<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
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 OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1000 WINTER STREET, SUITE 4300N, WALTHAM, MA 02154
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
617-466-6611
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NO CHANGES
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 ____
Number of shares outstanding of each of the registrant's classes of common
stock, as of October 31, 1997:
Common Stock, without par value: 26,033,445
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<PAGE> 2
PRIMARK CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
COVER............................................................................... i
INDEX............................................................................... ii
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements...................................................... 1
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition....................................................... 10
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.......................................... 13
SIGNATURE........................................................................... 13
</TABLE>
ii
<PAGE> 3
PART I -- FINANCIAL INFORMATION
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates market value)............... $ 16,308 $ 25,385
Billed receivables less allowance for doubtful accounts of $3,109,000 and
$3,412,000, respectively......................................................... 130,772 127,557
Unbilled and other receivables..................................................... 51,197 34,720
Other current assets............................................................... 16,609 13,890
Net assets of discontinued operations.............................................. 44,864 39,930
---------- --------
259,750 241,482
---------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $54,733,000 and $41,135,000,
respectively..................................................................... 652,763 588,315
Capitalized data and other intangible assets, less accumulated amortization of
$19,181,000 and $13,935,000, respectively........................................ 49,194 42,241
Capitalized software, less accumulated amortization of $17,956,000 and $11,280,000,
respectively..................................................................... 43,960 35,004
Other.............................................................................. 7,680 11,124
---------- --------
753,597 676,684
---------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment................................................................. 88,650 75,574
Leasehold improvements............................................................. 21,922 19,344
Other.............................................................................. 14,799 10,980
---------- --------
125,371 105,898
Less-accumulated depreciation (67,053) (52,481)
---------- --------
58,318 53,417
---------- --------
$ 1,071,665 $971,583
========== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable...................................................................... $ 2,951 $ --
Accounts Payable................................................................... 22,642 29,380
Accrued employee payroll and benefits.............................................. 38,621 35,070
Federal income, property and other taxes payable................................... 11,767 19,613
Deferred income.................................................................... 88,912 77,364
Current portion of long-term debt, including capital lease obligations............. 11,580 6,518
Other.............................................................................. 61,052 48,844
---------- --------
237,525 216,789
---------- --------
LONG-TERM DEBT AND OTHER CURRENT LIABILITIES
Long-term debt, including capital lease obligations................................ 335,843 241,822
Deferred income taxes.............................................................. 15,043 15,480
Other.............................................................................. 19,593 21,010
---------- --------
370,479 278,312
---------- --------
Total liabilities........................................................... 608,004 495,101
MINORITY INTEREST.................................................................... 907 265
CONTINGENCIES (NOTE 8)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital........................................ 275,533 296,546
Retained earnings.................................................................. 189,740 178,943
---------- --------
465,273 475,489
Less -- Cumulative foreign currency translation adjustment......................... 2,519 (728)
---------- --------
Total common shareholders' equity........................................... 462,754 476,217
---------- --------
$ 1,071,665 $971,583
========== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
1
<PAGE> 4
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES.............................................. $210,561 $168,143 $617,468 $478,322
OPERATING EXPENSES
Cost of services.............................................. 116,174 91,325 342,830 255,962
Selling, general and administrative........................... 58,478 48,254 179,905 146,577
Depreciation.................................................. 5,597 4,283 16,963 12,348
Amortization of goodwill...................................... 4,647 3,182 13,893 9,269
Amortization of other intangible assets....................... 4,260 2,708 12,188 7,849
Restructuring Charge.......................................... -- -- 6,800 --
-------- -------- -------- --------
Total operating expenses............................... 189,156 149,752 572,579 432,005
-------- -------- -------- --------
Operating income....................................... 21,405 18,391 44,889 46,317
-------- -------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Investment income............................................. 948 1,387 2,788 3,979
Interest expense.............................................. (6,876) (4,942) (19,809) (14,604)
Foreign currency gain (loss).................................. (9) 444 2,327 1,487
Other......................................................... 802 (804) 1,646 (735)
-------- -------- -------- --------
Total other income and (deductions).................... (5,135) (3,915) (13,048) (9,873)
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES........... 16,270 14,476 31,841 36,444
INCOME TAX EXPENSE.............................................. 8,595 6,765 18,537 16,859
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS............................... 7,675 7,711 13,304 19,585
-------- -------- -------- --------
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax (benefit)/ expense
of ($38,000), $84,000, ($370,000) and $1,492,000
respectively................................................ (72) 350 (552) 2,393
Gain on disposal of discontinued operations, net of income tax
expense of $5,407,000....................................... -- 8,400 -- 8,400
-------- -------- -------- --------
Total Discontinued Operations................................. (72) 8,750 (552) 10,793
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS................................ 7,603 16,461 12,752 30,378
EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT, net
of income tax benefit of $1,379,000........................... -- -- (1,955) --
-------- -------- -------- --------
NET INCOME...................................................... 7,603 16,461 10,797 30,378
DIVIDENDS ON PREFERRED STOCK.................................... -- -- -- (359)
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK........................... $ 7,603 $ 16,461 $ 10,797 $ 30,019
======== ======== ======== ========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Income from continuing operations............................. $ 0.28 $ 0.29 $ 0.48 $ 0.75
Discontinued operations
Discontinued operations..................................... -- 0.02 (0.02) 0.09
Gain on disposal of discontinued operations................. -- 0.32 -- 0.32
-------- -------- -------- --------
Total Discontinued operations................................. -- 0.34 (0.02) 0.41
-------- -------- -------- --------
Income before extraordinary item.............................. 0.28 0.63 0.46 1.16
Extraordinary item............................................ -- -- (0.07) --
-------- -------- -------- --------
Total earnings per share............................... $ 0.28 $ 0.63 $ 0.39 $ 1.16
======== ======== ======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING................................................... 27,349 26,252 27,577 25,807
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
<PAGE> 5
