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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K/A-1
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---------- EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 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_________________.
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.)
ONE DIAMOND HILL ROAD, MURRAY HILL, NJ 07974
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (908) 665-5000.
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $1 per share. . . . . . . . . . .New York Stock Exchange
Preferred Stock Purchase Rights . . . . . . . . . . . . .New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.___________
As of January 31, 1997, 170,988,313 shares of Common Stock of The Dun &
Bradstreet Corporation were outstanding and the aggregate market value of such
Common Stock held by nonaffiliates* (based upon its closing transaction price on
the Composite Tape on such date) was approximately $4,103.7 million.
*Calculated by excluding all shares held by executive officers and directors of
the registrant without conceding that all such persons are "affiliates" of
registrant for purposes of federal securities laws.
(Continued)
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<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART I
- ------
<S> <C> <C>
ITEM 1 -Business Note 16 Segment Information on page 42
and 43, of the 1996 Annual Report.
PART II
- -------
ITEM 5 -Market for the Registrant's Common Page 24, Financial Review, of the 1996
Equity and Related Stockholder Annual Report.
Matters
ITEM 6 -Selected Financial Data Page 46, Five-Year Selected Financial
Data, of the 1996 Annual Report.
ITEM 7 -Management's Discussion and Analysis Pages 20 to 24, Financial Review, of
of Financial Condition and Results of the 1996 Annual Report.
Operations
ITEM 8 -Financial Statements and Supplementary Pages 26 to 46 of the 1996 Annual Report.
Data
PART III
- --------
ITEM 10 -Directors and Executive Officers of the Pages 2 to 4 of the Company's Proxy
Registrant Statement dated March 27, 1997.
ITEM 11 -Executive Compensation Pages 11 to 24 of the Company's Proxy
Statement dated March 27, 1997.
ITEM 12 -Security Ownership of Certain Beneficial Pages 24 to 26 of the Company's Proxy
Owners and Management Statement dated March 27, 1997.
ITEM 13 -Certain Relationships and Related Pages 24 to 26 of the Company's Proxy
Transactions Statement dated March 27, 1997.
</TABLE>
------------
The Index to Exhibits is located on Page 8.
<PAGE>
THE DUN & BRADSTREET CORPORATION
The undersigned registrant hereby amends Item 8 and Item 14 to the Form
10-K for the year ended December 31, 1996, as set forth below:
INDEX TO FORM 10-K/A-1
PART II
Item 8 Financial Statements and Supplemental Data ................. S-1/F-1
PART IV
Item 14 Exhibits, Financial Statements Schedules and Reports
on Form 8-K .............................................. 1
Signatures .......................................................... 7
Exhibit Index ....................................................... 8
<PAGE>
Item 8--Financial Statements and Supplemental Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Partners of AM-DON
We have audited the financial statements of AM-DON (doing business as and
hereafter referred to as "DonTech") listed on the index on page 15. These
financial statements are the responsibility of DonTech's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DonTech as of December 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
COOPERS & LIBRAND L.L.P.
Chicago, Illinois
January 3, 1997
S-1
<PAGE>
DONTECH
BALANCE SHEETS
December 31, 1996 and 1995
ASSETS 1996 1995
Current assets:
Cash and cash equivalents $ 4,559,000 $ 2,491,000
Accounts receivable, net of allowances of
$13,908,000 (1996) and $23,106,000 (1995) 261,252,000 240,566,000
Deferred expenses 86,329,000 80,737,000
Other 3,057,000 1,382,000
------------ ------------
Total current assets 355,197,000 325,176,000
Fixed assets, net of accumulated depreciation
and amortization 6,621,000 9,118,000
----------- -----------
Total assets $361,818,000 $334,294,000
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 23,720,000 $ 22,797,000
Accrued liabilities 5,106,000 10,526,000
Deferred sales revenue 174,105,000 168,825,000
------------ ------------
Total current liabilities 202,931,000 202,148,000
Partners' capital 158,887,000 132,146,000
------------ ------------
Total liabilities and partners' capital $361,818,000 $334,294,000
============ ============
The accompanying notes are an integral part of the financial statements.
S-2
<PAGE>
DONTECH
STATEMENTS OF PARTNERS' CAPITAL
for the years ended December 31, 1996, 1995 and 1994
THE AMERITECH
REUBEN H. PUBLISHING
DONNELLEY OF
CORPORATION ILLINOIS, TOTAL
INC.
Balance, December 31, 1993 $58,910,000 $44,205,000 $103,115,000
Net income 109,079,000 85,705,000 194,784,000
Distributions to partners (100,240,000) (78,760,000) (179,000,000)
----------- ---------- -----------
Balance, December 31, 1994 67,749,000 51,150,000 118,899,000
Net income 112,446,000 92,001,000 204,447,000
Distributions to partners (107,525,000) (83,675,000) (191,200,000)
----------- ---------- -----------
Balance, December 31, 1995 72,670,000 59,476,000 132,146,000
Net income 120,039,000 102,255,000 222,294,000
Distributions to partners (106,920,000) (88,633,000) (19,5553,000)
---------- --------- -----------
Balance, December 31, 1996 $85,789,000 $73,098,000 $158,887,000
========== ========== ===========
The accompanying notes are an integral part of the financial statements.
S-3
<PAGE>
DONTECH
STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Sales $459,083,000 $442,952,000 $436,577,000
Less allowances 50,202,000 51,076,000 50,310,000
------------ ------------ ------------
Net sales 408,881,000 391,876,000 386,267,000
------------ ------------ ------------
Expenses:
Operating expenses 135,136,000 139,447,000 145,257,000
Selling, general & administrative 45,980,000 45,582,000 45,449,000
Occupancy and depreciation 8,148,000 6,175,000 3,587,000
------------ ------------ ------------
Total expenses 189,264,000 191,204,000 194,293,000
------------ ------------ ------------
Income from operations 219,617,000 200,672,000 191,974,000
Other income 2,677,000 3,775,000 2,810,000
------------ ------------ ------------
Net income $222,294,000 $204,447,000 $194,784,000
============ ============ ============
The accompanying notes are an integral part of the financial statements.
S-4
<PAGE>
DONTECH
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
for Net income $ 222,294,000 $ 204,447,000 $ 194,784,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,526,000 2,806,000 1,670,000
Provision for uncollectible accounts 21,307,000 30,189,000 24,566,000
Changes in assets and liabilities:
Increase in accounts receivable (41,993,000) (52,294,000) (59,542,000)
Increase in deferred printing and
manufacturing (5,592,000) (6,855,000) (4,578,000)
(Increase) decrease in other
current assets (1,675,000) 75,000 622,000
Increase (decrease) in accounts
payable 923,000 (3,433,000) 12,983,000
(Decrease) increase in accrued
liabilities (5,420,000) 712,000 (7,167,000)
Increase in deferred sales revenue 5,280,000 17,920,000 13,962,000
------------- --------------- ---------------
Total adjustments (23,644,000) (10,880,000) (17,484,000)
------------- --------------- ---------------
Net cash provided by operating 198,650,000 193,567,000 177,300,000
activities
Cash flows from investing activities:
Purchases of fixed assets (1,029,000) (5,850,000) (3,077,000)
Cash flows from financing activities:
Distributions to partners (195,553,000) (191,200,000) (179,000,000)
------------- --------------- ---------------
Net increase (decrease) in cash and cash
equivalents 2,068,000 (3,483,000) (4,777,000)
Cash and cash equivalents, beginning of
year 2,491,000 5,974,000 10,751,000
------------- --------------- ---------------
Cash and cash equivalents, end of year $ 4,559,000 $ 2,491,000 $ 5,974,000
============= =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-5
<PAGE>
DONTECH
1. FORM OF ORGANIZATION AND NATURE OF BUSINESS
AM-DON d.b.a. DonTech (the "Partnership") is a general partnership between
The Reuben H. Donnelley Corporation ("Donnelley"), a wholly owned
subsidiary of The Dun & Bradstreet Corporation, a Delaware corporation, and
Ameritech Publishing of Illinois, Inc. ("API/IL"), a wholly owned
subsidiary of Ameritech, Inc., an Illinois corporation, doing business as
Ameritech Advertising Services. The Partnership will be dissolved only upon
certain events as specified in the amended and restated partnership
agreement dated September 20, 1990, effective January 1, 1991.
The Partnership participates in a Directory Agreement with Donnelley,
Illinois Bell Telephone Company ("IBT"), doing business as Ameritech
Illinois, API/IL and Ameritech Publishing, Inc. ("API"), doing business as
Ameritech Advertising Services. The Partnership also participates in a
Subcontracting Agreement with API to perform certain of API's obligations
under the Publishing Services Contract between API and Indiana Bell
Telephone Company, Incorporated ("Indiana Bell"), doing business as
Ameritech Indiana. The Partnership publishes various directories, as
identified in the Directory Agreements, solicits advertising, its primary
source of revenues, and manufactures and delivers such directories.
A Board of Directors (the "Board") was appointed to administer the
activities of the Partnership. From time to time during the term of the
Partnership, the Board may call for additional capital contributions in
equal amounts from each of the Partners if, in the opinion of the Board,
additional capital is required for the operation of the Partnership. The
Partnership's net income is allocated to each Partner based on a predefined
percentage as set forth in the amended and restated partnership agreement.
In addition, API/IL is required to make an annual contribution to the
Partnership sufficient to maintain this predefined partnership interest
percentage.
2. SIGNIFICANT ACCOUNTING POLICIES
A. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an
initial maturity date of three months or less. The carrying value of
cash equivalents estimates fair value due to their short-term nature.
B. SALES AND DEFERRED SALES REVENUE
Substantially all sales made to customers in the cities covered by the
directories are recorded as deferred sales revenue and accounts
receivable in the month of publication. Revenue related to these sales
is recognized over the lives of the directories, generally twelve
months.
Sales made to customers outside the cities covered by the directories
are recognized each quarter. Sales for national accounts are recognized
in full in the month of publication.
C. FIXED ASSETS
Fixed assets are recorded at cost and are depreciated on a straight-line
basis over the estimated useful lives of the assets. Upon asset
retirement or other disposition, cost and the related accumulated
depreciation are removed from the accounts, and gain or loss is included
in the
S-6
<PAGE>
DONTECH
statement of operations. Amounts incurred for repairs and maintenance
are charged to operations.
D. DEFERRED EXPENSES
The printing, manufacturing, compilation, sales, delivery and
administrative costs of publications are deferred and recognized in
proportion to revenue.
E. INCOME TAXES
No provision for income taxes is made as the proportional share of the
Partnership's income is the responsibility of the individual Partners.
F. RECLASSIFICATIONS
Certain reclassifications have been made to the December 31, 1995 and
1994 financial statements to conform with the December 31, 1996
presentation. These reclassifications had no impact on previously
reported net income or partners' capital.
3. DEFERRED EXPENSES
Deferred expenses consist of the following at December 31:
1996 1995
Printing and manufacturing $ 34,720,000 $ 29,260,000
Selling 33,407,000 31,977,000
Other 18,202,000 19,500,000
------------- ------------
$ 86,329,000 $ 80,737,000
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S-7
<PAGE>
DONTECH
4. FIXED ASSETS
Fixed assets consist of the following at December 31:
1996 1995
Machinery and equipment $ 17,329,000 $ 16,497,000
Furniture and fixtures 3,712,000 3,639,000
Leasehold improvements 974,000 850,000
------------- ------------
22,015,000 20,986,000
Less accumulated depreciation
and amortization 15,394,000 11,868,000
------------- ------------
$ 6,621,000 9,118,000
============= ============
5. RELATED PARTY TRANSACTIONS
Under the Directory Agreement, the Partnership is obligated to pay Illinois
Bell Telephone (IBT) a minimum of $75 million per year in exchange for the
exclusive right to publish certain regional directories and for billing and
collection services performed by IBT. The base fee for these services is
$75 million for each calendar year until the Directory Agreement is
terminated. A termination fee of $37 million is payable in the year
following the date the Directory Agreement terminates. On April 14, 1993,
the Partnership and IBT renewed the Directory Agreement through December
31, 1999, with the anticipation there will be future renewals.
In addition to the base fee, the Partnership has agreed to pay IBT an
amount equal to 7 1/2% of the increase in total revenue received from
certain sources identified in the Directory Agreement over such revenues
received in the immediately preceding calendar year. The additional fee due
to IBT was $1,122,000 in 1996 and $487,000 in 1995. In 1994, no such
additional fee was due.
In addition, Donnelley provides compilation, photocomposition, and data
processing services to the Partnership. The Dun & Bradstreet Corporation
(Donnelley's parent company) provides employee benefits and administrative
services, and certain business insurance coverages for the Partnership. The
amount paid for these services is determined at the beginning of each year
based upon estimated activity and adjusted to actual at the end of each
year. The total amount paid for these services was approximately $22
million in 1996 and 1995 and $21.4 million in 1994. The amount paid for
employee benefits includes the administration of the Partnership's Profit
Sharing and 401(k) Plans as well as its health care, long and short term
disability, dental and pension plans.
The Partnership has also entered into subcontracting agreements for the
publishing of certain Indiana Bell directories and the delivery of
directories for Donnelley. In addition, under a Directory Fulfillment
Memorandum of Understanding, the Partnership is obligated to perform
certain directory fulfillment services for Ameritech Advertising Services
(AAS).
6. CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Partnership to
concentration of credit risk consist principally of commercial paper and
accounts receivables. The Partnership invests its
S-8
<PAGE>
DONTECH
excess cash in commercial paper with an investment rating of AA or higher
and has not experienced any losses on these investments.
The Partnership's trade accounts receivable are primarily composed of
amounts due from customers whose businesses are in the state of Illinois.
Collateral is generally not required from the Partnership's customers.
7. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expense
during the reporting period. Actual results could differ from those
estimates.
8. LEASE COMMITMENTS
The Partnership leases certain office and warehouse facilities under
noncancelable lease arrangements. Rent expense under these operating leases
was approximately $2,564,000 and $2,323,000 and $2,655,000 for 1996, 1995
and 1994, respectively.
The future minimum lease payments required under noncancelable operating
leases that have initial or remaining lease terms in excess of one year as
of December 31, 1996 are as follows:
DECEMBER 31, AMOUNT
1997 $ 2,445,000
1998 2,257,000
1999 2,287,000
2000 2,316,000
2001 2,282,000
Thereafter 3,893,000
------------
$ 15,480,000
============
S-9
<PAGE>
DONTECH
9. EMPLOYEE RETIREMENT AND PROFIT PARTICIPATION PLANS
The Partnership has a defined benefit pension plan covering substantially
all of its employees (the "Principal Plan"). The Principal Plan's assets
are invested in equity funds, fixed income funds and real estate. Total
expense for the Principal Plan was approximately $1,181,000, $1,647,000 and
$1,247,000 in 1996, 1995 and 1994, respectively. The Partnership
contributes amounts to the plan which are actuarially determined to meet
future benefit payments.
