<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER 1-8260
PRIMARK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MICHIGAN 38-2383282
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 WINTER STREET, SUITE 4300N 02154
WALTHAM, MA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 466-6611
<TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common stock, without par value New York Stock Exchange
Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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. Yes X No
--- ---
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The aggregate market of the registrant's common stock held by
non-affiliates as of February 29, 1996 was $928,641,287, based on the closing
price on that day (New York Stock Exchange -- Composite Transactions).
Number of Shares outstanding of the registrant's common stock without par
value on February 29, 1996 was 23,509,906.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Primark's 1995 Annual Report are incorporated by reference in
Part I, Item 1, and Part II, Items 5, 6, 7 and 8. Portions of Primark's 1996
Proxy Statement for its 1996 Annual Meeting of Shareholders, which will be filed
within 120 days of December 31, 1995, are incorporated by reference in Part III,
Items 10, 11, 12 and 13.
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C> <C>
Cover Page................................................................. i
Index...................................................................... ii
PART I
Item 1. Business................................................................... 1
Item 2. Properties................................................................. 11
Item 3. Legal Proceedings.......................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........................ 13
Executive Officers of the Registrant....................................... 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...... 14
Item 6. Selected Financial Data.................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of 14
Operations...............................................................
Item 8. Financial Statements and Supplementary Data................................ 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial 14
Disclosure...............................................................
PART III
Item 10. Directors and Executive Officers of the Registrant......................... 14
Item 11. Executive Compensation..................................................... 14
Item 12. Security Ownership of Certain Beneficial Owners and Management............. 14
Item 13. Certain Relationships and Related Transactions............................. 14
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.......... 15
Signatures................................................................. 16
</TABLE>
ii
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Primark Corporation (the "Company" or "Primark") is a Michigan corporation
organized in 1981. The Company is engaged principally in the information
services industry serving two primary markets, Financial Information and Applied
Information Technology. The Company's Financial Information businesses consist
of the operations of Datastream International Limited and affiliates
("Datastream"), Disclosure Incorporated ("Disclosure"), I/B/E/S International,
Inc. ("I/B/E/S"), Vestek Systems, Inc. ("Vestek") and Worldscope/Disclosure
Partners ("Worldscope"). Primark develops and markets "value-added" database
products that cover established and emerging markets worldwide, as well as
proprietary analytical software for the analysis and presentation of financial
and economic information. Customers include investment managers, investment
bankers, accounting and legal professionals and information and reference
service providers. The Applied Information Technology activities, conducted
through TASC, provide a broad spectrum of technology-based information services
and products primarily to U.S. government agencies principally involved in
national security and intelligence related activities, and increasingly to
commercial customers such as users of real-time weather information. The Company
is also engaged in transportation services and financial services through its
wholly owned subsidiaries, Triad International Maintenance Corporation ("TIMCO")
and Primark Storage Leasing Corporation ("PSLC"). At December 31, 1995, the
Company and its subsidiaries employed 5,131 persons.
Commencing with Primark's acquisition of TASC in 1991, the Company embarked
on a strategy of combining information technology expertise with proprietary
data content to serve the increasing information requirements of its customers
with value-added products. The Company focused its strategy on the Financial
Information market through its acquisitions of Datastream in 1992 and Vestek in
1994, while divesting certain of its non-core operations. Primark significantly
expanded its domestic presence in Financial Information content services through
the June 1995 acquisition of Disclosure and its subsidiary I/B/E/S.
Information regarding the revenues, operating results and identifiable
assets of the Company and its subsidiaries, both by industry and geographical
region, is incorporated by reference herein from Note 12 to the Consolidated
Financial Statements entitled "Segment and Geographic Information" in the
Company's 1995 Annual Report.
Acquisitions
On June 29, 1995, the Company acquired the entire equity interest of
Disclosure and certain of its affiliates, including I/B/E/S and a 50% ownership
of Worldscope. Disclosure is a provider of "as reported" and abstracted
financial information, primarily derived from Securities and Exchange Commission
filings and supplemented with information from companies, stock exchanges and
other sources, both in the United States and worldwide. I/B/E/S is a source of
earnings estimates for investors, financial institutions and portfolio managers
on a global basis. Total revenues reported by Disclosure and I/B/E/S were
approximately $85,972,000 for the year ended December 31, 1994. Information
regarding the Company's acquisition of Disclosure is incorporated by reference
herein from Note 2 to the Consolidated Financial Statements entitled
"Acquisitions" in the 1995 Annual Report.
INFORMATION SERVICES SEGMENT
Primark's information services industry serves two primary markets,
Financial Information and Applied Information Technology. The operations of
Datastream, Disclosure, I/B/E/S and Vestek provide the financial information
markets with economic and financial information and analysis of the information
through proprietary software. The applied information technology activities
provide a myriad of technology-based information services and products,
primarily to U.S. Government national security and intelligence agencies, and
increasingly to commercial customers.
1
<PAGE> 4
FINANCIAL INFORMATION MARKET
Datastream
Founded in 1964 and acquired by Primark in 1992, Datastream provides
on-line historical economic and financial information, along with proprietary
analytical software for accessing and manipulating such information. Datastream
is also a leading provider of computer-based investment valuation and fund
services in the United Kingdom. Datastream's customers include approximately
1,600 financial organizations in 45 countries, including investment bankers,
brokers, pension and money fund managers and insurance companies that use
financial and economic information for investment research and analysis. Other
users include publishers of financial journals and daily newspapers, business
schools and universities.
The core of Datastream's operations is its centralized data system which
maintains a series of linked databases of extensive international economic and
financial data collected from wire services, official publications of national
and international agencies, stock, options and futures exchanges, other
information vendors, brokers, dealers, banks and issuers. Customers have on-line
access to Datastream's databases through personal computers, networks or
workstations. Datastream's products and services enable customers to perform
extensive investment research and analysis, investment administration and
portfolio valuations on securities in all major markets, and to produce
graphics, statistics, time series analysis and perform other analytical
functions.
Datastream's customers typically subscribe through annual contracts. These
contracts are automatically renewed, unless notice of cancellation is given
three months before the annual renewal date. None of Datastream's customers
contributes more than 3% of Datastream's total revenues. Accordingly, the
Company does not believe that the loss of any one Datastream customer would have
a material adverse effect on Datastream's business.
Datastream's products and services fall into two principal categories
- -- investment research and fund management services.
Investment research services accounted for approximately 85%, 82% and 80%
of Datastream's total revenues for the fiscal years ended November 30, 1995,
1994 and 1993, respectively. These services consist of a set of software
programs to manipulate, analyze and present financial and economic information
obtained from Datastream's databases. The software is designed to facilitate the
customers' access to data from any of Datastream's databases, and to manipulate
this data in a variety of pre-programmed and pre-formatted ways such as graphs,
regressions, and tables.
Fund management services accounted for approximately 15%, 18% and 20% of
Datastream's total revenues for the fiscal years ended November 30, 1995, 1994
and 1993, respectively. Fund management services provide investment accounting,
portfolio valuation and performance measurement activities predominantly to fund
managers, unit trusts, mutual funds and portfolio managers located primarily in
the U.K. Other customers include U.K. clearing banks, insurance companies and
international financial institutions.
A critical component of Datastream's business is the data itself.
Datastream's principal supply requirements are for raw financial data which are
acquired from numerous data suppliers worldwide and developed internally. Once
acquired, the data are edited and stored in Datastream's databases for access
and manipulation through Datastream's applications and value-added software
programs. Data suppliers generally retain ownership of the raw data, but allow
Datastream and its customers the use of such data. Datastream places great
importance on the quality of its data and has developed a program to
continuously review its data sources to ensure quality, control and continuity.
Wherever possible, Datastream develops multiple sources of data to provide
backup and cross-checking.
Data relating to equities include pricing information for earnings and
dividends on approximately 42,000 stocks from 58 countries, including all major
markets and a number of emerging markets. This data includes historical earnings
and dividend data, as well as forecast data supplied by market specialists. Data
relating to bonds include maturity and yield on approximately 88,000 corporate
and government bonds from 42 countries, all Eurobonds and related indices. Data
relating to futures and options includes current prices, previously
2
<PAGE> 5
traded prices, trading volume and intra-day high and low values from the
international options and futures exchanges, including LIFFE (London), MONEP and
MATIF (Paris), SOFFEX (Switzerland), EOE (Amsterdam), DTB (Germany), Chicago and
Philadelphia.
Datastream has included databases from both I/B/E/S and Worldscope as an
integral part of its investment research services. Consequently, it has helped
these two companies gain additional customers, as well as customers new to
Datastream. Datastream has also installed the full Disclosure index on its
on-line system, and offers index searches and electronic ordering of hard copy
documents to Datastream users. Vestek is also developing investment management
software products that will be marketed and supported by Datastream's European
sales and service personnel.
Disclosure
Founded in 1968, Disclosure was acquired by the Company on June 29, 1995.
Disclosure is a leading provider of "as reported" and abstracted financial
information in the U.S. market, covering over 16,000 U.S. companies and 13,000
foreign companies, derived from a variety of government and third-party sources.
Disclosure's document and database services are provided on a subscription and
demand basis through electronic media such as on-line services and compact laser
disks, as well as through printed products. Disclosure's customer base includes
the majority of U.S. investment banks, law and accounting firms, together with
other institutions and individuals performing financial research. The United
States market accounted for 94% of Disclosure's 1995 revenues.
Disclosure's offering of financial information includes a wide spectrum of
Securities and Exchange Commission ("SEC") documents, such as Forms 10-K and
10-Q, proxy statements, registration statements and material event reports, as
well as non-SEC documents such as U.S. and foreign annual reports. The
information included in Disclosure's products is obtained through contractual
relationships with the SEC and major stock exchanges, as well as through
commercial acquisition of the information. Once acquired, Disclosure indexes,
tags and formats the information to allow for ease in navigation, searches and
analysis. This information is then delivered to clients through a variety of
products including Laser D (an image-based CD-ROM product), Compact D (a
searchable electronic database on CD-ROM), on-line distribution channels and
printed products.
Subscription services accounted for 51% and 50% of Disclosure's revenues
for the fiscal years ended December 31, 1995 and 1994, respectively. Disclosure
has experienced renewal rates for its subscription services in excess of 90%.
The remainder of Disclosure's revenues are predominantly derived from sales at
Disclosure's Demand Centers. No single customer accounts for more than 5% of
Disclosure's revenues. Disclosure's products fall into two major categories:
imaged based services and database services.
Disclosure's image-based services provide financial documents via paper,
microfiche, on-line and CD-ROM. The delivery of image-based information is
handled through Disclosure's Demand Centers, as well as through the Laser D and
Global Access applications. The Demand Centers are staffed by research
specialists who assist customers in locating requested information and provide
alert services for customers who want early identification of specified
documents. In 1995, Disclosure delivered over one million documents through its
Demand Centers' network. Laser D is a multi-disc CD-ROM document database that
provides a desktop library of information to high volume document users who
require instant access to documents filed with the SEC, banking agencies and
U.S. and foreign stock exchanges. Global Access offers on-line delivery of
Disclosure's unique proprietary electronic index of public company documents and
access to the SEC's EDGAR filings. Global Access provides desktop searching,
display and ordering from Disclosure's information repository of over 29,000
companies. Approximately 81% and 83% of Disclosure's total revenues were derived
from document services for the twelve months ended December 31, 1995 and 1994,
respectively.
Disclosure's database segment provides products which can be machine read
and manipulated by the end users. The products are delivered on CD-ROM disks and
through a growing list of third-party on-line vendors. The Company's EdgarPlus
product contains all EDGAR filings from 1993 to present and full text filings
back to 1987 through Disclosure's SEC On-line product, all of which have been
enhanced with value-added navigational and formatting tags. The SEC On-line
product had been creating EDGAR type databases prior to
3
<PAGE> 6
the EDGAR project's implementation by the SEC. The Disclosure/SEC Database is an
abstracted database containing a collection of company profiles and financial
statements on over 11,000 U.S. public companies, indexed and organized for
searching and screening. The Company also delivers other products such as the
New Issues Database, which is a collection of abstracted information on security
registrations and initial public offerings and Compact D/Canada, which provides
information on 10,000 Canadian companies. Approximately 19% and 17% of
Disclosure's total revenues were derived from database services for the years
ended December 31, 1995 and 1994, respectively.
I/B/E/S
I/B/E/S is a leading source of global earnings estimates for investors,
financial institutions and portfolio managers worldwide. I/B/E/S collects and
processes earnings per share estimates provided by over 6,700 individual
securities analysts representing approximately 770 firms on over 16,000
companies globally. The estimates and related data are delivered through
third-party distributors, I/B/E/S Express (a proprietary software delivery
system) and in printed publications. Approximately 78% of I/B/E/S's 1995
revenues were derived through annual subscription contracts and 22% through soft
dollar arrangements. Many I/B/E/S products permit the customer to perform
analytical functions and are enhanced by reports and graphics.
I/B/E/S, founded in 1971, serves over 1,000 customers worldwide. I/B/E/S
customers are represented by financial institutions and portfolio managers
globally, with particular interest by the quantitative analysts who access and
download information directly into analytic models. I/B/E/S products are also
sold to end users, such as management consultants and traditional investment
analysts who utilize I/B/E/S for general research. No I/B/E/S customer
contributes more than 2% of I/B/E/S's total revenues.
Vestek
Acquired by Primark in June of 1994, Vestek develops, markets and supports
investment information services and application software used to manage,
analyze, and optimize institutional portfolios of equity, fixed income, and
other financial instruments. Vestek also provides consulting services for
investment managers and plan sponsors. Vestek currently serves over 200 clients
in five countries. Vestek clients include major banks, plan sponsors,
consultants, insurers, and investment managers. The majority of Vestek's
revenues are derived from on-line services. None of Vestek's customers
contribute more than 6% of Vestek's total revenues.
Worldscope
Worldscope contains a collection of descriptive profiles and detailed
financial statements on over 11,900 companies in 45 countries. The Worldscope
database is standardized, indexed and organized for cross-border screening and
searching. In addition to its global database, Worldscope offers an emerging
market database. Worldscope products are delivered via third-party distributors,
CD-ROM and on-line platforms. Worldscope is a partnership owned 50% by the
Company and 50% by Wright Investors' Service.
Trademarks
Primark's Financial Information companies hold numerous trademarks
worldwide that are subject to continuous renewal ranging up to 20 years. These
trademarks are significant to the Company's business, and are registered in all
of the Company's major markets to ensure recognition among its many global
trading customers.
Marketing
The products and services of Primark's Financial Information companies are
marketed worldwide. Datastream is located in London, England and has sales and
support offices located in Germany, France, Italy, Switzerland, the Netherlands,
Belgium, Luxembourg, Sweden, Japan, Hong Kong, Singapore, Australia, Korea,
Thailand, Canada and the United States.
4
<PAGE> 7
Disclosure, headquartered in Bethesda, Maryland, markets and distributes
its products, predominantly in the United States. In addition to employing a
domestic and international sales force, Disclosure extends its sales and
marketing reach with Demand Centers strategically located in the major financial
centers including ten offices in major U.S. cities and several international
locations including London, Frankfurt, Madrid, Paris, Milan, Hong Kong, Mexico
City and Tokyo.
I/B/E/S, headquartered in New York City with offices in London and Tokyo,
delivers its products directly to customers via state-of-the-art electronic
delivery media. I/B/E/S Express, the fastest growing delivery mechanism, is a
PC-based proprietary software, database management and communications package.
I/B/E/S also offers its products through a network of more than 30 electronic
third-party distributors, including FactSet, OneSource, Datastream, FAME,
Bloomberg, Reuters, Telerate and CompuServe. These third-party distributors
offer I/B/E/S a mechanism to reach new markets and link I/B/E/S data to other
databases and applications software.
In addition, Datastream is marketing and selling I/B/E/S products in Asia
and Disclosure products in both Asia and Europe.
No single customer of the Financial Information businesses accounts for
more than 5% of the Company's consolidated revenues.
Competition
The global information industry is highly competitive. The advancement of
electronic delivery via on-line vendors and the Internet has further impacted
the competitive environment in the financial information market. There are many
large and successful companies in the financial information services industry
that supply financial data competitive to products and services provided by
Primark's Financial Information businesses.
Principal competitive factors include the quality, reliability and
comprehensiveness of the analytical services and data provided, flexibility in
tailoring services to client needs, experience, innovation, the capability of
technical and client service personnel, data processing and decision support
software, reputation, price and geographic coverage. Primark distinguishes its
products through its broad international coverage, wide range of databases, high
accuracy of the data, proprietary software applications, reputation, experience
and quality of customer support provided.
I/B/E/S competes on quality, depth and breadth of data, price, accuracy and
timeliness of delivery. I/B/E/S's major direct competitor is the First Call unit
of the Thomson Corporation. While First Call provides certain services not
currently offered by I/B/E/S, I/B/E/S believes its products are more globally
comprehensive and provide a unique historical database for analysis and
backtesting.
Overall, Primark's ability to remain competitive in the financial
information markets will depend largely upon its ability to maintain and develop
new products and access new markets in a cost efficient manner, including
integration of all its financial information products and services. There can be
no assurance that Primark will continue to maintain its market share in the
future.
Foreign Operating Risks
Substantially all of Datastream's revenues are derived from various foreign
markets. Approximately 47% of Datastream's 1995 revenues were derived from the
U.K. Consequently, the Company is exposed to certain risks associated with an
international business, particularly with respect to foreign currency exchange
rate movements. Datastream's business is also subject to the customary risks
associated with international transactions, including political risks, local
laws and taxes, the potential imposition of trade or currency exchange
restrictions, tariff increases and difficulties or delays in collecting accounts
receivable. Weak foreign economies and/or a weakening of foreign currencies in
certain countries against the U.S. dollar would adversely affect Datastream's
overall future operating results and cash flows. However, operating income,
under this condition, has been and will continue to be somewhat insulated due to
high levels of British pound-based operating expenses which also fluctuate
against the U.S. dollar. The Company has been and will
5
<PAGE> 8
continue hedging the currency risk associated with Datastream's foreign
operations as may be needed in the future.
APPLIED INFORMATION TECHNOLOGY
TASC
TASC was founded in 1966 to provide solutions to complex analytical and
technological problems. Concentrating on the application of leading-edge
information technology, TASC now provides a broad spectrum of products, services
and systems primarily to U.S. government organizations responsible for
intelligence and national defense activities. Growing demand for information
technology support has increased TASC's government and commercial customer base,
both in the United States and internationally.
