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 March 31, 1995
--------------
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
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.)
187 Danbury Road, Wilton, CT 06897
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 834-4200
--------------
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 April 28, 1995
--------------- -----------------
Common Stock,
par value $1 per share 169,562,908
<PAGE>
THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
- ----------------------------- -----
Item 1. Financial Statements
Condensed Consolidated Statement of Income (Unaudited)
Three Months Ended March 31, 1995 and 1994 3
Condensed Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 1995 and 1994 4
Condensed Consolidated Statement of Financial Position (Unaudited)
March 31, 1995 and December 31, 1994 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
- -----------------------------
Item I. FINANCIAL STATEMENTS
THE DUN & BRADSTREET CORPORATION
Condensed Consolidated Statement of Income (Unaudited)
(In millions except per share amounts)
<CAPTION>
Three Months Ended
March 31
________________________
1995 1994
________________________
<S> <C> <C>
Operating Revenue $1,219.6 $1,099.2
Operating Costs, Selling and
Administrative Expenses 1,046.8 939.4
________ ________
Operating Income 172.8 159.8
Interest (Expense) Income - Net (6.5) 4.0
Other Expense - Net (15.7) (12.0)
________ ________
Non-Operating Expense - Net (22.2) (8.0)
Income Before Provision for Taxes 150.6 151.8
Provision for Income Taxes 41.7 43.1
_______ _______
Net Income $108.9 $108.7
======= =======
Earnings Per Share of Common Stock $0.64 $0.64
======= =======
Dividends Paid Per Share of Common Stock $0.65 $0.61
======= =======
Average Number of Shares Outstanding 169.7 170.2
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</TABLE>
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<PAGE>
<TABLE>
The Dun & Bradstreet Corporation
Condensed Consolidated Statement
of Cash Flows (Unaudited)
Three Months Ended March 31
1995 1994
(Amounts in millions)
_________________________________________________________________________
<CAPTION>
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $108.9 $108.7
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 116.0 101.1
Restructuring Gains from Sale of Business 0.0 (1.7)
Restructuring Provisions 0.0 1.7
Restructuring Payments (37.1) (22.1)
Postemployment Benefit Payments (26.7) (40.0)
Net Increase in Accounts Receivable (46.7) (83.4)
Unearned Subscription Income 151.5 138.1
Income Taxes Paid- Net of Refunds (6.6) (31.7)
Net Changes in Other Working Capital Items (57.3) (89.1)
___________________________________________________________________________
Net Cash Provided by Operating Activities 202.0 81.6
___________________________________________________________________________
Cash Flows from Investing Activities:
Payments for Marketable Securities - Net (3.9) (70.3)
Payments for Acquisition of Businesses (excluding cash
and cash equivalents acquired of $.8 in 1994) (4.0) (31.3)
Capital Expenditures (80.0) (72.6)
Additions to Computer Software and
Other Intangibles (37.2) (33.3)
Increase in Other Investments and
Notes Receivable (6.3) (25.2)
Other 2.0 2.3
___________________________________________________________________________
Net Cash Used in Investing Activities (129.4) (230.4)
___________________________________________________________________________
Cash Flows from Financing Activities:
Payment of Dividends (110.9) (103.9)
Payments for Purchase of Treasury Shares (18.6) (28.7)
Net Proceeds from Exercise of Stock Options 7.5 7.5
Increase in U.S. Short-term Borrowings 113.1 296.1
Payment of Alaska Native Corp. Obligations 0.0 (166.2)
Other 6.9 6.8
___________________________________________________________________________
Net Cash (Used in) Provided by
Financing Activities (2.0) 11.6
___________________________________________________________________________
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 9.2 2.4
___________________________________________________________________________
Increase (Decrease) in Cash & Cash Equivalents 79.8 (134.8)
Cash and Cash Equivalents, Beginning of Year 335.4 650.9
___________________________________________________________________________
Cash and Cash Equivalents, End of Period $415.2 $516.1
___________________________________________________________________________
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
