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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 QUARTER ENDED MARCH 31, 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 April 30, 1997:
Common Stock, without par value: 26,229,617
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PRIMARK CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
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PAGE
NUMBER
-------
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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.................................................. 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................... 10
SIGNATURE.......................................................................... 10
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ii
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PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
---------- ------------
(In Thousands of Dollars)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates market value)...... $ 30,297 $ 25,709
Billed receivables less allowance for doubtful accounts of $4,165,000 and
$3,647,000, respectively................................................. 155,873 145,793
Unbilled and other receivables............................................ 66,255 42,314
Other current assets...................................................... 24,657 19,894
---------- --------
277,082 233,710
---------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $45,656,000 and $41,135,000,
respectively............................................................ 663,223 588,315
Capitalized data and other intangible assets, less accumulated
amortization of $15,530,000 and $13,935,000, respectively................ 48,115 42,241
Capitalized software, less accumulated amortization of $13,180,000 and
$11,280,000, respectively................................................ 37,416 35,004
Other..................................................................... 10,367 11,458
---------- --------
759,121 677,018
---------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment........................................................ 80,456 77,119
Leasehold improvements.................................................... 31,356 29,903
Other..................................................................... 20,654 17,654
---------- --------
132,466 124,676
Less-accumulated depreciation............................................. (61,083) (56,470)
---------- --------
71,383 68,206
---------- --------
$1,107,586 $978,934
========== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable.......................................................... $ 33,475 $ 31,693
Accrued employee payroll and benefits..................................... 33,552 38,748
Federal income, property and other taxes payable.......................... 13,782 19,622
Deferred income........................................................... 106,960 77,364
Current portion of long-term debt, including capital lease obligations.... 7,784 6,518
Other..................................................................... 55,317 50,195
---------- --------
250,870 224,140
---------- --------
LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt, including capital lease obligations....................... 340,175 241,822
Deferred income taxes..................................................... 17,304 15,480
Other..................................................................... 20,486 21,010
---------- --------
377,965 278,312
---------- --------
Total liabilities.................................................... 628,835 502,452
MINORITY INTEREST............................................................. 907 265
CONTINGENCIES (NOTE 5)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital............................... 298,689 296,546
Retained earnings......................................................... 181,103 178,943
---------- --------
479,792 475,489
Less-Cumulative foreign currency translation adjustment................... 1,948 (728)
---------- --------
Total common shareholders' equity.................................... 477,844 476,217
---------- --------
$1,107,586 $978,934
========== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
1
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PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1997 1996
-------- --------
(In Thousands Except
Per Share Amounts)
<S> <C> <C>
OPERATING REVENUES............................................................... $225,500 $179,022
OPERATING EXPENSES
Cost of services............................................................. 135,367 103,525
Selling, general and administrative.......................................... 60,830 50,125
Depreciation................................................................. 6,029 4,138
Amortization of goodwill..................................................... 4,552 2,987
Amortization of other intangible assets...................................... 3,731 2,645
Restructuring charge......................................................... 1,800 --
-------- --------
Total operating expenses................................................ 212,309 163,420
-------- --------
Operating income........................................................ 13,191 15,602
-------- --------
OTHER INCOME AND (DEDUCTIONS)
Investment income............................................................ 369 852
Interest expense............................................................. (6,119) (4,938)
Foreign currency gain (loss)................................................. 973 216
Other........................................................................ 1,236 (45)
-------- --------
Total other income and (deductions)..................................... (3,541) (3,915)
-------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES............................ 9,650 11,687
INCOME TAX EXPENSE............................................................... 5,535 5,541
-------- --------
INCOME FROM CONTINUING OPERATIONS................................................ 4,115 6,146