Primark acquired TASC in August 1991 as the information technology
cornerstone of its planned information services business. Primark recognized
that not only would the U.S. government have greater needs for information
technology, but also that TASC was capable of expanding its customer base to
many other organizations. Technology developed by TASC under U.S. government
contracts could be readily applied to create new products and services and used
to assist commercial organizations in improving internal performance as well as
service their own customers. For example, using internally developed imaging,
database, communications and workstation technology, TASC has leveraged its
weather information subsidiary, WSI, into a leading market position.
As Primark has acquired data content companies such as Datastream,
Disclosure, I/B/E/S and Vestek, it has used TASC to assist these acquisitions in
a variety of ways. TASC has participated in the development of technology
platforms used to deliver data and software to Financial Information customers
and, in one case, undertook turn-key development of a new product platform,
Easystream. TASC has also played a vital role in the planning and development of
the internal computer systems architecture and worldwide communications networks
used by the Financial Information businesses.
Finally, TASC has assisted the customers of the Financial Information
companies with their own internal information technology requirements, often
involving the integration of data from Primark with internal databases and other
third-party data. To accomplish these various objectives, personnel from TASC
consult on a reimbursable basis for periods of up to one year or TASC enters
into internal contracts with other companies within Primark.
TASC maintains its leadership in information technology in two principal
ways. First, TASC's core business involves the design and development of
advanced systems that encompass various information technologies, including
database development and access, software engineering, information system
architecture design, simulation and modeling, signal processing and visual
computing. While this work keeps TASC at the leading edge, TASC also receives
research contracts sponsored by U.S. government agencies to develop these
technologies further. In addition, TASC conducts its own internal research and
development programs. Total TASC research spending has historically exceeded $30
million annually. TASC has built the information technology research area as an
independent revenue source and uses the results of such research to continue to
support other business areas of TASC and the Company.
Second, TASC recruits top talent with advanced degrees from leading
universities, research laboratories and businesses, retaining these individuals
by providing challenging work in a stimulating atmosphere. Of TASC's 2,459
employees as of December 31, 1995, approximately 85% were professional or
technical personnel, the majority of which hold advanced degrees in engineering,
computer science, mathematics, earth and environmental sciences, business or
economics. TASC maintains 27 offices in the United States and abroad to provide
its customers with ready access to its personnel. The recognized quality and
professionalism of TASC's staff in providing unique information technology
solutions to both governmental and commercial customers have contributed to
TASC's record of 29 years of uninterrupted growth in revenues.
For the years ended December 31, 1995, 1994 and 1993, respectively,
approximately 49%, 57% and 60% of Primark's consolidated revenues were derived
from contracts that TASC holds with U.S. government agencies and from
subcontracts with U.S. government prime contractors.
6
<PAGE> 9
Government Business
TASC's strategy with its U.S. government customers is to provide high value
through the design, development and implementation of major systems that will
enable these customers to perform their missions in a superior manner and at
lower cost. Through the experience and qualifications of its personnel and its
history of performing top quality work, TASC is able to command higher prices
and margins than many competitors. However, TASC believes its solutions provide
the lowest overall cost to customers since systems provided through TASC are
typically completed within schedule and budget, and most importantly, combine
state-of-the-art capabilities with reliable performance.
In many cases, TASC assists its Federal government customers with the
determination of future requirements, assessments of technical feasibility, cost
estimates and systems design. Work of this nature is often termed systems
engineering, and involves mathematical modeling of complex systems development,
risk assessment, cost-performance tradeoffs, engineering, management information
systems development and decision support services.
Once a system has been designed and approved for procurement, TASC
frequently supports its customers in the development, testing and deployment of
such systems. Work of this nature is called program management support. TASC
will participate in structuring requests for proposals and in evaluating
responses. Once contractors have been selected, TASC supports its government
customers in overseeing the performance of these contractors. In addition to
continuing much of the systems engineering work described in the preceding
paragraph, TASC will perform configuration control, testing and independent
validation and verification, along with maintaining the management systems used
to monitor cost, schedule and performance. TASC has developed its own tools,
models, software and methods to perform both systems engineering and program
management support.
In performing systems engineering and program management support work, in
many ways TASC acts as an "extension" of the government organization management
team, supporting them in their responsibilities to manage multiple contractors
to create complex operational systems. TASC has tended to align itself with a
wide variety of long-term classified government programs of significant national
importance. TASC helps government managers in their oversight of these programs
and maintains technological superiority by moving systems from one generation to
the next.
Systems engineering and program management support comprise the majority of
TASC's work for the Federal government, but TASC also builds and implements
turn-key systems itself. This work, called specialized information system
integration, is usually done by integrating commercial hardware and software
programs with TASC-developed custom software.
Due to its technology and management expertise, TASC is also called upon to
provide analytic studies and evaluations of various technical, organizational
and policy issues for U.S. government customers in areas of defense,
intelligence, arms control, economic assessment, procurement and manufacturing.
For use in manufacturing applications, TASC has developed unique analytical
tools and databases to measure the cost and effectiveness of government
incentive strategies and defense system warranties. For example, TASC authored
the recent "Perry" study (named after Secretary of Defense Perry) on the cost of
U.S. government regulations in the procurement process.
TASC has successfully grown its U.S. government business revenues in the
face of national security spending cutbacks through the company's emphasis on
leading edge technology and its application to critical missions. As the U.S.
government has shifted to using information technology to maintain an adequate
defense posture with fewer resources, TASC has increased its emphasis on
surveillance, command/ control/communications, simulation, "smart weapons" and
the integration of tactical and strategic intelligence.
The following are certain important characteristics of TASC's business with
the Federal government.
Concentration. Approximately 87%, 88% and 89% of TASC's revenues for the
years ended December 31, 1995, 1994 and 1993, respectively, were derived from
contracts held by TASC with U.S. government
7
<PAGE> 10
agencies and from subcontractors with U.S. government prime contractors. TASC's
revenues from its three largest contracts with the U.S. government comprised
approximately 23%, 26%, and 32% of TASC's total revenue for the years ended
December 31, 1995, 1994 and 1993, respectively. No other single customer
accounted for 10% or more of TASC's or Primark's consolidated revenues for these
years.
Government Security Clearances. TASC is involved in a number of classified
programs and its ability to maintain its current base of business and to grow in
the future is based in part upon its ability to provide employees and facilities
which meet rigorous U.S. government security requirements. There can be no
assurance that the Company will be able to meet these requirements in the
future.
Pricing. TASC's U.S. government business is performed under cost
reimbursement, fixed price and fixed-rate time and materials ("T&M") contracts.
Cost reimbursement contracts awarded to TASC include cost plus fixed fee and
cost plus award fee contracts. Fees may either be fixed by the contract (cost
plus fixed fee), or variable based on actual performance within specified limits
for such factors as cost, quality and delivery schedule, and the customer's
subjective evaluation of TASC's work (cost plus award fee). TASC is subject to
regular audit with respect to costs incurred and charged to the government. Such
audits may result in the disallowance of amounts charged to or paid by the
government. There can be no assurance that such disallowances will not be
claimed or imposed against the Company, and if imposed, will not have a material
impact. For the year ended December 31, 1995, approximately 82% of TASC's
revenue from U.S. government contracts was generated by cost reimbursement
contracts; approximately $321 million and $215 million of TASC's backlog at
December 31, 1995 and 1994, respectively, were associated with cost
reimbursement contracts. See "Backlog."
Under fixed price contracts, TASC agrees to perform certain work for a
fixed price and, accordingly, realizes the benefit or detriment resulting from
decreased or increased costs of performing the contract. Under a fixed-rate T&M
contract, TASC has the responsibility to deliver professional services at a
predetermined hourly rate; thus, the profitability of such contracts depends
upon TASC's ability to deliver the specified services at costs below the rates
received from the government. For the year ended December 31, 1995,
approximately 18% of TASC's revenue from U.S. government contracts was fixed
price or fixed rate T&M contracts. Approximately $131 million and $73 million of
TASC's backlog at December 31, 1995 and 1994, respectively, were associated with
fixed price or fixed rate T&M contracts. See "Backlog."
Annual Funding. The U.S. government programs in which TASC participates
may extend for several years, but are normally contracted and funded on an
annual basis. Government contracts generally are conditioned upon the continuing
availability of Congressional appropriations. Congress usually appropriates
funds on a fiscal year basis, even though contract performance may take several
years. Consequently, at the outset of a major program, the contract is usually
partially funded and additional monies are normally committed to the contract by
the procuring agency only if and as appropriations are made by Congress for
future fiscal years.
Limitations imposed on spending by U.S. government agencies, which might
result from efforts to reduce the Federal deficit or for other reasons, may
limit the continued funding of TASC's existing contracts with the U.S.
government and may limit the ability of TASC to obtain additional contracts. All
contracts made with the U.S. government may be terminated by the U.S. government
at any time, with or without cause. In addition, TASC's operations are subject
to the usual risks inherent in contracting with the U.S. government on national
security related programs such as national and global political, social and
economic events that may affect U.S. national security programs. No assurance
can be given that the current level of government spending for national security
programs will continue, that the U.S. government will continue its commitment to
programs in which TASC's products and services are applicable or that TASC will
not be adversely affected by any decline in that spending or commitment by the
U.S. government.
TASC has rarely had a contract canceled and has been working on most of its
programs for many years; in the case of some programs, TASC's involvement has
encompassed the entire 29-year history of the company. However, one notable
exception was TASC's contract with the Ballistic Missile Defense Organization
(the "BMDO"), which was formerly called the Strategic Defense Initiative. TASC
was the second largest systems engineering and technical assistance contractor
for this program, and held a contract to support
8
<PAGE> 11
the program for six and one-half years, from April 1988 to December 1994.
Revenues from this contract peaked in 1992, reaching $55.6 million. Due to
changing government priorities, funding was reduced to $40.6 million in 1993,
$16.5 million in 1994 and $1.5 million in 1995. The contract was recompeted for
1995 and the number of prime contractors reduced from three to one. Although
TASC was not selected for the contract, it continues to perform a modest amount
of work for BMDO. Despite these funding cuts, TASC was able to grow its overall
revenues in 1993, 1994 and 1995 by 6.0%, 5.6% and 10.9%, respectively. During
these same periods, TASC's non-BMDO revenues grew 14.3%, 16.0% and 16.6%,
respectively.
Backlog. TASC's backlog (anticipated revenues from the uncompleted
portions of existing contracts, including options to continue specific contracts
beyond the current funding period) at December 31, 1995 and 1994 was
approximately $453 million and $288 million, respectively. TASC's total backlog
includes $9.8 million and $8.3 million of backlog related to commercial business
activity for the years ended 1995 and 1994, respectively. The increase in 1995
is principally due to a very high "win" rate of competitively bid contracts,
together with a sustained level of sole-source negotiated awards. Approximately
$181 million of TASC's 1994 backlog and $247 of the 1995 backlog represents
revenues expected to be realized beyond a 12 month period. TASC's backlog is
subject to seasonal fluctuations as a result of multi-year contracts and annual
renewals of other contracts throughout the year. Substantially all of TASC's
contracts reflected in the backlog are subject to termination at the convenience
of the customer.
Commercial Business
While the U.S. government's need for information technology remains a
stable source of growth, the principal growth strategy for TASC is to leverage
information technology developed under government contracts into new higher
margin commercial markets. Most importantly, TASC has used its satellite
imaging, communications, database and workstation technology as the foundation
for the weather information business of its subsidiary, WSI.
WSI provides its clients with timely and accurate weather information
services on a 24 hour basis. WSI, through the application of information
technology supplied by TASC, has developed automated satellite ground stations
to receive information from meteorological satellites that are used to create a
variety of information products, including weather satellite images commonly
seen on commercial television. An information system has been built to use this
information from meteorological satellites, together with inputs from the U.S.
national network of weather radar and worldwide observations of weather
conditions supplied through the World Meteorological Organization. This data,
along with forecasts and warnings provided by the U.S. National Weather Service,
is used as the basis for specialized information services that are provided to
users of real-time weather information including news media organizations, the
aviation industry, agri-businesses and energy utilities. TASC also provides
weather information services throughout Europe through The Weather Department,
Ltd., and The Computer Department, Ltd.
TASC is entering a number of new commercial markets on a worldwide basis,
using information technology developed under U.S. government contracts. Document
management is a fast-growing market as more businesses move to the "paperless
office" to organize their data, speed information retrieval and reduce storage
costs. Using proprietary data compression and COLD (computer output to laser
disk) software, TASC has designed and built document management systems for
financial services and healthcare firms, as well as for state government
agencies. TASC's geographic information systems software, sensor technology and
hyperspectral analysis capabilities have positioned it to perform environmental
analysis, surveillance and monitoring for business and government, both within
the United States and in foreign countries. Aviation systems engineering and
development has been an active growth area for TASC, with contracts completed or
in process for several airlines, air cargo carriers, the Eurocontrol air traffic
system, the Federal Aviation Administration and the governments of the United
Kingdom and Poland. TASC's extensive capabilities in the collection, storage,
retrieval and dissemination of imagery data have positioned it well to serve the
technology needs of the entertainment, cable and telephone companies entering
the interactive multimedia field.
9
<PAGE> 12
Additionally, TASC's communications engineers have assisted major oil companies
and financial institutions with network design and are providing support to
Motorola in the development of the Iridium personal communications system.
Marketing
TASC's marketing activities are conducted principally by its senior
management and by its professional staff of engineers, scientists and analysts.
TASC's marketing approach for both U.S. government and commercial organizations
begins with the development and organization of information concerning both
present and future requirements of potential customers. TASC believes that its
marketing approach enables it to anticipate the technical and other needs of its
customers, and allows it to develop proposals that satisfy customers'
requirements. TASC places significant emphasis on the importance of client
satisfaction and development of repeat business.
TASC prepares a number of proposals in response to U.S. government Requests
for Proposals ("RFPs"). The bidding on RFPs is often highly competitive and
preparing bids is an expensive and time consuming process requiring significant
allocation of highly qualified TASC personnel. If TASC's proposal for a contract
is accepted, TASC and its customer will negotiate and enter into a contract with
agreed upon price, terms and conditions. In addition, TASC often submits
unsolicited proposals to various U.S. government agencies which often lead to
contract awards on a negotiated basis. Approximately 32% of TASC's 1995
contracts resulted from the competitive RFP process.
For the commercial markets, TASC utilizes direct sales personnel, mailings,
trade journal advertising and trade shows to distribute information on the
products and services offered. The marketing of larger, customized systems often
uses techniques similar to those employed for the U.S. government, involving
professional personnel, the submission of unsolicited proposals and the response
to commercially prepared RFPs.
Competition
Most of the business areas in which TASC is involved are competitive and
require highly skilled and experienced technical personnel. TASC believes that
the skills and experience of its technical personnel are critical to maintaining
its competitive position. Many of these business areas also require high levels
of U.S. government security clearances, as previously discussed. TASC competes
with many companies in the business areas in which it is engaged, some of which
have greater resources than TASC, and there can be no assurance that TASC will
compete successfully in the future.
Many of TASC's contracts are acquired as a result of competitive bidding,
only a portion of which may result in the award of contracts. TASC believes that
its success in the competitive bidding process depends on a variety of factors,
including the technical content of the contract proposal, performance on
previous contracts, reputation, experience and price.
Patents and Technical Data
TASC owns three patents and has four pending patent applications. In
selected business areas, patent protection is increasingly important to TASC's
operations. In addition, TASC utilizes trade secret protection to safeguard key
technologies and software critical to its business. Commercial software products
benefit from copyright protection and are marketed under limited license
agreements. Certain technical data and software that was developed wholly under
government contracts and delivered to the government is subject to unlimited
rights of the U.S. Government and may be disclosed by the government to third
parties, including competitors of TASC. The Company does not believe that the
subsequent use of this data or software by the U.S. Government or its
contractors has had or will have a material adverse effect on its business.
10
<PAGE> 13
OTHER SEGMENTS
TRANSPORTATION SERVICES
Triad International Maintenance Corporation ("TIMCO") was formed by the
Company in 1989 to operate a newly constructed heavy aircraft maintenance
facility located at the Piedmont Triad International Airport in Greensboro,
North Carolina. TIMCO opened for business in October 1990. The company provides
major aircraft maintenance services such as scheduled maintenance checks,
modifications, overhauls and repair work on transport category aircraft. TIMCO
holds a Class IV Repair Station Certificate issued by the Federal Aviation
Administration (FAA) which enables TIMCO to work on all aircraft types. TIMCO
has also been classified as a Designated Alteration Station by the FAA, allowing
the company to approve major modifications to aircraft normally reserved for the
FAA.
TIMCO's services are offered to the industry at large and in particular, to
operators and owners of aircraft who do not have maintenance facilities of their
own, or whose facilities are unable to accommodate an increasing workload.
Emphasis has been and will continue to be placed on air cargo carrier customers
who have limited facilities to accomplish their required work. In addition,
TIMCO targets both aircraft involved in sale or lease transactions and passenger
airlines without adequate maintenance facilities as potential sources of
business.
TIMCO currently has six major customers, ABX Air, Inc. (also known as
"Airborne Express"), Emery Worldwide Airlines, Continental Airlines, Northwest
Airlines, General Electric Capital Aviation Services and United Parcel Service.
The first three of these customers generated over 1,096,000 man-hours of TIMCO's
1,519,000 total man-hours in 1995. Loss of any of the above customers contracts,
or any future contracts with major customers, could have a material adverse
effect on TIMCO. As of December 31, 1995, TIMCO had approximately 1,082,000
man-hours worth of business contracted for 1996.
The industry in which TIMCO operates is highly competitive. Space
availability, price, quality, trained personnel, on-time delivery and
accountability are the key competitive factors in the heavy aircraft maintenance
industry. These factors, with respect to TIMCO's performance, will determine its
future success in the industry.
FINANCIAL SERVICES
Primark Storage Leasing Corporation ("PSLC") owns and leases eight
underground natural gas storage fields and related facilities located in
Michigan to ANR Pipeline Company ("ANR"). PSLC is also involved in the
exploration and development of mineral resources underneath the storage fields
through various farm-out agreements with exploration companies.
Lease revenue accounted for 95%, 93% and 94% of PSLC's total revenues for
the years ended December 31, 1995, 1994, and 1993, respectively. PSLC's storage
fields and facilities are leased under noncancelable agreements that expire in
2003, and provide for two renewal options of five years each, which could extend
the lease term to 2013. Lease payments are calculated on a net plant base that
was approximately $27.4 million at December 31, 1995. The depreciation of a
portion of this plant base results in a corresponding reduction in the lease
payments.
ITEM 2. PROPERTIES
The Company currently occupies its principal executive offices, comprised
of approximately 17,848 square feet, in Waltham, Massachusetts under lease
agreements that expire in July 2001 with provision for two five-year renewal
options.