Additionally, the Partnership has a Profit Participation Plan (the "Profit
Plan") that covers substantially all its employees. Employees may
voluntarily contribute up to 6% of their salaries to the Profit Plan and
are guaranteed a matching contribution by the Partnership of fifty cents
per dollar contributed. The Partnership also makes contributions to the
Profit Plan based on a formula and contingent upon the attainment of
financial goals set in advance as defined in the plan. The contributions to
the plan by the Partnership were $809,000, $1,025,000, and $760,000 in
1996, 1995 and 1994, respectively.
10. VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31:
Col. A Col B. Col C. Col. D Col. E
- --------------------- ------------ --------------------- ---------- -----------
Additions
(1) (2)
Balance at Charged Charged
Beginning to Costs to Other Balance
of Period and Accounts at End of
Expenses Period
Description (a) Deductions
(a)
- --------------------- ------------ ---------- ---------- ---------- -----------
1996:
Allowance for $23,106,000 $21,307,000 - $30,505,000 $13,908,000
doubtful
accounts............
1995:
Allowance for $18,777,000 $30,189,000 - $25,860,000 $23,106,000
doubtful
accounts............
1994:
Allowance for $18,441,000 $24,566,000 - $24,230,000 $18,777,000
doubtful
accounts............
S-10
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
OVERVIEW
On November 1, 1996, The Dun & Bradstreet Corporation (the "Company")
reorganized into three publicly traded independent companies by spinning off
through a tax-free distribution two of its businesses to shareholders (the
"Distribution"). The Distribution resulted in the following three companies: 1)
The Dun & Bradstreet Corporation, consisting of Dun & Bradstreet, the operating
company ("D&B"), Moody's Investors Service ("Moody's") and Reuben H. Donnelley
("RHD"); 2) ACNielsen Corporation ("ACNielsen"); and 3) Cognizant Corporation
("Cognizant"), consisting of IMS International, Inc. ("IMS"), Gartner Group,
Nielsen Media Research, Pilot Software, Cognizant Technology Solutions
Corporation, Cognizant Enterprises and Erisco. In connection with the
reorganization, Dun & Bradstreet Software ("DBS"), NCH Promotional Services
("NCH") and American Credit Indemnity ("ACI") were divested. On October 10,
1996, following receipt of a ruling from the Internal Revenue Service that the
transaction would be tax-free to the Company and its U.S. shareholders, the
Company's Board of Directors declared a dividend distribution to shareholders of
record on October 21, 1996, consisting of one share of Cognizant common stock
for each share of the Company's common stock and one share of ACNielsen common
stock for every three shares of the Company's common stock held on such record
date. The Distribution was effected on November 1, 1996. These transactions
resulted in a noncash dividend which reduced shareholders' equity by $1,240.9
million.
For purposes of effecting the transaction and governing certain of the
on-going relationships among the Company, Cognizant and ACNielsen after the
Distribution and to provide for an orderly transition, the three new companies
have entered into various agreements, as described in Note 2 to the Consolidated
Financial Statements.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the consolidated financial statements of the Company have been
reclassified to reflect the dispositions of the companies that comprised the
Company's Marketing Information Services, Software Services and Other Business
Services business segments. These segments include the businesses that made up
Cognizant and ACNielsen, along with DBS and NCH. Accordingly, the revenues,
costs and expenses, assets and liabilities and cash flows of Cognizant,
ACNielsen, DBS and NCH have been excluded from the respective captions in the
Consolidated Statements of Operations, Consolidated Balance Sheets and
Consolidated Statements of Cash Flows. The net operating results of these
entities have been reported, net of applicable income taxes, as "Income (Loss)
from Discontinued Operations"; the net assets of these entities have been
reported as "Net Assets of Discontinued Operations"; and the net cash flows of
these entities have been reported as "Net Cash (Used in) Provided by
Discontinued Operations."
RESULTS OF OPERATIONS
1996 VERSUS 1995
Consolidated Results
The Company incurred a loss from continuing operations of $27.3 million or $.16
per share compared with earnings of $217.5 million or $1.28 per share in 1995.
These results include all corporate overhead expenses associated with the
Company prior to the Distribution and certain transaction-related expenses.
Operating revenues from continuing operations for the year ended December
31, 1996 of $2,159.2 million were essentially unchanged from $2,158.2 million
for 1995. Excluding the results of divested businesses, revenues from continuing
operations increased 5.2% from $1,989.0 million in 1995 to $2,092.3 million in
1996.
Operating income in 1996 of $197.6 million decreased from $398.6 million in
the prior year. Included in operating income in 1996 was $161.2 million in
transaction costs incurred in connection with the Company's reorganization.
These costs included $75.0 million for professional and consulting fees and
$86.2 million primarily for settlement of executive compensation plans and
retention bonuses. Also included in 1996 operating income are the losses
incurred as a result of the sales of the Proprietary West operations in Southern
California of RHD ("P-West") and ACI . The sales were completed in May and
October of 1996, respectively. In connection with these divestitures, the
Company recorded within operating costs a charge of $96.7 million ($68.2 million
for ACI and $28.5 million for P-West). 1995 operating costs included gains on
both the sales of Interactive Data
F-1
<PAGE>
- --------------------------------------------------------------------------------
Corporation ("IDC") of $90.0 million and warrants received in connection with
the previous divestiture of Donnelley Marketing of $28.0 million, offset by a
non-recurring charge of $206.2 million recorded in the fourth quarter of 1995,
described below.
Operating costs and selling and administrative expenses, excluding the
effects of divestitures, transaction costs associated with the reorganization
and the fourth quarter non-recurring charge increased 9.7% in 1996 compared with
1995. The increase reflects the Company's investments in new products and
services.
The Company reported 1996 non-operating expense-net of $71.2 million
compared with non-operating expense-net of $68.0 million in 1995. The increase
was attributable, in part, to lower interest income earned due to the high cash
requirements of the reorganization and the sale of ACI, which held $111.5
million of marketable securities at the date of the sale.
Despite lower reported pre-tax income, the provision for income taxes was
$153.7 million, 35.9% higher than the prior year. The Company's effective tax
rate was 121.6% in 1996 and 34.2% in 1995. In 1996, the higher effective tax
rate primarily reflects the non-deductibility of certain transaction costs,
lower tax benefits on losses from the sales of divested businesses, and certain
foreign taxes incurred in connection with the reorganization. The underlying
effective tax rate excluding these one-time items for 1996 was approximately
34%.
Income from discontinued operations, net of taxes was $141.1 million in
1996 compared with $103.3 million in the prior year. The Company also reported a
loss on the disposition of DBS which was completed in the fourth quarter of 1996
of $220.6 million ($158.2 million after-tax). The Company also sold NCH in the
fourth quarter of 1996, with no resulting gain or loss recorded on the
disposition. The 1995 results were impacted by the fourth quarter non-recurring
charge of $188.6 million after-tax.
Segment Results
Risk Management Services reported 1996 revenue growth of 2.7% to $1,781.7
million from $1,734.1 million in 1995. Excluding the results of divested
businesses, revenue growth would have been up 6.6% from 1995. Moody's reported
revenues of $385.3 million in 1996, up 16.9% from 1995, driven by strong
corporate and municipal bond market volumes during the year. D&B 's 1996
revenues were up 4.0% to $1,331.5 million. Domestic revenues were up 4.0%,
including increases in Marketing Information Services of 9.7% and Receivable
Management Services of 12.2%. Europe and other regions were up 3.1% and 7.8%,
respectively. Operating income for the segment was $327.1 million in 1996
compared with $449.5 million in 1995. Operating income in 1996 included a $68.2
million loss on the sale of ACI , while in 1995 the operating income included a
$90.0 million gain on the sale of IDC offset by $45.6 million attributable to
the fourth quarter non-recurring charge.
Directory Information Services reported a 10.9% decrease in operating
revenues to $377.5 million from $423.7 million in 1995. Excluding the results of
P-West, operating revenues would have been flat. Operating income decreased
24.3% to $141.1 million from $186.3 million in 1995 due to a reduction in the
contractual share of earnings in the DonTech partnership and lower commission
rates. Included in 1996 operating income was a $28.5 million loss on the sale of
P-West. Additionally, higher costs associated with the transition to the new
Raleigh production facility have negatively affected 1996 operating income.
Operating income in 1995 included $17.7 million of the fourth quarter
non-recurring charge.
1995 versus 1994
Consolidated Results
The Company's earnings per share from continuing operations in 1995 were $1.28,
down from $2.17 reported in 1994. Included in 1995 was a non-recurring charge of
$206.2 million ($135.6 million after-tax) or $.80 per share recorded in the
fourth quarter. Income from continuing operations in 1995 decreased to $217.5
million from $368.6 million in 1994, primarily as a result of the charge noted
above.
In the fourth quarter of 1995, the Company recorded within operating costs
a charge of $206.2 million. This charge primarily reflected an impairment loss
in connection with the adoption of the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"),
($100.9 million); a provision for postemployment benefits ($58.1 million) under
the Company's severance plan; an accrual for contractual obligations that have
no future economic benefits and for penalties to cancel certain contracts ($23.1
million); and other asset revaluations ($24.1 million).
This non-recurring charge evolved from the Company's annual budget and
strategic planning process in the fall of
F-2
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Financial Review continued
- --------------------------------------------------------------------------------
1995, which indicated, based on preliminary results, that the Company's
consolidated long-term profitability objectives would not be achieved.
Accordingly, a more comprehensive review was undertaken to review the Company's
underlying cost structure, products and services and assets used in the
business. Based upon such analysis, management, having the authority to approve
such business decisions, committed in December 1995 to a plan to discontinue
certain product lines and dispose of certain other assets, resulting in the
charge. These decisions were not reversed or modified as a result of the
Company's reorganization plan, which was reviewed and approved by the Board of
Directors on January 9, 1996.
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In connection with
this review, the Company recorded an impairment loss of $100.9 million
reflecting the revaluation of certain revenue, administrative and production
systems, notes receivable and other intangibles that were replaced or no longer
used at the Company.
The provision for postemployment benefits of $58.1 million represents the
cost of workforce reductions. The accrual of $23.1 million is for contractual
obligations that have no future economic benefits and penalties to cancel
certain contracts. In addition, the Company recognized a charge of $24.1 million
principally related to the write-off of fixed assets.
Revenues from continuing operations increased 1.6% in 1995 to $2,158.2
million from $2,124.9 million in 1994.
Operating income from continuing operations in 1995 decreased to $398.6
million from $594.9 million in 1994, primarily as a result of the non-recurring
charge of $206.2 million previously described. Included in operating income in
1995 was a $28.0 million gain related to the sale of warrants received in
connection with the divestiture of Donnelley Marketing and a gain of $90.0
million relating to the sale of IDC . Operating income in 1994 included several
non-recurring gains and charges described as follows. The assets of DunsNet were
sold for a pre-tax gain of $36.0 million, and Thomson Directories Ltd. ("TDL")
was sold for a pre-tax gain of $33.2 million. The Company took measures to
improve future performance by accelerating the introduction of newer
technologies and to restructure certain operations and businesses, which
resulted in an expense of $67.9 million. In addition, a change in eligibility
requirements for the Company's postretirement medical plan resulted in a
curtailment gain of $13.7 million, which was largely offset by a substantial
increase in spending for new-product development.
Operating costs and selling and administrative expenses, excluding the
effect of divestitures, the non-recurring charge and restructuring expense,
increased 14.7% in 1995 compared with 1994, reflecting the Company's investments
in new revenue growth initiatives and the impact of inflation in Latin America.
The Company reported 1995 non-operating expense-net of $68.0 million
compared with non-operating expense- net of $35.0 million in 1994. The increase
in non-operating expense-net in 1995 was due, in part, to higher U.S. interest
expense from higher average borrowings and higher rates. Other expense-net
included benefits from tax sharing agreements with an Alaska Native Corporation
of $6.0 million and $9.8 million in 1995 and 1994, respectively.
Income from discontinued operations, net of income taxes, was $103.3
million in 1995, down from $260.9 million in the prior year. The decline was a
result of the 1995 fourth quarter non-recurring after-tax charge of $188.6
million attributable to the discontinued operations, as well as the decline in
operating performance at several of the discontinued businesses.
Segment Results
Risk Management Services reported 1995 revenue growth of 8.0% to $1,734.1
million from $1,605.7 million in 1994. Moody's reported a 4.9% increase in 1995
revenue to $329.7 million, principally due to weakness in corporate-bond volumes
and public-debt refundings in the first half of the year. D&B 's 1995 revenue
was up 8.2% to $1,280.5 million. Revenues at D&B U.S. increased 6.1% to $753.2
million, including increases in Marketing Information Services of 13.5% and
Receivable Management Services of 7.7%. D&B Europe and other regions reported
11.8% and 8.9% revenue growth, respectively. Operating income for the segment
was essentially unchanged at $449.5 million, compared with $447.0 million in
1994. Segment profits in 1995 also were dampened by weakness in D&B 's
international operations, including the impact of integrating certain
acquisitions and the effects of weak economic conditions in Latin America.
F-3
<PAGE>
- --------------------------------------------------------------------------------
Directory Information Services reported a 3.7% decrease in 1995 revenue to
$423.7 million from $440.1 million in 1994 as a result of changes in contractual
arrangements with telephone companies. Operating income for the segment
decreased by 24.9% to $186.3 million from $248.0 million in 1994. In 1995,
operating income was negatively affected by the non-recurring charge in the
fourth quarter. Additionally, 1994 operating income included a $33.2 million
gain on the sale of TDL .
ADOPTION OF STATEMENTS OF FINANCIAL
ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which
requires that companies with stock-based compensation plans either recognize
compensation expense based on new fair value accounting methods or disclose
pro-forma income and earnings per share data, assuming the fair value method had
been applied. The Company adopted the disclosure option of SFAS No. 123 in 1996
and has disclosed pro-forma income and earnings per share, assuming the fair
value method had been applied. (See Note 8 to the Consolidated Financial
Statements.)
