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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8260
PRIMARK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MICHIGAN 38-2383282
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1000 WINTER STREET, SUITE 4300N,
WALTHAM, MA 02451-1241
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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781-466-6611
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common stock, without par value New York Stock Exchange
Pacific Exchange Inc.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No __.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __.
The aggregate market of the registrant's common stock held by
non-affiliates as of February 16, 1999 was $483,791,568, based on the closing
price on that day (New York Stock Exchange -- Composite Transactions). The
number of shares outstanding of the registrant's common stock without par value
on February 16, 1999 was 21,034,416.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Primark's 1998 Annual Report are incorporated by reference in
Part I, Item 1, and Part II, Items 5,6,7 and 8. Portions of Primark's 1999 Proxy
Statement for its 1999 Annual Meeting of Shareholders, which will be filed
within 120 days of December 31, 1998, are incorporated by reference in Part III,
Items 10, 11, 12 and 13.
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TABLE OF CONTENTS
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PAGE
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Cover Page.................................................. i
Index....................................................... ii
PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 14
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
PART II
Item 5. Market for Registrant's Common Equity and Related 14
Stockholder Matters.........................................
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition 15
and Results of Operations...................................
Item 7a. Market Risk Disclosures..................................... 15
Item 8. Financial Statements and Supplementary Data................. 16
Item 9. Changes in and Disagreements with Accountants on Accounting 16
and Financial Disclosure....................................
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 16
Item 11. Executive Compensation...................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and 17
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 17
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on 17
Form 8-K....................................................
Signatures.................................................. 21
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PART I
ITEM 1. BUSINESS
GENERAL
Primark is a leading global information service provider of comprehensive
financial, economic and market research information to investment, legal,
accounting, banking, corporate and government customers. We develop and market
"value-added" database and information products that cover established and
emerging markets worldwide. Our proprietary analytical software applications
provide for the analysis and presentation of financial, economic and market
research information.
We serve customers in the U.S., Europe and the Pacific Rim and compile,
analyze, integrate, package and distribute current and historical data, news and
commentary on financial securities, companies and markets worldwide. We own and
maintain large-scale databases, which are accessed through our on-line
distribution systems, the Internet and third-party distributors. Our databases
are authoritative sources of data and analytics used by more than 5,000
organizations worldwide, including 75 of the top 100 banks, 82 of the top 100
investment managers, 28 of the top 50 insurance companies and 450 of the top
1,000 U.S. companies. We believe our customers value our products because of
their high quality data as well as our understanding of niche markets, our
ability to develop products to serve these markets and our superior customer
service and support.
Our business operations are integrated into three customer-focused
divisions. Each division concentrates on specialized product sets, which address
the needs of specific customer market groups. Our three operating divisions are:
- Primark Financial Information Division. Primark Financial Information
Division develops "enterprise-wide" products and services for major
financial institutions on a global basis. It also has responsibility for
all transactional products, both historical and real-time, as well as
products supporting large-scale investment accounting functions, the
individual investor and the referential needs of very large financial
market customers. This division also manages the corporate network,
PrimarkNet, which serves as the major external delivery channel to our
customers on a global basis, as well as serving as an internal channel
connecting all three Primark divisions. This division's product offerings
serve most of our customer types and the division is a major service
provider to the "sell-side" portion of the financial markets.
- Primark Financial Analytics Division. Primark Financial Analytics
Division concentrates on developing and marketing a wide variety of
analytical products for money managers, fund sponsors and other
investors. These products combine our databases, advanced software,
analytical techniques and forecasts for all phases of the investment
process. This division's product offerings concentrate on customers in
the "buy-side" portion of the financial markets.
- Primark Decision Information Division. Primark Decision Information
Division develops, markets, and delivers information content products
that are primarily focused in areas other than the financial marketplace,
and also provides products and services for decision support to financial
customers.
We have established the Primark Data Company ("PDC") to support the data
needs of our operating divisions. PDC is an essential element in the overall
Primark strategy because of the necessity for high quality information provided
on an efficient basis. PDC is responsible for collecting, verifying and
organizing our equity pricing, indices, company account, ownership and economic
data sets throughout the three divisions of Primark. With major operations in
the United States, the United Kingdom, Ireland, India, and the Philippines, PDC
provides global data knowledge and support to the our three divisions.
