latest
Complaint. ACI intends to defend vigorously against the claims
asserted against it.
In the opinion of management, the outcome of all current proceedings,
claims and litigation could have a material effect on quarterly or
annual operating results when resolved in a future period. However,
in the opinion of management, these matters will not materially affect
the Company's consolidated financial position.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Earnings per share in the second quarter were $.85, up 9.0 percent from
$.78 per share a year ago. For the first six months of 1994, the
Company reported earnings per share of $1.49, up 8.8% from $1.37 per
share in the first six months of 1993, which excludes the cumulative
effect of accounting changes adopted in the first quarter of 1993.
Including the impact of SFAS Nos. 106 and 112, last year the Company
reported a loss in first-half earnings of $.82 per share.
Net income in the second quarter grew 4.2% to $144.6 million from
$138.8 million a year ago. First-half net income increased 3.8% to
$253.3 million from $243.9 million in the first half of 1993
(excluding the impact of SFAS Nos. 106 and 112). Growth in net income
was held down by the cost of funds that the Company used to repurchase
8.3 million shares of its common stock in the fourth quarter of 1993.
Due to the repurchase, which resulted in a lower number of average
shares outstanding, growth in earnings per share was greater than the
increase in net income.
Reported operating income in the second quarter increased 11.7% to
$214.1 million from $191.6 million a year ago, driven primarily by
workforce reductions, restructuring actions and other company-wide
productivity initiatives. The Company's operating income grew by
about 8%, excluding the effects of acquisitions, divestitures, a
stronger dollar and timing factors. Reported operating income in
the first six months increased 12.6% to $373.9 million from $332.1
million, driven primarily by workforce reductions and restructuring
actions throughout the Company. First-half operating income for
D&B's current portfolio of businesses increased by about 11%,
excluding the effects of acquisitions, divestitures, a stronger
dollar and timing factors.
The productivity actions being taken generated double-digit
underlying growth in the Company's operating income for the first
half of 1994, and the Company expects full-year growth to be in the
same range.
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<PAGE>
Reported second-quarter revenue increased 2.0% to $1,184.7 million
from $1,161.6 million a year ago. Excluding the effects of
acquisitions, divestitures, a stronger dollar and timing factors,
second-quarter revenue rose by about 1%. Growth for the quarter was
affected primarily by a decrease in mainframe-related revenue at Dun
& Bradstreet Software (DBS) and by past competitive losses at Nielsen
in the U.S. In the first six months of 1994, reported operating
revenue increased 2.3% to $2,283.9 million from a $2,233.0 million
a year ago. Excluding the effects of the factors noted above,
first-half revenue for D&B's current portfolio of businesses was
up about 1%.
The Company is aggressively implementing company-wide actions to
accelerate future revenue growth. For example, DBS introduced three
new client/server products during the second quarter and will complete
its client/server suite of products by launching ManufacturingStream
and DistributionStream this fall. D&B Information Services is now
rolling out several new products, including WorldBase, which offers
basic information on 35 million companies worldwide. IMS introduced
Xplorer, an open client/server system that provides powerful
decision-support applications for IMS's massive prescriber and
managed-care databases.
Top line growth also will be fueled by acquisitions, joint ventures
and geographic expansion. Nielsen substantially strengthened its
global competitive advantage by agreeing to acquire Survey Research
Group, the fast-growing leader in market research in Asia. In the
U.S., Nielsen recently agreed to form a joint venture with Market
Decisions to broaden its range of services to packaged goods
companies. Moody's opened a new office in Hong Kong. And building
on the acquisition of Soliditet and Novinform AG, D&B Information
Services acquired S&W, a French credit information company, and
formed a significant new strategic alliance with Tokyo Shoko
Research Ltd., a leading credit reporting firm in Japan.
Investment in new technologies, such as Nielsen Solution System, is
another revenue-growth driver. A recent key technology move is the
Company's agreement to acquire Pilot Software, a leader in the
accelerating market for on-line processing (OLAP) software.
Interest expense--net in the second quarter was $3.9 million compared
with interest income--net of $5.4 million a year ago, due in part to
interest expense on debt in hyperinflationary countries, which was
largely offset by foreign exchange gains reported in other expense
- - --net. Net interest expense also resulted from higher interest rates
paid on increased U.S. short-term borrowings and lower interest rates
earned on international cash investments. First half interest
income-net of $118,000 compared with interest income-net of $11.0
million a year ago, primarily as a result of interest expense on debt
in hyperinflationary countries and the other factors noted above.
Other expense--net in the second quarter was $8.3 million, compared
with other expense--net of $3.2 million a year ago. Other expense
- - --net in the second quarter of 1994 included minority interest
expense, related to two limited partnerships and Gartner Group, and
the favorable impact of foreign exchange gains. The cost of funds
raised by one partnership, which provided funding for the Company's
share repurchase program, was offset by the favorable impact on
earnings per share of lower average shares outstanding. Other
expense--net in the first half was $20.3 million compared with other
expense--net of $2.4 million a year ago. Other expense--net in the
first half of 1994 included minority interest expense related to two
limited partnerships and Gartner Group.