Datastream's two principal office facilities are located in London,
England. Comprised of an aggregate total of 100,995 square feet, these
facilities are occupied under lease agreements that expire in 2005 and 2018.
Through its affiliates, Datastream also occupies under short-term leases, an
aggregate total of approximately 55,000 square feet of office space, principally
located in Australia, Canada, France, Germany, Hong Kong, Italy, Japan, the
Netherlands, Singapore, Sweden, Switzerland, and the United States.
11
<PAGE> 14
Disclosure's headquarters, comprised of approximately 99,640 square feet,
is located in Bethesda, Maryland. The property is occupied under lease
agreements that expire in 2003. Disclosure's regional offices occupy
approximately 80,500 square feet of office space under lease terms that expire
through 2004. These offices are located in California, Georgia, Illinois,
Massachusetts, New York, Texas and Washington, D.C.
I/B/E/S occupies 19,600 square feet of space at its New York City
headquarters under a lease agreement that expires in 1997. Additional office
space totaling 3,000 square feet is located in England and Japan with lease
terms through 2004.
TASC's principal facilities, aggregating approximately 787,000 square feet,
are occupied under leases expiring at various dates through 2006. TASC's
headquarters is located in Reading, Massachusetts, and it has regional offices
in Alabama, Arizona, Colorado, Florida, Georgia, Maryland, Massachusetts,
Michigan, Missouri, New Mexico, New York, Ohio, Oklahoma, Texas, Virginia,
Washington, D.C. and England.
TIMCO leases a heavy aircraft maintenance facility from the Triad
International Airport Authority (the "Triad Authority") for an initial 30-year
lease term, with renewal options which could extend the lease term to the year
2029. Located in Greensboro, North Carolina, the facility encompasses over
422,000 square feet, which includes 284,000 square feet of hanger space, 109,000
square feet of support shops and stores and 30,000 square feet of administrative
office space. The facility is located on 45 acres.
PSLC owns eight underground natural gas storage fields and related
facilities in the state of Michigan that are leased on a long-term basis to ANR.
The storage fields encompass an area totaling 92,620 acres, contain
approximately 71 billion cubic feet ("Bcf") of PSLC-owned base gas and have a
working storage capacity of 125 Bcf. The storage field formation is primarily
owned by PSLC through storage and mineral deeds covering approximately 80,487
acres. Most of these deeds, however, are limited in depth to the storage field
formations. Within the total storage field area, PSLC owns 11,006 acres of land
in fee, leases 9,970 acres of storage and surface rights and has 2,713 acres of
oil and gas leases. The leased facilities consist principally of 791 active
storage injection/withdrawal wells, 129 observation wells, 7 brine disposal
wells, 202 plugged wells, 276 miles of field lines, dehydration plants and
compressor facilities with a rated capacity of 79,905 horsepower. In addition,
PSLC has interests in 12 producing gas wells and 21 producing oil wells for the
development of minerals underneath the storage fields.
The Company believes that its facilities are adequate for its present
needs, but will continue to evaluate the need for additional space as the growth
of the business requires.
ITEM 3. LEGAL PROCEEDINGS
HUTSON V. TASC ET AL.
On August 16, 1994, a jury in a civil case in the Federal District Court in
Boston, Massachusetts returned an unfavorable verdict against the Company's
wholly owned subsidiary, TASC, for approximately $3.1 million plus accrued
interest. The lawsuit was brought by a former TASC employee and involved a claim
for compensation for intellectual property transferred to TASC and claims
relating to such employee's termination of employment. The events underlying
this lawsuit occurred prior to the Company's acquisition of TASC in August of
1991. In July 1995, TASC paid $3.3 million in full settlement of this lawsuit.
The Company had previously reserved for the settlement.
BRADLEY V. GELB ET AL.
On June 24, 1994, a jury in a civil case in the Massachusetts Superior
Court (the "Court") returned an unfavorable verdict against the two founders of
TASC, and against TASC itself. The suit was brought by a former employee
regarding a TASC stock transaction which took place in 1976, prior to the
Company's acquisition of TASC in 1991. On June 28, 1994, the Court ordered that
judgment be entered on the verdict requiring the two founders (but not TASC
itself) to disgorge $19,800,000. Such amount accrues post-judgment interest at a
statutory rate. As an alternative course of action, the plaintiff may pursue the
two founders and TASC, jointly and severally, for $48,600. Based on the
adjudication, the Company has denied requests of the two founders for
indemnification. Certain post-verdict motions (including a motion for judgment
notwithstanding the verdict, and in the alternative, a motion for a new trial)
are pending. While the
12
<PAGE> 15
outcome of these motions cannot be predicted with certainty, the Company
believes it will not be required to pay any portion of this judgment.
ENVIRONMENTAL CLAIMS
The Company has received notifications from the Michigan Department of
Natural Resources of three matters involving environmental contamination in the
vicinity of natural gas storage fields in Michigan which the Company leases to
an interstate pipeline company. The Company conducts no operations of its own on
these properties. While the ultimate resolution of these matters cannot be
predicted at this time, the Company believes that its existing reserves of
approximately $250,000 are adequate for the resolution of such matters.
OTHER MATTERS
On April 8, 1994, the Department of Defense Office of the Assistant
Inspector General for Auditing (the "IG") issued a final report relative to its
audit of contracting practices of the Ballistic Missile Defense Organization
(the "BMDO"), which included a comprehensive review of one of TASC's contracts
with the BMDO. The report included a recommendation for monetary recovery from
TASC. All of the issues raised in the report were settled with the cognizant
government contracting officer during 1995. The Company's reserves were adequate
for the resolution of this matter.
The Company and its subsidiaries are involved in certain other
administrative proceedings and matters concerning issues arising in the ordinary
course of business. Management cannot predict the final disposition of such
issues, but believes that adequate provision has been made for the probable
losses and the ultimate resolution of these proceedings will not have a material
adverse effect on the Company's financial condition, results of operations or
financial liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of 1995.
<TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers of the Company, as of
February 29, 1996, is set forth below. Such officers are elected by the
Company's Board of Directors generally for one-year terms expiring at the next
organizational meeting to be held in May 1996.
<CAPTION>
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- --- ------------------------------------------
<S> <C> <C>
Joseph E. Kasputys....... 59 Chairman, President and Chief Executive Officer of the
Company since 1988. Mr. Kasputys has been a director of the
Company
since 1987.
John C. Holt............. 55 Executive Vice-President of the Company, President and
Chief Executive Officer of TASC, Inc. since February 1994.
From 1982 until January 1994, Mr. Holt held the position of
Executive Vice President of The Dun & Bradstreet
Corporation ("D&B"), an information services company, and
served as a director of that company from 1985 until 1994.
In addition, Mr. Holt is the former Chairman, President and
Chief Executive Officer of the A.C. Nielsen Company, a
marketing information business and an affiliate of D&B. Mr.
Holt has been a director of the Company since 1985.
Stephen H. Curran........ 48 Senior Vice President and Chief Financial Officer of the
Company since 1988.
Michael R. Kargula....... 48 Senior Vice President, General Counsel and Secretary of the
Company since 1988.
Patrick G. Richmond...... 45 Vice President of Corporate Development of the Company
since May 1989.
William J. Swift III..... 43 Vice President and Tax Counsel of the Company since 1988.
</TABLE>
13
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed and traded on the New York Stock
Exchange and the Pacific Stock Exchange. Other information set forth in the
section entitled "Supplementary Financial Information -- Quarterly Data" on page
43 of the Company's 1995 Annual Report is incorporated by reference herein.
Since 1988, the Company has not paid cash dividends on common stock to its
shareholders in order to reinvest available cash in the Company's operations.
Information regarding restrictions on the Company's ability to pay cash
dividends on its common stock is incorporated by reference herein from Note 6 to
the Consolidated Financial Statements entitled "Short-Term and Long-Term Debt",
on page 30 of the Company's 1995 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the section entitled "Selected Financial
Information -- Five Year Data" on page 42 of the Company's 1995 Annual Report is
incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information set forth in the section entitled "Management's Discussion
and Analysis of Results of Operations and Financial Condition" on pages 39
through 41 of the Company's 1995 Annual Report is incorporated by reference
herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and the related notes thereto, and
the Report of Independent Certified Public Accountants, as contained on pages 22
through 38 of the Company's 1995 Annual Report, and the "Supplementary Financial
Information -- Quarterly Data," as contained on page 43 of the Company's 1995
Annual Report, are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth in the section entitled "Election of Directors"
in the Company's 1996 Proxy Statement for its May 1996 Annual Meeting of
Shareholders is incorporated by reference herein. Information regarding the
executive officers of the Company is set forth in the section entitled
"Executive Officers of the Registrant" on page 13 in Part I of this report on
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the sections entitled "Directors
Compensation", "Executive Compensation", "Compensation Committee Report",
"Employment Agreements And Other Arrangements", and "Compensation Committee
Interlocks and Insider Participation" of the Company's 1996 Proxy Statement for
its May 1996 Annual meeting of Shareholders is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth in the sections entitled "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" of the
Company's 1996 Proxy Statement for its May 1996 Annual Meeting of Shareholders
is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the sections entitled "Executive
Compensation", "Compensation Committee Interlocks and Insider Participation" and
"Employment Agreements and Other Arrangements" of the Company's 1996 Proxy
Statement for its May 1996 Annual Meeting of Shareholders is incorporated by
reference herein.
14
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) LIST OF DOCUMENTS FILED AS PART OF FORM 10-K
1. Financial Statements:
- Consolidated Statements of Financial Position as of December 31, 1995
and 1994*
- Consolidated Statements of Income for each of the three years in the
period ended December 31, 1995*
- Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1995*
- Consolidated Statements of Common Shareholders' Equity for each of the
three years in the period ended December 31, 1995*
- Notes to Consolidated Financial Statements*
- Management's Discussion and Analysis of Results of Operations and
Financial Condition*
- Report of Independent Certified Public Accountants*
- Selected Financial Information--Quarterly Data*
2. Financial Statement Schedules:
- Financial statement schedules have been omitted as they are not
applicable or not required, or the required information is not
material or is included in the consolidated financial statements
thereto.
3. Exhibits
- The Exhibits filed as part of this Annual Report on Form 10-K are
listed in the Index to Exhibits on pages 18 to 21, and are
incorporated by reference herein.
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the fourth quarter ended
December 31, 1995.
(c) EXHIBITS
The Company hereby files as part of this Annual Report on form 10-K the
Exhibits listed in the Index to Exhibits.
(d) FINANCIAL STATEMENT SCHEDULES
Not Applicable.
- ---------------
* Referenced information is contained in Primark's 1995 Annual Report filed as
Exhibit 13.1 hereto.
15
<PAGE> 18
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 on the 29th day of
March, 1996.
PRIMARK CORPORATION
--------------------------------------
(Registrant)
By: /s/ STEPHEN H. CURRAN
---------------------------------
Stephen H. Curran
Senior Vice President and
Chief Financial Officer
The undersigned directors and officers of Primark Corporation, a Michigan
corporation, hereby severally constitute and appoint Joseph E. Kasputys, Stephen
H. Curran and Michael R. Kargula, and each of them, his or her true and lawful
attorneys-in-fact and agents, each with full power and authority (acting alone
and without the others) to execute in the name of and on behalf of the
undersigned as such Director or Officer, an Annual Report on Form 10-K, for the
year ended December 31, 1995, under the Securities and Exchange act of 1934, of
said Corporation, and all amendments to such Annual Report on Form 10-K; hereby
granting to such attorney and agents, and each of them, full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them may do or cause to be done by
virtue of these presents.
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ JOSEPH E. KASPUTYS Chairman, President and Chief January 3, 1996
- ---------------------------------------- Executive Officer (Principal
Joseph E. Kasputys Executive Officer)
/s/ STEPHEN H. CURRAN Senior Vice President and Chief January 21, 1996
- ---------------------------------------- Financial Officer (Principal
Stephen H. Curran Financial and Accounting Officer)
/s/ JOHN C. HOLT Director and Executive Vice January 16, 1996
- ---------------------------------------- President
John C. Holt
/s/ KEVIN J. BRADLEY Director January 3, 1996
- ----------------------------------------
Kevin J. Bradley
/s/ PATRICIA G. MCGINNIS Director January 4, 1996
- ----------------------------------------
Patricia G. McGinnis
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ STEVEN LAZARUS Director January 9, 1996
- ----------------------------------------
Steven Lazarus
/s/ ROBERT W. STEWART Director January 4, 1996
- ----------------------------------------
Robert W. Stewart
/s/ CONSTANCE K. WEAVER Director January 3, 1996
- ----------------------------------------
Constance K. Weaver
/s/ MICHAEL R. KARGULA Senior Vice President General January 10, 1996
- ---------------------------------------- Counsel and Secretary
Michael R. Kargula
/s/ PATRICK G. RICHMOND Vice President of Corporate January 9, 1996
- ---------------------------------------- Development
Patrick G. Richmond
/s/ WILLIAM J. SWIFT III Vice President and Tax Counsel January 2, 1996
- ----------------------------------------
William J. Swift III
By: /s/ STEPHEN H. CURRAN
- ----------------------------------------
Stephen H. Curran
Attorney-in-fact
</TABLE>
17
<PAGE> 20
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
2.1 Stock and Asset Purchase Agreement dated as of August 13, 1992 between the Company
and The Dun & Bradstreet Corporation and its affiliates (Exhibit 2.1 to the
Company's June 30, 1992 Form 10-Q); Amendment dated September 25, 1992, exhibits and
other related documents (Exhibit 2.1 to the Company's Form 8-K dated October 7,
1992).
2.2 Stock Purchase and Sale Agreement dated as of July 9, 1993, by and among Network
Financial Services, Inc., Primark Corporation, JMS Companies, Inc., and Westmark
Mortgage Corporation (Exhibit 2.4 to the Company's 1994 Form 10-K).
2.3 Loan Modification Agreement dated July 15, 1994 by and among Network Financial
Services, Inc., Westmark Mortgage Corporation, Primark Corporation, and JMS
Companies, Inc. (Exhibit 2.5 to the Company's 1994 Form 10-K).
2.4 Stock Purchase and Sale Agreement dated as of May 20, 1994 between Primark
Corporation and Card Establishment Services, Inc. (Exhibit 2.6 to the Company's 1994
Form 10-K).
2.5 Acquisition Agreement by and among Datastream International, Inc., VSI Acquisition,
Inc. and Vestek Systems, Inc. dated May 20, 1994 (Exhibit 2.7 to the Company's 1994
Form 10-K).
2.6 Stock Purchase Agreement between Primark Corporation and VNU International B.V.
dated as of May 26, 1995 (Exhibit 2.1 to the Company's Form 8-K dated June 2, 1995);
Amendment to Agreement dated as of June 29, 1995 (Exhibit 2.1 to the Company's Form
8-K dated July 3, 1995).
3.1 Articles of Incorporation of the Company (Exhibit 3.1 to the Company's Registration
Statement No. 2-74688); Amendment to the Articles of Incorporation (Exhibit 3.1 to
the Company's 1985 Form 10-K); Amendment dated June 16, 1988 (Exhibit 3.1 to the
Company's 1988 Form 10-K); Amendment dated August 8, 1991 (Exhibit 3(a) to the
Company's Form 8-K dated August 9, 1991); Amendment dated May 27, 1992 (Exhibit 3.1
to the Company's June 30, 1992 Form 10-Q).
3.2 By-Laws of the Company, as amended (Exhibit 3.1 to the Company's September 30, 1990
Form 10-Q).
4.1 Indenture dated as of October 18, 1993 by and among the Company and The First
National Bank of Boston, as Trustee (Exhibit 4.1 to the Company's September 30, 1993
Form 10-Q).
STORAGE FIELD LEASE AGREEMENTS
10.1 Lease Agreement dated August 31, 1948 (Exhibit 15-K to American Natural Resources
(American Natural) Registration Statement No. 2-7800); Amendatory Agreement dated
March 1, 1950 (Exhibit 15-TT to American Natural's Registration Statement No.
2-8567); Amendatory Agreement dated February 28, 1951 (Exhibit 15-N to American
Natural's Registration Statement No. 2-9003); Amendatory Agreement dated January 1,
1962 (Exhibit 4-E-5 to Registration Statement No. 2-21082); Amendatory Agreement
dated April 26, 1968 (Exhibit 4-D-12 to Registration Statement No. 2-29659);
Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline Company's
(ANR Pipeline) Registration Statement No. 2-50880).
10.2 Lease Agreement dated April 13, 1962 (Exhibit 4-E-9 to Registration Statement No.
2-21082); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-16 to Registration
Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-l to
ANR Pipeline's Registration Statement No. 2-50880).
10.3 Lease Agreement dated February 15, 1963 (Exhibit 13-S-1 to ANR Pipeline's
Registration Statement No. 2-21500); Amendatory Agreement dated April 26, 1968
(Exhibit 4-D-17 to Registration Statement No. 2-29659); Amendment dated August 1,
1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No. 2-50880).
10.4 Lease Agreement dated July 1, 1964 (Exhibit 13-F-1 to ANR Pipeline's Registration
Statement No. 2-26144); Amendatory Agreement dated September 1, 1971 (Exhibit 13-F-1
to ANR Pipeline's Registration Statement No. 2-42256); Amendatory Agreement dated
August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No.
2-50880).
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.5 Lease Agreement dated September 25, 1950 (Exhibit 15-0 to American Natural's
Registration Statement No. 2-9003); Amendatory Agreement dated January 1, 1962
(Exhibit 4-E-6 to Registration Statement No. 2-21082); Amendatory Agreement dated
April 26, 1968 (Exhibit 4-D-13 to Registration Statement No. 2-29659); Amendatory
Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration
Statement No. 2-50880).
10.6 Lease Agreement dated April 13, 1962 (Exhibit 4-E-8 to Registration Statement No.
2-21082); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-15 to Registration
Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to
ANR Pipeline's Registration Statement No. 2-50880).
10.7 Lease Agreement dated September 25, 1951 (Exhibit 13-F-4 to Registration Statement
No. 2-10282); Amendatory Agreements dated January 1, 1962 (Exhibit 4-E-7 to
Registration Statement No. 2-21082); Amendatory Agreement dated December 31, 1962
(Exhibit 10-7 to the Company s 1988 Form 10-K); Amendatory Agreement dated April 26,
1968 (Exhibit 4-D-14 to Registration Statement No. 2-29659); Amendatory Agreement
dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No.
2-50880).
10.8 Seven Amendatory Agreements dated April 8, 1977, to the Storage Lease Agreements
between MichCon and ANR Pipeline (Exhibit 20-4 to ANR Pipeline's 1980 Form 10-K,
File No. 1-7320).
