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 September 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
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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
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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 October 31, 1994
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Common Stock,
ar value $1 per share 169,788,332
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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 September 30, 1994 and 1993 3
Nine Months Ended September 30, 1994 and 1993 4
Condensed Consolidated Statement of Cash Flows (Unaudited)
Nine Months Ended September 30, 1994 and 1993 5
Condensed Consolidated Statement of
Financial Position (Unaudited)
September 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
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Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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PART l. FINANCIAL INFORMATION
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Item l. FINANCIAL STATEMENTS
THE DUN & BRADSTREET CORPORATION
Condensed Consolidated Statement of Income (Unaudited)
(In thousands except per share amounts)
<CAPTION>
Three Months Ended
September 30
________________________
1994 1993
________________________
<S> <C> <C>
Operating Revenue $1,203,362 $1,157,953
Operating Costs, Selling and
Administrative Expenses 953,008 929,189
__________ __________
Operating Income 250,354 228,764
Interest (Expense) Income - Net (4,250) 4,433
Other Expense - Net (13,311) (1,388)
__________ __________
Non-Operating (Expense) Income - Net (17,561) 3,045
Income Before Provision for Income Taxes 232,793 231,809
Provision for Income Taxes 66,113 73,260
__________ __________
Net Income $166,680 $158,549
========== ==========
Earnings Per Share Of Common Stock $0.98 $0.89
========== ==========
Dividends Paid Per Share of Common Stock $0.65 $0.61
========== ==========
Average Number of Shares Outstanding 170,004 178,288
<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>
Nine Months Ended
September 30
________________________
1994 1993
________________________
<S> <C> <C>
Operating Revenue $3,487,290 $3,390,938
Operating Costs, Selling and
Administrative Expenses 2,863,026 2,830,095
__________ __________
Operating Income 624,264 560,843
Interest (Expense) Income - Net (4,132) 15,455
Other Expense - Net (33,582) (3,812)
__________ __________
Non-Operating (Expense) Income - Net (37,714) 11,643
Income Before Provision for Taxes and Cumulative
Effect of Changes in Accounting Principles 586,550 572,486
Provision for Income Taxes 166,580 170,012
__________ __________
Income Before Cumulative Effect of Changes in
Accounting Principles 419,970 402,474
Cumulative Effect to January 1, 1993, of Changes
in Accounting Principles:
-SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions,"
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 $419,970 $ 11,878
========== ==========
Earnings Per Share of Common Stock:
Before Cumulative Effect of Changes in
Accounting Principles $2.47 $2.26
-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 $2.47 $ 0.07
========== ==========
Dividends Paid Per Share of Common Stock $1.91 $1.79
========== ==========
Average Number of Shares Outstanding 170,004 178,288
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
-4-
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<TABLE>
The Dun & Bradstreet Corporation
Condensed Consolidated Statement
of Cash Flows (Unaudited)
Nine Months Ended September 30
1994 1993
(Amounts in thousands)
_________________________________________________________________________
<CAPTION>
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $419,970 $ 11,878
Reconciliation of Net Income 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 309,028 278,033
Gain on Sale of DunsNet Assets (36,000) 0
Revaluation of Computer Software
and Other Assets 38,800 0
Restructuring Gains from Sale of Businesses (56,327) (13,616)
Restructuring Provisions 56,327 13,616
Restructuring Payments (109,563) (51,884)
Postemployment Benefit Payments (124,521) 0
Net Decrease in Accounts Receivable 74,990 169,090
Income Taxes Paid- Net of Refunds (139,667) (190,293)
Unearned Subscription Income 55,561 61,548
Postemployment Benefits - Curtailment Gains (33,410) 0
Net Changes in Other Working Capital Items (31,938) 6,125
___________________________________________________________________________
Net Cash Provided by Operating Activities 423,250 675,093
___________________________________________________________________________
Cash Flows from Investing Activities:
(Payments for)Proceeds from Marketable
Securities - Net (10,135) 16,064
Payments for Acquisition of Businesses (excluding cash
and cash equivalents acquired of $1,926 and
$6,548 in 1994 and 1993, respectively) (181,910) (100,787)
Proceeds from Sale of Businesses 143,648 42,511
Capital Expenditures (213,706) (158,924)
Additions to Computer Software and
Other Intangibles (128,561) (134,808)
Increase in Other Investments and
Notes Receivable (46,791) (31,919)
Other 6,323 14,486
___________________________________________________________________________
Net Cash Used in Investing Activities (431,132) (353,377)
___________________________________________________________________________
Cash Flows from Financing Activities:
Payment of Dividends (324,804) (319,143)
Payments for Purchase of Treasury Shares (59,887) (37,464)
Net Proceeds from Exercise of Stock Options 19,378 28,053
Increase (Decrease) in U.S.