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
--------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.......................................................... $ 10,797 $ 30,378
Adjustments to reconcile net income to net cash flows from operating
activities:
Discontinued operations............................................. 552 (10,793)
Change in year-end of subsidiary.................................... -- 2,518
Extraordinary loss on early extinguishment of debt.................. 1,955 --
Gain on sale of investment.......................................... (2,026) --
Depreciation and amortization....................................... 43,044 29,466
Foreign currency transaction (gain) loss -- net..................... (2,327) (1,487)
Other............................................................... 2,062 223
Changes in assets and liabilities which provided (used) cash,
exclusive of changes shown separately............................ (12,252) (7,258)
--------- --------
Net cash provided from operating activities................. 41,805 43,047
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable................................ 157,746 708
Repayment of short-term notes payable............................... (154,795) (708)
Issuance of long-term debt.......................................... 100,000 --
Common stock repurchased............................................ (26,633) --
Debt issue costs.................................................... (2,831) --
Common stock issuance and other..................................... 3,928 6,518
--------- --------
Net cash provided from financing activities................. 77,415 6,518
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................ (24,034) (17,601)
Capitalized software................................................ (14,810) (8,727)
Purchase of subsidiaries -- net of acquired cash.................... (88,090) (38,400)
Proceeds from sale of investment.................................... 3,494 --
Cash from (contributed to) discontinued operations.................. (5,486) 15,165
Other -- net........................................................ 1,087 (1,420)
--------- --------
Net cash used for investing activities...................... (127,839) (50,983)
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH............................... (458) (235)
NET DECREASE IN CASH AND CASH EQUIVALENTS............................. (9,077) (1,653)
CASH AND CASH EQUIVALENTS, JANUARY 1.................................. 25,385 59,990
--------- --------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30............................... $ 16,308 $ 58,337
========= ========
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH,
EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Billed, unbilled and other receivables-net.......................... $ (10,411) $(14,154)
Accounts payable.................................................... (7,184) (7,370)
Federal income, property and other taxes payable-net................ (5,918) 3,606
Other current assets and liabilities................................ 10,006 15,360
Other noncurrent assets and liabilities............................. 1,255 (4,700)
--------- --------
$ (12,252) $ (7,258)
========= ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
<PAGE> 6
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance -- Beginning of period........................ $182,137 $155,752 $178,943 $141,846
Add -- Net income.................................. 7,603 16,461 10,797 30,378
-- Change in year-end of Subsidiaries......... -- -- -- 348
Deduct -- Dividends on Preferred Stock................ -- -- -- (359)
-------- -------- -------- --------
Balance -- End of period.............................. $189,740 $172,213 $189,740 $172,213
======== ======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
<PAGE> 7
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS
During 1997, the Company made the acquisitions as described below, each of
which has been accounted for as a purchase. Accordingly, the purchase prices
have been allocated to the identifiable net assets acquired based upon
preliminary estimates of their fair market values as of the acquisition date.
The excess of purchase price over the estimated fair value of total net assets
acquired was allocated to goodwill. Future adjustments to the total purchase
price allocation, if any, are not expected to materially affect the Company's
financial statements. The consolidated financial statements include the
operating results of each business from the date of acquisition.
<TABLE>
<CAPTION>
BASELINE WEFA
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash..................................................... $40,963 $45,000
Acquisition Fees......................................... 233 204
------- -------
Total Consideration................................. 41,196 45,204
Acquired Cash............................................ (2) (308)
------- -------
Net Consideration................................... $41,194 $44,896
------- -------
Excess of Purchase Price over Fair Value................. $39,363 $43,963
------- -------
</TABLE>
a. BASELINE
On January 6, 1997, the Company purchased all of the outstanding stock of
Baseline Financial Services, Inc. ("Baseline") pursuant to the terms of a Stock
Purchase Agreement dated November 24, 1996, between the Company, Bowne & Co.,
Inc., and Robert G. Patterson for $41.0 million in cash. The excess of purchase
price over the fair value of net assets acquired of approximately $39.4 million
will be amortized over 30 years. Headquartered in New York City, Baseline
provides institutional investors with visual valuation graphics which portray
financial market information to institutional accounts throughout the U.S.,
Canada and the United Kingdom.
b. WEFA
On February 7, 1997, the Company acquired all of the outstanding stock of
WEFA Holdings, Inc. ("WEFA") for $45.0 million in cash. The excess of purchase
price over the fair value of net assets acquired of approximately $44.0 million
will be amortized over 40 years. Headquartered in Pennsylvania, WEFA is an
international provider of value added economic information, software and
consulting services to Fortune 1000 companies, governments, universities and
financial institutions.
c. YANKEE
Pursuant to the August 1996 Purchase Agreement between the Company and the
former shareholders of the Yankee Group, on September 26, 1997, the Company
recorded $4.3 million of additional consideration related to the acquisition. As
of September 30, 1997, the Company had paid $2.0 million in cash. The remaining
$2.3 million is due in August 1998 and has been recorded as a current liability.
The $4.3 million of contingent consideration has been recorded as an adjustment
to previously recorded goodwill. Future contingent payments, if any, will be
recorded to goodwill when known.
d. ICV
In connection with the October 1996 acquisition of ICV, the Company is
obligated to register with the SEC up to the 2.2 million shares of its common
stock issued in the acquisition to the former ICV shareholders by April of 1998.
Pursuant to the terms of the related Purchase Agreement, such shareholders are
entitled to
5
<PAGE> 8
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
receive for the number of shares registered the difference (if any) in the event
the average closing sales price of a share of Primark common stock for the ten
trading days immediately preceding October 23, 1997 is higher than the average
purchase price for the ten trading days immediately prior to registration. Any
such consideration will be recorded as a purchase price adjustment.
2. DISCONTINUED OPERATIONS
In June 1997, the Company adopted a formal plan to sell its non-core
transportation services segment consisting of Triad International Maintenance
Corporation ("TIMCO"). The financial results of TIMCO have been accounted for
within discontinued operations. Accordingly, the accompanying consolidated
financial statements reflect TIMCO's operating results and net assets separately
from the Company's continuing operations for all periods presented. Net assets
of discontinued operations represent the realizable value of the Company's
investment in TIMCO, and consist principally of working capital, fixed assets
and other noncurrent assets and liabilities. TIMCO reported revenues of $106.3
million for the year ended December 31, 1996. Discontinued operations for the
three and nine month periods ended September 30, 1996 include $8.6 million and
$9.2 million, respectively, related to the sale of the Company's Primark Storage
Leasing Corporation segment in 1996.
3. REFINANCING
Concurrent with the purchase of WEFA, on February 7, 1997, the Company
entered into a $300 million refinancing arrangement to replace some of the funds
expended for recent acquisitions and enhance liquidity for future opportunities.