10.9 Seven Amendatory Agreements dated January 1, 1982, to the Storage Lease Agreements
between MichCon and ANR Pipeline (Exhibit 10.18 to the Company's 1982 Form 10-K).
10.10 Agreement as to sale of Leased Facilities (Exhibit 10-21 to Registration Statement
No. 2-81102).
OTHER LEASES
10.11 Lease Agreement dated as of April 5, 1994 between the Trustees of London & Leeds
NDAI Bay Colony II Realty Trust and Primark Corporation; Amendatory Agreement dated
January 3, 1995 (Exhibit 10.11 to the Company's 1994 Form 10-K).
10.12 Lease Agreement dated August 8, 1991 between Arthur Gelb and Harry Silverman,
trustees of TASC Realty Trust, and The Analytic Sciences Corporation (Exhibit 10.13
to the Company's 1991 Form 10-K).
10.13 Fourth Amendment to Lease dated July 1, 1991 between Arthur Gelb and Harry B.
Silverman, as trustees of TASC Realty Trust, and The Analytic Sciences Corporation
(Exhibit 10.14 to the Company's 1991 Form 10-K).
10.14 Letter dated July 1, 1991 from Arthur Gelb and Harry B. Silverman, as trustees of
TASC Realty Trust, to The Analytic Sciences Corporation (Exhibit 10.15 to the
Company's 1991 Form 10-K).
10.15 Letter dated August 8, 1991 from Arthur Gelb and Harry B. Silverman, as trustees of
TASC Realty Trust, to The Analytic Sciences Corporation (Exhibit 10.16 to the
Company's 1991 Form 10-K).
10.16 Option Agreement dated August 8, 1991 between Arthur Gelb and Harry B. Silverman, as
trustees of TASC Realty Trust, and The Analytic Sciences Corporation (Exhibit 10.17
to the Company's 1991 Form 10-K).
10.17 Lease Agreement, dated November 1, 1989, between Triad International Maintenance
Corporation and Piedmont Triad Airport Authority (Exhibit 10.12 to the Company's
1989 Form 10-K).
OTHER CONTRACTS
10.18 Supplemental Medical Reimbursement and Life Insurance Plan (Exhibit 10.31 to
MichCon's 1983 Form 10-K, File No. 1-7310).
10.19 Operating and Servicing Agreement dated December 31, 1987, as amended, by and among
the Company, MichCon and Primark Leasing Corporation (Exhibit 10.33 to MichCon's
1987 Form 10-K, File No. 1-7310).
10.20 Tax Agreement dated December 31, 1987, as amended, between the Company and MichCon
(Exhibit 10.34 to MichCon's 1987 Form 10-K, File No. 1-7310).
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.21 Supplemental Death Benefit and Retirement Income Plan Agreement, as amended and
restated, dated March 25, 1986 (Exhibit 19.1 to the Company's March 31, 1985 Form
10-Q); Certified Copy of Resolution amending the Supplemental Death Benefit and
Retirement Income Plan Agreement (Exhibit 10.17 to the Company's 1990 Form 10-K); as
amended and restated as of January 1, 1992 (Exhibit 10.22 to the Company's 1991 Form
10-K); Amendment dated September 28, 1992 (Exhibit 28.4 to the Company's September
30, 1992 Form 10-Q).
10.22 Primark Corporation 1992 Stock Option Plan, dated March 2, 1992 (Exhibit 10.26 to
the Company's 1991 Form 10-K); Amendment dated September 28, 1995.
10.23* Primark Corporation Stock Option Plan for Non-Employee Directors, as amended, dated
January 12, 1988 (Exhibit 10.57 to the Company's 1987 Form 10-K); Amendment dated
February 21, 1992 (Exhibit 10.24 to the Company's 1991 Form 10-K); Amendment dated
September 28, 1992 (Exhibit 28.3 to the Company's September 30, 1992 Form 10-Q);
Amendment dated September 28, 1995; filed herewith.
10.24* Primark Corporation Executive Share Option Scheme (Exhibit 10.26 to the Company's
1992 Form 10-K); Amendment dated September 28, 1995; filed herewith.
10.25 Primark Corporation Employee Stock Ownership Plan, as amended and restated,
effective January 1, 1989; Amendment dated February 28, 1991 (Exhibit 10.20 to the
Company's 1990 Form 10-K); Amendments dated April 22, 1991 and February 21, 1992
(Exhibit 10.25 to the Company's 1991 Form 10-K); Amendment dated September 28, 1992
(Exhibit 28.2 to the Company's September 30, 1992 Form 10-Q).
10.26* Primark Corporation 1992 Employee Stock Purchase Plan, dated March 2, 1992 (Exhibit
10.27 to the Company's 1991 Form 10-K); Amended and Restated Stock Purchase Plan and
related Prospectus as filed under the Securities Act of 1933 (Exhibit 10.27 to the
Company's 1993 Form 10-K); Amendment dated October 4, 1995; filed herewith.
10.27 Form of Change of Control Compensation Agreement entered into between the Company
and selected executive officers (Exhibit 10.60 to the Company's 1987 Form 10-K).
10.28 Certain agreements entered into between the Company and Joseph E. Kasputys (Exhibit
19.1 to the Company's June 30, 1987 Form 10-Q).
10.29 Agreement between the Company and Robert W. Stewart entered into January 12, 1988
(Exhibit 10.62 to the Company's 1987 Form 10-K).
10.30 Employment agreement between the Company and Joseph E. Kasputys dated February 21,
1992 (Exhibit 10.32 to the Company's 1991 Form 10-K).
10.31 Employment and related agreements between The Analytic Sciences Corporation, the
Company and John C. Holt dated February 28, 1994 (Exhibit 10.32 to the Company's
1993 Form 10-K).
10.32 Management Incentive Plan adopted by Board of Directors on January 12, 1988 (Exhibit
10.64 to the Company's 1987 Form 10-K); Amendment dated February 21, 1992 (Exhibit
10.33 to the Company's 1991 Form 10-K).
10.33 Form of promissory note to be issued to the Company by executive officers in
connection with the Company's 1988 Management Incentive Plan (Exhibit 10.1 to the
Company's March 31, 1989 Form 10-Q).
10.34 Promissory notes, dated September 30, 1988, issued to the Company by executive
officers (Exhibit 10.1 to the Company's September 30, 1988 Form 10-Q).
10.35 Restricted Stock Award Agreements and Stock Option Agreements (Exhibit 4(b) to the
Company's Registration Statement No. 2-3876).
10.36 Credit Agreement dated as of October 18, 1993 by and among the Company, Lenders
Parties, Issuing Banks, Mellon Bank, N.A. and The First National Bank of Boston
(Exhibit 28.1 to the Company's September 30, 1993 Form 10-Q).
10.37 Underwriting Agreement dated October 8, 1993 by and among the Company and
PaineWebber Incorporated (Exhibit 28.2 to the Company's September 30, 1993 Form
10-Q).
10.38 Purchase Agreement dated as of July 30, 1992 between Primark Storage Leasing
Corporation and Teachers Insurance and Annuity Association of America (Exhibit 10.1
to the Company's June 30, 1992 Form 10-Q).
10.39 Mortgage, Assignment and Security Agreement dated as of July 30, 1992 between
Primark Storage Leasing Corporation and Teachers Insurance and Annuity Association
of America (Exhibit 10.2 to the Company's June 30, 1992 Form 10-Q).
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.40 Guaranty Agreement, dated November 1, 1989, between Triad International Maintenance
Corporation and Piedmont Triad Airport Authority (Exhibit 10.30 to the Company's
1989 Form 10-K).
10.41 Reimbursement Agreement, dated October 1, 1989, between Triad International
Maintenance Corporation and Mellon Bank, N.A. (Exhibit 10.31 to the Company's 1989
Form 10-K); Amendment dated September 25, 1992 and other related documents (Exhibit
28-4 to the Company's Form 8-K dated October 7, 1992); Amendments to Agreement and
other related documents dated February 1, 1993 (Exhibit 10-43 to the Company's 1993
Form 10-K).
10.42 Revolving Credit Agreement dated as of June 29, 1995 between Primark Corporation,
Lenders Parties, Mellon Bank, N.A. and the First National Bank of Boston and other
related documents (Exhibit 10.1 to the Company's Form 8-K dated July 3, 1995).
10.43 Term Loan Agreement dated as of June 29, 1995 between Primark Corporation, Lenders
Parties, Mellon Bank, N.A. and The First National Bank of Boston and other related
documents (Exhibit 10.2 to the Company's Form 8-K dated July 3, 1995).
10.44 Loan Agreement dated as of June 29, 1995 between TASC, Inc. and Mellon Bank, N.A.
(Exhibit 10.1 to the Company's Form 8-K dated July 3, 1995).
10.45 Underwriting Agreement dated November 29, 1995 by and among Primark Corporation and
PaineWebber Incorporated (Exhibit 1.1 to the Company's November 7, 1995 Form S-3
Amendment No. 1).
10.46 International Underwriting Agreement dated December 5, 1995 by and among the Primark
Corporation and PaineWebber Incorporated (Exhibit 1.2 to the Company's November 7,
1995 Form S-3 Amendment No. 1).
13.1* Primark Corporation 1995 Annual Report (which is not deemed to be "filed" except to
the extent that portions thereof are expressly incorporated by reference in this
Annual Report on Form 10-K); filed herewith.
21.1* Subsidiaries of Primark Corporation; filed herewith.
23.1* Consent of Independent Certified Public Accountants; filed herewith.
28.1 Rights Agreement, dated January 12, 1988, between the Company and Bankers Trust
Company, which includes, as Exhibit A thereto, the Rights Certificate and, as
Exhibit B thereto, the Summary of Rights to Purchase Common Stock (Exhibit 28.1 to
the Company's Form 8-K dated January 14, 1988); Certified Copy of Resolution
amending the Company's Rights Agreement (Exhibit 28.4 to the Company's Form 8-K
dated July 13, 1988); Amendment to Rights Agreement, dated April 9, 1990 (Exhibit
28.1 to the Company's Form 8-K dated April 12, 1990); Letter, dated May 10, 1990,
regarding appointment of Bank of America as new Rights Agent under the Rights
Agreement, as amended (Exhibit 28.1 to the Company's 1990 Form 10-K); Amendment to
Rights Agreement, dated May 31, 1992, between the Company and Bank of America
National Trust and Savings Association, as Rights Agent (Exhibit 28.1 to the
Company's June 30, 1992 Form 10-Q); Letter dated July 31, 1992 regarding the
appointment of The First National Bank of Boston as new Rights Agent (Exhibit 28.2
to the Company's June 30, 1992 Form 10-Q).
<FN>
- ---------------
* Indicates document filed herewith.
</TABLE>
For the Company's documents incorporated by reference, references are to File
No. 1-8260.
21
<PAGE> 1
Exhibit 10.23
PRIMARK CORPORATION
SECRETARY'S CERTIFICATE
I, Michael R. Kargula, Secretary of Primark Corporation, a Michigan
corporation, DO HEREBY CERTIFY that following is a true copy of certain
resolutions adopted by the Board of Directors at regular meetings of such
Board held on September 22, 1995:
RESOLVED, that effective September 22, 1995 Article V of the
Primark Corporation Stock Option Plan for Non-Employee Directors is
amended by adding a new paragraph 8 thereto to read in its entirety as
follows:
"8. Withholding Taxes.
The Corporation's obligation to deliver Shares upon the exercise of an
option by a Director who has become an employee of the Corporation or
one of its affiliates since the date of grant of the option shall be
subject to the satisfaction of applicable federal, state and local tax
withholding requirements. Any such withholding tax obligation may be
satisfied in whole or in part by any of the following means or by a
combination of such means: (a) tendering a cash payment, (b) authorizing
the Corporation to withhold Shares otherwise issuable to the Director,
or (c) delivering to the Corporation already owned and unencumbered
Shares. A director's election to pay the withholding tax obligation by
either of the latter two methods of payment is irrevocable and may be
made only during the period beginning the third business day following
the date of release of the Corporation's quarterly or annual summary
statement of sales and earnings and ending on the twelfth business day
following such date."
I have hereunto set my hand this 28th day of September, 1995.
MICHAEL R. KARGULA
------------------------------
Secretary
<PAGE> 1
Exhibit 10.24
PRIMARK CORPORATION
SECRETARY'S CERTIFICATE
I, Michael R. Kargula, Secretary of Primark Corporation, a Michigan
corporation, DO HEREBY CERTIFY that following is a true copy of certain
resolutions adopted by the Board of Directors at regular meetings of such Board
held on September 22, 1995:
RESOLVED, that the Primark Corporation Executive Share Scheme
("Scheme") be amended as follows:
(a) Rule 6.1(b) of the Scheme shall be amended to state as follows:
"an Option granted prior to 17th July, 1995 shall not be exercisable
after the expiry of 10 years from its Grant Date and an Option granted
on or after 17th July, 1995 shall not be exercisable after the expiry of
seven years from its Grant Date";
(b) Rule 6.3(a) of the Scheme shall be amended to state as follows:
"the expiry of 10 years from its Grant Date in relation to an Option
granted prior to 17th July, 1995 and the expiry of seven years from its
Grant Date in relation to an Option granted on or after 17th July,
1995";
(c) Rule 6.3 of the Scheme shall be amended by the addition of the
words "except that in relation to Options granted on or after 17th July,
1995 Rule 6.3(a) shall continue to apply" after the words "provisions of
such Rules shall not apply" at the end of such Rule 6.3.
FURTHER RESOLVED, that this Committee hereby recommends Messrs.
Stephen Herman and Richard Anderson be appointed as a Committee to
effect any changes to the Scheme necessary to obtain Inland Revenue
approval.
I have hereunto set my hand this 28th day of September, 1995.
MICHAEL R. KARGULA
-----------------------------
Secretary
<PAGE> 1
Exhibit 10.26
PRIMARK CORPORATION
SECRETARY'S CERTIFICATE
I, Michael R. Kargula, Secretary of Primark Corporation, a Michigan
corporation, DO HEREBY CERTIFY that following is a true copy of certain
resolutions adopted by the Board of Directors at regular meetings of such Board
held on July 25, 1995:
WHEREAS, the Corporation maintains the Primark Corporation 1992
Employee Stock Purchase Plan ("Plan"); and
WHEREAS, Article 13 of the Plan authorizes the Board of Directors
of the Corporation to amend the Plan from time to time; and
WHEREAS, the Corporation has determined it is desirable to amend
the Plan and related prospectus with respect to certain matters.
NOW, THEREFORE BE IT RESOLVED, that effective as of August 1, 1995
the 1992 Employee Stock Purchase Plan ("Plan") and related prospectus is
hereby amended to read substantially as presented to the Board of
Directors at this meeting; and
FURTHER RESOLVED, that the Corporation is hereby authorized to
repurchase, prior to the expiration of the two-year holding period,
shares of common stock of the Corporation which are purchased after
August 1, 1995 by participants under the Plan as long as such
participants are able to demonstrate a hardship.
FURTHER RESOLVED, that the Corporation be, and it hereby is,
authorized to take any and all action deemed necessary or appropriate by
any officer of the Corporation to facilitate and accomplish the
amendments contemplated by the foregoing resolutions; and
FURTHER RESOLVED, that Disclosure Incorporated and I/B/E/S
International, Inc. and their respective subsidiaries are hereby
authorized to participate in the Corporation's 1992 Employee Stock
Purchase Plan; and
FURTHER RESOLVED, that all previous action taken by the
Corporation in connection with the foregoing resolutions be, and they
hereby are, ratified and approved in all respects.
I have hereunto set my hand this 4th day of October 1995.
