SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 17, 1997
The Dun & Bradstreet Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-7155 13-2740040
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
One Diamond Hill Road, Murray Hill, N.J. 07974
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 665-5000.
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events
The press release issued by The Dun & Bradstreet Corporation
on December 17, 1997 is attached to this Form 8-K as an exhibit
and is incorporated by reference herein.
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SIGNATURE
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
By:
Name: Nancy L. Henry
Title: Senior Vice President and Chief Legal Officer
Date: December 18, 1997
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EXHIBIT INDEX
Exhibit No. Description
99.1 Press Release of the Registrant, dated December 17, 1997.
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EXHIBIT 99.1
For Immediate Release
Wednesday, December 17, 1997
Contact: David M. Monfried (media)
908.665.5350
[email protected]
Philip C. Danford (analysts/investors)
908.665.5030
[email protected]
The Dun & Bradstreet Corporation To Separate
Into Two Public Companies
Reuben H. Donnelley to be an Independent Company;
The Dun & Bradstreet Corporation to Consist of Moody's Investors Service and
the D&B Operating Company
The Dun & Bradstreet Corporation's Board Declares
Quarterly Dividend of $.22
D&B Operating Company Makes Significant Changes
in Sales and Service Process
Company Announces Change in Revenue Recognition Policies;
Non-Cash Charge to Lower Reported 1997 Net Income by $150 million
MURRAY HILL, N.J. - The Dun & Bradstreet Corporation announced today that it
intends to separate into two independent, publicly traded companies -- The
Reuben H. Donnelley Corporation and The Dun & Bradstreet Corporation. The
transaction is expected to be completed in the summer of 1998.
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Volney Taylor, chairman and chief executive officer, said, "The separation will
create two sharply focused companies that will be better positioned to leverage
their different core competencies. We believe customers and shareholders of both
companies will benefit."
After the transaction is completed, The Dun & Bradstreet Corporation will
consist of two leading global information companies -- Moody's Investors
Service, the preeminent debt-rating company and publisher of financial
information for investors, and Dun & Bradstreet (D&B), the leading provider of
commercial credit, business marketing and purchasing information, and
receivables management services. D&B and Moody's reported 1996 combined revenue
of $1.8 billion.
Reuben H. Donnelley, headquartered in Purchase, N.Y., is the largest independent
marketer of yellow pages in the United States, with 1996 reported revenue of
approximately $378 million. The company has long-term relationships with leading
telephone companies, including Bell Atlantic, Sprint, and Ameritech, to provide
sales and other yellow pages services. Frank Noonan, currently senior vice
president of The Dun & Bradstreet Corporation and president of Reuben H.
Donnelley, will become Donnelley's chief executive officer upon completion of
the transaction.
The Dun & Bradstreet Corporation said it currently anticipates that
approximately $450 million of its existing debt will be allocated to Donnelley.
This level of debt is consistent with Donnelley's strong and predictable cash
flow and earnings resulting from its long-term contractual commitments with the
telephone companies.
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The separation of the two companies would be accomplished through a tax-free
dividend of a new entity comprised of Moody's and the D&B operating company. The
new entity would be known as The Dun & Bradstreet Corporation and the remaining
entity would be known as The Reuben H. Donnelley Corporation. Both companies --
Dun & Bradstreet and Donnelley -- are expected to be listed on the New York
Stock Exchange.
Dun & Bradstreet intends to seek a ruling from the Internal Revenue Service with
respect to the tax-free treatment of the distribution. The transaction is
subject to the Internal Revenue Service's ruling and to final approval by The
Dun & Bradstreet Corporation's board of directors.
Taylor said that Donnelley, as a result of several actions taken over the past
two years, is poised for steady growth. He noted that Donnelley has consistently
generated strong cash flow and earnings. Now, he said, with its state-of-the-art
Information Center in Raleigh, N.C., becoming fully operational and with the
revised structure of DonTech, the partnership with Ameritech, Donnelley is well
positioned for the future.
The company said that its yellow pages business is fundamentally different from
that of the other two companies that comprise The Dun & Bradstreet Corporation.
Donnelley has built an exceptionally strong sales, marketing, and publishing
organization that links businesses to prospective customers through yellow pages
and other forms of advertising. Moody's and D&B, said Taylor, "are information
companies. Both are highly trusted, independent providers of business
information and risk management services. Both are best-in-class when it comes
to collecting and analyzing business data on a global basis and then using that
data to provide value-added information for business decision makers and
investors."
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The separation will better position both Donnelley and The Dun & Bradstreet
Corporation to achieve their strategic and financial objectives, explained
Taylor. Each company will be able to set its dividend, resource allocation and
compensation policies to meet its own unique strategic requirements.
Provides 1998 financial outlook
Taylor said that one of the major advantages of the transaction for The Dun &
Bradstreet Corporation is increased financial flexibility, arising from its
reduced level of debt. Taylor also said that, subject to market conditions, once
the separation is concluded it is his intention to recommend to The Dun &
Bradstreet Corporation's board of directors that a portion of the company's
increased debt capacity be used for an additional stock repurchase program. The
result of a stock repurchase program would be a higher earnings-per-share growth
rate, he noted.