The new arrangement, comprised of a $75 million revolving credit facility and a
$225 million term loan expiring in June 2004, replaced an outstanding $75
million revolving credit facility and a $125 million term loan. Interest on the
outstanding borrowings under the new credit facility and term loan are payable
at rates ranging from 0.625% to 1.00% and 0.625% to 1.25%, respectively, above
the current prevailing LIBOR rate of interest.
The Company incurred costs of $2.8 million in conjunction with the
arrangement which will be amortized over the term of the debt. The write-off of
unamortized debt issue costs related to the original financing generated an
extraordinary after-tax loss of $2.0 million in the first quarter of 1997.
4. SALE OF INVESTMENT
On January 7, 1997, the Company completed the sale of its investment in the
Weather Network pursuant to the terms of a Sale Agreement dated December 5, 1996
for 2.1 million pounds sterling ($3.5 million). The $2.5 million pretax gain on
the sale has been included in other income.
5. RESTRUCTURING AND INTEGRATION CHARGES
a. DISCLOSURE
During the first quarter of 1997, the Company recorded a $1.8 million
pretax charge, or $0.04 per share, at Disclosure to take advantage of new
information technology, reorganization of Disclosure's document business and
other actions aimed at reducing costs and enhancing efficiency. The
restructuring provision includes estimated costs for employee severance and
other benefits of $981.2 thousand, asset write-downs of $713.6 thousand and idle
facility related costs of $105.2 thousand. Cash flow expenditures, net of tax
recovery, were funded by the Company's cash flows from operating activities. The
spending for these accrued restructuring costs was completed in June 1997. The
restructuring plan is anticipated to result in annual savings of approximately
$4.0 million.
6
<PAGE> 9
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
b. DAFSA
During the second quarter of 1997, the Company recorded a restructuring
charge of $5.0 million related to the integration and downsizing of operations
at DAFSA. Due to the unprofitable condition of DAFSA, no tax benefits associated
with losses incurred during 1997, including the restructuring charge, have been
recorded. Consequently, the restructuring charge resulted in a reduction of
$0.18 to the Company's year to date earnings per share.
When the Company acquired DAFSA in June of 1996, approximately $1.5 million
of integration costs were considered in determining the purchase accounting. The
subsequent restructuring charge is the result of a plan to further integrate
DAFSA's personnel, space and product with those of the Company's other
subsidiaries. The $6.5 million total restructuring provision includes estimated
costs for exiting a line of business of $1.7 million, employee severance and
other benefits of $1.4 million, asset write-downs of $2.2 million and legal,
professional and other related costs of $1.2 million. Cash flow expenditures
will be funded by the Company's cash flows from operating activities. As of
September 30, 1997, $4.4 million of restructuring costs have been incurred, of
which $1.3 million was related to exiting a line of business, $0.9 million was
related to employee severance and other benefits, $1.3 million was related to
asset write-downs and $0.9 million was related to legal, professional and other
related costs. The restructuring plan, when fully implemented, is expected to
significantly improve DAFSA's operating margins. The spending is expected to be
essentially completed by the end of 1997.
6. SHAREHOLDERS' EQUITY
a. COMMON STOCK REPURCHASE AND RETIREMENT
On April 25, 1997, the Board of Directors authorized the repurchase of an
additional 1.2 million shares of the Company's Common Stock, bringing the total
authorized for repurchase to 2.2 million shares. During the second quarter, the
Company repurchased 1,349,000 shares of its outstanding common stock in the open
market at a total cost of $26.6 million. On May 13, 1997 and June 5, 1997, the
Company canceled 1,145,300 and 203,700 shares, respectively.
b. INCREASE IN AUTHORIZED SHARES
On May 28,1997, the shareholders of the Company approved a resolution which
amended the Company's Articles of Incorporation to increase the number of
authorized shares of common stock from 65,000,000 to 100,000,000.
c. RIGHTS AGREEMENT
On May 28, 1997, the Board of Directors executed a new Rights Agreement
(the "Rights Agreement") to extend the benefits of the Rights Agreement (the
"Prior Rights Agreement") adopted by the Company in 1988.
The Board of Directors authorized and declared a dividend distribution of
one Right for each share of the Company's Common Stock outstanding upon the
earlier of (i) the close of business on January 25, 1998 or (ii) the date on
which the 1988 Rights are redeemed (the "Record Date"). The Board of Directors
also authorized the issuance of one Right for each share of Common Stock of the
Company issued between the Record Date and the Distribution Date as defined in
the Rights Agreement. Each Right represents the right to purchase, if and when
the Right becomes exercisable, one share of Common Stock of the Company at a
price per share of $138.00. The description and terms of the Rights are set
forth in a Rights Agreement between the Company and the Rights Agent.
7
<PAGE> 10
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
d. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLAN
On May 28, 1997, the shareholders of the Company approved a resolution to
increase the shares of Company Common Stock issuable under the Primark
Corporation Employee Stock Purchase Plan from 1,000,000 to 3,000,000. The
shareholders also approved a resolution to amend the Primark Corporation 1992
Stock Option Plan to limit the number of shares subject to option that may be
granted to any participant in any year to 100,000 shares.
7. NEWLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This new standard requires dual presentation of basic and diluted
earnings per share ("EPS") on the face of the statement of income and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations. This statement will be effective for the Company's 1997 fiscal
year. Had SFAS 128 been effective for the 1997 and 1996 periods presented,
earnings per share from continuing operations on a pro forma basis would have
been as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Basic EPS........................................... $0.30 $0.32 $0.50 $0.82
Dilutive EPS........................................ $0.28 $0.29 $0.48 $0.76
</TABLE>
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
and SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" which will be applicable for the Company in fiscal 1998. Management
has not yet assessed the impact of implementation.
8. CONTINGENCIES
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 entered a
judgment in response to the verdict requiring the two founders (but not TASC
itself) to disgorge $19,800,000. As an alternative course of action, the
plaintiff may pursue the two founders and TASC, jointly and severally for
$48,600. On September 8, 1997, the Court denied the motion of the two founders
for a Judgment N.O.V. but ordered that the motion for a new trial be allowed.
On September 24, 1997, counsel for the founders advised TASC that they had
previously agreed on October 11, 1994 to settle the litigation for $4,000,000
plus an additional amount of up to $8,500,000 that was conditioned on the
outcome and reasoning to the then-pending motion for directed verdict and new
trial. The founders paid $4,000,000 in 1994. TASC has been advised that the
founders are disputing with the plaintiff whether any additional amount is owing
under the terms of this agreement, and it appears that those parties will
proceed to arbitration of that dispute.