MICHAEL R. KARGULA
-----------------------------
Secretary
<PAGE> 1
<TABLE>
Exhibit 13-1
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
===========================================================================================================================
In Thousands Except Per Share Amounts For Year Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 617,310 $ 477,026 $ 444,015
- ---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of services 403,435 309,158 292,942
Selling, general and administrative 120,609 102,295 87,606
Depreciation 15,068 12,091 10,910
Amortization of goodwill 9,561 6,932 6,650
Amortization of other intangible assets 11,726 8,514 8,637
- ---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 560,399 438,990 406,745
- ---------------------------------------------------------------------------------------------------------------------------
Operating income 56,911 38,036 37,270
- ---------------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND (DEDUCTIONS)
Investment income 1,079 722 842
Interest expense (20,382) (14,246) (14,641)
Foreign currency loss - net (2,620) (1,329) (1,477)
Other (Note 3) (1,026) 334 (720)
- ---------------------------------------------------------------------------------------------------------------------------
Total other deductions (22,949) (14,519) (15,996)
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 33,962 23,517 21,274
INCOME TAX EXPENSE 15,112 9,767 9,545
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 18,850 13,750 11,729
- ---------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
Loss from discontinued operations, net of income tax benefit
of $306,000 -- -- (764)
Loss from disposal of discontinued operations, net of income
tax benefit of $2,668,000 -- -- (2,802)
- ---------------------------------------------------------------------------------------------------------------------------
Total discontinued operations -- -- (3,566)
- ---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS 18,850 13,750 8,163
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT,
net of income tax benefit of $288,000 and $1,528,000, respectively (Note 6c) (534) -- (2,650)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME 18,316 13,750 5,513
DIVIDENDS ON PREFERRED STOCK (1,434) (1,434) (1,426)
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME APPLICABLE TO COMMON STOCK $ 16,882 $ 12,316 $ 4,087
===========================================================================================================================
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Income from continuing operations $ 0.85 $ 0.62 $ 0.52
- ---------------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Loss from discontinued operations -- -- (0.04)
Loss from disposal of discontinued operations -- -- (0.14)
- ---------------------------------------------------------------------------------------------------------------------------
Total discontinued operations -- -- (0.18)
- ---------------------------------------------------------------------------------------------------------------------------
Income before extraordinary loss 0.85 0.62 0.34
Extraordinary loss (Note 6c) (0.03) -- (0.13)
- ---------------------------------------------------------------------------------------------------------------------------
Total earnings per share $ 0.82 $ 0.62 $ 0.21
===========================================================================================================================
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 20,602 19,909 19,805
===========================================================================================================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
Primark Corporation and Subsidiaries
22
<PAGE> 2
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
===============================================================================================================================
In Thousands For Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 18,316 $ 13,750 $ 5,513
Adjustments to reconcile net income to net cash flows from operating activities:
Loss from discontinued operations -- -- 3,566
Extraordinary loss on early extinguishment of debt 534 -- 2,650
Depreciation and amortization 36,355 27,537 26,197
Foreign currency loss - net 2,620 1,329 1,477
Other (5,768) 185 1,803
Changes in assets and liabilities which provided (used) cash,
exclusive of changes shown separately (3,488) (2,533) 7,180
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from operating activities 48,569 40,268 48,386
- -------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Issuance of short-term notes payable 318,601 157,898 266,204
Repayment of short-term notes payable (318,601) (174,898) (259,578)
Issuance of long-term debt 125,000 -- 110,852
Repayment of long-term debt (3,768) (3,812) (153,162)
Proceeds from common stock offering 107,784 -- --
Debt issue costs (4,737) -- (5,085)
Other (3,924) 1,520 (894)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used for) financing activities 220,355 (19,292) (41,663)
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (22,662) (22,616) (12,667)
Capitalized software (6,232) (4,372) (4,021)
Principal payments received under financing leases 3,106 3,106 3,105
Purchase of subsidiaries - net of acquired cash (199,734) (6,106) --
Proceeds from sale of a subsidiary -- 6,500 --
Proceeds returned from discontinued operations - net -- 910 7,181
Restriction of cash to secure long-term obligations -- 9,529 (4,307)
Other - net (1,186) 2,769 (4,764)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (226,708) (10,280) (15,473)
- -------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 57 477 (290)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 42,273 11,173 (9,040)
CASH AND CASH EQUIVALENTS, JANUARY 1 20,059 8,886 17,926
- -------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 62,332 $ 20,059 $ 8,886
===============================================================================================================================
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED)
CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Billed, unbilled and other receivables - net $ (11,250) $ (8,351) $ 5,170
Accounts payable (3,101) (4,559) (3,928)
Federal income, property and other taxes payable - net 1,522 390 1,397
Other current assets and liabilities 6,989 6,262 6,208
Other noncurrent assets and liabilities 2,352 3,725 (1,667)
- -------------------------------------------------------------------------------------------------------------------------------
$ (3,488) $ (2,533) $ 7,180
===============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID FOR:
Income taxes, including amounts paid for discontinued operations $ 10,616 $ 8,086 $ 11,184
Interest $ 20,351 $ 14,503 $ 13,679
===============================================================================================================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
Primark Corporation and Subsidiaries
23
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<CAPTION>
==============================================================================================================================
In Thousands At December 31 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost(which approximates market value) $ 62,332 $ 20,059
Receivables:
Billed receivables less allowance for doubtful accounts of $4,371,000 and $2,226,000, respectively 107,636 78,940
Unbilled and other receivables 33,255 23,416
Other current assets 17,146 12,583
- ------------------------------------------------------------------------------------------------------------------------------
220,369 134,998
- ------------------------------------------------------------------------------------------------------------------------------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $27,330,000 and $18,072,000, respectively 436,203 256,345
Other intangible assets, less accumulated amortization of $9,308,000 and
$15,981,000, respectively 29,074 29,280
Capitalized software, less accumulated amortization of $5,015,000 and $1,810,000, respectively 20,676 10,472
Net long-term investment in financing leases (Note 5a) 11,871 14,960
Other (Note 6c) 12,396 8,384
- ------------------------------------------------------------------------------------------------------------------------------
510,220 319,441
- ------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment 56,765 42,446
Leasehold improvements 23,928 15,268
Property leased to others 16,020 16,020
Other 16,806 9,370
- ------------------------------------------------------------------------------------------------------------------------------
113,519 83,104
Less - Accumulated depreciation 41,709 29,627
- ------------------------------------------------------------------------------------------------------------------------------
71,810 53,477
- ------------------------------------------------------------------------------------------------------------------------------
$802,399 $507,916
==============================================================================================================================
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 21,184 $ 13,375
Accrued employee payroll and benefits 30,233 18,618
Federal income, property and other taxes payable 9,582 12,383
Deferred income 41,940 20,983
Current portion of long-term debt, including capital lease obligations (Note 6b) 5,105 4,907
Other 30,675 26,842
- ------------------------------------------------------------------------------------------------------------------------------
138,719 97,108
- ------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt, including capital lease obligations (Note 6b) 265,863 145,926
Deferred income taxes 13,189 13,220
Other 13,625 10,007
- ------------------------------------------------------------------------------------------------------------------------------
292,677 169,153
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 431,396 266,261
- ------------------------------------------------------------------------------------------------------------------------------
CONTINGENCIES (Note 8)
REDEEMABLE PREFERRED STOCK
$1 par value-authorized, 4,000,000 shares; issued and outstanding, 674,943 shares 16,874 16,874
- ------------------------------------------------------------------------------------------------------------------------------
COMMON SHAREHOLDERS' EQUITY (SEE ACCOMPANYING STATEMENT) 354,129 224,781
- ------------------------------------------------------------------------------------------------------------------------------
$802,399 $507,916
==============================================================================================================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
Primark Corporation and Subsidiaries
24
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<CAPTION>
==============================================================================================================================
In Thousands For Year Ended December 31 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK, without par value-authorized 65,000,000 shares, issued 24,435,968,
19,912,668, and 19,912,738 shares, respectively, at $0.02 stated value
Balance - beginning of period $ 398 $ 398 $ 398
Issued in public offering 91 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Balance - end of period 489 398 398
- ------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance - beginning of period 113,696 113,545 113,668
Issued in public offering 104,617 -- --
Tax benefit relating to stock option plans 4,177 -- --
Option exercises 3,076 -- --
Gain (loss) on treasury shares 439 151 (123)
- ------------------------------------------------------------------------------------------------------------------------------
Balance - end of period 226,005 113,696 113,545
- ------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance - beginning of period 124,964 112,648 108,561
Net income 18,316 13,750 5,513
Dividends on preferred stock (1,434) (1,434) (1,426)
- ------------------------------------------------------------------------------------------------------------------------------
Balance - end of period 141,846 124,964 112,648
- ------------------------------------------------------------------------------------------------------------------------------
TREASURY STOCK, at average cost, 1,119,287, 1,392,789 and
1,534,463 shares, respectively, held in treasury
Balance - beginning of period (13,145) (14,264) (15,918)
Repurchased (6,944) (764) (140)
Reissued for employee stock purchase plan 1,933 1,828 1,794
Reissued for stock option plans 3,342 55 --
- ------------------------------------------------------------------------------------------------------------------------------
Balance - end of period (14,814) (13,145) (14,264)
- ------------------------------------------------------------------------------------------------------------------------------
UNEARNED COMPENSATION
Balance - beginning of period (1,674) (2,678) (3,804)
Amortization of unearned compensation 965 1,004 1,126
- ------------------------------------------------------------------------------------------------------------------------------
Balance - end of period (709) (1,674) (2,678)
- ------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance - beginning of period 542 (1,515) (1,350)
Translation adjustment 1,224 3,070 (235)
Income tax benefit (expense) on adjustment (454) (1,013) 70
- ------------------------------------------------------------------------------------------------------------------------------
Balance - end of period 1,312 542 (1,515)
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Shareholders' Equity $ 354,129 $ 224,781 $ 208,134
==============================================================================================================================
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
25
Primark Corporation and Subsidiaries
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Primark
Corporation and all majority-owned subsidiaries (the "Company"). Investments in
companies of fifty percent or less are carried at equity unless the Company has
a controlling influence. Significant intercompany transactions and balances have
been eliminated. To facilitate the timely preparation of the Company's calendar
year financial statements, the foreign and domestic accounts of Datastream
International Limited and affiliates ("Datastream") are included in the
Company's consolidated accounts on a one-month lag based on a fiscal year ending
November 30.
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 expenses during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior years' statements to conform
to the current year presentation.
b. Foreign Currency Translation
The functional currency for most of the Company's foreign operations is the
applicable local currency. Foreign currency accounts are translated into U.S.
dollars using current exchange rates in effect at the balance sheet date for
assets and liabilities, and weighted average monthly exchange rates during the
period for revenues and expenses. Adjustments resulting from translation are
reported as a separate component of Common Shareholders' Equity. Gains and
losses resulting from transactions and certain balance sheet accounts that are
denominated in currencies other than the applicable functional currency are
included in income.
c. Derivative Financial Instruments
The Company enters into currency exchange and interest rate swap agreements,
consisting principally of forward exchange contracts and purchased currency
options, to minimize interest rate and foreign exchange risks. Gains and losses
related to qualifying accounting hedges of firm commitments are deferred and
recognized in income when the hedged transaction occurs. Gains and losses from
financial instruments which do not qualify for hedge accounting are marked to
market currently and recognized as a gain or loss in the current period. The
Company does not hold or issue derivative financial instruments for trading
purposes.
d. Contract Revenue Recognition
Revenues are derived from services provided to the U.S. Government and
commercial customers under various types of contracts. Revenues under cost
reimbursement type contracts are recorded as work is performed. Revenues derived
from fixed-price contracts are recorded using the percentage-of-completion
method measured by costs incurred to date to estimated total costs for each
contract. Revenues derived from time and materials contracts are recorded at
contractual rates as work is performed and costs are incurred. Revisions in
estimates of costs and profits related to contracts are reflected in income
currently. Provisions for estimated losses on contracts are recorded to income
when identified.
e. Subscription Revenue Recognition
Revenue derived from subscription contracts are generally billed in advance of
services provided. Amounts billed in advance are recorded to deferred income and
recognized ratably over the period in which services are performed.
f. Lease Classification and Revenue Recognition
The Company is the lessor of depreciable and non-depreciable property.
Depreciable property included in capital leases is classified and accounted for
as direct financing leases. Accordingly, the unearned interest is amortized to
income over the lease term using a method which approximates the interest
method. Nondepreciable property is classified and accounted for as operating
leases. Revenues on operating leases are recognized when earned. Revenues from
the Company's financing and operating leases also include reimbursements of
certain executory costs.
Primark Corporation and Subsidiaries
26
<PAGE> 6
NOTES CONTINUED
================================================================================
g. Cash and Cash Equivalents
Cash and cash equivalents represent cash and short-term, highly liquid
investments with original maturities of three months or less.
h. Goodwill and Other Intangibles
Goodwill represents the excess of the purchase price over the fair value of net
tangible assets acquired and is being amortized over estimated useful lives
ranging from 20 to 40 years. The Company annually evaluates the net balance of
goodwill for recoverability based on the undiscounted projected cash flows of
the respective businesses. Based upon the anticipated future income and cash
from operations, in the opinion of Company management, there has been no
impairment. Other intangible assets and liabilities consist of non-compete
covenants, proprietary data, trademarks and unfavorable lease commitments. These
costs are amortized on a straight-line basis over periods ranging from 3 to 20
years.
i. Property, Equipment and Capitalized Software
Computer equipment and other property, plant and equipment are recorded at cost
and depreciated on a straight-line basis over their estimated useful lives,
ranging from 3 to 10 years. Leasehold improvements are amortized over the
shorter of the remaining life of the lease or the estimated useful life of the
improvement. Capitalized software is amortized on a straight-line basis over
periods ranging from 3 to 5 years.
j. Income Taxes
The Company provides deferred income taxes for the expected future tax
consequences of all temporary differences, and adjusts deferred tax balances to
reflect changes in tax rates expected to be in effect during the periods in
which the temporary differences reverse. As temporary differences reverse, the
related deferrals are recorded to income.
k. Earnings Per Share
Earnings per share from continuing operations are computed by reducing the
related income by preferred stock dividends to derive per share amounts
applicable to common stock.
Per share amounts are computed based on the weighted average common shares
outstanding plus common equivalent shares. Common equivalent shares result from
the assumed exercise of outstanding stock options, reduced by the number of
shares that could be purchased from the proceeds of such exercise at the average
market price of the Company's common stock. Common equivalent shares of
1,452,000, 1,399,000, and 1,479,000 shares were included in the computation of
earnings per share amounts for the years ended December 31, 1995, 1994, and
1993, respectively. Earnings per share assuming full dilution have not been
disclosed for any year presented as they do not differ materially from earnings
per common and common equivalent share.
l. Newly Issued Accounting Standards
In March, 1995, Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS 121"), was issued. This statement, which will be required in 1996,
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used and for long lived-assets and certain identifiable intangibles to be
disposed of.
In October, 1995, Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123"), was issued. This
statement, which will be required in 1996, establishes financial accounting and
reporting standards for stock-based employee compensation plans. The Company is
continuing to evaluate whether it will elect to change to the recognition
provisions of SFAS 123.
The Company has not determined the effects of implementing SFAS 121 and SFAS 123
on its financial position and results of operations for any future periods.
Primark Corporation and Subsidiaries
27
<PAGE> 7
NOTES CONTINUED
================================================================================
2. Acquisitions
The Company's consolidated financial statements include the operations of
Disclosure from its June 29, 1995 acquisition date and the operations of Vestek
from its June 30, 1994 acquisition date for the years ended 1995 and 1994,
respectively.
a. Acquisition of Disclosure Incorporated and Affiliates
On June 29, 1995, the Company acquired the entire equity interest of Disclosure
Incorporated and certain of its affiliates ("Disclosure"), including I/B/E/S
International Inc. ("I/B/E/S") and a 50% ownership of Worldscope for a total
purchase price of $200,000,000 in cash. The Company obtained $215,000,000 of
external financing, of which $185,000,000 was used to finance the cash
consideration paid in the acquisition. Bank financing was obtained through a
$125,000,000 term loan and a $45,000,000 draw on a $75,000,000 revolving line of
credit, pursuant to a Term Loan Agreement and a Revolving Credit Facility (Note
6). The remaining $15,000,000 of bank financing was obtained pursuant to a loan
agreement with one of the Company's wholly-owned subsidiaries (Note 6a). The
Company incurred fees of approximately $6,076,000 associated with the
acquisition.
Founded in 1968, Disclosure is a provider of "as reported" and abstracted
financial information, primarily derived from Securities and Exchange Commission
filings and supplemented with information from companies, stock exchanges and
other sources, both in the United States and worldwide. I/B/E/S is a source of
earnings estimates for investors, financial institutions and portfolio managers
on a global basis.
The acquisition was accounted for as a purchase and, accordingly, the purchase
price was allocated to Disclosure's tangible and intangible net assets acquired,
based upon their estimated fair values as of the acquisition date. The excess of
the purchase price over the estimated fair value of total net assets acquired of
approximately $188,065,000 was recorded to goodwill and will be amortized over
lives ranging between 25 and 40 years. Future adjustments to the total purchase
price allocation, if any, are not expected to materially affect the Company's
financial statements.
<TABLE>
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company for the years ended December
31, 1995 and 1994 as though the acquisition of Disclosure had occurred on
January 1, 1994. This information has been prepared for comparative purposes
only and does not necessarily represent actual operating results that may be
achieved in the future or that would have occurred had the acquisition of
Disclosure been consummated on January 1, 1994.
<CAPTION>
================================================================================
(000s except Earnings Per Share) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Operating revenues $668,586 $562,600
Income from continuing operations 16,838 7,056
Net income applicable to common stock 15,404 5,622
Earnings per share from continuing
operations $ 0.75 $ 0.28
================================================================================
</TABLE>
<TABLE>
A summary of the cash components of the Disclosure acquisition is shown below.
<CAPTION>
================================================================================
(000s)
- --------------------------------------------------------------------------------
<S> <C>
Fair value of assets acquired (including goodwill) $247,475
Liabilities assumed 47,475
- --------------------------------------------------------------------------------
Total purchase price 200,000
Acquisition fees paid to date 6,076
- --------------------------------------------------------------------------------
Total cash paid 206,076
Acquired cash (1,605)
- --------------------------------------------------------------------------------
Cash paid - net of acquired cash $204,471
================================================================================
</TABLE>
b. Acquisition of Vestek Systems, Inc.
On June 30, 1994, the Company acquired all of the assets and assumed
substantially all of the liabilities of Vestek Systems, Inc. ("Vestek") for a
total purchase price of approximately $6,900,000 in cash. Vestek is a provider
of information services and applications software to customers in the U.S. and
Canada. The acquisition was accounted for as a purchase and, accordingly, the
purchase price (and related transaction fees) were allocated to the estimated
fair value of Vestek's assets and assumed liabilities. The remainder of the
purchase price of approximately $6,000,000 was recorded to goodwill and is being
amortized over 20 years.
Primark Corporation and Subsidiaries
28
<PAGE> 8
NOTES CONTINUED
================================================================================
3. Dispositions and Other Charges
On May 20, 1994, the Company sold all of the issued and outstanding common stock
of Wellmark Incorporated for $6,500,000 in cash. The sale resulted in a pre-tax
gain of $1,781,000 which has been included in other income for 1994. The sale
represented a disposal of a portion of the Company's information services
business segment. Accordingly, Wellmark's operating results through the date of
disposal, along with the gain resulting therefrom, have been included as part of
income from continuing operations.
On August 27, 1993, the Company sold all of the issued and outstanding common
stock of Westmark for approximately $6,000,000 consisting of $3,500,000 in cash
and two promissory notes. For the year ended December 31, 1993, the Company
recognized a loss from discontinued operations of $764,000, and an after-tax
loss from disposal of $1,594,000 for Westmark. During 1993, Westmark recorded
$5,166,000 of revenues.
In July 1994, the Company restructured the Westmark promissory notes. The
Company agreed to cancel the notes with a remaining value of $2,195,000 in
exchange for a $500,000 cash payment received in October 1994, 400,000 shares of
Network Financial Services, Inc. common stock and a full release from all
indemnity obligations given in connection with the Westmark sale. On June 30,
1994, the Company recorded a pre-tax charge of $1,251,000 reflecting the
write-off of these notes. The loss was recorded to continuing operations in
other deductions, as the revaluation of these notes occurred subsequent to the
disposal date.
On December 31, 1993, the Company liquidated its life insurance business
(previously a subsidiary of Westmark) which, after payment of certain
liquidation costs, resulted in net cash proceeds to the Company of approximately
$1,100,000. Additionally, an after tax charge of $1,208,000 was recorded during
the fourth quarter of 1993 for anticipated settlements of tax and legal matters
related to previously discontinued operations.
4. Unbilled Receivables
<TABLE>
Unbilled receivables under U. S. Government and commercial contracts consisted
of the following.
<CAPTION>
================================================================================
December 31 (000s) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government $19,536 $15,866
Commercial 11,347 5,827
- --------------------------------------------------------------------------------
Total unbilled receivables $30,883 $21,693
================================================================================
</TABLE>
Unbilled receivables represent recoverable costs and accrued profit not billed
to customers that will be billed on the basis of contractual terms and delivery
schedules. At December 31, 1995 and 1994, U.S. Government unbilled receivables
included a retainage of $4,418,000 and $4,487,000 respectively. Of the retainage
amount at December 31, 1995, $2,627,000 is expected to be collected after one
year, subject to government audit and approval. All other unbilled receivables
are due within one year.
================================================================================
5. Leases
a. Lessor
Primark Storage Leasing Corporation ("PSLC") leases to ANR Pipeline Company
underground natural gas storage fields under noncancellable agreements expiring
in 2003. Such agreements provide for renewal options which could extend the
lease term to 2013. Future minimum lease receipts, as shown below, are reflected
through the year 2003.