Frank R. Noonan said, "The decision to separate Donnelley from D&B enables us to
concentrate our full attention on growing the yellow pages business and
strengthens our prospects for the future. Donnelley's long-term relationships
with Bell Atlantic, Sprint, and Ameritech provide a springboard for solid
growth. In addition, we're aggressively leveraging our recent experience in
cable TV and Internet advertising to broaden the sales and marketing expertise
we provide to businesses. These and other products and services, along with the
new capacity at our Raleigh Information Center, provide exciting growth
opportunities for us."
It is currently anticipated that both companies will pay dividends that in total
equal the current Dun & Bradstreet Corporation annualized dividend of $.88 per
share. Actual dividend decisions will be dependent upon the future financial
conditions of the companies and will be made by the companies' boards of
directors.
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At its meeting today, The Dun & Bradstreet Corporation's board of directors
declared a quarterly dividend of $.22, payable March 10, 1998, to shareholders
of record at the close of business February 20, 1998.
Taylor announced revised 1998 growth goals for The Dun & Bradstreet Corporation
(excluding Reuben H. Donnelley). The new goal (excluding the transaction costs
associated with the separation of the two companies), he said, is to increase
net income by 7-to-9 percent in 1998, up from the goal of 5-to-7 percent growth
in 1997.
For 1998, Taylor reiterated a goal of 8-to-10 percent annual operating income
growth for Moody's and pointed out that Moody's is expected to have outstanding,
25 plus percent operating income growth in 1997. Similarly, he reiterated a 1998
goal of 5-to-7 percent operating income growth for the D&B operating company. He
noted that D&B's 1998 goal remains unchanged despite its absorbing significant
expenses associated with the Year 2000 software issue and the ongoing
development of the company's new European computer system.
Noonan said that, as previously disclosed to investors, 1997 revenue and
operating income for Reuben H. Donnelley are expected to be below that of 1996.
One of the factors in the decline is a shift in the timing of certain revenues
from 1997 to 1998. As a result of that revenue shift, as well as good underlying
sales growth and improved operating efficiencies next year, Donnelley has set a
1998 goal of earnings growth in the double digits. After 1998, Noonan said, he
expects operating income to increase at or slightly above the industry growth
rate of 4-to-5 percent. Noonan said he believes that Donnelley's strong cash
flow will be sufficient to service its anticipated debt level, pay dividends,
and invest in the business.
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D&B operating company changes sales and service process
The company also announced that after two years of gradually expanded testing,
it is significantly changing its ways of selling products and servicing its
customers in order to drive revenue growth and increase customer satisfaction.
"Our testing and analysis show," said Taylor, "that our traditional customer
contract and sales force incentive structure does not optimize increased
customer usage of D&B's products and, therefore, constrains revenue growth."
Accordingly, Taylor explained, the company has been changing the customer
contract and sales force incentive structure in Europe and in several U.S. sales
offices since early 1996 - with positive results in terms of revenue growth,
customer satisfaction, and sales force acceptance.
The changes in its customer relationships, the company said, have two key
components. First, customers will no longer be required to sign annual contracts
requiring payment in advance and a predetermined level of usage of D&B products.
Customers will now have the option to pay for the products and services they use
on a monthly basis. Second, sales force compensation will be based primarily on
customer usage rather than the value of the annual contracts customers currently
sign with D&B. Taylor said this change will provide a strong incentive for the
company's sales force to familiarize customers with the full line of D&B
solutions.
Change in revenue recognition policies
The Dun & Bradstreet Corporation also announced that it will change certain
revenue recognition policies.
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The most significant accounting change is that the company will now recognize
revenue for the D&B operating company's credit services component when products
and services are used by customers, rather than ratably over the contract
period. This change brings revenue recognition practices more in line with the
actual economics of the business and will provide a better measure of results.
The effect of these changes, which, in accordance with Generally Accepted
Accounting Principles will be classified as a "cumulative effect of accounting
changes," effective January 1, 1997, is to reduce reported net income for 1997
by approximately $150 million, or $.88 per share. This entire amount is non-cash
and will have no impact on cash flow or on the company's future revenue and
income goals.
"These changes will provide management and shareholders with a better
understanding of the company's performance and will have no impact on cash flow
in any year," said Taylor. "Excluding the effect of changes in accounting
policies on after-tax income, The Dun & Bradstreet Corporation is on track to
deliver at the upper end of its 1997 earnings-per-share expectations."
###
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Certain statements in this press release are forward-looking. These may be
identified by the use of forward-looking words or phrases such as "believe,"
"expect," "anticipate," "should," "planned," "estimated" and "potential," among
others. These forward-looking statements are based on The Dun & Bradstreet
Corporation's reasonable current expectations. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for such forward-looking statements.
In order to comply with the terms of the safe harbor, The Dun & Bradstreet
Corporation notes that a variety of factors could cause The Dun & Bradstreet
Corporation's or Reuben H. Donnelley's actual results and experience to differ
materially from the anticipated results or other expectations expressed in such
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of The Dun & Bradstreet
Corporation's or Reuben H. Donnelley's business include (1) complexity and
uncertainty regarding the development of new high-technology products; (2) loss
of market share through competition; (3) introduction of competing products or
technologies by other companies; (4) pricing pressures from competitors and/or
customers; (5) changes in the business information, risk management and yellow
pages industries and markets; (6) variable government funding in key geographic
regions; (7) the company's ability to protect proprietary information and
technology or to obtain necessary licenses on commercially reasonable terms; (8)
the loss of key employees to investment or commercial banks, or elsewhere; and
(9) fluctuations in foreign currency exchange rates.
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