-4-
</TABLE>
<PAGE>
<TABLE>
THE DUN & BRADSTREET CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
(Amounts in millions)
<CAPTION>
___________________________________________________________________________
March 31 December 31
1995 1994
___________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $415.2 $335.4
Marketable Securities 27.0 26.9
Accounts Receivable - Net 1,317.3 1,256.5
Other Current Assets 382.9 362.2
_______ _______
Total Current Assets 2,142.4 1,981.0
____________________________________________________________________________
Investments
Marketable Securities 135.3 133.1
Other Investments and Notes Receivable 379.2 366.4
_______ _______
Total Investments 514.5 499.5
____________________________________________________________________________
Property, Plant and Equipment - Net 929.3 918.5
____________________________________________________________________________
Other Assets - Net
Deferred Charges 370.9 363.1
Computer Software 333.0 335.9
Other Intangibles 215.9 216.0
Goodwill 1,150.2 1,149.9
_______ _______
Total Other Assets - Net 2,070.0 2,064.9
___________________________________________________________________________
Total Assets $5,656.2 $5,463.9
___________________________________________________________________________
Liabilities and Shareowners' Equity
Current Liabilities
Accounts Payable $315.8 $290.1
Short-term Debt 623.5 500.6
Accrued and Other Current Liabilities 1,139.6 1,300.4
Accrued Income Taxes 127.0 95.4
_______ _______
Total Current Liabilities 2,205.9 2,186.5
___________________________________________________________________________
Unearned Subscription Income 443.7 290.3
Postretirement and Postemployment Benefits 494.5 484.9
Deferred Income Taxes 205.3 209.3
Other Liabilities and Minority Interest 981.7 974.2
___________________________________________________________________________
Total Liabilities $4,331.1 $4,145.2
Shareowners' Equity 1,325.1 1,318.6
___________________________________________________________________________
Total Liabilities and Shareowners' Equity $5,656.2 $5,463.8
___________________________________________________________________________
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
-5-
</TABLE>
<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")
1994 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. Certain prior-year amounts have been reclassified
to conform with the 1995 presentation.
Note 2 - Financial Instruments with Off-Balance-Sheet Risk
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.
Interest rate swap agreements are entered into primarily as hedges
against variable interest rate exposures. During the first quarter of
1995, the Company executed swap agreements which effectively fixed
interest rates on an additional $100 million of variable rate debt.
As a result, at March 31, 1995, the Company had swap agreements
outstanding to fix interest rates on a total of $400 million of
variable rate debt through fiscal 2004. The weighted average fixed
rate payable under these agreements is 7.07%. The differential
interest to be paid or received under these agreements is included
in interest expense over the life of the debt.
Note 3 - 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 March 31, 1995
and December 31, 1994 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.
-6-
<PAGE>
Note 4 - 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
-7-
<PAGE>
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 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 did 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 first quarter were $.64, unchanged from a
year ago, reflecting a significant cyclical decline at Moody's
Investors Service and previously announced plans to increase
investment spending company-wide in 1995.
Net income in the first quarter was $108.9 million, essentially
unchanged from $108.7 million a year ago.
Reported first-quarter revenue increased by 11.0% to $1,219.6
million from $1,099.2 million a year ago, driven by aggressive
investments in new products, geographic and market expansion plus
high-growth acquisitions. Underlying first-quarter revenue growth
was 5%. D&B's first-quarter reported and underlying revenue growth
rates were more than double the rates D&B achieved in 1994.
On a reported basis, A.C. Nielsen, D&B Information Services (DBIS),
IMS International (IMS), Nielsen Media and Gartner Group all
achieved double-digit topline growth. DBIS reported its best
revenue growth since 1987.