<TABLE>
The cost of nondepreciable property leased under related operating leases was
$16,020,000 for the periods ending December 31, 1995 and 1994. The components of
PSLC's net investment in financing leases are shown below.
<CAPTION>
================================================================================
December 31 (000s) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Total minimum lease receipts $ 37,927 $49,395
Less-executory costs 15,732 21,185
- --------------------------------------------------------------------------------
Minimum lease receipts 22,195 28,210
Less-unearned interest 7,218 10,144
- --------------------------------------------------------------------------------
Net investment in financing leases 14,977 18,066
Current portion 3,106 3,106
- --------------------------------------------------------------------------------
Net long-term investment in financing leases $11,871 $14,960
================================================================================
</TABLE>
Primark Corporation and Subsidiaries
29
<PAGE> 9
NOTES CONTINUED
================================================================================
<TABLE>
Future minimum lease receipts related to direct financing leases will vary from
year to year as a result of the provisions of the lease agreements. Estimated
future minimum lease receipts at December 31, 1995 are shown below.
<CAPTION>
================================================================================
(000s) Direct Financing Operating
Leases Leases
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 7,289 $ 2,072
1997 6,814 2,070
1998 6,156 2,070
1999 5,594 2,069
2000 4,567 2,070
Thereafter 7,507 6,236
- --------------------------------------------------------------------------------
Total minimum lease receipts $37,927 $16,587
================================================================================
</TABLE>
b. Lessee
The Company leases a variety of assets principally under noncancellable
operating lease agreements, including office facilities, real property, computer
and office equipment, and heavy aircraft maintenance facilities and related
equipment. These leases expire at various dates through 2021.
Certain of TASC's office facilities are leased from a related party under
operating leases which expire through the year 2006. Rent expenses under these
leases were $3,750,000, $3,708,000, and $3,613,000 for the years ended 1995,
1994, and 1993, respectively. In connection with these leases, the Company has
an option to purchase TASC's corporate headquarters facility at any time through
June 30, 1996 for approximately $30,000,000.
<TABLE>
Estimated future minimum commitments under noncancelable leases are shown below.
<CAPTION>
================================================================================
(000s) Capital Operating
- --------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 1,714 $ 28,876
1997 1,161 20,036
1998 847 16,806
1999 49 13,564
2000 - 12,406
Thereafter - 62,338
- --------------------------------------------------------------------------------
Total minimum lease payments 3,771 $154,026
Amounts representing interest and other (435)
- --------------------------------------------------------------
Present value of net minimum payments 3,336
- --------------------------------------------------------------
Current portion (1,353)
- --------------------------------------------------------------
Long-term obligations $ 1,983
================================================================================
</TABLE>
Total rent expense for all operating leases, including TASC's related party
rentals, was $27,524,000, $20,982,000, and $21,052,000 (net of sublease rentals
of $250,000, $1,023,000, and $1,914,000) for the years ended December 31, 1995,
1994 and 1993, respectively.
6. Short-Term and Long-Term Debt
a. Notes Payable
<TABLE>
Information relative to short-term bank borrowings of the Company and its
subsidiaries is shown below.
<CAPTION>
================================================================================
(000s) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding borrowings
at December 31 $ - $ - $17,000
Available for future
borrowings at December 31 $75,000 $75,000 $58,000
Weighted average effective
interest rate on:
Average bank borrowings 8.0% 6.1% 5.8%
Bank borrowings at
December 31 - - 5.4%
Aggregate borrowings
outstanding:
Maximum outstanding $64,324 $21,858 $26,000
Average outstanding during
the year $22,661 $ 6,653 $11,197
================================================================================
</TABLE>
On June 29, 1995, the Company entered into a new $75,000,000 revolving credit
facility (the "Credit Facility") to replace its $75,000,000 credit agreement due
to expire in 1996 (Note 6c). The Credit Facility expires on October 15, 2000.
Interest on outstanding borrowings under the Credit Facility is payable at a
rate of 1.75% above the current prevailing LIBOR rate or, at the Company's
option, at 0.50% above the higher of the current prevailing Federal Funds rate
plus 0.50% or the prime rate of interest. Commitment fees are payable quarterly
at a rate of 0.375% per annum on the average daily unused portion of the
facility. The Credit Facility contains various restrictive covenants which,
among other things, require the Company to maintain certain minimum levels of
consolidated net worth and specific consolidated liquidity and long-term
solvency ratios. The Credit Facility is secured by a pledge of the outstanding
common stock of certain of the Company's subsidiaries.
Primark Corporation and Subsidiaries
30
<PAGE> 10
NOTES CONTINUED
================================================================================
On June 29, 1995, TASC, a wholly-owned subsidiary of the Company, entered into a
$15,000,000 unsecured Loan Agreement (the "Loan") due June 28, 1996 in
connection with the Company's acquisition of Disclosure. Interest of
approximately 7.625% was charged on outstanding borrowings under the Loan. On
December 6, 1995, the Loan was retired through proceeds received from the
Company's issuance of common stock (Note 10).
b. Long-Term Debt
<TABLE>
The Company's outstanding long-term debt, including capital lease obligations,
consisted of the following:
<CAPTION>
================================================================================
December 31 (000s) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Primark 8.75% Senior Notes $112,000,000
due 2000 $111,140 $111,003
Primark Storage Leasing 8.82% Senior
Secured Note due through 2010 31,492 35,260
Primark bank Term Loan due through 2002 125,000 -
Capital lease obligations 3,336 4,570
- --------------------------------------------------------------------------------
Total debt and capital lease obligations 270,968 150,833
Less - current maturities 5,105 4,907
- --------------------------------------------------------------------------------
Long-term debt and capital lease obligations $265,863 $145,926
================================================================================
</TABLE>
Required principal payments on long-term debt and notes payable over the next
five years, excluding capital lease obligations are $3,752,000 in 1996,
$8,929,000 in 1997, $18,947,000 in 1998, $23,884,000 in 1999, and $33,665,000 in
2000.
Primark's 8.75% Senior Notes due 2000 ("Senior Notes") are carried at their
principal amount due at maturity less unamortized discount. Interest on the
Senior Notes is payable semi-annually on April 15 and October 15. The Senior
Notes are unsecured obligations of the Company, contain no mandatory sinking
fund or redemption requirements, and are redeemable in whole or in part at the
option of the Company on or after October 15, 1997 at redemption prices ranging
from 104.375% in 1997 to 100.00% in 1999 and thereafter, plus accrued interest.
Under certain circumstances, the Company may redeem up to 35% of the originally
issued principal amount of the Senior Notes prior to October 15, 1997, at a
price of 109.00% plus accrued interest. The Indenture pursuant to which the
Senior Notes were issued contains various restrictive covenants. Under the most
restrictive covenants, the Company is restricted from paying cash dividends on
its common stock, repurchasing its common stock or making certain other payments
which in the aggregate exceed the sum of: (1) $10,000,000; (2) 50% of the
Company's consolidated net income (cumulative from the date of issuance of the
Senior Notes); plus (3) 100% of the net proceeds received from sales of the
Company's common stock for cash.
On August 7, 1992, Primark Storage Leasing issued through private placement a
$45,000,000, 8.82% Senior Secured Note. Proceeds from this note were transferred
to the Company to finance the Datastream acquisition. Principal and interest
payments on the note are due in quarterly installments until its October 15,
2010 maturity; principal installments paid during 1995 totaled $3,768,000. The
note is nonrecourse and secured by principally all assets of Primark Storage
Leasing, along with all of its leases and rental revenues.
On June 29, 1995, the Company entered into a $125,000,000 Term Loan Agreement
(the "Term Loan") due June 30, 2002. Principal payments are due semi-annually
commencing on December 31, 1997. Interest on outstanding borrowings under the
Term Loan is payable at a rate of 2.0% above the current prevailing LIBOR rate
of interest or, at the Company's option, at 0.75% above the higher of the
current prevailing Federal Funds rate plus 0.50% or the prime rate of interest.
The Term Loan contains various restrictive covenants which, among other things,
require the Company to maintain certain minimum levels of consolidated net worth
and specific consolidated liquidity and long-term solvency ratios. The Term Loan
is secured by a pledge of the outstanding common stock of certain of the
Company's subsidiaries.
Deferred debt issue costs are amortized over the terms of the related debt,
ranging from 3 to 18 years.
c. Debt Refinancing
On June 29, 1995, the Company entered into a new
Primark Corporation and Subsidiaries
31
<PAGE> 11
NOTES CONTINUED
================================================================================
$75,000,000 revolving Credit Facility (Note 6a) to replace a similar facility
due to expire in 1996. Pursuant to the terms of the Credit Facility, the
Company's prior revolving credit agreement was terminated. The early
extinguishment of such indebtedness generated an extraordinary after-tax loss of
$534,000 for the write-off of unamortized debt issue costs associated with the
credit agreement.
On October 18, 1993, the Company issued Senior Notes (Note 6b) at a price of
98.975% which generated total proceeds to the Company of $110,852,000 before
underwriting fees. Concurrent with the issuance of the Senior Notes, the Company
entered into the three-year $75,000,000 revolving credit agreement with a bank.
Proceeds from the issuance of the Senior Notes, together with an initial
borrowing under the credit agreement and existing cash balances, were used to
retire certain then existing indebtedness of the Company. The early
extinguishment of the indebtedness generated an extraordinary after-tax loss of
$2,650,000 for the year ended December 31, 1993. This loss primarily reflects
the write-off of unamortized debt issue costs associated with the Company's
retired indebtedness.
================================================================================
7. FINANCIAL INSTRUMENTS
a. Foreign Exchange Risk Management
The Company enters into forward exchange contracts and purchases currency
options to reduce the exposure of foreign currency fluctuations associated with
certain firm commitments and anticipated cash flows. The Company's principal
strategy is to protect the net cash flow from foreign customers' contracts. As
these contracts are typically under two years in length, most of the derivative
financial instruments are under two years in duration. The Company principally
enters into contracts which deliver Japanese yen, Swiss francs, German deutsche
marks and French francs for U.S. dollars at agreed-upon exchange rates. Other
contracts include the exchange of German deutsche marks for British pounds.
Counterparties to these agreements are major international financial
institutions.
<TABLE>
The tables below illustrate the U.S. dollar equivalent of foreign exchange
contracts at December 31, 1995 and 1994 along with unrecorded gross unrealized
gains and losses.
<CAPTION>
================================================================================
December 31 (000s) 1995
- --------------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized
Notional Gains Losses
Amount Deferred Deferred
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen $ 5,199 $495 $ -
Deutsche Mark/Sterling 2,986 - -
Deutsche Mark 4,836 161 (133)
Swiss Franc 3,798 165 (66)
French Franc 2,827 41 (44)
Other - - -
- --------------------------------------------------------------------------------
$19,646 $862 $ (243)
================================================================================
OPTION CONTRACTS:
Japanese Yen $ 876 $ 53 $ -
Deutsche Mark/Sterling 2,800 - (13)
Deutsche Mark 4,136 2 (24)
Swiss Franc 3,582 - (26)
French Franc 2,830 - (22)
Other 726 4 (1)
================================================================================
$14,950 $ 59 $ (86)
</TABLE>
<TABLE>
<CAPTION>
================================================================================
December 31 (000s) 1994
- --------------------------------------------------------------------------------
Gross Gross
Unrealized Unrealized
Notional Gains Losses
Amount Deferred Deferred
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen $ 6,795 $ 46 $ (50)
Deutsche Mark/Sterling 5,717 - -
Deutsche Mark 3,748 - (276)
Swiss Franc 3,232 8 (147)
French Franc 2,856 12 (94)
Other 313 - (13)
- --------------------------------------------------------------------------------
$ 22,661 $ 66 $ (580)
================================================================================
OPTION CONTRACTS:
Deutsche Mark $ 1,419 $ 4 $ -
Swiss Franc 1,462 3 -
French Franc 710 1 -
Other 288 - (3)
- --------------------------------------------------------------------------------
$ 3,879 $ 8 $ (3)
================================================================================
</TABLE>
b. Long-Term Foreign Currency Exchange Instruments
In 1992, as required by the Company's bank group, Datastream entered into
long-term foreign currency swap agreements. As a result of the 1993 refinancing
pursuant
Primark Corporation and Subsidiaries
32
<PAGE> 12
NOTES CONTINUED
================================================================================
to which Datastream's debt was repaid in full, these swaps were sold on October
25, 1993 for a small amount of cash. Changes in the market value of the swaps
were recorded to income which resulted in an after-tax loss of $939,000 for the
year ended December 31, 1993.
c. Interest Rate Swap Agreement
On August 1, 1995, the Company entered into an interest rate swap agreement with
a major bank, having a notional principal amount of $18,333,000. The swap
agreement effectively changed the interest rate of a portion of Primark's
long-term debt from a floating rate to a 6.1% fixed rate. This swap agreement
expires in December of 1999. Though the Company is exposed to credit and market
risk in the event of future non-performance by the bank, management does not
anticipate that such an event will occur.
d. Fair Value of Financial Instruments
<TABLE>
The carrying and estimated fair value of certain of the Company's financial
instruments are shown below.
<CAPTION>
==================================================================================
Carrying Value Estimated Fair Value
December 31 (000s) 1995 1994 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options $ 335 $ 168 $ 308 $ 173
Forwards $ 109 $ 56 $ 728 $ (458)
Interest rate swaps $ - $ - $ (298) $ -
8.75% Senior Notes $111,140 $ 111,003 $ 114,800 $107,520
8.82% Senior
Secured Note $ 31,492 $ 35,260 $ 37,443 $ 34,552
Redeemable
preferred stock $ 16,874 $ 16,874 $ 34,928 $ 17,717
==================================================================================
</TABLE>
Estimated fair values of these financial instruments at December 31, 1995 and
1994 were based upon quotes obtained from investment and commercial bankers
using comparable securities. The fair values of currency forward contracts and
purchased currency options were estimated based on quoted market prices of
contracts with similar terms. Other financial instruments have been excluded as
their carrying value approximates their market value.
================================================================================
8. CONTINGENCIES
On August 16, 1994, a jury in a civil case in the Federal District Court in
Boston, Massachusetts returned an unfavorable verdict against the Company's
wholly-owned subsidiary, TASC, for approximately $3.1 million plus accrued
interest. The lawsuit was brought by a former TASC employee and involved a claim
for compensation for intellectual property transferred to TASC and claims
relating to such employee's termination of employment. The events underlying
this lawsuit occurred prior to the Company's acquisition of TASC in August of
1991. In July 1995, TASC paid $3.3 million in full settlement of this lawsuit.
The Company had previously reserved for the settlement.
On June 24, 1994, a jury in a civil case in the Massachusetts Superior Court
(the "Court") returned an unfavorable verdict against the two founders of TASC,
and against TASC itself. The suit was brought by a former employee regarding a
TASC stock transaction with took place in 1976, prior to the Company's
acquisition of TASC in 1991. On June 28, 1994, the Court ordered that judgment
be entered on the verdict requiring the two founders (but not TASC itself) to
disgorge $19,800,000. Such amount accrues post-judgment interest at a statutory
rate. As an alternative course of action, the plaintiff may pursue the two
founders and TASC, jointly and severally, for $48,600. Based on the
adjudication, the Company has denied requests of the two founders for
indemnification. Certain post-verdict motions (including a motion for judgment
notwithstanding the verdict, and in the alternative, a motion for a new trial)
are pending. While the outcome of these motions cannot be predicted with
certainty, the Company believes it will not be required to pay any portion of
this judgment.
On April 8, 1994, the Department of Defense Office of the Assistant Inspector
General for Auditing (the "IG") issued a final report relative to its audit of
contracting practices of the Ballistic Missile Defense Organization (the
"BMDO"), which included a comprehensive review of one of TASC's contracts with
the BMDO. The report included a recommendation for monetary recovery from TASC.
All of the issues raised in the report were settled with the cognizant
government contracting officer during 1995. The Company's reserves were adequate
for the resolution of this matter.
Primark Corporation and Subsidiaries
33
<PAGE> 13
NOTES CONTINUED
================================================================================
The Company has received notifications from the Michigan Department of Natural
Resources of three matters involving environmental contamination in the vicinity
of natural gas storage fields in Michigan which the Company leases to an
interstate pipeline company. The Company conducts no operations of its own on
these properties. While the ultimate resolution of these matters cannot be
predicted at this time, the Company believes that its existing reserves of
approximately $250,000 are adequate for the resolution of such matters
The Company and its subsidiaries are involved in certain other administrative
proceedings and matters concerning issues arising in the ordinary course of
business. Management cannot predict the final disposition of such issues, but
believes that adequate provision has been made for the probable losses and the
ultimate resolution of these proceedings will not have a material adverse effect
on the Company's financial condition, results of operations or financial
liquidity.
================================================================================
9. REDEEMABLE PREFERRED STOCK
The Company's Series A Cumulative Convertible Preferred Stock pays cumulative
quarterly dividends at an annual rate of 8.5%. Such dividends may be paid in the
form of cash or additional shares of preferred stock through August 1996; all
such dividends thereafter must be paid in the form of cash. Increases in the
number of preferred shares outstanding as a result of dividends paid in the form
of additional preferred shares were 14,044 for the year ended December 31, 1993.
All subsequent preferred stock dividends declared have been paid in cash.
Subject to certain anti-dilution provisions, each share of preferred stock may
be converted, at any time, into the Company's common stock at a rate of $14.49.
Commencing August 1996, the Company may redeem the preferred stock at its $25
per share liquidation preference, plus any accrued and unpaid dividends.
Commencing August 1998, a mandatory sinking fund will be provided for the annual
retirement of 150,000 preferred shares. All preferred shares must be redeemed by
the Company by August 2001. Holders of the preferred stock have certain voting
rights should dividend defaults occur.
================================================================================
10. COMMON SHAREHOLDERS' EQUITY
<TABLE>
a. Common Stock
On December 5, 1995, the Company completed an equity offering in which it sold
4,068,200 shares of its common stock and offered an additional 288,000 shares
for certain selling shareholders. The sale of common stock together with
option proceeds related to the selling shareholders provided the Company
$107,784,000, net of commissions and expenses. A portion of the proceeds were
used to pay down the outstanding balance of $48,166,000 on the Company's
revolving credit agreement and to prepay the $15,000,000 TASC Loan (Note 6a).
Changes in the number of shares of the Company's common stock are shown below.