On September 29, 1995, the founders had entered into another settlement
agreement under which they paid $600,000, to settle a separate lawsuit which a
former employee threatened to bring in 1995 based on allegations similar to
those alleged above. Counsel for the founders advised TASC of this settlement on
September 24, 1997.
8
<PAGE> 11
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The founders have demanded that TASC indemnify them for the above amounts
plus litigation expenses. TASC has advised counsel for the founders that their
settlement agreements do not appear to satisfy bylaw requirements (including
prior company approval). TASC has therefore requested clarification of the basis
for the founders' indemnification claims.
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 accompanying consolidated financial statements.
9. GENERAL
There have been no significant changes in the Company's principal
accounting policies that were set forth in the Company's 1996 Annual Report and
Form 10-K. Certain reclassifications have been made to the prior year's
statements to conform with the 1997 presentation.
The unaudited information furnished herein, in the opinion of management,
reflects all adjustments necessary for a fair statement of the results of
operations during the interim periods.
The revenues, expenses, net income and earnings per share for the interim
periods should not be construed as representative of revenues, expenses, net
income and earnings per share for all or any part of the balance of the current
year or succeeding periods.
9
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Primark reported income from continuing operations of $7.7 million ($0.28
per share) and $13.3 million ($0.48 per share) for the three and nine months
ended September 30, 1997. The nine month ended numbers include restructuring
charges taken at DAFSA and Disclosure in the first half of 1997 which lowered
income $6.2 million, net of tax ($0.22 per share). Excluding the 1997
restructuring charges, income from continuing operations remained even with the
$7.7 million and $19.6 million reported for the three and nine months ended
September 30, 1996.
The 1997 third quarter financial results reflect significant growth in
revenues and operating income as a result of the Company's recent acquisitions,
together with improved sales at the operating companies and lower losses at
DAFSA. Offsetting these accomplishments were the continued transition of
Disclosure's paper document business and the negative impact of changes in
currency rates.
DAFSA continues to be the single most significant drag on income with
losses of $8.3 million, including the $5.0 million restructuring charge, for the
nine months ended September 30, 1997. Because of the restructuring program at
DAFSA, the loss for the third quarter of $0.4 million was much lower than
previous quarters. The Company anticipates that the further implementation of
its restructuring plan, the integration of certain business operations into
Disclosure, and additional cost containment measures will bring DAFSA to a break
even status going into the first quarter of 1998.
Net income for the three and nine months ended September 30, 1997 was $7.6
million ($0.28 per share) and $10.8 million ($0.39 per share) compared to $16.5
million ($0.63 per share) and $30.4 million ($1.16 per share), for the same
periods of 1996, respectively. The 1997 net income includes an after tax
extraordinary loss of $2.0 million recorded in the first quarter for the write
off of debt issue costs associated with bank debt which was successfully
refinanced. Net income for both periods was affected by discontinued operations.
In June of 1997, the Company adopted a formal plan to dispose of its
transportation business (TIMCO). Accordingly, the operating results and net
assets of TIMCO have been reclassified from continuing operations and recorded,
net of tax, as a discontinued operation. During the three and nine months ended
September 1997, TIMCO generated net losses of $0.1 million and $0.6 million,
respectively. In September of 1996, the Company sold its Primark Storage Leasing
Corporation segment (PSLC) which resulted in a $8.4 million gain, net of tax.
Discontinued operations for the three and nine months ended September 1996
include the net income of TIMCO of $0.1 and $1.6 million, respectively and the
net income of PSLC of $0.2 million and $0.8 million, respectively.
Acquisitions during the last half of 1996 and first quarter of 1997,
together with the Company's stock repurchase program, resulted in the Company
increasing its level of funded debt. As a result, net interest costs increased
$2.4 million for the quarter and $6.4 million year-to-date.
The Company's effective tax rate increased due to the non-deductibility of
goodwill created by recent acquisitions and because no tax benefits have been
recorded for the $0.4 million and $8.3 million of losses incurred at DAFSA for
the three and nine months ended September 30, 1997, respectively, due to DAFSA's
unprofitable condition.
10
<PAGE> 13
OPERATING RESULTS BY SEGMENT (IN MILLIONS) *
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1997 1996 CHANGE 1997 1996 CHANGE
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Information Services
Financial Information Services..... $ 94.4 $ 66.0 $28.4 $281.3 $190.2 $91.1
Applied Technology................. $116.2 $102.1 $14.1 $336.1 $288.1 $48.0
OPERATING INCOME:
Information Services
Financial Information Services..... $ 11.1 $ 9.4 $ 1.7 $ 22.2 $ 26.1 $(3.9)
Applied Technology................. $ 10.9 $ 9.3 $ 1.6 $ 28.0 $ 24.4 $ 3.6
</TABLE>
- ---------------
*Operating income excludes corporate expenditures and intercompany profit
eliminations.
FINANCIAL INFORMATION SERVICES
Revenues for the third quarter and nine months of 1997 are up considerably
over the same periods in 1996 primarily due to the acquisitions of Baseline on
January 6, 1997, WEFA on February 7, 1997 and ICV on October 24, 1996. On a pro
forma basis including the effect of all acquisitions, the financial information
businesses grew revenues 7.3% and 5.9% for the third quarter and year to date
periods, respectively. Excluding the effect of currency on 1997 results, pro
forma growth rates were 9% and 6% for the third quarter and year to date
periods, respectively.
Datastream/ICV:
Including the effects of currency and exchange fees, the Datastream/ICV
operation, on a pro forma basis, grew revenues 4.2% and 8.1% for the 1997 third
quarter and year-to-date periods. Excluding the effects of currency and exchange
fees, the Datastream/ICV operation grew revenues approximately 12% for both the
third quarter and year-to-date periods. ICV's Topic3 product line grew 13%,
exclusive of currency effects, in the quarter but was offset by declining
exchange fee revenues. ICV's overall margins increased due to shifts in product
mix, primarily the reduction of minimum margin exchange fee revenues. Excluding
the effects of currency, Datastream grew revenues 12.2% for the three month
period and 13.4% for the year, led by strong international growth with
Continental Europe and Asia up 18% and the UK and the Americas up 10%. The
Asian growth rates for the three month period were not as strong as they had
been earlier in the year, slowing to 12%.