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share" ("SFAS
No. 128"), which simplifies existing computational guidelines, revises
disclosure requirements and increases the comparability of earnings per share
data on an international basis. The Company is currently evaluating the new
statement; however, the impact of adoption of SFAS No. 128 on the Company's
financial statements is not expected to be significant. This statement is
effective for financial statements for periods ending after December 15, 1997
and requires restatement of all prior-period earnings per share data presented.
RESTRUCTURING
During 1993 and 1994, the Company initiated several restructuring actions to
improve operating performance. During 1996, the Company substantially completed
these restructuring actions. At December 31, 1996, the remaining accruals were
not significant. (See Note 4 to the Consolidated Financial Statements.)
NON-U.S. OPERATING AND MONETARY ASSETS
The Company has operations in 37 countries. The Company's non-U.S. operations
generated approximately 28% of total revenues, including approximately 22% from
European operations. Thirty-four percent of the Company's assets are located
outside of the U.S. and no one country had a significant concentration of cash.
The Company enters into foreign exchange forward contracts to hedge against
the effects of exchange rate movements on cross-border transactions denominated
in foreign currencies. At December 31, 1996, the Company had approximately $114
million in foreign exchange forward contracts outstanding with various
expiration dates through March 1997. (See Note 6 to the Consolidated Financial
Statements.)
LIQUIDITY AND FINANCIAL POSITION
The Company generates significant, predictable cash flows from its business
operations. Management believes that these cash flows are sufficient to fund its
operating needs, service debt and pay dividends. At December 31, 1996, cash and
cash equivalents totaled $127.9 million, a decrease from $147.1 million in 1995.
Net cash provided by operating activities decreased 15.8% to $196.3 million in
1996, due to the high cash requirements of the reorganization.
Net cash used in investing activities totaled $27.7 million in 1996
compared with net cash provided by investing activities of $42.6 million in
1995. In 1996, the Company received proceeds from sales of ACI and P-West of
$115.2 million that were offset by capital expenditures and additions to
computer software and other intangibles of $170.1 million. In 1995, proceeds
received from the sales of IDC and Donnelley Marketing warrants were $230.0
million, and expenditures for capital additions, computer software and other
intangibles totaled $235.2 million.
In the fourth quarter of 1996, in conjunction with the Distribution, the
Company redeemed $575.0 million of redeemable partnership interests in cash and
$50.0 million of redeemable partnership interests (included in the net assets of
discontinued operations at December 31, 1995) were assumed by Cognizant. This
redemption eliminated the third-parties' interest in the Company's investment
partnerships. (See Note 11 to the Consolidated Financial Statements.) To finance
the redemption, the Company increased its short-term borrowings.
F-4
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Financial Review continued
- --------------------------------------------------------------------------------
The Company obtained two committed bank facilities during 1996. One of the
facilities permits borrowings of up to $1 billion and matures in August 2001.
The second facility permits borrowings of up to $200 million and matures in
August 1997. The Company has the ability to borrow under such facilities at
prevailing short-term interest rates. The Company also has available uncommitted
lines of credit of $305 million. At December 31, 1996, the Company had $880.0
million outstanding under its committed bank facilities and $240.7 million
outstanding under its uncommitted lines of credit. The borrowings under the
committed bank facilities and uncommitted lines of credit were used, in part, to
replace commercial paper borrowing of $405 million at December 31, 1995.
The Company entered into interest rate swap agreements, which effectively
fix interest rates on $600.0 million of variable rate debt through January 2005,
at a weighted average fixed rate of 6.94%. (See Note 6 to the Consolidated
Financial Statements.) The Company does not expect interest rate movements to
significantly affect its operating results in the near term.
Over the next year, the Company anticipates replacing a significant portion
of the short-term bank debt with longer-term financing. The Company also plans
to reenter the commercial paper market as an additional source of short-term
financing.
During 1996, the Company repurchased 923,199 shares of its common stock for
$25.6 million including 800,000 shares issued to Cognizant in connection with
the Distribution. In January 1997, the Company announced a continuation of its
systematic stock repurchase plan, authorizing the purchase of up to 9.8 million
shares of common stock. The stock will be held in treasury and issued upon
exercise of employee stock options and for compensation plans. The repurchase
plan will allow the Company to maintain the current level of approximately 171
million shares outstanding. The Company also paid dividends of $310.8 million
during 1996.
Like most corporations, the Company is heavily reliant on technology to
deliver services. As the millennium approaches, the Company is preparing all of
its computer systems to be Year 2000 compliant. A company-wide taskforce has
been assembled to review all systems to ensure that they do not malfunction as a
result of the Year 2000. In this process, the Company expects to both replace
some systems and upgrade others. The current cost of this effort is still being
evaluated. While this is a substantial effort, it will give the Company the
benefit of new technology and functionality for many of its operational and
back-office systems.
DIVIDENDS
The regular quarterly dividend of $.66 was maintained through the first half of
1996. On July 17, 1996, the Company declared a third-quarter 1996 dividend of
$.25 per share, reflecting the revised dividend policies of each of the three
companies. The $.25 dividend was continued in the fourth quarter of 1996,
resulting in full-year dividends per share of $1.82, a decline of 30.8% from the
$2.63 paid in 1995.
As announced in 1996, the dividend policies of each of the three independent
public companies were formulated to be consistent with comparable businesses. Of
the $.25 per share dividend declared for the third and fourth quarters of 1996,
$.22 was attributable to the Company and $.03 was attributable to Cognizant. On
January 15, 1997, the Board of Directors approved a first quarter 1997 dividend
of $.22 per share, payable March 10, 1997 to shareholders of record at the close
of business February 20, 1997.
COMMON STOCK INFORMATION
The Company's common stock (symbol DNB ) is listed on the New York, London and
Swiss stock exchanges. The number of shareholders of record was 12,690 at
January 31, 1997.
The following table summarizes price and cash dividend information for the
Company's common stock as reported in the periods shown. The decline in price
per share during the fourth quarter of 1996 reflects the special stock dividend
of shares of Cognizant and ACNielsen.
Per Share ($) Dividends
--------------------------- Paid
1996 1995 Per Share ($)
--------------------------- ------------
High Low High Low 1996 1995
---- --- ---- --- ---- ----
First Quarter 69 59-3/8 55-1/4 48-1/2 .66 .65
Second Quarter 65-3/4 57-3/4 55-1/2 50-1/2 .66 .66
Third Quarter 62-5/8 56-1/4 59-1/8 51 .25 .66
Fourth Quarter 62-7/8 20-7/8 65-1/2 57 .25 .66
- ------------------------------------------------------------------
Year 69 20-7/8 65-1/2 48-1/2 1.82 2.63
==================================================================
F-5
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT
ACCOUNTANTS
TO THE SHAREHOLDERS AND THE BOARD OF
DIRECTORS OF THE DUN & BRADSTREET CORPORATION:
We have audited the accompanying consolidated balance sheets of The Dun &
Bradstreet Corporation and Subsidiaries at December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 31, 1996, 1995 and 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Dun &
Bradstreet Corporation and Subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 3 to the consolidated financial statements, in 1995,
the Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of."
COOPER & LYBRAND LLP
New York, New York
February 26, 1997
STATEMENT OF MANAGEMENT
RESPONSIBILITY FOR
FINANCIAL STATEMENTS
TO THE SHAREHOLDERS OF
THE DUN & BRADSTREET CORPORATION:
Management has prepared and is responsible for the consolidated financial
statements and related information that appear on pages 20 to 46. The
consolidated financial statements, which include amounts based on the estimates
of management, have been prepared in conformity with generally accepted
accounting principles. Other financial information in the annual report is
consistent with that in the consolidated financial statements.
Management believes that the Company's internal control systems provide
reasonable assurance at reasonable cost that assets are safeguarded against loss
from unauthorized use or disposition, and that the financial records are
reliable for preparing financial statements and maintaining accountability for
assets. These systems are augmented by written policies, an organizational
structure providing division of responsibilities, careful selection and training
of qualified financial personnel and a program of internal audits.
The independent accountants are engaged to conduct an audit of and render
an opinion on the financial statements in accordance with generally accepted
auditing standards. These standards include an assessment of the systems of
internal controls and tests of transactions to the extent considered necessary
by them to support their opinion.
The Board of Directors, through its Audit Committee consisting solely of
outside directors of the Company, is responsible for reviewing and monitoring
the Company's financial reporting and accounting practices. Coopers & Lybrand
L.L.P. and the internal auditors each have full and free access to the Audit
Committee and meet with it regularly, with and without management.
/S/ VOLNEY TAYLOR
- --------------------------------------------------
Volney Taylor
Chairman and Chief Executive Officer
/s/ FRANK S. SOWINSKI
- --------------------------------------------------
Frank S. Sowinski
Senior Vice President and Chief Financial Officer
F-6
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31 ,
<TABLE>
<CAPTION>
Dollar amounts in millions, except per share data 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $2,159.2 $2,158.2 $2,124.9
- ------------------------------------------------------------------------------------------------
Operating Costs 693.6 708.3 569.8
Selling and Administrative Expenses 949.4 886.8 816.7
Depreciation and Amortization 157.4 164.5 143.5
Reorganization Costs 161.2 -- --
- ------------------------------------------------------------------------------------------------
OPERATING INCOME 197.6 398.6 594.9
- ------------------------------------------------------------------------------------------------
Interest Income 4.4 10.2 10.3
Interest Expense (37.1) (37.3) (24.6)
Other Expense--Net (38.5) (40.9) (20.7)
- ------------------------------------------------------------------------------------------------
Non-Operating Expense--Net (71.2) (68.0) (35.0)
- ------------------------------------------------------------------------------------------------
Income from Continuing Operations before
Provision for Income Taxes 126.4 330.6 559.9
Provision for Income Taxes 153.7 113.1 191.3
- ------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations (27.3) 217.5 368.6
- ------------------------------------------------------------------------------------------------
Discontinued Operations:
Income from Discontinued Operations,
Net of Income Taxes of $155.9, $9.7 and
$58.4 for 1996, 1995 and 1994, respectively 141.1 103.3 260.9
Loss on Disposal, Net of Income Tax Benefit
of $62.4 for 1996 (158.2) -- --
- ------------------------------------------------------------------------------------------------
Income (Loss) from Discontinued Operations (17.1) 103.3 260.9
- ------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(44.4) $320.8 $629.5
================================================================================================
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Continuing Operations $(0.16) $1.28 $2.17
Discontinued Operations (0.10) 0.61 1.53
================================================================================================
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK $(0.26) $1.89 $3.70
================================================================================================
Weighted Average Number of Shares Outstanding 170,017,000 169,522,000 169,946,000
================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Balance Sheets
December 31,
<TABLE>
<CAPTION>
Dollar amounts in millions, except per share data 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS CURRENT ASSETS
Cash and Cash Equivalents $ 127.9 $ 147.1
Accounts Receivable--Net of Allowance of $38.1 in 1996 and $35.7 in 1995 600.7 588.9
Other Current Assets 188.8 280.2
---------------------------------------------------------------------------------------------------
Total Current Assets 917.4 1,016.2
---------------------------------------------------------------------------------------------------
NON-CURRENT ASSETS
Investments and Notes Receivable 292.2 223.7
Property, Plant and Equipment 373.1 382.9
Prepaid Pension Costs 172.1 212.6
Computer Software 150.7 100.7
Goodwill 218.4 295.6
Other Non-Current Assets 170.3 284.1
---------------------------------------------------------------------------------------------------
Total Non-Current Assets 1,376.8 1,499.6
---------------------------------------------------------------------------------------------------
Net Assets of Discontinued Operations -- 1,207.3
---------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,294.2 $3,723.1
===================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES CURRENT LIABILITIES
AND Notes Payable $1,120.7 $ 407.1
SHAREHOLDERS' Accrued and Other Current Liabilities 599.9 573.3
EQUITY Redeemable Partnership Interests -- 575.0
Unearned Subscription Income 297.0 319.6
---------------------------------------------------------------------------------------------------
Total Current Liabilities 2,017.6 1,875.0
Postretirement and Postemployment Benefits 354.1 393.0
Other Non-Current Liabilities 354.2 272.6
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,725.9 2,540.6
---------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred Stock, par value $1 per share, authorized--10,000,000 shares;
outstanding--none
Common Stock, par value $1 per share, authorized--400,000,000
shares; issued--188,420,996 shares for 1996 and 1995 188.4 188.4
Capital Surplus 72.6 70.0
Retained Earnings 480.3 2,208.7
Treasury Stock, at cost, 17,612,776 and 19,031,922 shares
for 1996 and 1995, respectively (1,019.7) (1,107.3)
Cumulative Translation Adjustment (153.3) (177.3)
---------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY (431.7) 1,182.5
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,294.2 $3,723.1
===================================================================================================
F-8 The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31 ,
<TABLE>
<CAPTION>
Dollar amounts in millions 1996 1995 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (44.4) $ 320.8 $ 629.5
Less: Income (Loss) from Discontinued Operations (17.1) 103.3 260.9
-------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations (27.3) 217.5 368.6
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 157.4 164.5 143.5
Losses (Gains) from Sales of Businesses, Net of Taxes 82.2 (118.0) (70.9)
Equity Earnings in Excess of Dividends Received (14.9) (10.4) (33.8)
Increase in Note Receivable (41.2) -- --
Restructuring Provisions -- -- 39.0
Non-Recurring Charge -- 206.2 --
Restructuring Payments (50.7) (68.9) (71.0)
Postemployment Benefit Expense (Curtailment Gain) -- 9.0 (29.9)
Postemployment Benefit Payments (50.3) (60.0) (75.1)
Net Increase in Accounts Receivable (47.5) (60.4) (13.0)
Deferred Income Taxes 118.1 (66.3) (15.1)
Accrued Income Taxes 50.4 (57.6) (22.9)
Net Decrease (Increase) in Other Working Capital Items 33.3 55.0 (26.6)
Other (13.2) 22.4 (28.9)
-------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 196.3 233.0 163.9
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Marketable Securities 17.6 34.1 189.1
Payments for Marketable Securities (2.4) (22.9) (230.1)
Proceeds from Sale of Businesses 115.2 230.0 103.9
Payments for Acquisition of Businesses -- (3.0) (52.7)
Capital Expenditures (73.9) (116.8) (122.5)
Additions to Computer Software and Other Intangibles (96.2) (118.4) (78.9)
Other 12.0 39.6 (5.0)
-------------------------------------------------------------------------------------------------
Net Cash (Used in) Provided by Investing Activities (27.7) 42.6 (196.2)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Dividends (310.8) (446.1) (435.2)
Payments for Purchase of Treasury Shares (25.6) (72.3) (70.0)
Net Proceeds from Exercise of Stock Options 63.7 42.2 29.3
(Decrease) Increase in Commercial Paper Borrowings (405.0) (38.7) 360.8
Increase in Short-term Borrowings 1,116.2 -- --
Payment of Redeemable Partnership Interests (575.0) -- --
Payment of Alaska Native Corp. Obligations -- -- (166.2)
Other 1.6 (1.6) (5.9)
-------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (134.9) (516.5) (287.2)
-------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (2.1) 4.0 (5.0)
-------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 31.6 (236.9) (324.5)
Net Cash (Used In) Provided by Discontinued Operations (50.8) 261.9 155.0
Cash and Cash Equivalents, Beginning of Year 147.1 122.1 291.6
-------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year $ 127.9 $ 147.1 $ 122.1
=================================================================================================
The accompanying notes are an integral part of the consolidated financial statements F-9
</TABLE>
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Dollar amounts in millions, except per share data
- -------------------------------------------------------------------------------------------------------------------------
Common Cumulative Total
Stock Capital Retained Treasury Translation Shareholders'
($1 Par Value) Surplus Earnings Stock Adjustment Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 $ 188.4 $ 64.2 $2,135.7 $(1,036.5) $(240.5) $1,111.3
Net Income 629.5 629.5
Cash Dividends ($2.56 per share) (435.2) (435.2)
Treasury Shares Reissued Under
Stock Options and Deferred Compensation
Plans (552,805) 3.0 23.4 26.4
Treasury Shares Reissued Under Restricted
Stock Plan (114,930) 5.9 5.9
Treasury Shares Acquired (1,193,631) (70.0) (70.0)
Change in Cumulative Translation Adjustment 57.0 57.0
Unrealized Losses on Investments (6.3) (6.3)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 188.4 67.2 2,323.7 (1,077.2) (183.5) 1,318.6
- -------------------------------------------------------------------------------------------------------------------------
Net Income 320.8 320.8
Cash Dividends ($2.63 per share) (446.1) (446.1)
Treasury Shares Reissued Under
Stock Options and Deferred Compensation
Plans (741,526) 2.8 34.2 37.0
Treasury Shares Reissued Under Restricted
Stock Plan (174,100) 8.0 8.0
Treasury Shares Acquired (1,297,138) (72.3) (72.3)
Change in Cumulative Translation Adjustment 6.2 6.2
Unrealized Gains on Investments 10.3 10.3
- -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 188.4 70.0 2,208.7 (1,107.3) (177.3) 1,182.5
- -------------------------------------------------------------------------------------------------------------------------
Net Loss (44.4) (44.4)
Cash Dividends ($1.82 per share) (310.8) (310.8)
Stock Dividend to Shareholders of Cognizant
and ACNielsen, Including 800,000
Treasury Shares (1,370.2) 49.5 79.8 (1,240.9)
Treasury Shares Reissued Under
Stock Options and Deferred Compensation
Plans (1,525,935) 2.6 59.0 61.6
Treasury Shares Reissued Under Restricted
Stock Plan (16,410) 4.7 4.7
Treasury Shares Acquired (923,199) (25.6) (25.6)
Change in Cumulative Translation Adjustment (55.8) (55.8)
Unrealized Losses on Investments (3.0) (3.0)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ 188.4 $ 72.6 $ 480.3 $(1,019.7) $(153.3) $ (431.7)
=========================================================================================================================
F-10 The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include those
of The Dun & Bradstreet Corporation (the "Company"), its subsidiaries and
partnerships in which the Company has a controlling interest. Investments in
companies over which the Company has significant influence but not a controlling
interest are carried on the equity basis. The effects of all significant
intercompany transactions have been eliminated.