Short-term Borrowings 363,017 (81,850)
Third Parties' Investment in Partnership 0 125,000
Payment of Alaska Native Corp. Obligations (166,208) 0
Other 30,442 (7,797)
___________________________________________________________________________
Net Cash Used in Financing Activities (138,062) (293,201)
___________________________________________________________________________
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 13,951 (19,878)
___________________________________________________________________________
(Decrease) Increase in Cash and Cash Equivalents(131,993) 8,637
Cash and Cash Equivalents, Beginning of Period 650,909 494,520
___________________________________________________________________________
Cash and Cash Equivalents, End of Period $518,916 $503,157
___________________________________________________________________________
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
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<TABLE>
The Dun & Bradstreet Corporation
Condensed Consolidated Statement of Financial Position (Unaudited)
(Amounts in thousands)
<CAPTION>
___________________________________________________________________________
September 30 December 31
1994 1993
___________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $518,916 $650,909
Marketable Securities, interest-bearing 31,719 17,749
Accounts Receivable - Net 1,049,083 1,078,943
Other Current Assets 386,367 374,828
--------- ---------
Total Current Assets 1,986,085 2,122,429
___________________________________________________________________________
Investments
Marketable Securities, interest-bearing 122,495 106,219
Other Investments and Notes Receivable 356,010 310,585
--------- ---------
Total Investments 478,505 416,804
___________________________________________________________________________
Property, Plant and Equipment - Net 911,647 861,065
___________________________________________________________________________
Other Assets-Net
Deferred Charges $347,948 $318,469
Computer Software 275,187 294,474
Other Intangibles 214,215 214,743
Goodwill 1,091,701 942,378
--------- ---------
Total Other Assets-Net 1,929,051 1,770,064
___________________________________________________________________________
TOTAL ASSETS $5,305,288 $5,170,362
___________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Shareowners' Equity
<S> <C> <C>
Current Liabilities
Accounts and Notes Payable $750,290 $371,776
Accrued and Other Current Liabilities 1,192,442 1,561,509
Accrued Income Taxes 145,428 110,759
--------- ---------
Total Current Liabilities 2,088,160 2,044,044
___________________________________________________________________________
Unearned Subscription Income 325,029 263,686
Postretirement and Postemployment Benefits 442,807 545,661
Deferred Income Taxes 84,642 85,850
Other Liabilities and Minority Interests 1,157,080 1,119,805
___________________________________________________________________________
TOTAL LIABILITIES $4,097,718 $4,059,046
___________________________________________________________________________
Shareowners' Equity $1,207,570 $1,111,316
___________________________________________________________________________
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $5,305,288 $5,170,362
___________________________________________________________________________
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
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<PAGE>
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 position 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 $107.1 million and $149.2 million
at September 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):
September 30, 1994 December 31, 1993
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
Equity securities $25.7 $25.6 $11.6 $11.7
Debt securities of the U.S.
Government and its agencies 71.5 70.2 63.2 67.4
Debt securities of states
and other sub-divisions
of the U.S. Government 90.8 90.4 85.8 89.6
Debt securities of
non-U.S.governments 11.7 11.5 9.9 10.3
Corporate debt securities 17.6 16.1 19.6 19.7
Other 3.1 2.9 0.2 0.2
---- ---- ---- ----
$220.3 $216.7 $190.3 $198.9
====== ====== ====== ======
At September 30, 1994, gross unrealized gains and losses were $3.9
million and $7.5 million, respectively. At December 31, 1993, gross
unrealized gains and losses were $9.1 million and $0.5 million,
respectively.