Disclosure/Worldscope:
On a pro forma basis, Disclosure and Worldscope generated revenues of $21.1
million and $67.1 million for the three and nine month periods, respectively,
reflecting a decrease of 5% and 2%, compared to the same periods in 1996 due to
the ongoing transition of Disclosure's paper document business to an electronic
media business. Disclosure's electronic products now represent about one third
of total revenues and continue to do very well with approximately 29% and 30%
growth in revenues for the three and nine month periods ended September 30,
1997, respectively. Revenues for the remainder of Disclosure's business,
comprised primarily of its "Laser D" CD ROM products and its paper based demand
business, are down 17% and 12% for the quarter and year to date compared to the
same periods last year. The majority of the decrease was due to the paper based
demand business which was down 25% for the quarter and 19% year to date.
Financial Analytics:
The financial analytics group, comprised of I/B/E/S, Baseline, WEFA and
Vestek, contributed $23.4 million and $67.0 million of revenues for the three
and nine months ended September 30, 1997, respectively. As a group, on a pro
forma basis, these operations grew revenues 30% in the quarter and 25% year to
date. The margins of these operations also improved significantly. The strong
performance in the quarter was led by I/B/E/S and Baseline with pro forma growth
in revenues of 43% and 30%, respectively. On a pro
11
<PAGE> 14
forma basis, WEFA also produced a good quarter with a 16% increase in revenues
over the same quarter last year.
APPLIED TECHNOLOGY
On a pro-forma basis with the Yankee Group included for the entire 1996
third quarter, the applied technology segment grew revenues 12.5%. This growth
reflects 12.8% growth in TASC's government business, which is consistent with
growth rates experienced in earlier quarters. The commercial portion of this
segment is growing at 5% reflecting flat results at WSI due to delays in new
product sales offset by over 27% growth at Yankee on a pro-forma basis. Margins
were consistent with 1996.
CAPITAL RESOURCES & LIQUIDITY:
During the nine months ended September 30, 1997, cash and cash equivalents
decreased $9.1 million. Operating activities generated $41.8 million, the
issuance of long term debt provided $97.2 million (net of debt issue costs),
$3.0 million was provided under the Company's bank revolver, and the sale of the
Weather Network generated $3.5 million. Uses of cash included $86.1 million to
purchase Baseline and WEFA, $26.6 million to repurchase and retire stock and
$38.8 million to fund capital expenditures.
Operating activities provided $41.8 million during the first nine months of
1997, a $1.2 million decrease compared to 1996. Working capital uses increased
$5.0 million over the 1996 nine month period, principally due to income tax
payments. In June 1997, the Company adopted a formal plan to sell TIMCO;
accordingly, the operations of TIMCO have been accounted for as discontinued.
The 1997 year to date operations of TIMCO required $4.9 million of working
capital support for existing contracts.
Cash flows from financing activities provided $77.4 million for the first
nine months of 1997, a $70.9 million increase over the same period in 1996. The
increase is primarily the result of the February 7, 1997 $300 million bank
refinancing arrangement which provided an additional $100 million in long term
debt. The new arrangement is comprised of a $75 million revolving credit
facility and a $225 million term loan expiring in June 2004. The new financing
replaced an outstanding $75 million revolving credit facility and a $125 million
term loan. The Company incurred costs of $2.8 million in conjunction with the
arrangement which will be amortized over the term of the debt. The additional
borrowings increased Primark's debt to total capital ratio from 34.3% at
December 31, 1996 to 43.1% at September 30, 1997. Partially offsetting the
increase from the refinancing was $26.6 million used to repurchase the Company's
common stock. These repurchased shares were canceled during the second quarter.
Primark's $75 million revolving credit facility was utilized with $3.0 million
outstanding at September 30, 1997.
Investing activities used $127.8 million during the first nine months of
1997, an increase of $76.9 million over the same period in 1996. The majority of
investing uses were for the purchases of Baseline and WEFA which used $41.2 and
$44.9 million, respectively. Other investing activities included capital
expenditures for property plant and equipment, other intangibles, and
capitalized software of $38.8 million during the first nine months of 1997, an
increase of $12.5 million over the same period in 1996. Approximately $7.6
million of the increase was due to capital requirements of acquired companies,
primarily for computer equipment and capitalized software. The majority of the
remaining expenditures included a $3.2 million increase in computer equipment at
TASC and a $2.9 million increase at Disclosure for capitalized software
initiatives. Partially offsetting these uses were proceeds from the Company's
sale of its investment in the Weather Network which provided $3.5 million of
cash.
With the improved performance created by the new acquisitions and the
Company's new bank credit facility, Primark believes that it has adequate
liquidity to operate its existing businesses and pursue investment opportunities
as they arise.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." This statement will be effective for the Company's 1997 fiscal year. In
June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income" and
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" which will be applicable for the Company in fiscal 1998. Management
has not yet assessed the impact of implementation.
12
<PAGE> 15
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<C> <S> <C>
3.1 Amendment to the Company's Articles of Incorporation dated May 28, 1997
(Exhibit 3.1 to the Company's June 30, 1997 Form 10-Q).
4.1 Rights Agreement dated May 29, 1997 between Primark Corporation and Bank
Boston, N.A., as Rights Agent, which includes, as Exhibit A, the Rights
Certificate and as Exhibit B, the Summary of Rights to Purchase Common Stock
(Exhibit 4.1 to the Company's Form 8-A dated June 19, 1997).
10.1 Amendment to the Refinancing Agreements dated May 1, 1997 (Exhibit 10.1 to
the Company's June 30, 1997 Form 10-Q).
10.2 Amendment to the Refinancing Agreements dated June 30, 1997 (Exhibit 10.2 to
the Company's June 30, 1997 Form 10-Q).
10.3* Form of Amendments dated September 29, 1997 to the Change of Control
Compensation Agreement (filed as Exhibit 10.60 to the Company's 1987 Form
10-K) entered into between the Company and selected executive officers and
the officer of a subsidiary.
27* Financial Data Schedule
</TABLE>
- ---------------
*Indicates document filed herewith.
For the Company's documents incorporated by reference, references are to
File No. 1-8260.