The financial statements of subsidiaries outside the United States and
Canada reflect a fiscal year ending November 30 to facilitate timely reporting
of the Company's consolidated financial results.
As discussed more thoroughly in Note 2, Cognizant Corporation
("Cognizant"), ACNielsen Corporation ("ACNielsen"), Dun & Bradstreet Software
("DBS") and NCH Promotional Services ("NCH" ) are presented as discontinued
operations.
Cash Equivalents. Marketable securities that mature within 90 days of purchase
date are considered cash equivalents and are stated at cost, which approximates
fair value.
Marketable Securities. In accordance with Statement of Financial Accounting
Standards ("SFAS" ) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," marketable securities at December 31, 1996 and 1995, are
classified as "available for sale," and are reported at fair value, with net
unrealized gains and losses reported in shareholders' equity.
The fair value of current and non-current marketable securities was
estimated based on quoted market prices. Realized gains and losses on marketable
securities are determined on the specific identification method.
Property, Plant and Equipment. Buildings, machinery and equipment are
depreciated over their estimated useful lives using principally the
straight-line method. Leasehold improvements are amortized on a straight-line
basis over the shorter of the term of the lease or the estimated useful life of
the improvement.
Computer Software, Goodwill and Intangible Assets. Certain computer software
costs are capitalized in accordance with SFAS No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed," and are reported
at the lower of unamortized cost or net realizable value. Other intangibles
result from acquisitions and database development. Computer software and other
intangibles are being amortized, using principally the straight-line method,
over three to five years and five to 15 years, respectively. Goodwill represents
the excess purchase price over the fair value of identifiable net assets of
businesses acquired and is amortized on a straight-line basis over five to 40
years.
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121") in 1995. This statement requires that long-lived assets and
certain identifiable intangibles held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In general, this statement
requires recognition of an impairment loss when the sum of undiscounted expected
future cash flows is less than the carrying amount of such assets. The
measurement for such an impairment loss is then based on the fair value of the
asset. (See Note 3.)
At each balance sheet date, the Company reviews the recoverability of
goodwill, not identified with long-lived assets, based on estimated undiscounted
future cash flows from operating activities compared with the carrying value of
goodwill, and recognizes any impairment on the basis of such comparison. The
recognition and measurement of goodwill impairment is assessed at the business
unit level.
Revenue Recognition. The Company recognizes revenue as earned, which is
generally over the contract period or as the information is delivered or related
services are performed. Amounts billed for service and subscriptions are
credited to unearned subscription income and reflected in operating revenue over
the subscription term, which is generally one year. Revenues from the
publication of directories are recognized when the directories are published.
(See Note 17.)
Foreign Currency Translation. For all operations outside the United States where
the Company has designated the local currency as the functional currency, assets
and liabilities are translated using the end-of-year exchange rates, and
revenues and expenses are translated using average exchange rates for the year.
For these countries, currency translation adjustments are accumulated in a
separate component of shareholders' equity, whereas realized transaction gains
and losses are recognized in other expense-net. For operations in countries that
are considered to be highly inflationary, where the U.S. dollar is designated as
the functional currency, monetary assets and liabilities are translated using
end-of-year exchange rates, nonmonetary accounts are translated using historical
exchange rates, and all translation and transaction adjustments are recognized
in other expense-net.
F-11
<PAGE>
- --------------------------------------------------------------------------------
Note 1. Summary of Significant Accounting Policies (continued)
Earnings Per Share of Common Stock. Earnings per share are based on the weighted
average number of shares of common stock outstanding during the year. The
inclusion of shares issuable under stock options in the calculation of earnings
per share would not result in material dilution.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which simplifies existing computational guidelines,
revises disclosure requirements and increases the comparability of earnings per
share data on an international basis. The Company is currently evaluating the
new statement; however, the impact of adoption of SFAS No. 128 on the Company's
financial statements is not expected to be significant. This statement is
effective for financial statements for periods ending after December 15, 1997
and requires restatement of all prior-period earnings per share data presented.
Financial Instruments. The Company is a party to financial instruments with
off-balance sheet risk, that 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 fair value of foreign exchange forward contracts is determined
by market quotes and the fair value of interest rate swap agreements is
determined by gains or losses to terminate agreements. (See Note 6.)
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates. Estimates are used in the
determination of allowances for doubtful accounts, depreciation and
amortization, computer software, employee benefit plans, taxes and contingencies
among others.
Reclassifications. As discussed in Note 2, the consolidated financial statements
for 1995 and 1994 have been reclassified to identify separately the results of
operations, net assets and cash flows of the Company's discontinued operations.
In addition, certain prior-year amounts have been reclassified to conform with
the 1996 presentation.
- --------------------------------------------------------------------------------
NOTE 2. REORGANIZATION AND DISCONTINUED OPERATIONS
On November 1, 1996, the Company reorganized into three publicly traded
independent companies by spinning off through a tax-free distribution two of its
businesses to shareholders (the "Distribution"). The Distribution resulted in
the following three companies: 1) The Dun & Bradstreet Corporation, consisting
of Dun & Bradstreet, the operating company ("D&B" ), Moody's Investors Service
and Reuben H. Donnelley ("RHD" ); 2) ACNielsen; and 3) Cognizant, consisting of
IMS International, Inc. ("IMS" ), Gartner Group, Nielsen Media Research, Pilot
Software, Cognizant Technology Solutions Corporation, Cognizant Enterprises and
Erisco. In connection with the reorganization, DBS and NCH were sold. On October
10, 1996, following receipt of a ruling from the Internal Revenue Service that
the transaction would be tax-free to the Company and U.S. shareholders, the
Company's Board of Directors declared a dividend distribution to shareholders of
record on October 21, 1996, consisting of one share of Cognizant common stock
for each share of the Company's common stock and one share of ACNielsen common
stock for every three shares of the Company's common stock held on such record
date. The Distribution was effected on November 1, 1996. These transactions
resulted in a noncash dividend which reduced shareholders' equity by $1,240.9
million.
For purposes of governing certain of the on-going relationships among the
Company, Cognizant and ACNielsen, the three new companies entered into various
agreements, including a Distribution Agreement, Tax Allocation Agreement,
Employee Benefits Agreement, Indemnity and Joint Defense Agreement, Intellectual
Property Agreement, Shared Transaction Services Agreement, Data Services
Agreement and a Transaction Services Agreement. These agreements set forth the
principles to be applied in allocating certain related costs and specified
portions of contingent liabilities to be shared if certain amounts are exceeded.
Pursuant to Accounting Principles Board Opinion ("APB" ) No. 30, "Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the consolidated financial statements of the Company have been
reclassified to reflect the dispositions of the companies that comprised the
Company's Marketing Information Services, Software Services and Other Business
Services business segments. These segments include the companies that made up
Cognizant and ACNielsen, along with DBS and NCH. Accordingly, the revenues,
costs and expenses, assets and liabilities, and cash flows of Cognizant,
ACNielsen, DBS and NCH have been excluded from the respective captions in the
Consolidated Statements
F-12
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
Note 2. Reorganization and Discontinued Operations (continued)
of Operations, Consolidated Balance Sheets and Consolidated Statements of Cash
Flows. The net operating results of these entities have been reported, net of
applicable income taxes, as "Income (Loss) from Discontinued Operations"; the
net assets of these entities have been reported as "Net Assets of Discontinued
Operations"; and the net cash flows of these entities have been reported as "Net
Cash (Used in) Provided by Discontinued Operations."
Summarized financial information for the discontinued operations, were as
follows:
For the years ended
December 31 1996* 1995 1994
- --------------------------------------------------------------------------------
Operating Revenues $2,761.6 $3,256.9 $2,770.9
Income before
Provision for Income
Taxes $297.0 $113.0 $319.3
- --------------------------------------------------------------------------------
Income from
Discontinued
Operations, Net
of Income Taxes $141.1 $103.3 $260.9
================================================================================
* Includes the results of Cognizant, ACNielsen and DBS for the ten months ended
October 31, 1996 and the results of NCH for the full year.
At December
31, 1995
- --------------------------------------------------------------------------------
Current Assets $1,312.7
Total Assets $3,030.5
- --------------------------------------------------------------------------------
Current Liabilities $1,308.6
Total Liabilities $1,823.2
- --------------------------------------------------------------------------------
Net Assets of Discontinued Operations $1,207.3
================================================================================
The Company completed the sale of DBS on November 1, 1996 for proceeds of $191.3
million, including a note of $41.2 million resulting in a pre-tax loss of $220.6
million ($158.2 million after-tax). Pursuant to the Distribution Agreement, the
cash proceeds from the sale were transferred to Cognizant.
The sale of NCH was completed on December 31, 1996. Pursuant to the
Distribution Agreement between the Company and Cognizant, the proceeds of $20.5
million from the sale of NCH which includes a note of $8.5 million will be
transferred to Cognizant. At December 31, 1996, the Company has recorded a
receivable of $20.5 million from the buyer of NCH and a corresponding payable to
Cognizant. The Company did not record a gain or loss on the sale.
The 1996 results for the Company reflect after-tax non-recurring charges of
$492.0 million, incurred as a result of the Distribution and the sales of DBS ,
NCH , American Credit Indemnity ("ACI") and the Proprietary West operations of
RHD ("P-West"). Income from continuing operations included $284.7 million of
these costs, while $207.3 million was recorded within income from discontinued
operations, net of income taxes. Of the $284.7 million included in continuing
operations, $257.9 million was recorded in pre-tax income and a net tax cost of
$26.8 million was recorded in the provision for income taxes. The $257.9 million
represents reorganization costs of $161.2 million (professional and consulting
fees of $75.0 million and settlement of executive compensation plans and
retention bonuses of $86.2 million) and $96.7 million resulting from the losses
incurred on the sales of P-West and ACI . The sales of P-West and ACI were
completed in May and October of 1996, respectively. The $207.3 million included
within discontinued operations consists of the net loss on the disposal of DBS
and tax costs allocated to discontinued operations of $49.1 million.
- --------------------------------------------------------------------------------
NOTE 3. NON-RECURRING CHARGES
In the fourth quarter of 1995, the Company recorded within operating costs a
charge of $206.2 million. This charge primarily reflected an impairment loss in
connection with the adoption of the provisions of SFAS No. 121 ($100.9 million),
a provision for postemployment benefits ($58.1 million) under the Company's
severance plan, an accrual for contractual obligations that have no future
economic benefits and for penalties to cancel certain contracts ($23.1 million)
and other asset revaluations ($24.1 million).
This non-recurring charge evolved from the Company's annual budget and
strategic planning process, which included a review of the Company's underlying
cost structure, products and services, and assets used in the business. Based
upon such analysis, management, having the authority to approve such business
decisions, committed in December 1995 to a plan to discontinue certain product
lines and dispose of certain other assets, resulting in the charge. These
decisions were not reversed or modified as a result of the Company's
reorganization plan, which was reviewed and approved by the Board of Directors
on January 9, 1996.