-------- --------
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax expense of $0 and $71,000,
respectively................................................................ -- 254
-------- --------
Total Discontinued Operations................................................ -- 254
-------- --------
INCOME BEFORE EXTRAORDINARY LOSS................................................. 4,115 6,400
EXTRAORDINARY ITEM-LOSS ON EARLY EXTINGUISHMENT OF DEBT,
net of income tax benefit of $1,379,000...................................... (1,955) --
-------- --------
NET INCOME....................................................................... 2,160 6,400
DIVIDENDS ON PREFERRED STOCK..................................................... -- (359)
-------- --------
NET INCOME APPLICABLE TO COMMON STOCK............................................ $ 2,160 $ 6,041
======== ========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Income from continuing operations............................................ $ 0.15 $ 0.23
Discontinued operations...................................................... -- 0.01
-------- --------
Income before extraordinary item............................................. 0.15 0.24
Extraordinary item........................................................... (0.07) --
-------- --------
Total earnings per share................................................ $ 0.08 $ 0.24
======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING................. 28,351 25,362
</TABLE>
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1997 1996
-------- --------
(In Thousands)
<S> <C> <C> <C>
Balance -- Beginning of period.................................................. $178,943 $141,846
Add -- Net Income........................................................... 2,160 6,400
-- Change in year-end of Subsidiaries................................... -- 482
Deduct -- Dividends on Preferred Stock......................................... -- (359)
-------- --------
Balance -- End of period........................................................ $181,103 $148,369
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
2
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PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1997 1996
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(In Thousands of
Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................................ $ 2,160 $ 6,400
Adjustments to reconcile net income to net cash flows from
operating activities:
Discontinued operations........................................... -- (253)
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................................ 14,312 9,770
Foreign currency transaction (gain) loss - net............... (973) (216)
Other........................................................ 1,005 431
Changes in assets and liabilities which provided (used) cash,
exclusive of changes shown separately...................... (14,690) (14,827)
-------- --------
Net cash provided from operating activities............. 1,743 3,823
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable.............................. 58,596 708
Repayment of short-term notes payable............................. (58,596) (708)
Issuance of long-term debt........................................ 100,000 --
Debt issue costs.................................................. (2,831) --
Common stock issuance and other................................... 1,493 2,244
-------- --------
Net cash provided from financing activities............. 98,662 2,244
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.............................................. (8,691) (5,308)
Capitalized software.............................................. (4,226) (1,933)
Purchase of subsidiaries - net of acquired cash................... (86,022) --
Proceeds from sale of investment.................................. 3,494 --
Cash contributed to discontinued operations....................... -- (71)
Other - net....................................................... 55 (219)
-------- --------
Net cash used for investing activities.................. (95,390) (7,531)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................ (427) (185)
NET DECREASE IN CASH AND CASH EQUIVALENTS.............................. 4,588 (1,649)
CASH AND CASH EQUIVALENTS, JANUARY 1................................... 25,709 59,990
-------- --------
CASH AND CASH EQUIVALENTS, MARCH 31.................................... $ 30,297 $ 58,341
======== ========
CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED)
CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY
Billed, unbilled and other receivables-net........................ $(24,448) $(16,608)
Accounts payable.................................................. 1,814 (1,185)
Federal income, property and other taxes payable-net.............. (4,596) 1,558
Other current assets and liabilities.............................. 13,433 789
Other noncurrent assets and liabilities........................... (893) 619
-------- --------
$(14,690) $(14,827)
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
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PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS
During the three months ended March 31, 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.
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<CAPTION>
BASELINE WEFA
(IN THOUSANDS)
<S> <C> <C>
Cash $40,963 $45,000
Acquisition Fees 135 234
--------- -------
Total Consideration 41,098 45,234
Acquired Cash (2) (308)
--------- -------
Net Consideration $41,096 $44,926
--------- -------
Excess of Purchase Price over Fair
Value $39,497 $43,552
--------- -------
</TABLE>
a. Baseline
On January 6, 1997, the Company purchased all of the outstanding stock of
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 $39.5 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 $43.6 million
will be amortized over 35 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.
2. 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 for the quarter ended March 31,
1997.