At September 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 $20.5 $19.2
Due after one year through five years 65.3 64.3
Due after five years through ten years 97.9 96.9
Mortgage-backed securities 7.9 7.8
------ ------
$191.6 $188.2
====== ======
For the nine months ended September 30, 1994 and 1993, proceeds from
the sales and maturities of marketable securities were $123.7
million and $57.4 million, respectively 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 September 30, 1994, the Company had approximately
$130 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 September 30, 1994, the fair value of the interest rate swaps
and foreign exchange forward contracts was $21.1 million and $131
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 September 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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<PAGE>
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
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
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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.
On September 2, 1994, ACI and counsel for the plaintiffs entered into
an agreement to settle all claims that were or could have been
asserted against ACI in the Towers Class Action for $1.25 million.
The proposed settlement is subject to United States District Court
approval. The amount of the proposed settlement will not materially
affect the Company's 1994 earnings.
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 third quarter were $.98, up 10.1% from $.89
per share a year ago. For the first nine months of 1994, the Company
reported earnings per share of $2.47, up 9.3% from $2.26 per share in
the first nine 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
earnings in the first nine months of $.07 per share.
Net income in the third quarter grew 5.1% to $166.7 million from
$158.5 million a year ago. Net income for the first nine months
increased 4.3% to $419.9 million from $402.5 million in the first nine
months 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.
As a result of the Company's emphasis on productivity, reported
operating income in the third quarter increased 9.4% to $250.4
million from $228.8 million a year ago. Operating-income growth
outpaced revenue growth primarily because of workforce reductions,
prior restructuring actions and other company-wide productivity
initiatives, including a substantial reduction in healthcare costs
for U.S. employees. Several non-recurring gains and significant
changes in costs were included in the third quarter. As a result of
the decision to outsource communications services, the assets of
DunsNet were sold for a pre-tax gain of $36 million. Dun &
Bradstreet Plan Services was divested with no gain recorded. The
Company also took proactive measures to improve D&B's future
performance by accelerating the introduction of newer technologies,
though this resulted in a charge of $39 million. The charge
principally reflected the revaluation of certain computer software
and other intangible assets that will be replaced or no longer be
used at Dun & Bradstreet Software (DBS), IMS International (IMS),
Dun & Bradstreet Information Services (DBIS), and Nielsen.
In
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addition, a change in eligibility requirements for the Company's
postretirement medical plan resulted in a curtailment gain of
approximately $26 million, which was largely offset by a substantial
increase in spending for new-product development. Excluding these
factors, as well as the effects of acquisitions, divestitures, a
weaker U.S. dollar and timing issues, D&B's third-quarter operating
income grew by about 9%.
Reported operating income in the first nine months increased 11.3%
to $624.3 million from $560.8 million, driven primarily by workforce
reductions and restructuring actions throughout the Company.
Nine-month operating income for D&B's current portfolio of
businesses increased by about 11%, excluding the effects of
acquisitions, divestitures, a stronger dollar, timing factors and
the other items noted above.
The Company is continuing to focus on long-term revenue growth and
ongoing productivity improvement. Productivity actions clearly
showed an impact on third-quarter results and the Company is working
aggressively to improve the revenue outlook. At DBIS and DBS,
actions have been taken to build new management structures and teams
to drive the top line. Key changes in top management at DBIS North
America and Europe followed the appointment at DBS of a new
president with strong sales and marketing skills.
Third-quarter revenue increased 3.9% to $1,203.4 million from
$1,157.9 million a year ago. Excluding the effects of acquisitions
and divestitures, a weaker U.S. dollar and timing factors, third-
quarter revenue rose by about 1%. Good underlyling revenue
performance at IMS International, Nielsen Media Research, Gartner
Group and Directory Information Services was largely offset by a
decline at Moody's Investors Service, a decrease in mainframe-
related revenue at DBS, and by past competitive losses at Nielsen
in the U.S. During the third quarter, the Company continued to
invest in a broad range of new initiatives to accelerate revenue
growth. In the first nine months of 1994, reported operating
revenue increased 2.8% to $3,487.3 million from $3,390.9 million a
year ago. Excluding the effects of acquisitions, divestitures, a
stronger dollar and timing factors, nine-month revenue for D&B's
current portfolio of businesses was up about 1%.