SFAS No. 121 requires that long-lived assets and certain intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In connection with
this
F-13
<PAGE>
- --------------------------------------------------------------------------------
Note 3. Non-Recurring Charges (continued)
review, the Company recorded an impairment loss of $100.9 million reflecting the
revaluation of certain revenue, administrative and production systems, notes
receivable and other intangibles that were replaced or no longer used at the
Company.
The provision for postemployment benefits of $58.1 million, represents the
cost of workforce reductions. The accrual of $23.1 million is for contractual
obligations that have no future economic benefits and penalties to cancel
certain contracts. In addition, the Company recognized a charge of $24.1 million
principally related to the write-off of fixed assets.
Also in 1995, the Company recorded in operating costs a $28.0 million gain
related to the sale of warrants received in connection with the divestiture of
Donnelley Marketing and a $90.0 million gain relating to the sale of Interactive
Data Corporation.
In 1994, several non-recurring gains and charges were included in the
Company's operating results. As a result of the decision to outsource
communications services, the assets of DunsNet were sold for a pre-tax gain of
$36.0 million. Thomson Directories Ltd. was sold for a pre-tax gain of $33.2
million, and Dun & Bradstreet Plan Services was divested with no gain or loss
recorded.
Also in 1994, the Company took measures to improve future performance by
accelerating the introduction of newer technologies, which resulted in a charge
of $28.9 million. The charge principally reflected the revaluation of certain
computer software and other intangible assets that have been replaced or are no
longer used at D&B . In addition, a change in eligibility requirements for the
Company's postretirement medical plan resulted in a curtailment gain of
approximately $13.7 million, which was largely offset by increases in spending
for new-product development.
- --------------------------------------------------------------------------------
NOTE 4. RESTRUCTURING
In the second quarter of 1994, the Company initiated actions to restructure
certain operations and businesses and to reduce costs and increase operating
efficiencies. These restructuring measures included office consolidations, 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
were $39.0 million. During 1996, the Company substantially completed these
restructuring actions. At December 31, 1996, the remaining restructuring
reserves were not significant.
- --------------------------------------------------------------------------------
NOTE 5. MARKETABLE SECURITIES
The amounts disclosed below represent marketable securities of the Company and
the assets of the grantor trusts established to pay benefits for U.S.
supplemental pension plans. These amounts are classified in the Consolidated
Balance Sheets as other current assets and other non-current assets. Cash
equivalents of $59.6 million and $46.1 million at December 31, 1996 and 1995,
respectively, have been excluded from these disclosures. All securities have
been classified as "available for sale."
A summary of cost (amortized cost of debt instruments) and fair values at
December 31 follows:
1996 1995
------------------ -------------------
Cost Fair Value Cost Fair Value
- -------------------------------------------------------------------------------
Equity securities $ -- $ -- $ 8.8 $ 10.8
Debt securities
of the U.S.
Government and
its agencies 43.6 45.1 71.8 75.2
Debt securities of
states and other
subdivisions of
the U.S.
Government -- -- 99.0 101.7
Debt securities
of non-U.S.
governments 2.4 2.4 6.3 6.6
Corporate debt securities -- -- 4.8 4.7
Other .1 .1 .1 .1
- -------------------------------------------------------------------------------
$46.1 $47.6 $190.8 $199.1
===============================================================================
F-14
<PAGE>
The Bun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
Note 5. Marketable Securities (continued)
At December 31, 1996 and 1995, gross unrealized gains were $1.8 million and
$8.9 million, respectively, and unrealized losses were $.3 million and $.6
million, respectively.
Gross realized gains and losses were not material for the years ended
December 31, 1996, 1995 and 1994, respectively.
At December 31, 1996, cost and fair values of debt securities by
contractual maturity were as follows:
Cost Fair Value
- --------------------------------------------------------------------------------
Due in one year or less $ 5.4 $ 5.5
Due after one year through five years 36.7 38.2
Due after five years through ten years 4.0 3.9
- --------------------------------------------------------------------------------
$46.1 $47.6
================================================================================
- --------------------------------------------------------------------------------
NOTE 6. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Company uses various financial instruments, including interest rate swap
agreements and foreign exchange forward contracts to reduce exposure to
fluctuations in interest and foreign exchange rates. The Company does not use
derivative financial instruments for speculative purposes. Collateral is
generally not required for these types of instruments.
By their nature, all such instruments involve risk, including the credit
risk of nonperformance by counterparties. However, at December 31, 1996 and
1995, in management's opinion, there was no significant risk of loss in the
event of nonperformance of the counterparties to these financial instruments.
The Company controls its exposure to credit risk through monitoring procedures.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements to manage exposure to
changes in interest rates. Interest rate swaps also allow the Company to raise
funds at floating rates and effectively swap them into fixed rates that are
lower than those available to it if fixed-rate borrowings were made directly.
These agreements involve the exchange of floating-rate for fixed-rate payments
without the exchange of the underlying principal amount. Fixed interest rate
payments are at rates ranging from 6.25% to 7.68%. Floating-rate received are
based on rates tied to prevailing short-term interest rates. If the Company
terminates a swap agreement, the gain or loss is recorded as an adjustment to
the basis of the underlying asset or liability. At December 31, 1996, the
unrealized fair value of the interest rate swaps was a loss of $15.8 million.
The following table indicates the type of swaps in use at December 31, 1996
and 1995 and their weighted average interest rates. Average variable rates are
those in effect at the reporting date and may change significantly over the
lives of the contracts.
1996 1995
- --------------------------------------------------------------------------------
Variable to fixed swaps--
Notional amount $600.0 $400.0
Average pay (fixed) rate 6.94% 7.07%
Average receive (variable) rate 5.57% 6.31%
================================================================================
The swap contracts expire from October 1, 1998 through January 15, 2005.
Foreign Exchange
Foreign exchange forward contracts are entered into as hedges against currency
risk resulting from cross-border transactions denominated in foreign currencies.
Gains or losses on these forward contracts are reported in the income statement
and are offset by gains or losses on the underlying foreign currency
transactions. At December 31, 1996, the Company had approximately $114 million
in foreign exchange forward contracts outstanding with various expiration dates
through March 1997. At December 31, 1996, unrealized gains on these contracts
were $3.5 million and the unrealized losses were $1.3 million.
F-15
<PAGE>
- --------------------------------------------------------------------------------
NOTE 7. PENSION AND POSTRETIREMENT BENEFITS
Pension Plans
The Company has defined benefit pension plans covering substantially all
associates in the United States. The benefits to be paid to associates under
these plans were based on years of credited service and average final
compensation. Pension costs are determined actuarially and funded in accordance
with the Internal Revenue Code. Supplemental and excess plans in the United
States are maintained to provide retirement benefits in excess of levels allowed
by ERISA .
Effective January 1, 1997, the D&B Retirement Plan was amended to provide
retirement income based on a percentage of annual compensation, rather than
final pay. The percentage of compensation allocated annually to a retirement
account ranges from 3% to 12.5%, based on age and service. Amounts allocated
under the plan also receive interest credits based on 30-year Treasury Bonds
with a minimum interest credit rate of 3%. Associates close to or eligible for
retirement as of January 1, 1997, will receive the higher of benefits provided
by the final pay formula or retirement account formula.
The Company has retained the obligation for pension benefits for personnel
who retired prior to November 1, 1996 from the businesses that comprise
discontinued operations.
The Company's non-U.S. subsidiaries provide retirement benefits for
associates consistent with local practices, primarily using defined benefit or
termination indemnity plans.
The components of net periodic pension costs for the years ended December
31, which includes both continuing and discontinued operations, are summarized
as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
Service cost $ 34.8 $ 43.1 $ 50.3
Interest cost 87.4 108.5 93.8
Actual return on plan assets (173.2) (248.1) (7.2)
Net amortization and deferral 67.3 126.8 (111.1)
- --------------------------------------------------------------------------------
Net periodic pension cost $ 16.3 $ 30.3 $ 25.8
================================================================================
Discontinued operations were allocated pension expense of $10.4 million, $11.1
million and $17.2 million in 1996, 1995 and 1994, respectively.
The status of defined benefit pension plans at December 31, 1996 and 1995 (1995
includes both continuing and discontinued operations) is as follows:
<TABLE>
<CAPTION>
Funded Unfunded
------------------------ ------------------------------------------
U.S.(1) Non-U.S.
------------------- ------------------
1996 1995 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fair value of plan assets $1,146.5 $1,366.3 $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefits 811.8 1,065.6 95.8 140.3 7.1 68.6
Non-vested benefits 35.7 42.1 4.6 3.7 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations 847.5 1,107.7 100.4 144.0 7.1 68.6
Effect of projected future salary increases 89.7 133.9 60.5 59.4 -- .1
- -----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligations 937.2 1,241.6 160.9 203.4 7.1 68.7
- -----------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligations 209.3 124.7 (160.9) (203.4) (7.1) (68.7)
Unrecognized net loss .5 154.1 30.2 55.4 -- --
Unrecognized prior service cost 6.7 13.3 22.8 30.3 -- .6
Unrecognized net transition (asset) obligation (44.4) (79.5) 1.6 2.0 -- --
Adjustment to recognize minimum liability -- -- (6.4) (28.3) -- (.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 172.1 $ 212.6 $ (112.7) $(144.0) $(7.1) $(68.6)
===================================================================================================================================
</TABLE>
(1) Represents supplemental and excess plans for which grantor trusts (with
assets of $58.9 million and $71.0 million at December 31, 1996 and 1995,
respectively) have been established to pay plan benefits.
F-16
<PAGE>
The Dun & Bradstreet Corporation and Subsidiarie
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
Note 7. Pension and Postretirement Benefits (continued)
The weighted average expected long-term rate of return on pension plan assets
was 9.75% for 1996, 1995 and 1994. At December 31, 1996 and 1995, the projected
benefit obligations were determined using weighted average discount rates of
7.77% and 7.16%, respectively, and weighted average rates of increase in future
compensation levels of 5.15% and 4.70%, respectively. Plan assets are invested
in diversified portfolios that consist primarily of equity and debt securities.
Postretirement Benefits
In addition to providing pension benefits, the Company provides various
health-care and life-insurance benefits for retired associates. Substantially
all of the Company's associates in the United States become eligible for these
benefits if they reach normal retirement age while working for the Company.
Certain of the Company's subsidiaries outside the United States have
postretirement benefit plans, although most participants are covered by
government sponsored or administered programs. The cost of Company sponsored
postretirement benefit plans outside the U.S. is not significant.
The Company has retained the obligation for postretirement benefits for
personnel who retired prior to November 1, 1996 from the businesses that
comprise discontinued operations.
The components of net periodic postretirement benefit cost other than
pensions for the years ended December 31, for both continuing and discontinued
operations are summarized as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
Service cost $ 5.9 $ 5.1 $ 4.5
Interest cost 15.4 16.0 15.8
Net amortization and
deferral (4.8) (5.0) (4.3)
- --------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $16.5 $16.1 $16.0
================================================================================
Discontinued operations were allocated net periodic postretirement benefit cost
of $4.4 million, $4.8 million, and $4.5 million in 1996, 1995 and 1994,
respectively.
The status of postretirement benefit plans other than pensions at December
31, 1996 and 1995 (1995 includes both continuing and discontinued operations) is
as follows:
1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of benefit obligation:
Retirees and dependents $(165.9) $(170.0)
Active associates--eligible (15.7) (25.7)
Active associates--not yet eligible (15.0) (35.6)
- --------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation (196.6) (231.3)
Unrecognized net (gain) loss (.2) 26.2
Unrecognized prior service credit (11.9) (18.1)
================================================================================
Accrued postretirement benefit obligation $(208.7) $(223.2)
================================================================================
Benefits are paid as incurred from general corporate assets.
The accumulated postretirement benefit obligation at December 31, 1996 and
1995 was determined using discount rates of 7.75% and 7.0%, respectively. The
assumed rate of future increases in per capita cost of covered health-care
benefits is 8.0% in 1997, decreasing gradually to 5.0% for the year 2021 and
remaining constant thereafter. Increasing the assumed health-care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation by $18.4 million and would increase annual
aggregate service and interest costs by $2.8 million.
- --------------------------------------------------------------------------------
NOTE 8. EMPLOYEE STOCK PLANS
The Company has granted options to certain associates, under its Key Employees
Stock Option Plans, to purchase shares of its common stock at the market price
on the date of the grant. Under the plans, the options vest ratably over a four
year period and expire ten years from the date of the grant. The 1991 Key
Employees Stock Option Plan provides for the granting of up to 17 million
shares.
In November 1996, in conjunction with the Distribution, those individuals
who became employees of Cognizant or ACNielsen were granted substitute awards in
the stock of their new employer, and any stock awards or options held by them in
respect of the Company were reflected as surrendered in the following table. For
the remaining holders of unexercised options, including employees of the
Company, retirees and certain other former employees of the Company, the number
of shares subject to options and the option exercise price was adjusted
immediately following the Distribution to preserve, as closely as possible, the
economic value of the options that existed prior to the Distribution, pursuant
to the plans.
F-17
<PAGE>
- --------------------------------------------------------------------------------
Note 8. Employee Stock Plans (continued)
The Company applies APB No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for the stock option plans. The Company
has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). Had compensation cost for the
Company's stock option plan been determined based on the fair value at the grant
date for awards in 1996 and 1995 consistent with the provisions of SFAS No. 123,
the Company's income (loss) from continuing operations and earnings (loss) per
share would have been reduced to the pro-forma amounts indicated below:
1996 1995
- --------------------------------------------------------------------------------
Income (loss) from continuing operations
As reported $(27.3) $217.5
Pro-forma $(31.2) $217.5
Earnings (loss) per share of common stock
from continuing operations
As reported $ (.16) $ 1.28
Pro-forma $ (.18) $ 1.28
================================================================================
The pro-forma disclosures shown are not representative of the effects on income
(loss) and earnings (loss) per share in future years.
The fair value of the Company's stock options used to compute pro-forma
income (loss) and earnings (loss) per share disclosures is the estimated present
value at grant date using the Black-Scholes option-pricing model. The following
weighted average assumptions were used to value grants made prior to the
Distribution: dividend yield of 4.7%; expected volatility of 15%; a risk-free
interest rate of 6.08%; and an expected holding period of five years. The
incremental fair value of the Company's options converted on October 31, 1996,
used to compute pro-forma income (loss) and earnings (loss) per share
disclosures and the value of new grants after November 1, 1996 was determined
using the Black-Scholes option-pricing model with the following weighted average
assumptions: dividend yield of 3.7%; expected volatility of 17%; a risk-free
interest rate of 5.85%; and an expected holding period of 4.5 years.