(b) No reports on Form 8-K were filed during the quarter.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIMARK CORPORATION
By: /s/ STEPHEN H. CURRAN
------------------------------------
Stephen H. Curran
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 5, 1997
13
<PAGE> 1
EXHIBIT 10.3
AMENDMENT TO
CHANGE OF CONTROL COMPENSATION AGREEMENT
This AMENDMENT TO CHANGE OF CONTROL COMPENSATION AGREEMENT (as so
amended, the "AGREEMENT") is made this 29th day of September, 1997, between
PRIMARK CORPORATION, a Michigan corporation (the "Company"), and Name (the
"Executive"). [Stephen H. Curran; John C. Holt; Michael R. Kargula; Joseph E.
Kasputys; Patrick G. Richmond; William J. Swift]
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a change of control of the Company.
Therefore, this Agreement provides for the payment by the Company of
severance benefits to the Executive if the Executive's employment with the
Company is terminated by the Company without cause following a Change of Control
of the Company (as defined in Section 2 hereof).
1. TERM. This Agreement shall become effective only upon the occurrence
of a Potential Change of Control as defined in Section 7 or a Change of Control
as defined in Section 2. Executive and the Company acknowledge that this
Agreement creates no right to continuing employment and no right to any payments
except as set forth in Section 3.
This Agreement shall terminate upon termination of the Executive's
employment with the Company, except to the extent such termination of employment
entitles the Executive to the payment provided for by Section 3.
2. CHANGE OF CONTROL. A Change of Control of the Company shall be deemed
to have occurred if: (i) there shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; or
(ii) the stockholders of the Company approved any plan or proposal for the
liquidation or dissolution of the Company; or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 30% or more of the Company's
outstanding Common Stock; or (iv) during any calendar year, individuals who at
the beginning of such year constitute the entire Board of Directors of the
Company shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the year.
3. SEVERANCE BENEFIT. If (i) a Change of Control of the Company occurs
or a Potential Change of Control exists while the Executive is an employee of
the Company; and (ii) the Executive's employment is terminated, other than (A)
by the Company for Cause, (B) by
<PAGE> 2
reason of death or Disability, or (C) by the Executive without Good Reason, at
any time during the existence of the Potential Change of Control or on or within
a period of 36 months after the Change of Control, the Company shall pay to the
Executive, in a lump sum, in cash, on the fifth day following any such
termination of employment, an amount equal to three times the average of the
aggregate annual compensation paid to and includable in the gross income of the
Executive during the lesser of: (i) the 5 calendar years preceding the date of
termination if prior to a Change of Control, or the date of the Change of
Control of the Company if such has occurred by the time of termination; or (ii)
the portion of such 5 year period during which the Company existed and the
Executive was an employee of the Company.
Notwithstanding the provisions of this Section 3, if
(a) any payments or benefits received or to be received by the
Executive, whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement which constitute "parachute payments" (such payments or
benefits being hereinafter referred to as the "Parachute Payments") within the
meaning of section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), and
(b) the aggregate present value of the Parachute Payments reduced
by an excise tax imposed under section 4999 of the Code (or any similar tax that
may thereafter be imposed) (the "Excise Tax") would be less than 3 times the
Executive's "base amount," as defined in section 280G(b)(3) of the Code, then,
the amount of the lump sum payment payable under this Section 3 shall be reduced
such that the aggregate present value of the Parachute Payments is equal to 2.99
times the Executive's base amount.
For purposes of the preceding paragraph, the Executive's base amount,
the present value of the Parachute Payments, the amount of the Excise Tax and
all other appropriate matters shall be determined by a reputable accountant
selected by the Executive (which may be the Company's independent auditors) in
accordance with the principles of section 280G of the Code and based upon the
advice of tax counsel selected by such auditors and such determination shall be
conclusive and binding.
In addition, any payment made pursuant to this section shall, to the
extent consistent with applicable IRS limitations and requirements with respect
to the qualification of Company's employee benefit and welfare plans and
arrangements, be treated by the Company as: (x) additional consideration under
such plans and arrangements and (y) as three additional years of service for
purposes of determining the amounts payable under the plans and arrangements
maintained by the Company on the effective date of the Change of Control.
4. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER CONTRACTUAL
RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment or other performance of services after the effective date
of Change of Control or Potential Change of Control, or otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, under any benefit or welfare plan or
arrangement.
5. SUCCESSOR TO THE COMPANY.
2
<PAGE> 3
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it. As used
in this Agreement, "Company" shall mean the Company as defined herein and any
successor or assign to its business and/or assets which executes and delivers
the agreement provided for in this section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's beneficiary, devisee, legatee, or
other designee or, if there be no such designee, to the Executive's estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
PRIMARK CORPORATION
1000 Winter Street, Suite 4300
Waltham, Massachusetts 02154
Attention: President
If to the Executive:
<<Address>>
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. Anything to the contrary notwithstanding, this
Agreement may be unilaterally rescinded or amended by the Company's Board of
Directors, without the mutual consent of the parties hereto, until the earlier
of (A) the occurrence of a Change of Control (as defined in Section 2) or (B)
actions potentially leading to a Change of Control have occurred or have been
overtly threatened (a "Potential Change of Control"). Thereafter, no provision
of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the Executive and
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. Moreover, for this purpose, the
parties hereby consent to the jurisdiction of the courts of Massachusetts and to
the service of process at the notice address as
3
<PAGE> 4
specified in Section 7 hereof. Each party shall take all necessary steps to
facilitate such jurisdiction, including the execution of any appropriate waiver
documents and compliance with such other formalities as may be required.
8. VALIDITY. The invalidity or unenforceability of any provisions
of this Agreement shall not effect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees
and expenses which the Executive may incur as a result of the Company's
contesting the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
11. OTHER DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(a) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after termination for Good
Reason by the Executive) after a written demand for substantial performance is
approved by a two-thirds vote of the Board and delivered to the Executive, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act,
or failure to act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was in the best
interest of the Company and (y) in the event of a dispute concerning the
application of this provision, no claim by the Company that Cause exists shall
be given effect unless the Company establishes to the Board by clear and
convincing evidence that Cause exists.