4
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PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SALE OF INVESTMENT
On January 7, 1997, the Company sold 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 pre tax gain on the sale has
been included in other income for the period ended March 31, 1997.
4. RESTRUCTURING AND INTEGRATION CHARGES
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, will be funded by the Company's cash flows from operating activities.
As of March 31, 1997, $676.0 thousand of restructuring costs have been incurred,
of which $651.7 thousand was related to employee severance and other benefits
and $24.3 thousand was related to idle facility related costs. The restructuring
plan, when fully implemented, will result in annual savings of approximately
$4.0 million. The spending is expected to be essentially completed by the end of
1997.
5. 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 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.
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.
6. 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.
5
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PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. NEWLY ISSUED ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.128, "Earnings Per Share." This new standard,
which will be effective for the 1997 fiscal year, 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. The Company has not performed the calculation for
the pro forma financial statement disclosure of the effect of this standard,
however, management believes the results would not materially differ from
earnings per share as presented.
8. SUBSEQUENT EVENTS
a. Common Stock
As of April 30, 1997 the Company had repurchased 1,000,000 shares of its
outstanding common stock in the open market at a total cost of $19.6 million. On
April 25, 1997, the board of directors authorized the repurchase of an
additional 1.2 million shares of the Company's Common Stock.
b. DAFSA
The Company expects to incur a total restructuring cost of $6.5 million
related to the integration and downsizing of its operation at DAFSA. Of that
amount, $1.5 million was identified and reserved for at the time of acquisition
in June of 1996. Pending certain government and other approvals, the remaining
$5.0 million is expected to be recorded as a restructuring charge in the second
quarter. 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 restructuring costs are primarily related to exiting a line of
business, employee severance and other benefits and idle facility related costs.
6
<PAGE> 9
ITEM 2. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Primark reported net income of $2.2 million ($0.08 per share) for the first
quarter of 1997 compared to $6.0 million ($0.24 per share) in 1996. Net income,
as reported, includes the effect of an extraordinary loss of $2.0 million (after
tax) for the write off of debt issue costs associated with prior bank debt which
was successfully refinanced in 1997. Revenues of $225.5 million were reported
for the three months ended March 31, 1997, a 26.0% increase over the $179.0
reported for the first quarter of 1996. New acquisitions contributed $28.7
million to the increase in revenues. Excluding these acquisitions, the Company's
other operations had revenue growth of 9.9% compared to 1996.
The 1997 first quarter income from continuing operations of $4.1 million
($0.15 per share) declined 33.0% from the $6.1 million ($0.23 per share)
reported for 1996. This quarter's income from continuing operations was affected
by the acquisition of six new businesses, the poor operating performance of
DAFSA and TIMCO, the restructuring at Disclosure, the sale of the Weather
Network partnership, increased interest costs, and the effects of currency on
foreign operations. While some of these items were positive, the poor operating
results at DAFSA and TIMCO and the restructuring charge at Disclosure were the
major causes for an increase of overall operating expenses of 29.9%.
Excluding DAFSA, which will be discussed separately, the remaining five new
businesses, Yankee, ICV, Baseline, WEFA and the controlling interest in
Worldscope added $27.0 million of revenue, $5.8 million of EBITDA and $2.2
million of operating income. Each of these new businesses are performing as
anticipated with growth in revenues of 16.1% over their same period last year.
DAFSA reported revenues of $1.7 million and an operating loss of $2.4
million in the first quarter. Because of the unprofitable condition of DAFSA, no
tax benefits associated with these losses were recorded, which increased the
Company's effective tax rate. As DAFSA becomes profitable, these losses will
shelter future tax expenses. The Company has undertaken measures to lower
DAFSA's operating expenses and integrate certain operations with other
businesses. These actions will result in a restructuring charge of approximately
$6.5 million. Of that amount, $1.5 million was identified and reserved for at
the time of acquisition in June of 1996. Assuming the receipt of French
government and other approvals, the remaining $5.0 million is expected to be
recorded as a restructuring charge in the second quarter. Most of these costs
relate to exiting a line of business, idle facility costs and severance and
other employee reduction costs.