Options outstanding at December 31, 1996 were granted during the years 1987
through 1996 and are exercisable over periods ending not later than 2006. At
December 31, 1996, 1995 and 1994, options for 8,313,166, 4,859,596 and 4,306,119
shares of common stock were exercisable and 4,240,772, 10,306,592 and 1,567,393
shares were available for future grants under the plans.
Changes in stock options for the three years ended December 31, 1996, are
summarized as follows:
Weighted
Average
Shares Exercise Price ($)
- --------------------------------------------------------------------------------
Options outstanding,
January 1, 1994 7,444,166 52.73
Granted 2,158,258 54.09
Exercised (547,668) 42.16
Surrendered or expired (321,584) 56.85
- --------------------------------------------------------------------------------
Options outstanding,
December 31, 1994 8,733,172 53.57
Granted 1,821,780 63.35
Exercised (736,145) 46.11
Surrendered or expired (671,079) 56.63
- --------------------------------------------------------------------------------
Options outstanding,
December 31, 1995 9,147,728 55.90
Granted 10,704 60.25
Exercised (977,042) 51.09
Surrendered or expired (689,297) 59.10
- --------------------------------------------------------------------------------
Options outstanding,
October 31, 1996 7,492,093 56.23
Attributable to discontinued
operations (2,958,686) 57.08
- --------------------------------------------------------------------------------
Options outstanding,
October 31, 1996 4,533,407 55.68
- --------------------------------------------------------------------------------
Options converted at
November 1, 1996 11,958,980 21.10
Granted 4,452,250 22.96
Exercised (543,354) 21.02
Surrendered or expired (451,416) 22.87
================================================================================
OPTIONS OUTSTANDING,
DECEMBER 31, 1996 15,416,460 21.59
================================================================================
The weighted average fair value of options granted during 1996 and 1995 was
$3.32 and $7.61, respectively.
F-18
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
Note 8. Employee Stock Plans (continued)
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
--------------------------------------------------- ----------------------------------
Weighted Average
Remaining Weighted Average Weighted Average
Range of Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$15.73-$20.98 5,639,214 3.9 Years $19.01 4,679,802 $18.71
$21.51-$24.16 9,777,246 7.6 Years $23.08 3,633,364 $22.83
- --------------------------------------------------------------------------------------------------------------------
15,416,460 8,313,166
====================================================================================================================
</TABLE>
The plans also provide for the granting of stock appreciation rights and
limited stock appreciation rights in tandem with stock options to certain key
employees. At December 31, 1996, there were no stock appreciation rights
attached to stock options; however, 887,295 limited stock appreciation rights
were outstanding, which are exercisable only if, and to the extent that, the
related option is exercisable and only upon the occurrence of specified
contingent events.
Under the 1989 Key Employees Restricted Stock Plan, key associates may be
granted restricted shares of the Company's stock. The plan provides for the
granting of up to 1,800,000 shares of the Company's common stock prior to
December 31, 1998. In October 1996, in conjunction with the Distribution, all
outstanding restricted shares became vested and were released to participants of
the plan. During November and December 1996, 19,779 shares of restricted stock
were awarded under the plan. During 1995 and 1994, 184,465 and 117,262
restricted shares, respectively, were awarded under the plan. Forfeitures in
1996 (prior to the Distribution), 1995 and 1994 totaled 6,877, 10,365 and 2,332,
respectively. The restrictions on the majority of such shares lapse over a
period of three years from the date of the grant and the cost is charged to
compensation expense ratably.
- --------------------------------------------------------------------------------
NOTE 9. INCOME TAXES
Income (loss) from continuing operations before provision for income taxes
consisted of:
1996 1995 1994
- --------------------------------------------------------------------------------
U.S. $125.1 $356.4 $531.3
Non-U.S. 1.3 (25.8) 28.6
- --------------------------------------------------------------------------------
$126.4 $330.6 $559.9
================================================================================
The provision (benefit) for income taxes consisted of:
1996 1995 1994
- --------------------------------------------------------------------------------
Current tax provision:
U.S. Federal $ 43.3 $121.3 $158.5
State and local (21.6) 29.2 31.8
Non-U.S. 13.9 28.9 16.1
- --------------------------------------------------------------------------------
Total current tax provision 35.6 179.4 206.4
- --------------------------------------------------------------------------------
Deferred tax provision (benefit):
U.S. Federal 86.9 (30.6) (27.3)
State and local 15.7 (23.8) 4.5
Non-U.S. 15.5 (11.9) 7.7
- --------------------------------------------------------------------------------
Total deferred tax
provision (benefit) 118.1 (66.3) (15.1)
- --------------------------------------------------------------------------------
Provision for income taxes $153.7 $113.1 $191.3
================================================================================
The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and the Company's effective tax rate for financial
statement purposes.
1996 1995 1994
- --------------------------------------------------------------------------------
Statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
U.S. Federal tax
benefit (3.0) 1.7 6.5
Non-U.S. taxes 12.8 5.1 4.3
Recognition of capital
and ordinary losses (14.3) (13.2) (12.1)
Reorganization costs 34.9 -- --
Non-deductible capital
losses 24.0 -- --
Repatriation of foreign
earnings 30.1 -- --
Other 2.1 5.6 .5
- --------------------------------------------------------------------------------
Effective tax rate 121.6% 34.2% 34.2%
================================================================================
Income taxes paid were $170.2 million, $119.9 million and $191.4 million in
1996, 1995 and 1994, respectively. Income taxes refunded were $140.9 million,
$17.8 million and $10.8 million in 1996, 1995 and 1994, respectively.
F-19
<PAGE>
- --------------------------------------------------------------------------------
Note 9. Income Taxes (continued)
Deferred tax assets (liabilities) consisted of the following at December
31:
1996 1995
- --------------------------------------------------------------------------------
Deferred tax assets:
Operating losses $ 34.6 $117.6
Postretirement benefits 83.6 71.7
Postemployment benefits 24.1 37.7
Reorganization and restructuring costs 13.1 40.3
Bad debts 11.2 20.6
Other 18.0 13.6
- --------------------------------------------------------------------------------
Total deferred tax assets 184.6 301.5
Valuation allowance (34.6) (16.4)
- --------------------------------------------------------------------------------
Net deferred tax assets 150.0 285.1
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Intangibles (63.3) (51.2)
Revenue recognition (65.4) (59.2)
Tax leasing transactions (37.8) (68.9)
Depreciation (1.1) (5.3)
- --------------------------------------------------------------------------------
Total deferred tax liabilities (167.6) (184.6)
- --------------------------------------------------------------------------------
Net deferred tax (liability) asset $(17.6) $100.5
================================================================================
During 1996, $467.9 million of non-U.S. earnings, primarily from the Cognizant
and ACNielsen businesses, were repatriated by the Company in order to facilitate
its reorganization. At December 31, 1996, undistributed earnings of non-U.S.
subsidiaries totaled $123.4 million. Deferred tax liabilities have not been
recognized for these undistributed earnings because it is management's intention
to reinvest such undistributed earnings outside the U.S. If all undistributed
earnings were remitted to the U.S. , the amount of incremental U.S. Federal and
foreign income taxes payable, net of foreign tax credits, would be approximately
$23 million.
During the three-year period ended December 31, 1983, the Company invested
$304.4 million in tax-leasing transactions, varying in length from 4.5 to 25
years. These leases provided the Company with benefits from tax deductions in
excess of taxable income for Federal income tax purposes. These amounts are
included in deferred income taxes.
- --------------------------------------------------------------------------------
NOTE 10. NOTES PAYABLE
Notes payable consisted of the following at December 31:
1996 1995
- --------------------------------------------------------------------------------
Commercial paper $ -- $405.0
Bank notes 1,120.7 1.3
Other -- .8
- --------------------------------------------------------------------------------
$1,120.7 $407.1
================================================================================
The Company has two committed bank facilities that provide funding for the
Company. One of the facilities permits borrowings of up to $1 billion and
matures in August 2001. The second facility permits borrowings of up to $200
million and matures in August 1997. Under these facilities the Company has the
ability to borrow at prevailing short-term interest rates and is required to pay
commitment fees of $1.0 million per year. At December 31, 1996, $880.0 million
was borrowed against these facilities. The Company also had non-committed lines
of credit of $305 million at December 31, 1996. At year-end 1996, $240.7 million
was borrowed against these non-committed facilities. None of these arrangements
had material commitment fees or compensating balance requirements.
The weighted average interest rates on notes payable at December 31, 1996
and 1995, respectively, were 5.78% and 7.11%.
NOTE 11. INVESTMENT PARTNERSHIPS
During 1993, three of the Company's former and current subsidiaries contributed
assets and third-party investors contributed cash ($125.0 million) to a limited
partnership. One of the Company's former subsidiaries served as general partner.
All of the other partners, including the third-party investors, held limited
partner interests. The partnership, which was a separate and distinct legal
entity, was 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 held limited partner and special investors interests
totaling $500.0 million. The special investors were entitled to a specified
return on their investments. Funds raised by the partnership provided a source
of financing for the Company's repurchase in 1993 of 8.3 million shares of its
common stock.
F-20
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
Note 11. Investment Partnerships (continued)
For financial reporting purposes, the results of operations, the assets,
liabilities, and cash flows of the partnerships described previously are
included in the Company's consolidated financial statements. The third-party
investments in these partnerships at December 31, 1995, totaled $575.0 million
and are reflected as redeemable partnership interests. These third-party
investments were redeemed in full during 1996. Third-parties share of
partnerships results of operations, including specified returns, is reflected in
other expense-net.
During the fourth quarter of 1996, in conjunction with the Distribution,
the Company redeemed $575.0 million of redeemable partnership interests. This
redemption was financed with bank notes.
In November 1996, in conjunction with the Distribution, a Cognizant
subsidiary assumed $50.0 million in redeemable partnership interests (as well as
D&B stock and warrants) in redemption from one of the partnerships described
above. This amount is included in net assets of discontinued operations at
December 31, 1995.
- --------------------------------------------------------------------------------
NOTE 12. CAPITAL STOCK
In October 1988, the Company adopted a Shareholders' Rights Plan. The plan is
intended to protect the shareholders' interests in the event of an unsolicited
attempt to acquire the Company. The plan is not intended to prevent a takeover
of the Company on terms that are favorable and fair to all shareholders and will
not interfere with a merger approved by the Board of Directors.
Under the plan, each share of the Company's common stock has a right which
trades with the stock until the right becomes exercisable. Each right entitles
the shareholders to buy 1/100 of a share of Series A participating preferred
stock at a purchase price of $230, subject to adjustment. The rights will not be
exercisable until a person or group ("Acquiring Person") acquires beneficial
ownership of, or commences a tender offer for, 20% or more of the Company's
outstanding common stock.
In the event the Company is acquired in a merger or other business
combination, or subject to other transactions, as described in the Shareholders'
Rights Plan, each right will entitle its holder (other than the Acquiring
Person) to receive upon exercise, stock with a value of two times the exercise
price in the form of the Company's common stock or, where appropriate, the
Acquiring Person's common stock. The Company may redeem the rights, which expire
in October 1998, for $.01 per right, under certain circumstances.
The shareholders have authorized the issuance of 10.0 million shares of $1
par value preferred stock. The preferred stock can be issued with varying terms,
as determined by the Board of Directors.
- --------------------------------------------------------------------------------
NOTE 13. LEASE COMMITMENTS
Certain of the Company's operations are conducted from leased facilities, which
are under operating leases that expire over the next ten years. The Company also
leases certain computer and other equipment under operating leases that expire
over the next five years. These leases are frequently renegotiated or otherwise
changed as advancements in computer technology produce opportunities to lower
costs and improve performance. Additionally, the Company has agreements with
various third-parties to purchase certain data processing and telecommunications
services extending beyond one year. Rental expenses under operating leases were
$117.6 million, $121.9 million and $117.1 million for the years ended December
31, 1996, 1995 and 1994, respectively. Future minimum lease payments under
non-cancelable leases at December 31, 1996 are as follows:
1997 1998 1999 2000 2001 Thereafter Total
- --------------------------------------------------------------------------------
$96.5 $78.7 $60.4 $30.1 $18.4 $54.6 $338.7
================================================================================
- --------------------------------------------------------------------------------
NOTE 14. LITIGATION
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and litigation
could have a material effect on quarterly or annual operating results or cash
flows when resolved in a future period. However, in the opinion of management,
these matters will not materially affect the Company's consolidated financial
position.
F-21
<PAGE>
- --------------------------------------------------------------------------------
Note 14. Litigation (continued)
Information Resources
Additionally, on July 29, 1996, Information Resources, Inc. ("IRI" ) filed
a complaint in the United States District Court for the Southern District of New
York, naming as defendants the Company, A.C. Nielsen Company (a subsidiary of
ACNielsen) and IMS (a subsidiary of Cognizant).
The complaint ("IRI Action") alleges various violations of United States
antitrust laws, including alleged violations of Section 1 and 2 of the Sherman
Act. The complaint also alleges a claim of tortious interference with a contract
and a claim of tortious interference with a prospective business relationship.
These claims relate to the acquisition by defendants of Survey Research Group
Limited ("SRG" ) prior to the Distribution. IRI alleges SRG violated an alleged
agreement with IRI when it agreed to be acquired by the defendants and that the
defendants induced SRG to breach that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount
IRI asked to be trebled under antitrust laws. IRI also seeks punitive damages in
an unspecified amount.
In connection with the IRI Action, Cognizant, ACNielsen and the Company
have entered into the Indemnity and Joint Defense Agreement pursuant to which
they agreed (i) to certain arrangements allocating potential liabilities ("IRI
Liabilities") that may arise out of or in connection with the IRI Action and
(ii) to conduct a joint defense of such action. In particular, the Indemnity and
Joint Defense Agreement will provide that ACNielsen will assume exclusive
liability for IRI Liabilities up to a maximum amount to be calculated at such
time such liabilities, if any, become payable (the "ACN Maximum Amount"), and
that the Company and Cognizant will share liability equally for any amounts in
excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by
an investment banking firm as the maximum amount that ACNielsen is able to pay
after giving effect to (i) any plan submitted by such investment bank that is
designed to maximize the claims paying ability of ACNielsen without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring stockholder approval), and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of ACNielsen, after giving effect to such plan, the payment of related
fees and expenses, and the payment of the ACN Maximum Amount, to pay its debts
as they become due and to finance the current and anticipated operating and
capital requirements of its business, as reconstituted by such plan, for two
years from the date any such plan is expected to be implemented.