(b) "Disability" shall be deemed the reason for the termination
by the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a notice of termination for Disability, and, within thirty (30) days
after such notice of termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(c) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change of Control, or prior to a Change of
Control under the circumstances defined in Section 7 as a Potential Change of
Control (treating all references in paragraphs (1) through (7)
4
<PAGE> 5
below to a "Change of Control" as references to a "Potential Change of
Control"), of any one of the following acts by the Company, or failures by the
Company to act;
(1) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive officer of the
Company or a substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately prior to the
Change of Control;
(2) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be increased from
time to time;
(3) the relocation of the Executive's principal place of
employment to a location more than 5 miles from the Executive' principal place
of employment immediately prior to the Change of Control or the Company's
requiring the Executive to be based anywhere other than such principal place of
employment (or permitted relocation thereof) except for required travel on the
Company's business to an extent substantially consistent with the Executive's
present business travel obligations;
(4) the failure by the Company to pay to the Executive
any portion of the Executive's current compensation, or to pay to the Executive
any portion of an installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of the date such
compensation is due;
(5) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately prior to the
Change of Control which is material to the Executive's total compensation,
including but not limited to the Company's 1992 Stock Option Plan or any
substitute plans adopted prior to the Change of Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue the
Executive's participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of the amount or timing of
payment of benefits provided and the level of the Executive's participation
relative to other participants, as existed immediately prior to the Change of
Control;
(6) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the Executive
under any of the Company's pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was participating
immediately prior to the Change of Control (except for across the board changes
similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company), the taking of any other
action by the Company which would directly or indirectly materially reduce any
of such benefits or deprive the Executive of any material fringe benefit enjoyed
by the Executive at the time of the Change of Control, or the failure by the
Company to provide the Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the time of
the Change of Control; or
5
<PAGE> 6
(7) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination given to
the Executive at least 60 days prior to the termination date. For purposes of
this Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Board of Directors by clear and
convincing evidence that Good Reason does not exist.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: PRIMARK CORPORATION
__________________________________ By:_________________________________
EXECUTIVE
____________________________________
6
<PAGE> 7
AMENDMENT TO
CHANGE OF CONTROL COMPENSATION AGREEMENT
This AMENDMENT TO CHANGE OF CONTROL COMPENSATION AGREEMENT (as so
amended, the "AGREEMENT") is made this 29th day of September, 1997, between
PRIMARK CORPORATION, a Michigan corporation (the "Company"), and STEVEN L.
SCHNEIDER (the "Executive").
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
the Executive and of members of the Company's management to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a change of control of the Company.
Therefore, this Agreement provides for the payment by the Company of
severance benefits to the Executive if the Executive's employment with
Disclosure, Inc. (the "Company Subsidiary") is terminated by the Company
Subsidiary without cause following a Change of Control of the Company (as
defined in Section 2 hereof).
1. TERM. This Agreement shall become effective only upon the occurrence
of a Potential Change of Control as defined in Section 7 or a Change of Control
as defined in Section 2. Executive and the Company acknowledge that this
Agreement creates no right to continuing employment and no right to any payments
except as set forth in Section 3.
This Agreement shall terminate upon termination of the Executive's
employment with the Company Subsidiary, except to the extent such termination of
employment entitles the Executive to the payment provided for by Section 3.
2. CHANGE OF CONTROL. A Change of Control of the Company shall be deemed
to have occurred if: (i) there shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company; or
(ii) the stockholders of the Company approved any plan or proposal for the
liquidation or dissolution of the Company; or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 30% or more of the Company's
outstanding Common Stock; or (iv) during any calendar year, individuals who at
the beginning of such year constitute the entire Board of Directors of the
Company shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the year.
3. SEVERANCE BENEFIT. If (i) a Change of Control of the Company occurs
or a Potential Change of Control exists while the Executive is an employee of
the Company Subsidiary; and (ii) the Executive's employment is terminated, other
than (A) by the Company Subsidiary for Cause, (B) by reason of death or
Disability, or (C) by the Executive without Good Reason, at any time during the
existence of the Potential Change of Control or on or within a
<PAGE> 8
period of 36 months after the Change of Control, the Company shall pay to the
Executive, in a lump sum, in cash, on the fifth day following any such
termination of employment, an amount equal to three times the average of the
aggregate annual compensation paid to and includable in the gross income of the
Executive during the lesser of: (i) the 5 calendar years preceding the date of
termination if prior to a Change of Control, or the date of the Change of
Control of the Company if such has occurred by the time of termination; or (ii)
the portion of such 5 year period during which the Company existed and the
Executive was an employee of the Company Subsidiary.
Notwithstanding the provisions of this Section 3, if
(a) any payments or benefits received or to be received by the
Executive, whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement which constitute "parachute payments" (such payments or
benefits being hereinafter referred to as the "Parachute Payments") within the
meaning of section 280G(b)(2) of the Internal Revenue Code of 1986, as amended
(the "Code"), and
(b) the aggregate present value of the Parachute Payments
reduced by an excise tax imposed under section 4999 of the Code (or any similar
tax that may thereafter be imposed) (the "Excise Tax") would be less than 3
times the Executive's "base amount," as defined in section 280G(b)(3) of the
Code,
then, the amount of the lump sum payment payable under this Section 3 shall be
reduced such that the aggregate present value of the Parachute Payments is equal
to 2.99 times the Executive's base amount.
For purposes of the preceding paragraph, the Executive's base amount,
the present value of the Parachute Payments, the amount of the Excise Tax and
all other appropriate matters shall be determined by a reputable accountant
selected by the Executive (which may be the Company's independent auditors) in
accordance with the principles of section 280G of the Code and based upon the
advice of tax counsel selected by such auditors and such determination shall be
conclusive and binding.
In addition, any payment made pursuant to this section shall, to the
extent consistent with applicable IRS limitations and requirements with respect
to the qualification of Company Subsidiary's employee benefit and welfare plans
and arrangements, be treated by the Company Subsidiary as: (x) additional
consideration under such plans and arrangements and (y) as three additional
years of service for purposes of determining the amounts payable under the plans
and arrangements maintained by the Company Subsidiary on the effective date of
the Change of Control.
4. NO OBLIGATION TO MITIGATE DAMAGES; NO EFFECT ON OTHER
CONTRACTUAL RIGHTS.
(a) The Executive shall not be required to mitigate damages or
the amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment or other performance of services after the effective date
of Change of Control or Potential Change of Control, or otherwise.
(b) The provisions of this Agreement, and any payment provided
for hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, under any benefit or welfare plan or
arrangement.
2
<PAGE> 9
5. SUCCESSOR TO THE COMPANY.
(a) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it. As used
in this Agreement, "Company" shall mean the Company as defined herein and any
successor or assign to its business and/or assets which executes and delivers
the agreement provided for in this section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive should die while any amounts are still payable to him hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's beneficiary, devisee, legatee, or
other designee or, if there be no such designee, to the Executive's estate.