Interest expense-net in the third quarter was $4.2 million, compared
with interest income--net of $4.4 million a year ago, due in part to
a lower cash position as a result of cash payments for acquisitions,
and lower interest rates earned on international cash investments.
Net interest expense also resulted from interest expense on debt in
hyperinflationary countries, which was partly offset by foreign-
exchange gains reported in other expense--net, and higher interest
rates paid on increased U.S. short-term borrowings. For the first
nine months of 1994, the Company reported interest expense--net of
$4.1 million, compared with interest income--net of $15.5 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 third quarter was $13.3 million, compared
with other expense--net of $1.4 million a year ago. Other expense--
net in the first nine months was $33.6 million compared with other
expense--net of $3.8 million a year ago. Other expense--net in the
third quarter and first nine months of 1994 included minority interest
expense related to two previously disclosed limited partnerships and
to Gartner Group. 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.
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The Company's third-quarter tax rate was 28.4%, compared with the
third-quarter 1993 tax rate of 31.6% (which reflected the increase
in the U.S. corporate income-tax rate, retroactive to January 1,
1993).
Business Segment Highlights
Third-quarter operating results were highlighted by excellent revenue
performances at both Nielsen Media Research and Gartner Group, and
solid underlying revenue growth at IMS International. Directory
Information Services achieved underlying revenue growth of about 7%
in the third quarter, continuing a successful reversal of a flat-to-
declining trend over the past few years.
Marketing Information Services reported a 9.9% increase in third-
quarter revenue to $513.5 million from $467.2 million a year ago.
Excluding the impact of a weaker U.S. dollar, the acquisition of
Survey Research Group (SRG), AGB Australia and Amfac Chemdata and
the divestiture of Donnelley Marketing Information Services (DMIS),
third-quarter revenue growth for the segment was up about 4%. IMS
International reported third-quarter revenue of $174 million, up
11.4% on a reported basis and up about 8%, excluding the acquisition
of Amfac Chemdata and the impact of the dollar. Nielsen Marketing
Research reported third-quarter revenue of $277 million, up 6.3% on
a reported basis and essentially unchanged excluding the impact of a
weaker U.S. dollar, the acquisition of SRG and AGB Australia and the
divestiture of DMIS. Nielsen Marketing Research's underlying third-
quarter revenue was held down by past competitive losses in the U.S.
Nielsen Marketing Research's multi-year contracts result in a six
month to a year lag in impact on reported revenue. Therefore,
business lost in 1993 is now adversely impacting 1994 results.
However, this timing also holds true for 1994 competitive wins,
which will be reflected next year. While the competitive environment
in the U.S. remained intense, in the third quarter Tambrands and Dole
Foods joined a growing number of clients, such as Bristol Myers
Squibb, Johnson & Johnson, Clairol and Colgate Palmolive, that have
reestablished and/or consolidated their information needs with
Nielsen. During the past year, more than 20 clients have been won
back from competition, underscoring Nielsen's growing momentum,
particularly in the U.S. marketplace. Nielsen Media Research had
a substantial increase in third-quarter revenue, reflecting growth
in both cable and broadcast audience measurement.
Risk Management and Business Marketing Information Services reported
third-quarter revenue growth of 0.9% to $391.3 million from $387.8
million a year ago. Excluding the impact of a weaker U.S. dollar and
the acquisition of Novinform AG, segment revenue was essentially
unchanged, held down by a decline at Moody's Investors Service.
Moody's reported significantly lower third-quarter revenue,
principally due to the dramatic decline in corporate-bond volumes
and public-debt refundings. Dun & Bradstreet Information Services
(DBIS) reported revenue of $313 million, up 4.6% from last year.
Excluding the weaker U.S. dollar and the acquisition of Novinform,
DBIS's revenue was up about 3%. DBIS North America's third-quarter
revenue was up slightly, held down by flat U.S. credit services
revenue resulting from customers' increased use of lower priced,
less comprehensive U.S. credit services products. Excluding the
impact of a weaker U.S. dollar and the acquisition, DBIS Europe's
third-quarter revenue increased by about 5%, driven by new products
and accelerated actions to strengthen D&B's competitive capabilities
throughout Europe.