Management is unable to predict at this time the final outcome of the IRI
Action or whether the resolution of the matter could materially affect the
Company's results of operations, cash flows or financial position.
NOTE 15. SUPPLEMENTAL FINANCIAL DATA
Other Current Assets:
At December 31, 1996 1995
- --------------------------------------------------------------------------------
Deferred taxes $ 27.3 $158.3
Prepaid expenses 136.5 73.2
Other 25.0 48.7
- --------------------------------------------------------------------------------
$188.8 $280.2
================================================================================
Property, Plant and Equipment--Net, carried at cost:
At December 31, 1996 1995
- --------------------------------------------------------------------------------
Buildings $199.3 $200.2
Machinery and equipment 499.9 496.9
- --------------------------------------------------------------------------------
699.2 697.1
Less: accumulated depreciation 390.7 382.2
- --------------------------------------------------------------------------------
308.5 314.9
Leasehold improvements, less:
accumulated amortization
of $49.2 and $40.0 35.6 34.7
Land 29.0 33.3
- --------------------------------------------------------------------------------
$373.1 $382.9
================================================================================
Computer Software and Goodwill:
Computer
Software Goodwill
- --------------------------------------------------------------------------------
January 1, 1995 $ 88.8 $403.8
Additions at cost 80.4 --
Amortization (24.8) (16.8)
Other deductions and reclassifications (43.7)(1) (91.4)(2)
- --------------------------------------------------------------------------------
December 31, 1995 100.7 295.6
Additions at cost 84.5 .8
Amortization (37.9) (16.5)
Other deductions and reclassifications 3.4 (61.5)(2)
- --------------------------------------------------------------------------------
December 31, 1996 $150.7 $218.4
================================================================================
(1) Includes fourth quarter non-recurring charge for impairment of assets.
(2) Primarily sale of Interactive Data Corporation in 1995 and ACI in 1996.
F-22
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
NOTE 16. SEGMENT INFORMATION
The Company, operating in 37 countries, delivers information services
principally through two business segments referenced below. Risk Management
Services provides commercial credit and business marketing information,
receivable management services, debt rating and financial information for
investors. Directory Information Services provides sales, marketing and
publishing services for yellow pages and other directory products. Intersegment
sales are immaterial.
BUSINESS SEGMENTS
Years Ended December 31,
----------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
OPERATING REVENUES:
Risk Management Services $1,781.7 $1,734.1 $1,605.7
Directory Information Services 377.5 423.7 440.1
Corporate and Other -- .4 79.1
- --------------------------------------------------------------------------------
Total $2,159.2 $2,158.2 $2,124.9
================================================================================
OPERATING INCOME (LOSS):
Risk Management Services(1) $327.1 $449.5 $447.0
Directory Information Services(2) 141.1 186.3 248.0
Corporate and Other(3) (270.6) (237.2) (100.1)
- --------------------------------------------------------------------------------
Total 197.6 398.6 594.9
Non-Operating Expense--Net (71.2) (68.0) (35.0)
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES $ 126.4 $ 330.6 $ 559.9
================================================================================
DEPRECIATION AND AMORTIZATION:(4)
Risk Management Services $ 130.5 $ 113.6 $ 102.6
Directory Information Services 16.8 16.6 15.6
Corporate and Other 10.1 34.3 25.3
- --------------------------------------------------------------------------------
Total $ 157.4 $ 164.5 $ 143.5
================================================================================
CAPITAL EXPENDITURES:
Risk Management Services $ 50.7 $ 75.0 $ 71.9
Directory Information Services 16.0 19.3 8.2
Corporate and Other 7.2 22.5 42.4
- --------------------------------------------------------------------------------
Total $ 73.9 $ 116.8 $ 122.5
================================================================================
ASSETS:
Risk Management Services $1,272.9 $1,491.7 $1,574.0
Directory Information Services 527.9 539.7 514.9
Corporate and Other 493.4 484.4 418.0
Discontinued Operations -- 1,207.3 1,342.3
- --------------------------------------------------------------------------------
Total $2,294.2 $3,723.1 $3,849.2
================================================================================
(1) 1996 Operating Income (Loss) includes a loss on the divestiture of ACI of
$68.2 million and 1995 includes a fourth quarter non-recurring charge of
$45.6 million offset by a gain on the sale of Interactive Data Corporation
of $90.0 million. 1994 includes $5.1 million of restructuring expense and a
non-recurring charge.
(2) 1996 Operating Income (Loss) includes a loss on the sale of P-West of $28.5
million, 1995 includes a fourth quarter non-recurring charge of $17.7
million and 1994 includes a gain on the sale of Thomson Directories Ltd. of
$33.2 million partially offset by $1.2 million of restructuring expense and
a non-recurring charge.
(3) 1996 Operating Income (Loss) includes reorganization costs of $161.2
million. 1995, includes a fourth quarter non-recurring charge of $142.9
million partially offset by a $28.0 million gain on the sale of warrants
received in connection with the divestiture of Donnelley Marketing and 1994
includes $61.6 millon of restructuring expense and a non-recurring charge
partially offset by the gain on the sale of DunsNet of $36.0 million.
(4) Includes depreciation and amortization of Property, Plant and Equipment,
Computer Software, Goodwill and Other Intangibles.
F-23
<PAGE>
- --------------------------------------------------------------------------------
Note 16. Segment Information (continued)
GEOGRAPHIC SEGMENTS
Years Ended December 31,
-----------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
OPERATING REVENUES:
United States $1,564.0 $1,582.6 $1,638.1
Europe 481.6 465.5 378.0
Other Non-U.S. 113.6 110.1 108.8
- --------------------------------------------------------------------------------
Total $2,159.2 $2,158.2 $2,124.9
================================================================================
OPERATING INCOME (LOSS):
United States(1) $ 182.2 $ 406.4 $ 526.0
Europe(2) 12.9 3.5 63.4
Other Non-U.S.(3) 2.5 (11.3) 5.5
- --------------------------------------------------------------------------------
Total 197.6 398.6 594.9
Non-Operating Expense--Net (71.2) (68.0) (35.0)
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES $ 126.4 $ 330.6 $ 559.9
================================================================================
ASSETS:
United States $1,511.2 $1,691.4 $1,688.9
Europe 660.0 774.1 622.6
Other Non-U.S. 123.0 50.3 195.4
Discontinued Operations -- 1,207.3 1,342.3
- --------------------------------------------------------------------------------
Total $2,294.2 $3,723.1 $3,849.2
================================================================================
(1) 1996 Operating Income (Loss) includes losses on the sales of ACI and P-West
of $68.2 million and $28.5 million, respectively, and reorganization costs
of $161.2 million. 1995 includes a fourth quarter non-recurring charge of
$184.7 million partially offset by gains on the sale of Interactive Data
Corporation of $90.0 million and the sale of warrants received in connection
with the divestiture of Donnelley Marketing of $28.0 million. 1994 includes
$55.7 million of restructuring expense and a non-recurring charge partially
offset by a gain on the sale of DunsNet of $36.0 million.
(2) 1995 includes a fourth quarter non-recurring charge of $8.4 million and 1994
includes a gain on the sale of Thomson Directories Ltd. of $33.2 million
partially offset by $10.7 million of restructuring expense and a
non-recurring charge.
(3) 1995 includes a fourth quarter non-recurring charge of $13.1 million and
1994 includes $1.5 millon of restructuring expense and a non-recurring
charge.
The Directory Information Services segment includes the results of DonTech, a
partnership between RHD and Ameritech Advertising Services. The Company's share
of partnership earnings which is included in operating revenues was $122.4
million, $127.7 million and $121.2 million in 1996, 1995 and 1994, respectively.
At December 31, 1996, DonTech's assets and liabilities were as follows: current
assets $408.4 million, other assets $6.6 million and current liabilities $29.1
million. DonTech's December 31, 1995 assets and liabilities were as follows:
current assets $387.9 million, other assets $9.2 million and current liabilities
$27.1 million. DonTech's gross revenues totaled $468.5 million, $472.8 million
and $462.2 million for 1996, 1995 and 1994, respectively. Pre-tax income was
$226.7 million, $232.2 million and $216.4 million for 1996, 1995 and 1994,
respectively. At December 31, 1996 and 1995, the Company's investment in DonTech
was $215.3 million and $197.2 million, respectively.
F-24
<PAGE>
The Dun & Bradstreet Corporation and Subsidiaries
Notes to Consolidated Financial Statements continued
Tabular dollar amounts in millions, except per share data
- --------------------------------------------------------------------------------
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
March 31 June 30 September 30 December 31 Year
- ---------------------------------------------------------------------------------------------------------------------------
1996(1)(2)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES $450.4 $505.1 $509.8 $ 693.9 $2,159.2
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)(3) $ 52.3 $(14.2) $ 76.0 $ 83.5 $ 197.6
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS):
CONTINUING OPERATIONS, NET OF INCOME TAXES $ 21.9 $(43.9) $ 24.3 $ (29.6) $ (27.3)
DISCONTINUED OPERATIONS, NET OF INCOME TAXES 42.3 .3 26.6 (86.3) (17.1)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 64.2 $(43.6) $ 50.9 $(115.9) $ (44.4)
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
CONTINUING OPERATIONS $ .13 $ (.26) $ .14 $ (.17) $ (.16)
DISCONTINUED OPERATIONS .25 -- .16 (.51) (.10)
- ---------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) PER SHARE OF COMMON STOCK $ .38 $ (.26) $ .30 $ (.68) $ (.26)
===========================================================================================================================
1995(1)(2)
- ---------------------------------------------------------------------------------------------------------------------------
Operating Revenues $486.5 $515.7 $530.7 $ 625.3 $2,158.2
- ---------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)(4) $119.5 $116.5 $212.6 $ (50.0) $ 398.6
- ---------------------------------------------------------------------------------------------------------------------------
Income (Loss):
Continuing Operations, Net of Income Taxes $ 67.6 $ 63.5 $127.6 $ (41.2) $ 217.5
Discontinued Operations, Net of Income Taxes 41.3 82.6 43.9 (64.5) 103.3
- ---------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $108.9 $146.1 $171.5 $(105.7) $ 320.8
- ---------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .40 $ .37 $ .75 $ (.24) $ 1.28
Discontinued Operations .24 .49 .26 (.38) .61
- ---------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share of Common Stock $ .64 $ .86 $ 1.01 $ (.62) $ 1.89
===========================================================================================================================
</TABLE>
(1) Previously filed Forms 10-Q for the quarters ended March 31 and June 30,
1996, have been reclassified to reflect certain of the Company's businesses
as discontinued operations.
(2) In the fourth quarter of 1996, the Company changed its revenue recognition
accounting policy in connection with its Directory Information Services
segment, effective January 1, 1996. The Company changed to the predominant
industry practice of recognizing revenue and related expenses at the time
the yellow page directories are published. Previously, revenue and related
expenses were reported ratably during the year consistent with historic
publishing patterns. This accounting change had no impact on the full-year
results. As a result of this accounting change, results for the first three
quarters of 1996 have been restated. In accordance with APB No. 20,
"Accounting Changes," 1995 results have not been restated.
(3) Includes reorganization costs of $1.4 million, $7.6 million, $18.9 million
and $133.3 million incurred in the quarters ended March 31, June 30,
September 30 and December 31, 1996, respectively, loss on the sale of ACI of
$63.8 million and $4.4 million in the quarters ended June 30 and September
30, 1996, respectively, and loss on the sale of P-West of $25.0 million and
$3.5 million in the quarters ended June 30 and September 30, 1996,
respectively.
(4) Includes a non-recurring charge of $206.2 million in the quarter ended
December 31, 1995, partially offset by gains of $28.0 million in the quarter
ended March 31, 1995, on the sale of warrants received in connection with
the divestiture of Donnelley Marketing and $90.0 million in the quarter
ended September 30, 1995, associated with the sale of Interactive Data
Corporation.
F-25
<PAGE>
- --------------------------------------------------------------------------------
Note 17. Quarterly Financial Data (Unaudited) (continued)
SUPPLEMENTAL INFORMATION
The following supplemental information is provided to present 1995 quarterly
results on a comparable basis to 1996. 1995 results have been restated as if the
revenue recognition change described previously was effective as of January 1,
1995.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------
March 31 June 30 September 30 December 31 Year
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Operating Revenues $441.2 $494.5 $525.2 $697.3 $2,158.2
- ----------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss)(1) $ 85.4 $ 91.3 $211.3 $ 10.6 $ 398.6
- ----------------------------------------------------------------------------------------------------------------------------
Income (Loss):
Continuing Operations, Net of Income Taxes $ 45.0 $ 46.9 $126.8 $ (1.2) $ 217.5
Discontinued Operations, Net of Income Taxes 41.3 82.6 43.9 (64.5) 103.3
- ----------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 86.3 $129.5 $170.7 $(65.7) $ 320.8
- ----------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ .27 $ .27 $ .75 $ (.01) $ 1.28
Discontinued Operations .24 .49 .26 (.38) .61
- ----------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share of Common Stock $ .51 $ .76 $ 1.01 $ (.39) $ 1.89
============================================================================================================================
</TABLE>
(1) Includes a non-recurring charge of $206.2 million in the quarter ended
December 31, 1995, offset by gains of $28.0 million in the quarter ended
March 31, 1995, on the sale of warrants received in connection with the
divestiture of Donnelley Marketing and $90.0 million in the quarter ended
September 30, 1995, associated with the sale of Interactive Data
Corporation.