Key factors in Primark's success are recognizable quality and international
market acceptance of our branded products sold by the various business units
within the divisions. Primark's business units and related brands by division
include:
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PRIMARK FINANCIAL INFORMATION DIVISION
- Datastream. Datastream, acquired in 1992, is one of the world's leading
providers of global historical and fundamental real-time securities data
and news covering more than 45,000 stocks from 59 countries, over 97,000
corporate and government bonds from 32 countries and more than 1,800
major indices.
- ICV. ICV, acquired in 1996, is a leading provider in the U.K. of on-line
equity trading products. In 1998, ICV had a market share of approximately
70% of on-line U.K. equities trading. ICV was the number one rated vendor
to U.K. brokers by the 1996, 1997 and 1998 Kimsey Surveys.
- Primark Investment Management Services. Primark Investment Management
Services, acquired as part of Datastream in 1992, is a leading provider
of computer-based accounting and other investment fund services,
including portfolio valuation and performance measurement services, to
money managers in the U.K. and, to a lesser extent, in continental
Europe.
- Disclosure/Worldscope. Disclosure, acquired in 1995, and Worldscope,
with 50% equity interest acquired in 1995 and an additional 30% interest
acquired in 1996, are two of the leading providers of "as reported" and
abstracted financial information. These businesses have databases that
include more than five million SEC filings by more than 16,000 U.S.
companies dating back to 1968, as well as foreign company filings from
more than 13,000 companies in 45 countries.
- A-T Financial Information. On December 29, 1998, Primark executed a
definitive agreement to acquire 100% of the outstanding common stock of
A-T Financial Information, Inc. (A-T). The acquisition was completed on
February 5, 1999. Founded in 1987, A-T is a provider of Windows-
compatible financial market data and software to money managers, traders,
banks and other institutional investors. A-T has launched an Internet
site for individual investors, which is marketed as "A-T Attitude." The
A-T suite of products represents leading real-time data and information
capabilities and will be integrated with the full range of Primark's
financial information products.
- Extel. On February 22, 1999, Primark acquired the company fundamental
data business and the Extel brand name ("Extel") from The Financial Times
Group. Extel is a widely recognized brand name in the European and Asian
markets and provides summarized financial statements for rapid corporate
analysis, historical company accounts, image-based data, textual
corporate profiles and company news to the investment industry worldwide.
The Extel company fundamental data business will be integrated into the
operation of the Primark Financial Information Division.
PRIMARK FINANCIAL ANALYTICS DIVISION
- I/B/E/S. I/B/E/S, acquired in 1995, is a leading provider of global
earnings expectations, historical data on earnings surprises and research
reports obtained from more than 800 brokerage firms and 7,000 research
analysts on more than 17,000 companies worldwide.
- Baseline. Baseline, acquired in 1997, offers a leading stock and
portfolio analysis and selection system designed specifically for
institutional portfolio managers.
- Vestek. Vestek, acquired in 1994, is an international provider of
portfolio information, analytics and consulting support to investment
professionals.
PRIMARK DECISION INFORMATION DIVISION
- WEFA. WEFA, acquired in 1997, is an international provider of economic
research, analysis and forecasts.
- Primark Decision Economics. Primark Decision Economics, an
unconsolidated company started in 1996 in which Primark has an equity
interest of 20%, disseminates timely, value-added economic forecasts,
analyses and commentaries covering the world's major economies and
markets.
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- The Yankee Group. Yankee Group, acquired in 1996, is an international
market research and consulting firm focusing on the communications and
computing industries. In the most recent survey by Information Week
Magazine, the Yankee Group was rated number one in credibility.
Primark had net operating revenues of $277.1 million, $397.9 million and
$434.5 million for the twelve months ended December 31, 1996, December 31, 1997
and December 31, 1998, respectively. Our principal sources of revenue are from
customer subscriptions, royalty revenues from third party distributors and fees
for consulting services. More than 80% of the Company's revenues are derived
from subscription or royalty contracts. A majority of these contracts are paid
in advance either quarterly or annually. For the twelve months ended December
31, 1998, approximately 82% of Primark's revenues were from subscriptions, 4%
from royalties and 14% from other sources.