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The Company's tax rate for the first-half was 28.4%, unchanged from a
year ago.
Business Segment Highlights
Second-quarter operating results were highlighted by good underlying
revenue growth at IMS International, and strong revenue performances at
both Nielsen Media Research and Gartner Group. Directory Information
Services, which posted flat underlying revenue last year, has
successfully reversed a flat-to-declining trend by achieving mid-
single-digit underlying revenue growth in the first half of 1994.
Marketing Information Services reported a 2.6% increase in second-
quarter revenue to $483.8 million from $471.5 million year ago.
Excluding the impact of the stronger dollar and the divestiture of
Donnelley Marketing Information Services (DMIS), second-quarter
revenue growth for the segment was about 4%. IMS International
reported second-quarter revenue of $166 million, up 7.7% on a
reported basis and up about 8% excluding the impact of a stronger
dollar. Nielsen Marketing Research reported second-quarter revenue
of $257 million, down 4.1% on a reported basis and essentially
unchanged excluding the impact of a stronger dollar and the
divestiture of DMIS. Nielsen Marketing Research's second-quarter
revenue growth was held down by past competitive losses in the U.S.
While the competitive environment in the U.S. remains intense,
Nielsen recently renewed significant contracts with Helene Curtis,
Coors, Maybelline, Revlon, Welch Foods Inc., Whitehall/Robins and
Procter & Gamble. Nielsen Media Research had a strong increase in
second-quarter revenue.
Risk Management and Business Marketing Information Services reported
second-quarter revenue growth of 2.3% to $392.0 million from $383.0
million a year ago. Excluding the impact of a stronger dollar and the
acquisition of Soliditet and Novinform AG, segment revenue was
essentially unchanged. DBIS North America's second-quarter revenue
also was flat. U.S. credit services revenue, which includes the
recognition of revenue from previous subscription sales, was down
slightly, reflecting customers' increased use of lower priced, less
comprehensive U.S. credit services products. Second-quarter sales
of U.S. credit services were up slightly. Excluding the impact of a
stronger dollar and the acquisition of Soliditet and Novinform AG,
DBIS Europe's second-quarter revenue declined slightly. DBIS recently
introduced a number of new products aimed at stimulating revenue
growth, including: new database marketing services on CD/ROM; a new
low-cost product for the high-transaction trucking industry; a new
small-business scoring report in conjunction with Equifax; and a new
low-cost trade-based payment analysis report. Moody's Investors
Service's second-quarter revenue was essentially unchanged as a result
of the slowdown in the volume of refinancings and new debt issues.
Software Services reported a 17.3% decrease in second-quarter revenue
to $99.1 million from $119.9 million a year ago. DBS's second-quarter
1994 revenue, adjusted for the dollar, was down in line with the
segment, due to lower mainframe-related revenue. During the second
quarter, DBS introduced three new client/server products: SmartPath,
a tool set for automating migration from mainframe applications to the
Company's SmartStream suite of client/server solutions; SmartStream
Budget, a client/server budgeting and planning application; and
TotalHR, a human resources application for the PC/LAN environment.
While the sales cycle is longer than expected due to the scope of
shifting to enterprise-wide client/server solutions, customer interest
in DBS's client/server products is high and sales are ahead of last
year.
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<PAGE>
Directory Information Services reported a 2.2% increase in second-
quarter revenue to $103.2 million from $101.0 million a year ago.
Excluding the impact of timing and the divestiture of Thomson
Directories, revenue growth for the quarter was about 5%. Underlying
second-quarter sales growth of Directory Information Services yellow
pages directories was up in the same range as revenue growth,
reflecting the continuation of the improved sales performance that
began in the first quarter.
Other Business Services reported second-quarter revenue of $106.6
million up 23.8% from $86.1 million a year ago. Adjusted for the
acquisition of Gartner Group and Dataquest's divestiture of its
Machinery Information Division, segment revenue increased about 12%.
Gartner Group reported an excellent increase in second-quarter
revenue, consistent with the strong expectations for this business
when it was acquired by D&B last year. NCH Promotional Services
reported a significant decrease in second-quarter revenue, reflecting
a decline in worldwide coupon redemptions and competitive pricing in
the industry as well as the impact of actions taken to improve cash
flow and profitability.
Changes in Financial Condition at June 30, 1994
Compared with December 31, 1993
Accounts and Notes Payable increased to $651.5 million at June 30,
1994 from $371.8 million at December 31, 1993, primarily reflecting
increased domestic short-term borrowings ($258.0 million).