6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt registered, postage prepaid, as follows:
If to the Company:
PRIMARK CORPORATION
1000 Winter Street, Suite 4300
Waltham, Massachusetts 02154
Attention: President
If to the Executive:
Mr. Steven L. Schneider
9105 Dara Lane
Great Falls, Virginia 22066
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. MISCELLANEOUS. Anything to the contrary notwithstanding, this
Agreement may be unilaterally rescinded or amended by the Company's Board of
Directors, without the mutual consent of the parties hereto, until the earlier
of (A) the occurrence of a Change of Control (as defined in Section 2) or (B)
actions potentially leading to a Change of Control have occurred or have been
overtly threatened (a "Potential Change of Control"). Thereafter, no provision
of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the Executive and
the Company. No waiver by either party hereto at any time of any breach by the
other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject
3
<PAGE> 10
matter hereof have been made by either party which are not set forth expressly
in this Agreement.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. Moreover, for this purpose, the
parties hereby consent to the jurisdiction of the courts of Massachusetts and to
the service of process at the notice address as specified in Section 7 hereof.
Each party shall take all necessary steps to facilitate such jurisdiction,
including the execution of any appropriate waiver documents and compliance with
such other formalities as may be required.
8. VALIDITY. The invalidity or unenforceability of any provisions of
this Agreement shall not effect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the Executive's interpretation of, or
determinations under, this Agreement.
11. OTHER DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(a) "Cause" for termination by the Company Subsidiary of the
Executive's employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the Company
Subsidiary (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or anticipated
failure after termination for Good Reason by the Executive) after a written
demand for substantial performance is approved by a two-thirds vote of the Board
and delivered to the Executive, which demand specifically identifies the manner
in which the Board believes that the Executive has not substantially performed
the Executive's duties, or (ii) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company Subsidiary,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company Subsidiary and (y) in the event of
a dispute concerning the application of this provision, no claim by the Company
Subsidiary that Cause exists shall be given effect unless the Company Subsidiary
establishes to the Board by clear and convincing evidence that Cause exists.
(b) "Disability" shall be deemed the reason for the termination
by the Company Subsidiary of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company Subsidiary for a period of six (6) consecutive months, the Company
Subsidiary shall have given the Executive a notice of termination for
Disability, and, within thirty (30) days after such notice of termination is
given, the Executive shall not have returned to the full-time performance of the
Executive's duties.
4
<PAGE> 11
(c) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change of Control, or prior to a Change of
Control under the circumstances defined in Section 7 as a Potential Change of
Control (treating all references in paragraphs (1) through (7) below to a
"Change of Control" as references to a "Potential Change of Control"), of any
one of the following acts by the Company Subsidiary, or failures by the Company
Subsidiary to act;
(1) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive officer of the
Company Subsidiary or a substantial adverse alteration in the nature or status
of the Executive's responsibilities from those in effect immediately prior to
the Change of Control;
(2) a reduction by the Company Subsidiary in the
Executive's annual base salary as in effect on the date hereof or as the same
may be increased from time to time;
(3) the relocation of the Executive's principal place of
employment to a location more than 5 miles from the Executive' principal place
of employment immediately prior to the Change of Control or the Company
Subsidiary's requiring the Executive to be based anywhere other than such
principal place of employment (or permitted relocation thereof) except for
required travel on the Company Subsidiary's business to an extent substantially
consistent with the Executive's present business travel obligations;
(4) the failure by the Company Subsidiary to pay to the
Executive any portion of the Executive's current compensation, or to pay to the
Executive any portion of an installment of deferred compensation under any
deferred compensation program of the Company Subsidiary, within seven (7) days
of the date such compensation is due;
(5) the failure by the Company Subsidiary to continue in
effect any compensation plan in which the Executive participates immediately
prior to the Change of Control which is material to the Executive's total
compensation, including but not limited to the Company's 1992 Stock Option Plan
or any substitute plans adopted prior to the Change of Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company
Subsidiary to continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount or timing of payment of benefits provided and the level
of the Executive's participation relative to other participants, as existed
immediately prior to the Change of Control;
(6) the failure by the Company Subsidiary to continue to
provide the Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company Subsidiary's pension, savings, life
insurance, medical, health and accident, or disability plans in which the
Executive was participating immediately prior to the Change of Control (except
for across the board changes similarly affecting all senior executives of the
Company Subsidiary and all senior executives of any Person in control of the
Company Subsidiary), the taking of any other action by the Company Subsidiary
which would directly or
5
<PAGE> 12
indirectly materially reduce any of such benefits or deprive the Executive of
any material fringe benefit enjoyed by the Executive at the time of the Change
of Control, or the failure by the Company Subsidiary to provide the Executive
with the number of paid vacation days to which the Executive is entitled on the
basis of years of service with the Company Subsidiary in accordance with the
Company Subsidiary's normal vacation policy in effect at the time of the Change
of Control; or
(7) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination given to
the Executive at least 60 days prior to the termination date. For purposes of
this Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall be presumed to
be correct unless the Company Subsidiary establishes to the Board of Directors
by clear and convincing evidence that Good Reason does not exist.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: PRIMARK CORPORATION
__________________________________ By:_________________________________
EXECUTIVE
____________________________________
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRIMARK
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER
30, 1997 AS REPORTED IN THE FORM 10-Q FOR SUCH PERIOD AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000356064
<NAME> PRIMARK
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 16,308
<SECURITIES> 0
<RECEIVABLES> 181,969
<ALLOWANCES> 3,109
<INVENTORY> 0
<CURRENT-ASSETS> 259,750
<PP&E> 125,371
<DEPRECIATION> 67,053
<TOTAL-ASSETS> 1,071,665
<CURRENT-LIABILITIES> 237,525
<BONDS> 335,843
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,071,665
<SALES> 0
<TOTAL-REVENUES> 617,468
<CGS> 0
<TOTAL-COSTS> 342,830
<OTHER-EXPENSES> 229,749
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,809
<INCOME-PRETAX> 31,841
<INCOME-TAX> 18,537
<INCOME-CONTINUING> 13,304
<DISCONTINUED> (552)
<EXTRAORDINARY> (1,955)
<CHANGES> 0
<NET-INCOME> 10,797
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