BUSINESS AND OPERATING STRATEGY
Primark's business and operating strategy is designed to generate strong
revenue growth and increased profitability by selling existing products, by
integrating key products and operations, by launching and acquiring new products
and by capitalizing on our international brands and comprehensive high quality
data. The key elements of this strategy include:
Expanding customer relationships and cross-selling. We believe that our
customers have an increasing need for financial and economic information from a
select group of integrated providers of such information. By cross-selling our
variety of well-known brands, we believe that we are well positioned to serve
this need. In addition to cross-selling, we believe that we will be able to
expand relationships with existing customers by using our core products and
services as platforms for launching new integrated database and analytic
products drawn from multiple sources within Primark. Management also intends to
further integrate our databases with our software products to encourage service
expansion. Due to the low incremental cost of providing additional products and
services to existing customers, we expect these measures to result in increased
revenues and improved profit margins.
Introducing new products, databases and service enhancements. We believe we
can leverage our existing customer base, databases and technology to introduce
new products and services. For example, Primark recently introduced I/B/E/S
Active Express, an on-line platform for delivery of I/B/E/S information, as well
as other databases; Piranha, a product enabling customers to manipulate and
integrate data from multiple databases on the customer's desktop; and World
Market Monitor, a daily, weekly, monthly or bi-annual economic report tailored
to the needs of individual customers. We believe our ability to add new products
will continue to provide us with a competitive advantage.
Leveraging introduction of the euro. In 1998, approximately 50% of
Primark's revenues were derived from European customers and we believe we are
well positioned to continue to take advantage of the euro introduced on January
1, 1999. The euro is expected to lead to new European securities, increased
cross-border investing and the liberalization of the European pension and
retirement savings industry. We anticipate that all of these trends may also
dramatically increase the demand for our products and services from our existing
customers and attract new customers. Primark currently possesses a leading
position in U.K. equities trading and provides one of the most comprehensive
databases of European company filings available electronically. Management
intends to capitalize on these trends by introducing new databases capturing
European trading and company data, as well as software products and news
services to serve the information needs of customers worldwide.
Capitalizing on, and improving distribution through, new channels and new
partnerships. We currently rely on a variety of distribution channels including
proprietary software, on-line and satellite feed delivery, as well as third
party distributors, paper-based services, CD-ROM and the Internet to distribute
our products. We believe we can further capitalize on these distribution
channels to introduce new products and services to both existing and new
customers. Primark currently has contracts with America Online, E-Trade,
Microsoft Investor, Quicken and Quote.Com, among others, to provide database
products to on-line customers and will seek to expand these relationships
further.
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Leveraging technology. We will continue to use advanced information
technology to increase the efficiency, speed and flexibility of our data
gathering, database construction and customer delivery efforts. For example, we
plan to integrate our database platforms in order to optimize our product
capabilities. We have begun to use new technology that we believe will
facilitate the integration of multiple databases maintained in diverse computer
systems for use by our analytics packages. This will allow us to leverage
existing brands and databases to provide new products to new and existing
customers. For example, through the use of advanced information technology,
Primark has transformed Disclosure from a primarily paper-based business to one
that now derives approximately 45% of its revenues from electronic delivery to
the desktop. Also, we expect to continue to use new technology to leverage our
brand name products and believe these efforts will increase revenues and improve
margins.
Providing superior customer service. Providing superior customer support
and service is a key aspect of Primark's business philosophy and has contributed
to a high customer retention rate. In 1998, this rate was approximately 85% for
subscription products. Primark's sales and marketing staff, as well as our
technical experts and consultants, work closely with clients, often on-site, to
maximize the value of Primark products and services and to develop custom
applications tailored to clients' information and software needs. We believe our
superior customer service and support will continue to provide us with increased
opportunities for additional product and service revenues.
Capitalizing on integration of operating units. Primark has grown primarily
through acquisitions over the last six years. In order to capitalize on the
advantages expected to result from the integration of these acquired businesses,
on June 30, 1998 we reorganized our twelve operating units into three divisions,
to focus on common customer groups. We believe that the restructuring will
enable us to reap benefits from combined marketing, sales and administrative
operations, eliminate redundant production and delivery platforms, provide
broader access to our customer base and deliver current and new product
offerings faster and more efficiently.
