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, 1996
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
THE DUN & BRADSTREET CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-2740040
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(State of Incorporation) (I.R.S. Employer Identification No.)
187 Danbury Road, Wilton, CT 06897
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 834-4200
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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 April 30, 1996
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Common Stock,
par value $1 per share 169,933,000
<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, 1996 and 1995 3
Condensed Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Statement of Financial Position (Unaudited)
March 31, 1996 and December 31, 1995 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<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
---------------------------------------------
1996 1995
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<S> <C> <C>
Operating Revenue $1,272.0 $1,219.6
Operating Costs 647.9 599.0
Selling and Administrative Expenses 481.5 475.8
Restructuring (Income) - Net 0.0 (28.0)
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Operating Income 142.6 172.8
Interest Expense - Net 3.6 6.5
Other Expense - Net 16.4 15.7
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Non-Operating Expense - Net 20.0 22.2
Income Before Provision for Taxes 122.6 150.6
Provision for Income Taxes 34.8 41.7
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Net Income $87.8 $108.9
================== =================
Earnings Per Share of Common Stock $0.52 $0.64
================== =================
Dividends Paid Per Share of Common Stock $0.66 $0.65
================== =================
Average Number of Shares Outstanding 169.7 169.7
<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</TABLE>
<PAGE>
<TABLE>
THE DUN & BRADSTREET CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
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Three Months
Ended March 31,
(Amounts in millions) 1996 1995
<CAPTION>
<S> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating
Activities:
Net Income $87.8 $108.9
Reconciliation of Net
Income to Net Cash
Provided by Operating
Activities:
Depreciation and 107.5 116.0
Amortization
Gain from Sale of 0.0 (28.0)
Business
Restructuring Provisions 0.0 0.0
Restructuring Payments (28.9) (37.1)
Postemployment Benefits 5.0 3.5
Expense
Postemployment Benefits 0.0 0.0
Curtailment Loss/(Gain)
Postemployment Benefit (21.3) (26.7)
Payments
Net Decrease (Increase) 16.2 (46.7)
in Accounts Receivable
Unearned Subscription 144.5 151.5
Income
Income Taxes 5.6 (6.6)
Refunded/(Paid) - Net
Net Changes in Other (104.2) (65.9)
Working Capital Items
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Net Cash Provided by 212.2 168.9
Operating Activities
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Cash Flows from Investing
Activities:
Proceeds from Marketable 14.0 9.1
Securities
Payments for Marketable (32.0) (4.5)
Securities
Capital Expenditures (61.9) (80.0)
Additions to Computer (47.7) (37.2)
Software and Other
Intangibles
Decrease (Increase) in 2.2 (11.9)
Other Investments and Notes
Receivable
Other 8.6 28.2
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Net Cash Used in Investing (116.8) (96.3)
Activities
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Cash Flows from Financing
Activities:
Payment of Dividends (112.0) (110.9)
Payments for Purchase of (3.1) (18.6)
Treasury Shares
Net Proceeds from Exercise 24.8 7.5
of Stock Options
Increase in U.S. Short-term 2.2 113.1
Borrowings
Other (0.3) 6.9
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Net Cash Used in Financing
Activities (88.4) (2.0)
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Effect of Exchange Rate
Changes on Cash and Cash Equivalents (2.5) 9.2
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Increase in Cash and Cash 4.5 79.8
Equivalents
Cash and Cash Equivalents, 385.5 335.4
Beginning of Year
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Cash and Cash Equivalents, $390.0 $415.2
End of Period
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<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</TABLE>
<PAGE>
<TABLE>
THE DUN & BRADSTREET CORPORATION
Condensed Consolidated Statement of Financial Position (Unaudited)
(Amounts in millions)
<CAPTION>
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March 31 December 31
1996 1995
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<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $390.0 $385.5
Marketable Securities 74.4 52.8
Accounts Receivable-Net 1,427.1 1,451.7
Other Current Assets 437.8 408.5
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Total Current Assets 2,329.3 2,298.5
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Investments
Marketable Securities 134.9 139.5
Other Investments and Notes Receivable 335.2 336.9
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Total Investments 470.1 476.4
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Property, Plant and Equipment-Net 879.4 874.4
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Other Assets-Net
Deferred Charges 361.8 366.3
Computer Software 336.0 312.3
Other Intangibles 161.6 178.5
Goodwill 1,002.6 1,009.4
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Total Other Assets-Net 1,862.0 1,866.5
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TOTAL ASSETS $5,540.8 $5,515.8
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $321.8 $357.6
Short-term Debt 446.6 444.5
Accrued and Other Current Liabilities 1,273.5 1,364.3
Accrued Income Taxes 73.8 42.1
Redeemable Partnership Interests 625.0 625.0
------------------ --------------
Total Current Liabilities 2,740.7 2,833.5
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Unearned Subscription Income 463.1 319.6
Postretirement and Postemployment Benefits 560.6 553.3
Deferred Income Taxes 164.9 167.7
Other Liabilities and Minority Interests 432.2 459.2
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TOTAL LIABILITIES $4,361.5 $4,333.3
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Shareholders' Equity $1,179.3 $1,182.5
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,540.8 $5,515.8
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<FN>
See accompanying notes to the condensed consolidated financial statements
(unaudited).