<CAPTION>
================================================================================
December 31 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
ISSUED 24,435,968 19,912,668 19,912,738
COMMON STOCK
HELD IN TREASURY
Balance - beginning
of period (1,392,789) (1,534,463) (1,714,652)
Treasury shares
acquired (279,154) (61,030) (13,100)
Treasury shares
reissued:
Employee stock
purchase plan 203,647 196,617 193,289
Exercise of Stock
Options 349,009 6,087 -
- --------------------------------------------------------------------------------
Balance - end of
period (1,119,287) (1,392,789) (1,534,463)
- --------------------------------------------------------------------------------
COMMON STOCK
OUTSTANDING 23,316,681 18,519,879 18,378,275
================================================================================
</TABLE>
In November 1993, the Company's Board of Directors authorized the repurchase of
up to 1,000,000 shares of the Company's common stock from time to time through
open market and/or privately negotiated transactions. The Company repurchased
61,030 shares and 13,100 shares of its outstanding common stock on the open
market for the years ended December 31, 1994 and 1993, respectively. During
1995, shares of the Company's common stock were delivered to satisfy the
exercise price of stock options and shares were withheld from the exercise of
stock options to
Primark Corporation and Subsidiaries
34
<PAGE> 14
NOTES CONTINUED
================================================================================
satisfy the related tax withholding requirements. All such repurchased shares
are held in treasury to be used for general corporate purposes.
The Company's Rights Agreement is designed to deter coercive or unfair takeover
tactics, and to prevent a buyer from gaining control of the Company without
offering a fair price to all of its shareholders. The Rights Agreement, which
expires on January 25, 1998, generally becomes effective when an "Acquiring
Person" (as defined in the agreement) beneficially owns 20% or more of the
outstanding shares of the Company's common stock. In general, upon a "Triggering
Event" (as defined in the agreement), each share of the Company's common stock
carries the right to convert the corresponding "Attached Rights" (as defined in
the agreement) into one share of common stock at a specified price. At December
31, 1995, common stock reserved for issuance under the Rights Agreement was
23,316,681 shares.
b. Employee Stock Ownership and Profit Sharing Plans
The Primark Corporation Employee Stock Ownership Plan covers all of the
employees of the Company and certain subsidiaries. The plan was pre-funded in
1989 with 965,000 shares of the Company's common stock which is being allocated
to participants over an eight-year period.
TASC's Profit Sharing and Stock Ownership Plan covers substantially all of its
employees. Employer contributions primarily are determined by TASC's Board of
Directors at amounts not exceeding the maximum amount deductible for Federal
income tax purposes. Contributions to this plan were $10,625,000, $9,680,000 and
$7,742,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
This plan holds all of the Company's outstanding preferred stock (Note 9).
c. Employee Stock Purchase and Stock Option Plans
Established in 1992, the Primark Corporation Employee Stock Purchase Plan is
available for all employees of the Company and certain subsidiaries. Under this
plan, employees may purchase, through periodic payroll deductions, up to a
maximum of 1,000,000 shares of the Company's common stock at 85% of the lower of
the average market price of such shares either at the beginning or end of each
six month offering period.
The Primark Corporation 1992 Stock Option Plan provides for the granting of
options to purchase common stock to officers and certain key employees of the
Company and its subsidiaries. The Primark Corporation Stock Option Plan for
Non-Employee Directors provides for the granting of options to purchase shares
of common stock to each director who is not an employee. Common stock reserved
for issuance under the Company's stock option plans is 1,438,380.
<TABLE>
Changes in the number of shares under option granted under the Company's various
stock option plans are shown below.
<CAPTION>
===============================================================================
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
beginning of year 4,351,285 3,627,360 3,403,568
Granted 683,786 798,000 260,292
Canceled options
(ranging from $10.625
to $14.625 per share) (17,244) (67,988) (36,500)
Exercised (ranging from
$4.436 to $14.625
per share) (804,109) (6,087) --
- -------------------------------------------------------------------------------
Outstanding at end
of year (ranging from
$4.512 to $25.250
per share) 4,213,718 4,351,285 3,627,360
Outstanding options
not vested (1,008,072) (853,657) (636,950)
- -------------------------------------------------------------------------------
Outstanding and
exercisable at end
of year 3,205,646 3,497,628 2,990,410
===============================================================================
Available for future
grant at end of year 675,331 993,123 952,097
===============================================================================
</TABLE>
Stock options available for grant in any one year under Primark Corporation's
1992 Stock Option Plan may not exceed 1.5% of the Company's outstanding common
stock as of January 1 of each year, plus any excess of available stock options
not granted from previous years. Accordingly, stock options available for grant
at December 31, 1995 included 365,383 stock options that are available for grant
during 1996 under Primark Corporation's 1992 Stock Option Plan.
Primark Corporation and Subsidiaries
35
<PAGE> 15
NOTES CONTINUED
================================================================================
11. INCOME TAXES
<TABLE>
<CAPTION>
===============================================================================
December 31 (000s) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL AND OTHER
INCOME TAXES CONSISTED OF:
Current provision $ 14,273 $ 12,378 $ 13,582
Deferred provision
(benefit) - net 839 (2,611) (4,037)
- -------------------------------------------------------------------------------
Total Federal and other
income tax expense $ 15,112 $ 9,767 $ 9,545
- -------------------------------------------------------------------------------
RECONCILIATION BETWEEN
STATUTORY AND ACTUAL
INCOME TAXES:
Income from
continuing operations $ 18,850 13,750 $ 11,729
Income tax expense 15,112 9,767 9,545
- -------------------------------------------------------------------------------
Book pretax income $ 33,962 $ 23,517 $ 21,274
===============================================================================
Statutory Federal
income taxes at a rate
of 35% $ 11,887 $ 8,231 $ 7,446
Adjustments to Federal
income taxes:
Amortization of goodwill 3,110 2,361 2,245
State income taxes - net 893 24 872
Effect of foreign tax rates (99) (27) (20)
Federal income taxes
received from lessee (189) (196) (193)
Adjustment of Federal
income taxes provided
in prior years (205) (419) (670)
Other - net (285) (207) (135)
- -------------------------------------------------------------------------------
Total Federal and other
income tax expense $ 15,112 $ 9,767 $ 9,545
===============================================================================
</TABLE>
<TABLE>
Gross deferred income tax liabilities and benefits
comprising the Company's net deferred income tax
liability are shown below.
<CAPTION>
================================================================================
December 31 (000s) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax liability $24,229 $13,561
Deferred tax benefits (9,700) (2,293)
Net deferred income tax liability 14,529 11,268
Current liability (benefit) 1,340 (1,952)
Non-current portion $13,189 $13,220
================================================================================
</TABLE>
<TABLE>
At December 31, 1995 and 1994, no valuation allowance relative to deferred
income tax benefits was required. The tax effects of significant temporary
differences which gave rise to the net deferred income tax liability are shown
below.
<CAPTION>
================================================================================
December 31 (000s) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Intangible assets $ 7,370 $ 7,399
Unbilled receivables 7,567 6,816
Property, plant and equipment 3,164 2,024
Unearned ESOP compensation 248 586
Accruals not currently deductible (2,309) (3,019)
Accrued vacation (2,260) (1,774)
Other 749 (764)
- --------------------------------------------------------------------------------
Net deferred income tax liability $14,529 $11,268
================================================================================
</TABLE>
12. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates primarily in the information services industry. Information
services and related products are provided by TASC, Datastream, Disclosure,
I/B/E/S and Vestek principally in the United States and the United Kingdom. Most
of Primark's international sales are generated through its affiliated operating
structure ("affiliates"), which is located throughout Europe, Asia and the
United States. The Company is also engaged in the transportation services
industry as a provider of heavy aircraft maintenance and the financial services
industry as a lessor of natural gas storage fields to an interstate pipeline
company.
The Company's operations by industry segment and geographic region are presented
in the following table on a stand-alone basis. Information presented includes
the operations of Disclosure from its June 29, 1995 acquisition date and
includes the operations of Vestek from its June 30, 1994 acquisition date for
the years ended 1995 and 1994, respectively.
Primark Corporation and Subsidiaries
36
<PAGE> 16
NOTES CONCLUDED
<TABLE>
<CAPTION>
=============================================================================================================
INDUSTRY SEGMENTS Information Transportation Financial Corporate Consolidated
(000s) Services(1) Services Services & Other (2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Operating Revenues $ 530,980 $ 79,236 $ 7,094 $ -- $ 617,310
Depreciation and Amortization $ 33,978 $ 952 $ 84 $ 1,341 $ 36,355
Operating Income (Loss) $ 52,846 $ 6,012 $ 4,068 $ (6,015) $ 56,911
Identifiable Assets $ 673,925 $ 39,197 $ 38,184 $ 51,093 $ 802,399
Capital expenditures $ 14,414 $ 7,466 $ 17 $ 765 $ 22,662
- -------------------------------------------------------------------------------------------------------------
1994
Operating Revenues $ 423,193 $ 46,362 $ 7,471 $ -- $ 477,026
Depreciation and Amortization $ 25,569 $ 622 $ 85 $ 1,261 $ 27,537
Operating Income (Loss) $ 36,704 $ 3,016 $ 4,515 $ (6,199) $ 38,036
Identifiable Assets $ 434,910 $ 14,514 $ 42,778 $ 15,714 $ 507,916
Capital expenditures $ 16,772 $ 4,418 $ 119 $ 1,307 $ 22,616
- -------------------------------------------------------------------------------------------------------------
1993
Operating Revenues $ 395,054 $ 40,834 $ 8,127 $ -- $ 444,015
Depreciation and Amortization $ 25,156 $ 558 $ 86 $ 397 $ 26,197
Operating Income (Loss) $ 34,752 $ 1,616 $ 4,722 $ (3,820) $ 37,270
Identifiable Assets $ 427,908 $ 10,606 $ 46,194 $ 12,870 $ 497,578
Capital expenditures $ 12,108 $ 480 $ 25 $ 54 $ 12,667
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================
GEOGRAPHIC REGIONS Domestic United Other Corporate Consolidated
(000s) Kingdom International & Other(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Operating Revenues
Non-affiliate $ 491,006 $ 63,473 $ 62,831 $ -- $ 617,310
Affiliate (3) $ -- $ 33,621 $ -- $ (33,621) $ --
Operating Income (Loss)
Non-affiliate $ 45,226 $ (16,491) $ 34,191 $ (6,015) $ 56,911
Affiliate (3) $ (4,834) $ 33,621 $ (28,787) $ -- $ --
Identifiable Assets $ 540,605 $ 163,647 $ 47,054 $ 51,093 $ 802,399
- -------------------------------------------------------------------------------------------------------------
1994
Operating Revenues
Non-affiliate $ 376,025 $ 55,068 $ 45,933 $ -- $ 477,026
Affiliate (3) $ -- $ 21,373 $ -- $ (21,373) $ --
Operating Income (Loss)
Non-affiliate $ 31,171 $ (8,711) $ 21,775 $ (6,199) $ 38,036
Affiliate (3) $ (3,730) $ 21,373 $ (17,643) $ -- $ --
Identifiable Assets $ 284,936 $ 176,100 $ 31,166 $ 15,714 $ 507,916
- -------------------------------------------------------------------------------------------------------------
1993
Operating Revenues
Non-affiliate $ 353,038 $ 62,550 $ 28,427 $ -- $ 444,015
Affiliate (3) $ -- $ 17,387 $ -- $ (17,387) $ --
Operating Income (Loss)
Non-affiliate $ 26,752 $ (2,024) $ 16,362 $ (3,820) $ 37,270
Affiliate (3) $ (3,002) $ 17,387 $ (14,385) $ -- $ --
Identifiable Assets $ 278,493 $ 175,189 $ 31,026 $ 12,870 $ 497,578
=============================================================================================================
<FN>
(1) Information services provided to the U.S. Government accounted for
$300,566,000 (49%), $273,541,000 (57%), and $265,439,000 (60%) of total
operating revenues for the years ended December 31, 1995, 1994 and 1993,
respectively.
(2) Corporate and other includes corporate accounts, eliminations and
reclassifications, as well as the net assets of the Company's discontinued
operations.
(3) Affiliate transfers represent service fees received by Datastream's United
Kingdom operation from its international affiliates.
</TABLE>
PRIMARK CORPORATION AND SUBSIDIARIES
37
<PAGE> 17
REPORT OF MANAGEMENT
================================================================================
Management of Primark Corporation and its subsidiaries (the "Company") is
responsible for the preparation and integrity of the accompanying consolidated
financial statements and other financial information contained in this Annual
Report. Management believes that all such information has been prepared in
conformity with generally accepted accounting principles, and necessarily
includes certain amounts that are based on management's judgments and estimates.
The consolidated financial statements have been audited by Deloitte & Touche
LLP, the Company's independent certified public accountants. Their audit was
made in accordance with generally accepted auditing standards, as indicated in
their report, and included a review of the Company's system of internal
accounting controls and test of transactions to the extent they considered
necessary to carry out their responsibilities.
In management's opinion, the Company's system of internal accounting controls,
coupled with an ongoing program of internal audits to review such controls,
provide reasonable assurance that the Company's assets are safeguarded from
material loss and that transactions are executed and recorded in accordance with
established procedures. The system is supported by formal policies and
procedures, including an active Code of Conduct program intended to ensure key
employees adhere to the highest standards of personal and professional
integrity. The concept of reasonable assurance is based on the recognition that
the cost of maintaining a system of internal accounting controls should not
exceed the related benefits to be derived.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management, internal auditors and Deloitte &
Touche LLP to review planned audit scope and results and to discuss other
matters affecting the adequacy of internal accounting controls and the quality
of financial reporting. Deloitte & Touche LLP has full and free access to the
Audit Committee and may meet with the committee without management
representatives present.
/s/ Stephen H. Curran
Stephen H. Curran
Senior Vice President and Chief Financial Officer
February 8, 1996
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
================================================================================
To the Board of Directors of Primark Corporation:
We have audited the accompanying consolidated statements of financial
position of Primark Corporation and its subsidiaries as of December 31, 1995
and 1994 and the related consolidated statements of income, cash flows and
common shareholders' equity for each of the three years in the period ended
December 31, 1995. 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
misstatements. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Primark Corporation and its
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
February 8, 1996
Primark Corporation and Subsidiaries
38
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
================================================================================
RESULTS OF OPERATIONS
1995 Compared to 1994
Primark reported 1995 net income available for common stock of $16.9 million
($0.82 per share) compared to $12.3 million ($0.62 per share) earned in 1994.
During 1995, $534 thousand ($0.03 per share) of accrued costs related to the
refinancing of the Company's revolving bank credit were written-off as an
extraordinary item. Excluding the effects of the extraordinary item, 1995 net
income was $18.9 million ($0.85 per share), increasing 37.1% over 1994.
Primark's 1995 revenues increased 29.4% to $617.3 million. Operating income for
1995 of $56.9 million increased $18.9 million over 1994, representing a 49.6%
improvement.
The significant increases in revenues and operating income reflect the June 29,
1995 acquisition of Disclosure and I/B/E/S coupled with strong sales efforts and
improved profitability in Primark's existing information service and
transportation segments. When the effects of the acquisition are excluded, the
Company's 1995 revenues and operating income increased 18.6% and 29.9%,
respectively, over 1994. Increases in net income were principally the result of
operating improvements in Primark's existing businesses, as the impact of the
acquisition was partially offset by additional interest costs. The earnings per
share calculation was impacted by the December 5, 1995 issue of 4.4 million
shares of common stock. However, the effect of the increase in shares
outstanding was offset by lower interest costs, with a large portion of the
proceeds used to pay off existing bank obligations.
Primark's information services segment reported revenues of $531.0 million and
operating income of $52.8 million for 1995, representing increases of 25.5% and
44.0%, respectively, over 1994. The information service segment benefited from
the Disclosure and I/B/E/S acquisition, that accounted for $51.7 million of the
increase in revenue. Primark's information services primarily support two
markets, financial information and technology applications.
The financial information markets accounted for $184.8 million of revenues and
are served by Datastream, Disclosure, I/B/E/S and Vestek. Excluding the newly
acquired companies, Datastream exhibited the strongest sales in this group, with
a 17.3% increase in revenues. Approximately $6.4 million of Datastream's
increased revenues resulted from favorable currency movements in its foreign
source billings. Excluding the effects of currency, Datastream's revenues grew
10.6% with its research product growing 14.6%. The research product line
represented 84.9% of Datastream's 1995 sales. Partially offsetting the research
product sales was a 9.2% drop in sales associated with the fund management
product, which is currently undergoing a transition to new generation offerings.
Datastream's geographic regions demonstrated significant improvements in 1995
with Continental Europe growing 14.9%, the Pacific Basin up 19.9% and North
America up 30.8%. The United Kingdom experienced 3.1% growth, reflecting lower
sales for the transitioning fund management product sold primarily in that
region.
The technology applications market, served by TASC, reported 1995 revenues of
$346.2 million, increasing 10.9% over 1994. The largest customer base in this
market is the U. S. Government, representing $300.0 million of 1995 revenues. In
December of 1994, TASC lost its contract with the Ballistic Missile Defense
Organization (the "BMDO"). Although it had been decreasing in value over the
last several years, the BMDO contract accounted for $16.5 million of 1994
revenue. During 1995, TASC replaced all of the lost BMDO revenues by growing its
other government businesses 16.2%. When the effects of the BMDO contract are
excluded, TASC's revenues grew 16.6% overall. TASC also grew its weather data
business, WSI, 25.4% and other commercial businesses 11.5%. TASC ended 1995 with
$452.8 million in backlog, a 57.3% increase over 1994. The backlog includes
$222.7 million of contracts maturing within one year. Although the government
may cancel any such contract at its discretion and many of the contracts are
issued on a competitive bidding basis, TASC has a history of few cancellations
and a high rate of success on competitively bid contracts.
Primark Corporation and Subsidiaries
39
<PAGE> 19
MANAGEMENT'S DISCUSSION CONTINUED
================================================================================
The transportation segment is represented by TIMCO, Primark's aircraft
maintenance business which markets to large commercial aircraft operations. This
segment reported $79.2 million of revenue and $6.0 million of operating income
in 1995. These results represent increases of $32.9 million and $3.0 million
over 1994 revenues and operating income, respectively. The dramatic improvement
over 1994 was accomplished through additional hangar space added in December
1994, coupled with TIMCO's ability to market the added capacity. The company has
further expanded its hangar space over 48% in December 1995 to take advantage of
customer demands for 1996.
The financial services industry segment is represented by Primark Storage
Leasing Corporation, which leases underground natural gas storage facilities
under long-term arrangements. The 1995 lease revenues of $7.1 million are based
on a declining property base and reflect a $0.4 million decline from 1994
levels.