BUSINESS AND PRODUCTS
OVERVIEW
Primark supplies information to investment and commercial banks, investment
firms, corporations, government organizations, professional service firms and
individual consumers. The organizations in the financial community generally can
be divided into two groups, although there are hybrids and exceptions. One group
consists of "buy-side" firms, which invest individual consumer assets or
institutional pension funds. The second group consists of "sell-side" firms,
which perform investment research, brokerage and trading functions, often
combined with corporate finance services.
Within the "buy-side," investment managers can be classified according to
their particular style of investing -- large cap, small cap, emerging markets,
value, growth, indices, etc. While the actual method by which they make
investment decisions may vary according to their investment style, the overall
investment process is essentially similar across all firms. It can be broken
down into five major categories.
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Asset Security Portfolio Security Fund
Deployment & Criteria Research & Selection Construction & Tracking Trading Accounting
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Primark is involved in all aspects of the investment decision-making
process. Primark Financial Analytics Division focuses extensively on the
"buy-side" sector; however, depending on the functional activity, Primark may
also have either of its other operating divisions supply information and
analytical services to that function. For example:
ASSET DEPLOYMENT CRITERIA. The allocation of resources across
different asset categories -- equity versus fixed income, international
versus domestic, industry selection. Our operations that serve these
activities are through Vestek and I/B/E/S products (Primark Financial
Analytical Division) and WEFA and Primark Decision Economics products
(Primark Decision Information Division).
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SECURITY RESEARCH AND SELECTION. The evaluation of individual
investment securities. Depending on the investment approach used --
technical, fundamental or quantitative -- the information needs will be
different, as will the analytical tools. Our operations that serve these
activities are Datastream, Disclosure, Worldscope, Extel and ICV products
(Primark Financial Information Division) and Baseline, I/B/E/S and Vestek
products (Primark Financial Analytics Division).
PORTFOLIO CONSTRUCTION AND TRACKING. The process of creating a
portfolio of individually selected securities that collectively possesses
the appropriate risk and return characteristics. Primark Financial
Analytics Division serves these activities through the Vestek and Baseline
products.
SECURITY TRADING. The actual buying and selling of individual
securities. Timing, costs and other technical factors play important roles
in the efficient execution of a tracking strategy. Primark Financial
Information Division's ICV and A-T products serve these activities.
FUND ACCOUNTING. The accounting for the investment management process
on an intra-day, daily, weekly, monthly and annual basis. This includes
accounting for portfolio valuation, transactions, tax, regulatory and
client reports and performance measurement. Our operations that serve these
activities are the Datastream and Primark Investment Management Services
products through Primark Financial Information Division and the Vestek
product through Primark Financial Analytics Division.
The "sell-side" firms are involved in many aspects of the investment cycle.
Each of these aspects is generating stronger demand for more and better
financial and economic information. All of Primark's divisions offer products
essential to these firms, with Primark Financial Information Division
representing the largest share of those offerings. Some of the functions
performed by the "sell-side" include:
BROKERAGE. This involves the generation and fulfillment of buy and
sell orders for specific securities from money managers, trust departments,
insurance companies and individuals. Information from Primark Financial
Information Division, through ICV, A-T, Datastream and Disclosure, as well
as I/B/ E/S and WEFA information, through Primark Financial Analytics
Division and Primark Decision Information Division, respectively, are
useful in this process.
RESEARCH. Analysts study corporate securities and other investment
instruments to estimate the likely returns from these investments and
arrive at buy and sell recommendations. Primark Financial Information
Division's Datastream, Disclosure, Extel and Worldscope, together with
I/B/E/S and WEFA (Primark Financial Analytics Division and Primark Decision
Information Division, respectively) provide useful data and tools to the
investment research analyst, as well as distribution systems for the
results of their work.