Accrued and Other Current Liabilities decreased to $1,273.4 million
at June 30, 1994 from $1,561.5 million at December 31, 1993,
primarily reflecting the payment ($166.2 million) of the Company's
obligation to an Alaska Native Corporation, postemployment benefit
payments ($79.4 million), restructuring payments ($50.1 million),
partially offset by the reclassification of accrued postemployment
benefits of $100.0 million to accrued and other current liabilities
(see postretirement and postemployment benefits below).
Unearned Subscription Income increased to $357.3 million at June 30,
1994, from $263.7 million at December 31, 1993, reflecting the
cyclical pattern of higher subscription sales in the first quarter.
Postretirement and Postemployment Benefits decreased to $441.4
million at June 30, 1994 from $545.7 million at December 31, 1993,
primarily reflecting the reclassification to accrued and other
current liabilities of $100.0 million of accrued postemployment
benefits (primarily severance).
Condensed Consolidated Statement of Cash Flows
Six months Ended June 30, 1994 and 1993
Net cash provided by operating activities for the six months ended
June 30, 1994 totaled $265.6 million compared with $472.8 million
for the comparable period during 1993. The decrease in cash provided
by operating activities ($207.2 million) primarily reflected an
increase ($127.3 million) in other working capital items at American
Credit Indemnity, NCH Promotional Services (NCH) and R.H. Donnelley,
lower deferred revenue at D&B Software, a smaller reduction in
accounts receivable at NCH and higher postemployment benefit payments
($79.4 million), partially offset by lower income taxes paid-net of
refunds ($44.7 million).
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<PAGE>
Net cash used in investing activities for the six months ended June
30,1994 totaled $303.8 million compared with $238.4 million for the
comparable period in 1993. The increase in cash used for investing
activities primarily reflected higher payments for marketable
securities ($99.6 million) and higher capital expenditures ($33.3
million) offset, in part, by higher proceeds from sale of businesses
($30.1 million) and lower payments for acquisition of businesses
($55.4 million).
Net cash used in financing activities was $139.8 million for the
six months ended June 30, 1994 compared with net cash used in
financing activities of $245.1 million for the comparable period
in 1993. The decrease in cash usage primarily reflected increased
domestic short term borrowings of $282.0 million, partially offset
by the payment of Alaska Native Corp. obligations of $166.2 million.
Restructuring Actions
During the second quarter, the Company took further steps to improve
productivity. The Company divested two non-strategic businesses--
Thomson Directories and the Machinery Information Division of
Dataquest--and initiated other actions to restructure certain
operations and businesses, and to reduce costs and increase operating
efficiencies. These restructuring actions included office
consolidations and relocations, the closedown of Sales Technologies'
European operations, the discontinuance of certain production and
data-collection systems and products, as well as additional steps to
complete certain actions initiated in the fourth quarter of 1993.
The pre-tax costs associated with these restructuring actions
essentially offset a pre-tax gain of $55 million on the two
divestitures.
The ongoing pre-tax savings from these actions and the synergy actions
that were initiated in the fourth quarter of 1993 are expected to
grow in the next few years to more than $100 million annually.
In 1994, the Company anticipates cash outlays in the range of $170
million primarily associated with restructuring actions initiated in
1994 and 1993.
Other
Looking ahead, the Company reiterated it is anticipating growth in
earnings per share somewhat above the 8.4% growth in 1993. (For the
full year 1993, earnings per share rose 8.4% to $3.36, excluding the
impact of a fourth-quarter restructuring charge and the adoption of
required accounting changes.) While revenue growth is expected to
improve in the second half of this year, underlying revenue growth
for the full year is likely to be less than 1993 revenue growth of
about 3.5%, primarily because of the decline in revenue at DBS and
competitive pressures at Nielsen in the U.S.
The Board of Directors declared on July 20, 1994 a quarterly dividend
of 65 cents per share, payable September 9, 1994, to shareowners of
record at the close of business August 19, 1994.
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<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareowners of The Dun & Bradstreet
Corporation was held on April 19, 1994.
The following nominees for director named in the Proxy Statement
dated March 11, 1994 were elected at the Meeting by the votes
indicated:
For Withheld
----------- --------
Hall Adams, Jr. 137,410,238 980,795
Michael R. Quinlan 137,418,144 972,889
Robert E. Weissman 137,431,118 959,915
The votes in favor of the election of the nominees represent at
least 99.3% of the shares voted for each of the nominees.
Ratification of the appointment of Independent Public Accountants
was approved by the following vote:
For Against Abstain
--- ------- -------
Number of shares 137,968,652 198,420 223,961
The proposal on implementation of the Macbride principles was
defeated by the following vote:
For Against Abstain No Votes
--- ------- ------- --------
Number of shares 18,990,592 99,406,797 9,066,300 10,927,344
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
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<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 11, 1994 By:EDWIN A. BESCHERER, JR.
__________________________
Edwin A. Bescherer, Jr.,
Executive Vice President - Finance
and Chief Financial Officer
Date: August 11, 1994 By:THOMAS W. YOUNG
__________________
Thomas W. Young,
Senior Vice President
and Controller
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