</FN>
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</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") 1995 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 1996 presentation.
On January 9, 1996, the Company announced a plan to reorganize into three
publicly traded independent companies by spinning off through a tax-free
distribution two of its businesses to shareholders. The three companies will be:
Cognizant Corporation, consisting of IMS International, Gartner Group, Nielsen
Media Research, Pilot Software and Erisco; The Dun & Bradstreet Corporation,
consisting of Dun & Bradstreet Information Services, Moody's Investors Service
and Reuben H. Donnelley; and ACNielsen. In connection with the reorganization,
several other divisions, such as Dun & Bradstreet Software (DBS) and American
Credit Indemnity (ACI) will be divested. The distribution is subject to final
approval by the Company's board of directors and obtaining a ruling from the
Internal Revenue Service with respect to the tax-free treatment of the
distribution.
Note 2 - Assets Held for Sale
The Company plans to divest DBS and ACI in 1996, in connection with plans to
reorganize into three separate companies later in 1996. The aggregate carrying
amount of the businesses held for sale totaled $490 million at March 31, 1996.
For the quarter ended March 31, 1996 aggregate operating revenue and operating
losses of the businesses to be divested were $95 million and $7 million,
respectively. Additionally, in April, the Company obtained authorization to sell
the Proprietary West division of Reuben H. Donnelley.
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.
-6-
<PAGE>
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, 1996 and December 31, 1995 totaled approximately $625
million, and are reflected in redeemable partnership interests. Third-parties
share of partnerships results of operations, including specified returns, is
reflected in other income and expense-net.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations Earnings per share in the first quarter were $.52 compared
with year-ago earnings of $.64, which included a $.12 per share, or $28 million
pre-tax restructuring gain related to the sale of warrants received in
connection with the divestiture of Donnelley Marketing. Excluding the gain,
D&B's first-quarter earnings were unchanged. Earnings were held down by $.03 a
share, or $7 million, due to operating losses at businesses that will be
divested by D&B in connection with the Company's reorganization.
First-quarter revenue rose to $1.27 billion, up 4.3% from $1.22 billion a year
ago. Revenue for the quarter was held down by a decline at DBS, lower revenue at
Directory Information Services, and the divestiture of Interactive Data
Corporation.
Operating income in the first quarter was $142.6 million, compared with $172.8
million a year ago. The decline reflected in part the impact of the year-ago
gain, first-quarter losses from businesses to be divested, and the absence of
income from Interactive Data Corporation. Excluding these factors, operating
income was up slightly.
Non-operating expense-net in the first quarter was $20.0 million, compared with
$22.2 million of expense in 1995. Non-operating expense-net decreased, in part,
due to a lower level of borrowings.
Net income in the first quarter was $87.8 million, compared with $108.9 million
in the first quarter of 1995, also reflecting the year-ago gain, first-quarter
losses at DBS and ACI, and the absence of income from Interactive Data
Corporation in late 1995.
The Company's first-quarter effective tax rate was 28.4%, compared with the
first-quarter 1995 effective tax rate of 27.7%.
Business Segment Highlights
Marketing Information Services reported a 9.2% increase in first-quarter revenue
to $575.8 million from $527.4 million a year ago. IMS reported first-quarter
revenue of $191.1 million, up 9.9% from a year ago. IMS's revenue growth in the
U.S. was driven by the impact of client winbacks attributable to the Xponent
prescriber database service; by increased sales of SNAP/Pharma marketed by IMS's
Sales Technologies unit; and by sales of new products, including the Xplorer
decision-support system. IMS Japan generated growth in its sales territory
reports and usage of its online database service. IMS International generated
strong revenue growth in Germany, Iberia and Southeast Asia.