TIMCO reported revenues of $28.3 million or an increase of 2.0% over last
year and operating income of $293 thousand compared to $2.4 million for the
first quarter of 1996. These results are reflective of losses attributable to
one major contract and difficulties in expanding the workforce to meet demand.
The Company believes that the drain on operating results from the one problem
contract identified will be resolved by the end of the second quarter and that
progress on staffing will be made throughout the year.
During the first quarter, the Company recorded a $1.8 million restructuring
charge at Disclosure where investments in new information technology and the
on-going shift from paper-based documents to desktop electronic delivery have
enabled major productivity improvements. These measures have resulted in the
elimination of over one hundred positions. The restructuring provision includes
estimated costs for employee severance and other benefits, asset write-downs and
idle facility related costs. Approximately 38% of the restructuring has been
paid through March 31, 1997 and the remaining balance is expected to be spent by
the end of June, 1997.
Offsetting Disclosure's restructuring charge was the sale of The Weather
Network partnership. This investment was sold for $3.5 million and resulted in a
gain of $2.0 million which has been recorded in other income.
Interest expense increased $1.2 million over the first quarter of 1996,
primarily as a result of the February 1997 refinancing which provided an
additional $100 million in long term debt.
Currency movements negatively impacted first quarter operating income by
approximately $1.5 million. The Company has profitable operations in continental
Europe and Japan and a large cost base in the United
7
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Kingdom. The negative impact was due to the strengthening dollar against the
currencies of continental Europe and Japan, coupled with the weakening dollar
against the UK pound. Offsetting the negative impact currency had on operating
income was a $1.0 million gain on currency transactions recorded in the first
quarter, the majority of which was from hedging transactions.
OPERATING RESULTS BY SEGMENT (IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1997 1996 CHANGE
------ ----- ------
<S> <C> <C> <C>
OPERATING REVENUES
Information Services
Applied Technology...................................... $106.4 $90.9 $15.5
Financial Information Services.......................... $ 90.8 $60.4 $30.4
Transportation Services...................................... $ 28.3 $27.7 $ 0.6
OPERATING INCOME
Information Services
Applied Technology...................................... $ 8.6 $ 7.1 $ 1.5
Financial Information Services.......................... $ 5.3 $ 7.4 $(2.1)
Transportation Services...................................... $ 0.3 $ 2.4 $(2.1)
</TABLE>
The applied technology market is comprised of TASC, WSI and the Yankee
Group. Revenues and operating income in the applied technology market were up
17.1% and 21.0% respectively, led by the addition of the Yankee Group in August
of 1996 and strong performance in both the government and commercial businesses.
The financial information businesses are comprised of Datastream, ICV,
DAFSA, Disclosure, Worldscope, IBES, Vestek, Baseline and WEFA. Aggregate
revenues from these businesses was up 50.3% or $30.4 million. Acquired financial
information companies contributed $28.7 million to the increase. Operating
income in the financial information companies was down $2.1 million.
Restructuring charges at Disclosure of $1.8 million, $2.4 million of operating
losses at DAFSA and adverse currency movements of approximately $1.4 million
were the major contributing factors to the decrease. Exclusive of these three
events, operating income at the financial information services businesses would
have increased 47%.
The transportation services segment is comprised of the Company's aircraft
maintenance facility (TIMCO) which had a 2.0% growth in revenues and an 87.7%
decrease in operating income. These results are reflective of losses on one
contract and difficulties in expanding the workforce to meet demand.
Not included in the above table are corporate expenses of $1.0 million and
$1.3 million for the quarters ended March 31, 1997 and March 31, 1996
respectively.
CAPITAL RESOURCES AND LIQUIDITY
During the three months ended March 31, 1997, cash and cash equivalents
increased $4.6 million. Operating activities generated $1.7 million, the
issuance of long term debt provided $97.2 million net of debt issue costs, and
the sale of the Weather Network generated $3.5 million, while $86.0 million was
used to purchase Baseline and WEFA and $12.9 million was used to fund capital
expenditures.