Other income and deductions reflect increased interest costs associated with
acquisition debt incurred on June 29, 1995 and partially repaid in December
1995. Foreign currency losses reflect transactions and valuations of currency
hedges implemented to protect the Company's cash flows from dramatic currency
exchange movements. The 1995 currency loss of $2.6 million was created by a
relatively weak dollar and its effect on Primark's currency hedges. The currency
loss in other income and deductions was in turn offset by gains in operating
income when the stronger foreign operating revenues where converted to U. S.
Dollars throughout the year.
1994 Compared to 1993
Net income applicable to common stock for 1994 of $12.3 million ($0.62 per
share) increased $8.2 million over 1993 earnings of $4.1 million ($0.21 per
share). During 1993 the Company recorded a $3.6 million loss on discontinued
operations and a $2.7 million extraordinary loss associated with the 1993 debt
refinancing. Primark's 1994 revenues of $477.0 million increased 7.4% over 1993.
Operating income grew from $37.3 million in 1993 to $38.0 million in 1994. For
1994, the information service segment recorded improvements of 7.1% and 5.6%
over 1993's revenue and operating income. Growth and profitability were masked
by investments in new office expansion at Datastream and the impact of TASC's
BMDO contract.
Datastream experienced 1994 revenue growth of 8.5%, excluding the effects of
currency. Datastream's research product grew 11.3% worldwide and total sales in
each of Datastream's geographic regions improved over 10% with the exception of
the United Kingdom. The 1994 fund management product sales were flat compared to
1993 and contributed to a 3.2% growth rate in the United Kingdom. Datastream
opened new offices in Boston, San Francisco and Toronto, resulting in added
expense and reducing operating income. However, these expenditures also resulted
in a 31.9% increase in North American revenues.
TASC reported 1994 revenues of $312.3 million or a 5.6% increase over 1993.
TASC's BMDO contract represented $16.5 million of revenues in 1994 and $40.6
million in 1993. Excluding the effects of the BMDO contract, TASC's 1994
revenues grew 16.0% over 1993. During 1994, TASC increased other government
business 14.3% and commercial product revenues over 20%.
The transportation segment increased 1994 revenues 13.5% to $46.4 million and
posted operating income of $3.0 million during the year.
Other income and deductions during 1994 were favorably impacted by a pre-tax
gain of $1.8 million from the sale of Wellmark. This was partially offset by
a $1.3 million pre-tax charge related to the write-off of Westmark notes.
================================================================================
CAPITAL RESOURCES AND LIQUIDITY
1995 Compared to 1994
Primark ended the year 1995 with a $62.3 million balance in cash and cash
equivalents compared to $20.1 million at year end 1994, an increase of over
200%. There were several events that either used or generated large amounts of
cash during 1995 with offsetting effects. The purchase of Disclosure and I/B/E/S
on June 29, 1995 required the use
40
Primark Corporation and Subsidiaries
<PAGE> 20
MANAGEMENT'S DISCUSSION CONCLUDED
================================================================================
of $199.7 million and was financed with $185.0 million of commercial borrowings.
The Company also generated $107.8 million through its December equity issue.
Cash flows provided from operating activities of $48.6 million during 1995
represented an increase of $8.3 million or 20.6% over 1994. Excluding changes in
working capital, operating cash flows totaled $52.1 million for 1995, a 21.6%
increase over 1994. A large portion of the improvement in operations was
absorbed in working capital requirements of $3.5 million, of which accounts
receivable accounted for $11.3 million. TIMCO required the largest level of
support in trade receivables due to its high growth in sales during 1995.
Cash flow from financing activities provided $220.4 million dollars in 1995
compared to a use of cash in 1994 of $19.3 million. During 1994 Primark was in a
position to repay debt while in 1995 the Company funded the acquisition of
Disclosure and I/B/E/S with three separate credit agreements. Primark refinanced
its $75.0 million revolving credit agreement and borrowed $45.0 million against
that agreement for the purposes of funding the purchase. The Company, through
one of its subsidiaries, also established a $15.0 million one year term loan.
Finally, the Company borrowed $125.0 million under a newly established seven
year bank loan. The Company incurred $4.7 million of costs associated with
establishing these credit facilities during 1995. The $125.0 million seven year
bank loan remained outstanding at December 31, 1995; however, the other
acquisition related borrowings were repaid in conjunction with the fourth
quarter equity offering. On December 5, 1995, Primark sold 4.1 million shares of
common stock, generating gross proceeds of $110.3 million. The transaction
incurred $5.2 million of commissions and $0.4 million of related expenses. There
were also 288 thousand shares sold by other shareholders in conjunction with
this offering and as a result, the Company received $3.1 million of related
option proceeds. The net proceeds from this offering of $107.8 million were used
to repay the loan balances noted above and for general corporate purposes.
Financing activities also reflect $3.8 million of repayments under the PSLC
note.
Cash used for investing activities totaled $226.7 million in 1995 compared to
$10.3 million in 1994. The 1994 period reflects $27.0 million of capital
expenditures and capitalized software offset by the sale of Wellmark for $6.5
million and the release of $9.5 million of restricted cash. The 1995 period
reflects $199.7 million of expenditures to purchase the stock of Disclosure and
I/B/E/S on June 29, 1995. Expenditures on capital items during 1995 were
consistent with 1994. The 1995 period reflected $10.7 million spent on computer
equipment at TASC, Datastream and Disclosure and $5.4 million at TIMCO for the
new hangar facility. Expenditures for software in 1995 were $6.2 million
compared to $4.4 million in 1994 and reflect $2.3 million spent at Disclosure
which was not present in 1994.
1994 Compared to 1993
Cash and cash equivalents for 1994 of $20.1 million represented an increase of
$11.2 million over 1993. Cash flows from operating activities during 1994 and
1993 were dramatically influenced by changes in working capital. Accounts
receivable led the change in working capital largely due to increased sales
activity. Financing activities in 1993 absorbed $41.7 million of cash compared
to $19.3 million in 1994. Primark refinanced its commercial bank debt in 1993
with the $112 million 8.75% public bond issue. There were also $5.1 million of
related debt issue cost paid in 1993. Cash flow from investing activities in
1993 reflects cash restricted by various credit agreements, that were
subsequently released in 1994.
Inflation and Foreign Exchange Risk
Currency and inflation had little impact on cash balances during all periods
presented. The rate of inflation in all of Primark's operating areas around the
world were consistently absorbed through the local product pricing structures.
Currency transactions did not have a material cash impact on any of the years
reported due, in part, to Primark's hedging programs.
Primark Corporation and Subsidiaries
41
<PAGE> 21
<TABLE>
SELECTED FINANCIAL INFORMATION-FIVE YEAR DATA
<CAPTION>
==============================================================================================================================
($000s) Except Per Share Amounts 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL AND OPERATING DATA (1)
Operating revenues $ 617,310 $ 477,026 $ 444,015 $ 344,959 $ 133,647
Operating income (loss) $ 56,911 $ 38,036 $ 37,270 $ 21,739 $ (3,905)
Income from continuing operations $ 18,850 $ 13,750 $ 11,729 $ 9,220 $ 1,052
Net income applicable to common stock (2) $ 16,882 $ 12,316 $ 4,087 $ 5,821 $ 375
Earnings per share from continuing operations $ 0.85 $ 0.62 $ 0.52 $ 0.41 $ 0.03
Total earnings per share (2) $ 0.82 $ 0.62 $ 0.21 $ 0.30 $ 0.02
Total assets $ 802,399 $ 507,916 $ 497,578 $ 524,404 $ 309,788
Total debt, including capital lease obligations $ 270,968 $ 150,833 $ 169,458 $ 204,545 $ 55,182
Redeemable preferred stock $ 16,874 $ 16,874 $ 16,874 $ 16,522 $ 15,190
Common shareholders' equity (4) $ 354,129 $ 224,781 $ 208,134 $ 201,555 $ 195,393
EBITDA (3) $ 93,266 $ 65,573 $ 63,467 $ 33,446 $ (286)
Debt to total capitalization 42.2% 38.4% 43.0% 48.4% 20.8%
Capital expenditures $ 22,662 $ 22,616 $ 12,667 $ 8,238 $ 4,747
Capitalized software $ 6,232 $ 4,372 $ 4,021 $ 529 $ 175
Total employees 5,131 3,789 3,439 3,272 3,182
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
Actual shares outstanding (000) 23,317 18,520 18,378 18,198 18,169
Weighted average common and equivalent shares
outstanding (000) 20,602 19,909 19,805 19,388 19,689
Book value per share $ 15.19 $ 12.14 $ 11.33 $ 11.08 $ 10.75
Market price per share on NYSE/PSE:
High $ 30-1/4 $ 15 $ 16-3/8 $ 14-3/4 $ 14-3/4
Low $ 12-3/4 $ 11 $ 10-1/2 $ 9-3/4 $ 6-3/4
==============================================================================================================================
<FN>
1 - The financial data for the Company includes the following acquisitions:
Disclosure in June 1995 for $200 million; Vestek in June 1994 for $6.9
million; Datastream in September 1992 for $191 million; and TASC in August
1991 for $167 million.
2 - Includes an after-tax extraordinary loss of $534 thousand for 1995 and
$2.7 million for 1993 resulting from the early extinguishment of debt. Also
includes dividends on the Company's outstanding preferred stock and losses
associated with discontinued operations of the Company for all years
presented.
3 - EBITDA represents operating income plus depreciation and amortization
expense. Due to the high non-cash amortization expense recorded to net
income, the Company presents EBITDA to provide the shareholder a measure of
cash flows within operations. EBITDA represents supplemental information
only and is not to be construed as an alternative to operating income or to
cash flows as defined by GAAP.
4 - In December 1995, the Company issued common stock -
see Note 10 to the Consolidated Financial Statements.
</TABLE>
[GRAPH] [GRAPH]
<TABLE>
<CAPTION>
Operating Revenues Operating Income
(In Millions of Dollars) (In Millions of Dollars)
<S> <C>
$134-1991 $(4)-1991
$345-1992 $ 22-1992
$444-1993 $ 37-1993
$477-1994 $ 38-1994
$617-1995 $ 57-1995
</TABLE>
42
Primark Corporation and Subsidiaries
<PAGE> 22
<TABLE>
SUPPLEMENTARY FINANCIAL INFORMATION-QUARTERLY DATA
================================================================================
The following quarterly operating results include the acquired operations of
Disclosure and I/B/E/S from June 29, 1995 and Vestek from June 30, 1994.
Quarterly earnings per share may not total for the year as quarterly
computations are based on weighted average common and common equivalent shares
outstanding during each quarter. The following quarterly common stock prices set
forth the intraday high and low market prices per share on the NYSE Composite
Tape. As of the close of business of February 29, 1996, there were 10,605
holders of record of the Company's common stock.
<CAPTION>
================================================================================================================
(000s) Except Per Share Amounts First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------------
1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues $ 135,861 $143,041 $168,710 $ 169,698
Operating income $ 11,817 $ 13,113 $ 16,249 $ 15,732
Income from continuing operations $ 4,454 $ 4,576 $ 4,701 $ 5,119
Net income applicable to common stock (1) (2) $ 4,096 $ 3,683 $ 4,342 $ 4,761
Earnings per share before extraordinary loss (2) $ 0.20 $ 0.21 $ 0.21 $ 0.22
Earnings per share (1) (2) $ 0.20 $ 0.18 $ 0.21 $ 0.22
- ----------------------------------------------------------------------------------------------------------------
Market price per share:
High $ 14 1/2 $ 18 3/4 $ 26 1/4 $ 30 1/4
Low $ 12 3/4 $ 14 1/2 $ 17 5/8 $ 21 7/8
================================================================================================================
1994
- ----------------------------------------------------------------------------------------------------------------
Operating revenues $ 112,387 $119,016 $120,997 $ 124,626
Operating income $ 9,918 $ 8,836 $ 10,372 $ 8,910
Income from continuing operations (3) $ 3,140 $ 3,561 $ 3,284 $ 3,765
Net income applicable to common stock (2) $ 2,782 $ 3,202 $ 2,925 $ 3,407
Earnings per share (2) $ 0.14 $ 0.16 $ 0.15 $ 0.17
- ----------------------------------------------------------------------------------------------------------------
Market price per share:
High $ 15 $ 14 5/8 $ 13 3/8 $ 13 1/4
Low $ 11 $ 11 1/8 $ 11 1/8 $ 12 1/4
================================================================================================================
<FN>
(1) Includes, for the 1995 second quarter, an after tax extraordinary loss of
$534,000 which resulted from the early extinguishment of debt.
(2) Includes, for all interim periods presented, dividends on the Company's
outstanding preferred stock.
(3) Includes, for the 1994 second quarter, an after tax gain of $1,394,000 from
the sale of a portion of the Company's information segment and an after tax
loss of $813,000 on the restructuring of notes associated with the sale of
Westmark Mortgage Corporation. The 1994 fourth quarter includes before-tax
charges of $1,565,000 for completed or anticipated settlements of legal and
other matters.
</TABLE>
Primark Corporation and Subsidiaries
43
<PAGE> 23
SHAREHOLDER INFORMATION
================================================================================
1996 Annual Meeting
The Annual Meeting of Shareholders will be held at the Colonial Hilton Hotel,
127 Walnut Street, Lynnfield, Massachusetts on Wednesday, May 22, 1996 at 11:00
a.m. (Eastern Time). Information with respect to this meeting, the proxy
statement and proxy will be mailed on or about April 4, 1996.
Stock Listed
New York and Pacific Stock Exchanges Trading Symbol: PMK
Corporate Information/Investor Inquiries
The following information is available without charge to shareholders and other
interested parties:
- - Annual Report
- - Annual Report on Form 10-K filed with the Securities and Exchange
Commission (exhibits filed as part of this report are available upon payment
of a specified fee)
- - Quarterly Report to Shareholders
- - Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission
To request these publications or if you have any questions about Primark, you
are invited to contact:
Investor Relations
1000 Winter Street, Suite 4300N
Waltham, MA 02154-1248
(617) 466-6611 (800) 755-1032
E-mail: [email protected]
Shareholder Services
All inquiries regarding the following items should
be directed to the Stock Transfer Agent.
- - Change of address
- - Lost stock certificates
- - Duplicate mailings
- - Transfer of stock to another person
- - Other administrative concerns
Stock Transfer Agent and Registrar
The First National Bank of Boston
c/o Boston EquiServ
Shareholder Services Department
P.O. Box 644, Mail Stop 45-02-09
Boston, MA 02102-0644
(617) 575-3120 (800) 730-6001
Independent Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617
(617) 261-8000
The Annual Report
This report is submitted for the general information of the shareholders of
Primark Corporation and is not intended to be used in connection with any sale
or purchase of securities.
[GRAPHIC]
Primark Corporation and Subsidiaries
44
<PAGE> 1
EXHIBIT NO. 21.1
SUBSIDIARIES OF PRIMARK CORPORATION
Primark Corporation owns all of the issued and outstanding common stock of
Primark Holding Corporation, and Triad International Maintenance Corporation
both of which are Delaware corporations, and Primark Storage Leasing
Corporation, a Michigan corporation.
Primark Holding Corporation owns all of the issued and outstanding common
stock of:
- TASC, Inc., a Massachusetts corporation, which owns all of the issued and
outstanding common stock of:
- WSI Corporation, a Massachusetts corporation; and
- TASC Services Corporation, a Delaware corporation.
- Primark Information Services U.K. Limited (U.K.) which owns all the
common stock of:
- The Analytic Sciences Corporation Limited (U.K.) which owns all of the
issued and outstanding common stock of The Weather Department Limited
(U.K.) and The Computer Department Limited (United Kingdom);
- Datastream Group (U.K.);
- Datastream Pension Trustees Limited (U.K.);
- Datastream Investment Management Services Limited (U.K.);
- Datastream International Limited (U.K.) which owns all the common
stock of Datastream International B.V. (the Netherlands);
- I/B/E/S (U.K.) LTD; and
- Disclosure LTD (England).
- Datastream International (France) S.A. which owns all of the common stock
of Primark France S.A.
- Datastream International (Switzerland) Limited
- Datastream International GmbH (Germany)
- Datastream International (Hong Kong) Limited which owns all of the common
stock of Primark Hong Kong Limited
- Datastream International Inc. (Delaware)
- Datastream International (Japan) K.K.
- Datastream International (Australia) Pty. Limited which owns all of the
common stock of ACN 3802444 Pty. Limited
- Datastream International (D.C.), Inc.
- Datastream International (Canada) Ltd.
- Datastream International (Italy) Srl
- Datastream International (Sweden) Aktiebolag
- Datastream International (South Africa) Proprietary Limited
- Datastream International (Korea) Limited
- Vestek Systems, Inc., a California corporation
<PAGE> 2
- Disclosure Incorporated (Delaware) which owns all the issued and
outstanding stock of:
- Disclosure International, Inc. (Delaware) which owns a 50% interest
in:
- Worldscope/Disclosure Partners (Connecticut); and
- Worldscope/Disclosure Incorporated LLC (Connecticut) which owns all
of the issued and outstanding stock of Worldscope/Disclosure
Incorporated (India) Pty. Ltd.
- Worldscope/Disclosure International Partners (Ireland)
- Disclosure Information Services, Inc. (Delaware)
- I/B/E/S International, Inc. (Delaware) which owns all the issued and
outstanding stock of:
- I/B/E/S Inc. (Delaware)
- I/B/E/S (Japan) K.K.
- Disclosure GmbH (Germany)
<PAGE> 1
EXHIBIT NO. 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in Primark Corporation's
Registration Statement Nos. 2-92579, 33-77751, 33-23876, 33-6009, 33-49132 and
33-49134 on Form S-8 of our report dated February 8, 1996, incorporated by
reference in the Annual Report on Form 10-K of Primark Corporation for the year
ended December 31, 1995.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Boston, Massachusetts
March 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) PRIMARK
CORPORATIONS CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000356064
<NAME> PRIMARK
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 62,332
<SECURITIES> 0
<RECEIVABLES> 140,891
<ALLOWANCES> 4,371
<INVENTORY> 0
<CURRENT-ASSETS> 220,369
<PP&E> 113,519
<DEPRECIATION> 41,709
<TOTAL-ASSETS> 802,399
<CURRENT-LIABILITIES> 138,719
<BONDS> 265,863
16,874
0
<COMMON> 489
<OTHER-SE> 353,640
<TOTAL-LIABILITY-AND-EQUITY> 802,399
<SALES> 0
<TOTAL-REVENUES> 617,310
<CGS> 0
<TOTAL-COSTS> 403,435
<OTHER-EXPENSES> 156,964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,382
<INCOME-PRETAX> 33,962
<INCOME-TAX> 15,112
<INCOME-CONTINUING> 18,850
<DISCONTINUED> 0
<EXTRAORDINARY> (534)
<CHANGES> 0
<NET-INCOME> 18,316
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
</TABLE>