-13-
<PAGE>
Software Services reported a 13.4% decrease in third-quarter revenue
to $94.0 million from $108.6 million a year ago. DBS's third-quarter
1994 revenue, adjusted for the dollar, was down in line with the
segment, due to lower mainframe-related revenue.
Directory Information Services reported a 2.3% increase in third-
quarter revenue to $101.8 million from $99.5 million a year ago.
Excluding the impact of timing, revenue growth for the quarter was
about 7%. Underlying third-quarter sales of Directory Information
Services yellow pages directories were down slightly.
Other Business Services reported third-quarter revenue of $102.9
million, up 8.4% from $94.9 million a year ago. Adjusted for
Dataquest's divestiture of its Machinery Information Division and
the divestiture of Plan Services, segment revenue increased about 19%.
Gartner Group reported an excellent increase in third-quarter revenue,
consistent with the strong expectations for this business when it was
acquired by D&B last year. NCH Promotional Services reported a
decrease in third-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 Position at September 30, 1994
Compared with December 31, 1993
Goodwill - Net increased to $1,091.7 million at September 30, 1994
from $942.4 million at December 31, 1993 reflecting goodwill arising
from the Company's acquisitions during 1994 of SRG, AGB Australia,
Amfac Chemdata, Novinform AG and S&W Wys Muller.
Accounts and Notes Payable increased to $750.3 million at September
30, 1994 from $371.8 million at December 31, 1993, primarily
reflecting increased U.S. short-term borrowings
($363.0 million).
Accrued and Other Current Liabilities decreased to $1,192.4 million
at September 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 ($124.5 million) and restructuring payments
($109.6 million), partially offset by the reclassification of accrued
postretirement benefits of $100.0 million to accrued and other current
liabilities (see postretirement and postemployment benefits below).
Postretirement and Postemployment Benefits decreased to $442.8
million at September 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
Nine months Ended September 30, 1994 and 1993
Net cash provided by operating activities for the nine months ended
September 30, 1994 totaled $423.3 million compared with $675.1
million for the comparable period during 1993. The decrease in
cash provided by operating activities ($251.8 million) primarily
reflected a smaller reduction in accounts receivable at NCH ($90.4
million), higher restructuring payments ($57.7 million), higher
postemployment benefit payments ($124.5 million) and the
postemployment benefits curtailment gains ($33.4 million)
partially offset by lower income taxes paid-net of refunds ($50.6
million).
-14-
<PAGE>
Net cash used in investing activities for the nine months ended
September 30, 1994 totaled $431.1 million compared with $353.4
million for the comparable period in 1993. The increase in cash
used for investing activities primarily reflected higher payments
for marketable securities-net ($26.2 million), higher payments for
acquisition of businesses ($81.1 million) and higher capital
expenditures ($54.8 million), offset in part, by higher proceeds
from sale of businesses ($101.1 million).
Net cash used in financing activities was $138.1 million for the nine
months ended September 30, 1994 compared with net cash used in
financing activities of $293.2 million for the comparable period in
1993. The decrease in cash usage primarily reflected the change in
U.S. short-term borrowings ($444.8 million), partially offset by the
payment of Alaska Native Corporation obligations ($166.2 million)
and the absence of third parties' investments in a limited
partnership ($125.0 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
The Company reiterated it is anticipating growth in full-year
earnings per share in 1994 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.) Underlying revenue
growth for the full year is expected to be in the range of 1-to-2%.
The Board of Directors declared on October 19, 1994 a quarterly
dividend of 65 cents per share, payable December 9, 1994, to
shareowners of record at the close of business November 18, 1994.
-15-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
A report on Form 8-K was filed on September 16, 1994 to report
under Item 5 - Other Events, that on September 2, 1994, American
Credit Indemnity Company (ACI), a ninety-five percent owned
subsidiary of the Company, and counsel for the plaintiffs entered
into an agreement to settle all claims that were or could have been
asserted against ACI in the Towers Class Action for $1.25 million,
as explained more fully in Note 6 - Litigation.
-16-
<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: November 10, 1994 By:EDWIN A. BESCHERER, JR.
Edwin A. Bescherer, Jr.,
Executive Vice President -
Finance and Chief Financial
Officer
Date: November 10, 1994 By:THOMAS W. YOUNG
Thomas W. Young,
Senior Vice President and
Controller
-17-
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