-7-
<PAGE>
Nielsen Media Research reported double-digit revenue growth for the period,
driven by accelerating revenue growth from new products, a robust advertising
environment, and the continued impact of new broadcast and cable network
subscribers.
ACNielsen's worldwide revenue increased by 7%. In Asia/Pacific, revenues
continued to increase at double digit rates, growing by $10 million in the first
quarter. ACNielsen's Americas region achieved break-even results in the 1996
quarter, its best performance since 1993. This was a direct result of the
back-to-front re-engineering efforts that began in mid-1995 in the United
States. To date, these efforts have not only reduced costs but improved customer
service and overall productivity. In Europe, ACNielsen continues to invest in
improving customer service, data quality and delivery. The European
re-engineering efforts, although similar in structure to the U.S. initiatives,
did not begin until late 1995. Progress is already apparent, as European
delivery time of scanning information has been improved by 30%. In line with
expectations, increased investments in ACNielsen's European business have
resulted in a reduction of the region's profitability, compared with historical
levels.
Risk Management and Business Marketing Information Services reported
first-quarter revenue growth of 4.9% to $429.4 million from $409.2 million a
year ago. Dun & Bradstreet Information Services (DBIS) reported first-quarter
revenue growth of 4.7% to $320.5 million from $306.2 million, excluding ACI.
DBIS U.S. reported a 3% increase in first-quarter revenue. While
first-quarter revenue growth for DBIS U.S. was held down by the timing of
several major contracts, significant additional revenue was generated by the
new-customer acquisition program launched in 1995. DBIS Europe's revenue was up
6% in the quarter, reflecting investments in new product development, the
database and technology.
Moody's Investors Service reported excellent revenue growth for the quarter,
driven by a substantial increase in bond volume in both the corporate and
public-finance sectors.
Software Services reported a 14.2% decline in first-quarter revenue to $90.8
million from $105.8 million a year ago, reflecting in part, a decline in revenue
at DBS.
Directory Information Services reported first-quarter revenue of $71.8 million
down 7.6% from $77.6 million a year ago, primarily due to the effect of changes
in publication dates at Reuben H. Donnelley for certain yellow pages
directories. Excluding the impact of these changes, Donnelley's revenue
increased modestly for the quarter.
Other Business Services reported first-quarter revenue of $104.3 million up 4.7%
from $99.7 million a year ago. Gartner Group achieved excellent first-quarter
revenue growth, while introducing seven new products, including INET, which
provides analysis on Internet technologies, trends and strategies.
-8-
<PAGE>
Changes in Financial Position at March 31, 1996
Compared with December 31, 1995
Unearned Subscription Income increased to $463.1 million at March 31, 1996, from
$319.6 million at December 31, 1995, reflecting the cyclical pattern of higher
subscription sales in the first quarter.
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 1996 and 1995
Net cash provided by operating activities for the three months ended March 31,
1996 totaled $212.2 million compared with $168.9 million for the comparable
period in 1995. The increase of $43.4 million primarily reflected a net decrease
($16.2 million), in accounts receivable in the current period compared with an
increase ($46.7 million) in the comparable period in 1995, reflecting a number
of timing factors, substantially offset by an increase in other working capital
items at several divisions.
Net cash used in financing activities for the three months ended March 31, 1996
totaled $88.4 million compared with $2.0 million for the comparable period in
1995. The increase in cash usage reflected lower U.S. short-term borrowings
($110.9 million) partially offset by higher net proceeds from exercise of stock
options ($17.3 million).
Other
The Board of Directors declared on April 17, 1996, a dividend of 66 cents per
share payable June 10, 1996, to shareowners of record at the close of business
May 20, 1996.
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 January 12, 1996 to report under Item
5 - Other Events that 1) the Company announced its plan to reorganize
into three public independent companies by spinning off two of its
businesses to shareholders and 2) gave initial financial indicators for
the three new companies.
-9-
<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 7, 1996 By:/s/ Nicholas L. Trivisonno
==========================================
Nicholas L. Trivisonno
Executive Vice President - Finance
and Chief Financial Officer
Date: May 7, 1996 By:/s/ Thomas W. Young
===========================================
Thomas W. Young
Senior Vice President and Controller
-10-
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