F-26
<PAGE>
FIVE-YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Tabular amounts in millions, except per share data 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Operating Revenues $2,159.2 $2,158.2 $2,124.9 $2,127.0 $2,151.9
Costs and Expenses(1) 1,961.6 1,759.6 1,530.0 1,794.2 1,627.3
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Income 197.6 398.6 594.9 332.8 524.6
Non-Operating (Expense) Income--Net (71.2) (68.0) (35.0) 1.8 (7.4)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations before
Provision for Income Taxes 126.4 330.6 559.9 334.6 517.2
Provision for Income Taxes 153.7 113.1 191.3 122.7 158.5
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss):
Continuing Operations (27.3) 217.5 368.6 211.9 358.7
Discontinued Operations, Net of Income Taxes(2) (17.1) 103.3 260.9 72.6 194.8
- ---------------------------------------------------------------------------------------------------------------------------------
Income (Loss) before Cumulative Effect
of Accounting Changes (44.4) 320.8 629.5 284.5 553.5
Cumulative Effect of Accounting Changes(3) -- -- -- (246.4) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (44.4) $ 320.8 $ 629.5 $ 38.1 $ 553.5
=================================================================================================================================
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Continuing Operations $ (0.16) $ 1.28 $ 2.17 $ 1.20 $ 2.01
Discontinued Operations (0.10) 0.61 1.53 0.41 1.09
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) before Cumulative Effect
of Accounting Changes (0.26) 1.89 3.70 1.61 3.10
Cumulative Effect of Accounting Changes(3) -- -- -- (1.38) --
- ---------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share of Common Stock $(0.26) $ 1.89 $ 3.70 $ 0.23 $ 3.10
=================================================================================================================================
Dividends Per Share $ 1.82 $ 2.63 $ 2.56 $ 2.40 $ 2.25
Dividends Paid $310.8 $ 446.1 $ 435.2 $ 423.0 $ 401.3
Weighted Average Number of Shares Outstanding 170.0 169.5 169.9 177.2 178.3
=================================================================================================================================
BALANCE SHEET:
Total Assets(4) $2,294.2 $3,723.1 $3,849.2 $3,651.2 $3,845.6
=================================================================================================================================
Shareholders' Equity $(431.7) $1,182.5 $1,318.6 $1,111.3 $2,156.0
=================================================================================================================================
</TABLE>
(1) 1996 includes one-time charges of $161.2 million for reorganization costs
and losses on divestitures of $68.2 million and $28.5 million for ACI and
P-West, respectively. 1995 includes a fourth quarter non-recurring charge of
$206.2 million partially offset by gains of $90.0 million and $28.0 million
for the sale of Interactive Data Corporation and warrants received in
connection with the divestiture of Donnelley Marketing, respectively. 1994
includes restructuring expense and a non-recurring charge of $67.9 million
offset by gains on the sales of Thomson Directories Ltd. and DunsNet of
$33.2 million and $36.0 million, respectively. 1993 includes restructuring
expense of $173.8 million partially offset by gains of $13.6 million for the
redemption of preferred shares received from the 1991 sale of Donnelley
Marketing, $9.5 million on the sale of Donnelley Marketing and $8.9 million
for the redemption of notes related to the 1992 sale of Datastream
International. 1992 includes gains of $90.0 million on the sale of
Datastream International and Information Associates partially offset by
restructuring expense of $55.8 million.
(2) Income taxes on Discontinued Operations was $93.5 million, $9.7 million,
$58.4 million, $36.7 million and $83.3 million in 1996, 1995, 1994, 1993 and
1992, respectively.
(3) Includes impact of $130.9 million or $.73 per share for the adoption of SFAS
No. 112 and $115.5 million or $.65 per share for the adoption of SFAS No.
106 in 1993.
(4) Includes Net Assets of Discontinued Operations of $1,207.3 million, $1,342.3
million, $1,186.4 million and $1,686.9 million in 1995, 1994, 1993 and 1992,
respectively.
F-27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Financial Statements.
See Index to Financial Statements and Schedules on Page 15.
(2) Financial Statement Schedule.
See Index to Financial Statements and Schedules on Page 15.
(3) Exhibits.
See Index to Exhibits on Pages 18 to 20.
(b) Reports on Form 8-K.
Filed October 24, 1996, Item 5. Other Events Reported
Financial Statements include:
Consolidated Statement of Income for the six months ended June
30, 1996 and the years ended December 31, 1995, 1994 and 1993.
Consolidated Statement of Financial Position at June 30, 1996
and December 31, 1995 Financial Data Schedules
(d) Separate Financial Statements of Subsidiaries Not Consolidated and
Fifty Percent Owned
(1) Financial Statements of Dontech
See Index on Page 15
1
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS:
The Company's consolidated financial statements, the notes thereto and the
related report thereon of Coopers & Lybrand L.L.P., independent accountants, for
the years ended December 31, 1996, 1995 and 1994, appearing on Pages 25 to 46 of
the accompanying 1996 Annual Report, are incorporated by reference into this
Annual Report on Form 10-K (see below). The additional financial data indicated
below should be read in conjunction with such consolidated financial statements.
<TABLE>
<CAPTION>
PAGE
------------------------------------------
10-K 1996 ANNUAL
REPORT
-------------------- ------------------
-------------------- ------------------
<S> <C> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ................................... F-6 25
Statement of Management Responsibility
for Financial Statements .......................................... F-6 25
At December 31, 1996 and 1995:
Consolidated Balance Sheets ....................................... F-8 27
For the years ended December 31, 1996, 1995 and 1994:
Consolidated Statement of Operations .............................. F-7 26
Consolidated Statement of Cash Flows .............................. F-9 28
Consolidated Statement of Shareholders' Equity .................... F-10 29
Notes to Consolidated Financial Statements ........................ F-11 to F-24 30 to 45
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... F-1 to F-5 20 to 24
Other financial information
Five-year selected financial data ................................. F-27 46
SCHEDULE:
Report of Independent Accountants ................................. 16 --
II-Valuation and Qualifying Accounts for the years ended
December 31, 1996, 1995 and 1994 ................................ 17 --
Schedules other than the one listed above are omitted as not required or
inapplicable or because the required information is provided in the
consolidated financial statements, including the notes thereto.
SEPARATE FINANCIAL STATEMENTS OF FIFTY-PERCENT OWNED UNCONSOLIDATED
SUBSIDIARY
Report of Independent Accountants ................................... S-1 --
At December 31, 1996 and 1995:
Balance Sheets .................................................... S-2 --
For the years ended December 31, 1996, 1995 and 1994:
Statement of Operations ........................................... S-4 --
Statement of Cash Flows ........................................... S-5 --
Statement of Partners' Capital .................................... S-3 --
Notes to Financial Statements ..................................... S-6 to S-10 --
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994
(IN MILLIONS)
- ---------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
BALANCE CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(A) OF PERIOD
----------- --------- -------- ------------- ---------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
For the Year Ended December 31, 1996.......... $35.7 $25.8 $(23.4) $38.1
======= ====== ========= ============
For the Year Ended December 31, 1995.......... $47.8 $35.2 $(47.3) $35.7
======= ====== ========= ============
For the Year Ended December 31, 1994.......... $52.9 $41.8 $(46.9) $47.8
======= ====== ========= ============
</TABLE>
NOTE:
(a) Represents primarily the charge-off of uncollectible accounts for which a
reserve was provided.
3
<PAGE>
INDEX TO EXHIBITS
REGULATION S-K
EXHIBIT NUMBER
- --------------
(3) Articles of Incorporation and By-laws.
(a) Restated Certificate of Incorporation of The Dun & Bradstreet
Corporation dated June 15, 1988 (incorporated herein by reference to
Exhibit 4(a) to Registrant's Registration No. 33-25774 on Form S-8 filed
November 25, 1988).
(b) By-laws of Registrant dated December 15, 1993 (incorporated herein by
reference to Exhibit E to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993, file number 1-7155, filed March 25,
1994).
(4) Instruments Defining the Rights of Security Holders, Including Indentures.
*(a)Credit Agreement, dated as of August 30, 1996 among The Dun & Bradstreet
Corporation, The Borrowing Subsidiaries Party Hereto, The Lenders Party
Hereto, The Chase Manhattan Bank, Citibank, N.A. and Morgan Guaranty
Trust Company of New York, $1,000,000,000 Revolving Credit and
Competitive Advance Facility. Another Instrument with respect to an
issue of long term debt has not been filed as an exhibit to this Annual
Report on Form 10-K, as the authorized principal amount of such issue
does not exceed 10% of total assets of registrant and subsidiaries on a
consolidated basis. The Dun & Bradstreet Corporation agrees to furnish a
copy of such instrument to the Commission upon request.
(10) Material Contracts.
*+(a) Nonfunded Deferred Compensation Plan for Non-Employee Directors of
Registrant, as amended November 20, 1996.
+(b) Pension Benefit Equalization Plan, as amended December 21, 1994
(incorporated herein by reference to Exhibit F to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994, file number
1-7155, filed March 27, 1995).
+(c) Profit Participation Benefit Equalization Plan, as amended and restated
effective January 1, 1995 (incorporated herein by reference to Exhibit E
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, file number 1-7155, filed March 27, 1995).
+(d) 1982 Key Employees Stock Option Plan for Registrant and Subsidiaries,
as amended April 18, 1995 (incorporated herein by reference to Exhibit F
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1995, file number 1-7155, filed March 27, 1995.)
+(e) 1991 Key Employees Stock Option Plan for Registrant and Subsidiaries,
as amended April 18, 1995 (incorporated herein by reference to Exhibit C
to Registrant's Proxy Statement dated March 10, 1995, file number
1-7155).
+(f) Ten-Year Incentive Stock Option Agreement (incorporated herein by
reference to Exhibit 28(b) to Registrant's Registration No. 33-44551 on
Form S-8, filed December 18, 1991).
+(g) Ten-Year Non-Qualified Stock Option Agreement (incorporated herein by
reference to Exhibit 28(c) to Registrant's Registration No. 33-44551 on
Form S-8, filed December 18, 1991).
+(h) Stock Appreciation Rights Agreement relating to Incentive Stock Options
(incorporated herein by reference to Exhibit 28(d) to Registrant's
Registration No. 33-44551 on Form S-8, filed December 18, 1991).
+(i) Stock Appreciation Rights Agreement relating to Non-Qualified Stock
Options (incorporated herein by reference to Exhibit 28(e) to
Registrant's Registration No. 33-44551 on Form S-8, filed December 18,
1991).
+(j) Limited Stock Appreciation Rights Agreement relating to Incentive Stock
Options (incorporated herein by reference to Exhibit 28(f) to
Registrant's Registration No. 33-44551 on Form S-8, filed December 18,
1991).
4
<PAGE>
REGULATION S-K
EXHIBIT NUMBER
- --------------
+(k) Limited Stock Appreciation Rights Agreement relating to Non-Qualified
Stock Options (incorporated herein by reference to Exhibit 28(g) to
Registrant's Registration No. 33-44551 on Form S-8, filed December 18,
1991).
+(l) Key Employees Performance Unit Plan for Registrant and Subsidiaries, as
amended October 16, 1996 subject to Shareholder approval on May 1, 1997
(incorporated by reference to Exhibit B to Registrant's Proxy Statement
dated March 27, 1997, file number 1-7155).
+(m) Corporate Management Incentive Plan, as amended October 16, 1996 and
February 19, 1997 (incorporated herein by reference to Exhibit A to
Registrant's Proxy Statement dated March 27, 1997, file number 1-7155).
+(n) 1989 Key Employees Restricted Stock Plan for Registrant and
Subsidiaries, as amended April 18, 1995 (incorporated herein by
reference to Exhibit D to Registrant's Proxy Statement dated March 10,
1995, file number 1-7155).
+(o) Restricted Stock Agreement (incorporated herein by reference to Exhibit
L to Registrant's Annual Report on Form 10-K for the year ended December
31, 1989, file number 1-7155, filed March 26, 1990).
+(p) Form of Change-in-Control Severance Agreement, approved July 19, 1989
(incorporated herein by reference to Exhibit M to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989, file number
1-7155, filed March 26, 1990).
+(q) Supplemental Executive Benefit Plan, as amended December 21, 1994
(incorporated herein by reference to Exhibit G to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994, file number
1-7155, filed March 27, 1995).
+(r) Restricted Stock Plan for Non-Employee Directors, adopted July 20, 1994
(incorporated by reference to Exhibit E to Registrant's Proxy Statement
dated March 10, 1995, file number 1-7155).
*+(s) Executive Transition Plan, as amended on February 19, 1997.
*+(t) 1996 The Dun & Bradstreet Corporation Non Employee Directors' Stock
Incentive Plan, adopted December 18, 1996 and amended January 15, 1997.
(u) Agreement of Limited Partnership of D&B Investors L.P., dated as of
October 14, 1993 (incorporated herein by reference to Exhibit H to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993, file number 1-7155, filed March 25, 1994).
(v) Purchase Agreement and Purchase Agreement Amendment dated October 14,
1993 among D&B Investors L.P. and other parties (incorporated herein by
reference to Exhibit I to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993, file number 1-7155, filed March 25,
1994).
*(w) Agreement to Retire General Partner Interest dated October 21, 1996 by
and between D&B Investors L.P. and IMS America, Ltd.
*(x) Distribution Agreement dated as of October 28, 1996, among the Company,
Cognizant Corporation and ACNielsen Corporation .
*(y) Tax Allocation Agreement dated as of October 28, 1996, among the
Company, Cognizant Corporation and ACNielsen Corporation.
*(z) Employee Benefits Agreement dated as of October 28, 1996, among the
Company, Cognizant Corporation and ACNielsen Corporation.
*(aa) Indemnity and Joint Defense Agreement dated as of October 28, 1996,
among the Company, Cognizant Corporation and ACNielsen Corporation.
5
<PAGE>
REGULATION S-K
EXHIBIT NUMBER
- --------------
*(11) Statement Re Computation of Per Share Earnings.
Computation of Earnings Per Share of Common Stock on a Fully
Diluted Basis
*(13) Annual Report to Security Holders.
1996 Annual Report
*(21) Subsidiaries of the Registrant.
List of Active Subsidiaries as of January 31, 1997
*(23) Consents of Experts and Counsel.
**(23.b) Consent of Independent Accountants
*(27) Financial Data Schedules
*These exhibits were previously filed as part of this report on Form 10-K
for the year ended December 31, 1996.
**Filed herewith
+Represents a management contract or compensatory plan.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
By: /s/CHESTER J. GEVEDA, JR.
-----------------------------
(Chester J. Geveda, Jr.
Vice President - Controller)
Date: April 2, 1997
7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
----------- ----------- ----
23(b) Consent of Experts and Counsel Consent of
Independent Accountants
8
Exhibit 23 (b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of The Dun & Bradstreet Corporation on Forms S-8 (File Nos. 2-53006,
33-21719, 33-25774, 33-27144, 33-44551, 33-49060, 33-51005, 33-56289 and
33-64317) of our report dated January 3, 1997, on our audits of the financial
statements of DonTech as of December 31, 1996 and 1995 and for the years
ended December 31, 1996, 1995 and 1994, which report is included in this
Annual Report on Form 10-K.
COOPERS & LIBRAND L.L.P.
Chicago, Illinois
March 26, 1997