Due to lower public bond-market volumes, Moody's reported a
significant decline in revenue. However, excluding Moody's, the
Company achieved underlying revenue growth of almost 7% and reported
growth of 13%. Moreover, while stabilization was the goal at D&B
Software (DBS) and Nielsen U.S., the Company actually saw modest
revenue gains in both of these businesses for the quarter.
-8-
<PAGE>
Reported operating income in the first quarter increased 8.1% to
$172 million from $159 million a year ago, led by good operating-
income performance at IMS, A.C. Nielsen, DBIS U.S., Nielsen Media
Research and Gartner Group. First-quarter operating income included
a $28 million gain from the sale of warrants received in connection
with the divestiture of Donnelley Marketing in 1991. Operating
income was held down by a significant decline at Moody's and by a
substantial increase in investment spending on new revenue
initiatives.
Non-operating expense-net in the first quarter was $22.2 million,
compared with $8 million of expense a year ago. Non-operating
expense--net in the first quarter of 1995 increased, in part, due
to a lower cash position as a result of cash payments for
acquisitions, restructuring and severance, lower interest rates
earned on international cash investments, higher interest rates paid
on increased U.S. short-term borrowings, and higher minority
interest expense related to Gartner Group's increased income and to
a previously disclosed limited partnership.
The Company's first-quarter tax rate was 27.7%, compared with the
first-quarter 1994 tax rate of 28.4%.
Business Segment Highlights
Marketing Information Services reported a 19.8% increase in first-
quarter revenue to $527.4 million from $440.3 million a year ago.
Excluding the impact of a weaker U.S. dollar and acquisitions,
including Survey Research Group (SRG), AGB Australia/New Zealand and
Amfac Chemdata, first-quarter revenue growth for the segment was
about 9%. IMS International reported first-quarter revenue of $174
million, up 18% on a reported basis and up about 8%, excluding the
impact of acquisitions and the dollar. A.C. Nielsen reported
first-quarter revenue of $288 million, up 22% on a reported basis and
up about 8%, excluding the impact of acquisitions and the dollar.
Nielsen Media Research reported strong growth in first-quarter
revenue.
Risk Management and Business Marketing Information Services reported
first-quarter revenue growth of 6.1% to $409.2 million from $385.6
million a year ago. Excluding the impact of a weaker U.S. dollar
and the acquisitions of Orefro L'Informazione in Italy, S&W in
France and Novinform in Switzerland, segment revenue was
essentially unchanged. Compared with its strong results in the
first quarter a year ago, Moody's posted a significant decrease in
revenue, principally due to the dramatic decline in public-debt
refundings. DBIS reported revenue of $325 million, up 13% from the
same year-ago period. Excluding the impact of acquisitions and the
dollar, DBIS's revenue was up about 6%. DBIS's U.S. first-quarter
revenue was $189 million, up 7%, fueled in part by strong growth
in business marketing services products. First-quarter sales of U.S.
credit services were up in the mid-single digits. DBIS Europe's
first-quarter revenue increased by 30% on a reported basis.
Excluding the impact of acquisitions and the dollar, DBIS Europe's
revenue increased only 1% due in part to a significant decline in
France. Performance in France is expected to improve with the
integration of the S&W acquisition and new product offerings.
-9-
<PAGE>
Software Services reported an 11.7% increase in first-quarter revenue
to $105.8 million from $94.8 million a year ago, reflecting the
acquisition of Pilot Software and improved performance at D&B
Software. Excluding the impact of the dollar and the acquisition of
Pilot, underlying revenue was unchanged. DBS's first-quarter 1995
underlying revenue was up modestly from a year ago. Positive customer
response to D&B Software's new client/server products, a new
management team, an enhanced marketing program and renewed focus on
the extensive base of mainframe customers is resulting in
significantly improved performance.
Directory Information Services reported first-quarter revenue of $77.6
million down 1.5% from $78.8 million a year ago, due to changes in
commission rates and other contractual arrangements with telephone
companies. Underlying sales, however, showed a mid-single-digit
increase for the quarter.