Operating activities provided $1.7 million during the first quarter of
1997, a $2.1 million decrease compared to 1996. The $2.1 million decrease is
primarily due to the 1996 cash flow impact of changing Datastream's year end
from a November 30 fiscal year to December 31. The $4.2 million decrease in net
income was primarily offset by a $4.5 million increase in non-cash depreciation
and amortization expense. Working capital uses remained flat, with increases in
unbilled receivables at TASC and TIMCO being offset by increases in deferred
income at ICV, I/B/E/S and Disclosure.
Cash flows from financing activities provided $98.7 million for the first
quarter of 1997, a $96.4 million increase over the 1996 first quarter. 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
8
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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 capacity
increased Primark's debt to total capital ratio from 34.3% at December 31, 1996
to 42.1% at March 31, 1997.
Investing activities used $95.4 million during the first three months of
1997, an increase of $87.9 million over the same period in 1996. The majority of
investing uses were for the purchases of Baseline and WEFA which used $41.1 and
$44.9 million, respectively. Other capital expenditures for property, plant and
equipment, other intangibles, and capitalized software amounted to $12.9 million
during the first three months of 1997, an increase of $5.7 million over the same
period in 1996. Of this amount, $3.4 million was for computer equipment, $1.0
million of which was for TASC and the remainder for the financial information
companies. Leasehold improvements for new facilities at IBES, ICV and TIMCO
resulted in $1.9 million of capital expenditures. Capitalized software costs
totaled $4.2 million, of which $2.4 million were for upgrading and revising
Disclosure's product line and production operation. The purchase of capitalized
data and equipment accounted for approximately $3.1 million. 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.
The majority of the estimated restructuring charge at DAFSA and the
majority of the restructuring charge incurred at Disclosure are expected to be
paid in full by the end of 1997.
As of April 30, 1997 the Company had completed the previously announced
1,000,000 share common stock buyback program at a cost of $19.6 million. On
April 25, 1997, the board of directors authorized the repurchase of an
additional 1.2 million shares of the Company's common stock.
With the Company's new bank credit facility, and with the improved
performance created by the new acquisitions in the aggregate, even after
considering DAFSA, Primark believes that it has adequate liquidity to operate
its existing businesses and pursue investment opportunities as they arise.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share", which will
be effective during fourth quarter 1997. SFAS No. 128 will require the Company
in its fourth quarter and its annual report to restate all previously reported
earnings per share information to conform with the new pronouncement's
requirements.
9
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------ -----
<C> <S> <C>
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) The Company filed three reports on Form 8-K dated February 4, 1997,
April 3, 1997 and April 18, 1997. All three reports were filed under Item 9
"Sales of Equity Securities Pursuant to Regulation S".
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
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
Dated: May 7, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRIMARK
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31,
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> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 30,297
<SECURITIES> 0
<RECEIVABLES> 222,128
<ALLOWANCES> 4,165
<INVENTORY> 0
<CURRENT-ASSETS> 277,082
<PP&E> 132,466
<DEPRECIATION> 61,083
<TOTAL-ASSETS> 1,107,586
<CURRENT-LIABILITIES> 250,870
<BONDS> 340,175
0
0
<COMMON> 543
<OTHER-SE> 477,301
<TOTAL-LIABILITY-AND-EQUITY> 1,107,586
<SALES> 0
<TOTAL-REVENUES> 225,500
<CGS> 0
<TOTAL-COSTS> 135,367
<OTHER-EXPENSES> 76,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,119
<INCOME-PRETAX> 9,650
<INCOME-TAX> 5,535
<INCOME-CONTINUING> 4,115
<DISCONTINUED> 0
<EXTRAORDINARY> (1,955)
<CHANGES> 0
<NET-INCOME> 2,160
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