Other Business Services reported first-quarter revenue of $99.7
million, down 0.2% from $99.8 million a year ago. Adjusted for
Dataquest's divestiture of its Machinery Information Division, the
divestiture of Plan Services and timing factors, segment revenue
increased about 21%. NCH Promotional Services reported a decrease
in first-quarter revenue, reflecting a decline in worldwide coupon
redemptions and competitive pricing in the industry. During the
quarter, however, profits were up and NCH signed major new contracts
with Nabisco and General Mills. Gartner Group continued its run of
outstanding results in the first quarter, achieving excellent
underlying growth in revenue for the period, which reflected strong
renewals of subscription information services.
Changes in Financial Position at March 31, 1995
Compared with December 31, 1994
Short-term Debt increased to $623.5 million at March 31, 1995 from
$500.6 million at December 31, 1994, primarily reflecting increased
U.S. short-term borrowings ($113.1 million).
Unearned Subscription Income increased to $443.7 million at March 31,
1995, from $290.3 million at December 31, 1994, reflecting the
cyclical pattern of higher subscription sales in the first quarter.
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 1995 and 1994
Net cash provided by operating activities for the three months ended
March 31, 1995 totaled $202.0 million compared with $81.6 million for
the comparable period in 1994. The increase of $120.4 million
primarily reflected a lower net increase in accounts receivable ($36.7
million) that resulted from improved cash collections at several
divisions, lower income taxes paid-net of refunds ($25.1 million) and
a lower increase in other working capital items ($31.8 million).
-10-
<PAGE>
Net cash used in investing activities for the three months ended March
31, 1995 totaled $129.4 million compared with $230.4 million for the
comparable period in 1994. The decrease in cash used for investing
activities primarily reflected lower payments for the purchase of
marketable securities-net ($66.4 million), and lower cash paid for
acquisition of businesses ($27.3 million) as well as lower amounts
paid for minority ownership interests included in other investments
and notes receivable ($18.9 million).
Other
Regarding 1995, the Company has reaffirmed its expectations for
underlying revenue growth in the mid-single digits, and growth in
earnings per share at or nearly at D&B's underlying topline
performance. Reported revenue growth for 1995 is expected to be in
the high-single digits. Continuing weakness at Moody's is expected to
hold down second-quarter results.
Consistent with 43 consecutive years of dividend increases, but also
taking into account the company's goal in recent years of gradually
lowering the dividend payout ratio, the board of directors declared
on April 19, 1995 a one-cent per share increase in the quarterly
dividend rate to 66 cents a share, an increase of 1.5%.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
There were no reports on Form 8-K during the quarter ended March
31, 1995.
-11-
<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: May 12, 1995 By: EDWIN A. BESCHERER, JR.
-------------------------
Edwin A. Bescherer, Jr.,
Executive Vice President -
Finance
and Chief Financial Officer
Date: May 12, 1995 By:THOMAS W. YOUNG
----------------------------
Thomas W. Young,
Senior Vice President and
Controller
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated statements of income (unaudited) and financial
position (unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 415,237
<SECURITIES> 27,000
<RECEIVABLES> 1,317,282
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,142,330
<PP&E> 1,964,837
<DEPRECIATION> 1,035,505
<TOTAL-ASSETS> 5,656,160
<CURRENT-LIABILITIES> 2,205,958
<BONDS> 0
<COMMON> 188,416
0
0
<OTHER-SE> 1,136,663
<TOTAL-LIABILITY-AND-EQUITY> 5,656,160
<SALES> 0
<TOTAL-REVENUES> 1,219,631
<CGS> 0
<TOTAL-COSTS> 1,046,806
<OTHER-EXPENSES> 15,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,506
<INCOME-PRETAX> 150,553
<INCOME-TAX> 41,703
<INCOME-CONTINUING> 108,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,850
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