TRADING. The actual process of identifying buyers and sellers of
securities and executing orders, whether for customers or the firm's own
account, make up the bulk of activities in trading. Such orders are usually
accomplished through exchanges for most equities, options and futures,
while bonds and foreign currencies are more often traded directly or
through other brokers. Primark Financial Information Division's ICV
products directly support the trading process in London with quotes and
news. However, traders have become interested in value-added data as
trading strategies have become more sophisticated. To meet this need, we
have various products that combine quotes and news from ICV or A-T with
fundamental information, analyses and forecasts from our other business
units. Similarly A-T's products fulfill the same role in North America.
CORPORATE FINANCE. The traditional investment banking functions
involving the underwriting of securities, determining capital structure and
merger and acquisition activity are very information intensive. All three
divisions, through the products of Datastream, Disclosure, Extel,
Worldscope, I/B/ E/S and WEFA, provide extensive support to investment
bankers.
In addition to the financial community, our customers include
corporations and governmental organizations.
CORPORATIONS. To aid in the increasing competition in the global
marketplace, corporations require greater financial and economic
information on countries, markets and competitors. Our operations that
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serve those needs are Primark Financial Information Division's Disclosure
and Worldscope, Primark Financial Analytics Division's I/B/E/S and Primark
Decision Information Division's WEFA, Primark Decision Economics and Yankee
Group products.
GOVERNMENTAL ORGANIZATIONS. As issues related to commerce, trade and
international finance gain prominence in governmental decision-making,
along with fiscal and monetary policy, governmental organizations require
greater amounts of financial and economic data. Our operations that serve
these needs are Primark Financial Information Division's Disclosure,
Primark Financial Analytics Division's I/ B/E/S, Primark Decision
Information Division's WEFA, Primark Decision Economics and Yankee Group
products.
The decision to organize Primark under the current divisional structure was
made in June of 1998, and is an important step in fully integrating operational
functions within Primark to meet customer needs efficiently and to allow for
further market penetration with existing and new product offerings.
PRIMARK FINANCIAL INFORMATION DIVISION
The Primark Financial Information Division recorded $306.4 million of
revenues for the 1998 fiscal year. This represented 70.5% of Primark's total
revenues. Primark Financial Information Division generated $216.0 million of
revenues outside of North America with $122.8 million of those revenues coming
from Datastream products, $55.2 million from ICV, $27.4 million from Primark
Information Management Services and the remaining $10.7 from Disclosure. The
$90.3 million generated in North America represented $63.0 million from
Disclosure, $10.6 million from Worldscope and $16.7 million from Datastream
sales.
Datastream. Datastream provides global historical economic and financial
information to customers worldwide and, together with Primark Investment
Management Services products, is a leading provider of computer-based accounting
and other investment fund services in the United Kingdom.
The core of Datastream's products is its centralized data system. This
system maintains a series of linked databases of extensive international
economic and financial data collected from wire services, official publications
of national agencies, stock options and futures exchanges, other information
vendors, and brokers, dealers, banks and issuers. Customers have online access
to Datastream's databases through personal computers, networks or workstations.
Datastream's products and services enable customers to perform extensive
investment research and analysis, investment administration and portfolio
valuations on securities in all major markets, and to produce graphics,
statistics, time series analysis and perform other analytical functions.
Datastream's products and services fall into two principal categories --
investment research and fund management services.
Investment research services accounted for approximately 82% of
Datastream's total revenues for the fiscal year ended December 31, 1998 and 85%
for each of the fiscal years ended December 31, 1997 and 1996. These services
consist of a set of software programs to manipulate, analyze and present
financial and economic information obtained from Datastream's databases. The
software is designed to facilitate the customers' access to data from any of
Datastream's databases and to manipulate this data through a variety of
pre-programmed and user-defined ways to produce graphs, tables and reports and
to perform analyses.
Fund management services accounted for approximately 18%, of Datastream's
total revenues for the fiscal year ended December 31, 1998, and 15% for each of
the fiscal years ended December 31, 1997 and 1996. Fund management services,
available through Primark Information Management Services, provide investment
accounting, portfolio valuation and performance measurement activities.
A critical component of Datastream's business is the data itself.
Datastream's principal supply requirements are for raw financial data, which
through the Primark Data Company are acquired from numerous data suppliers
worldwide or developed internally. Once acquired, and edited, the data sets are
stored in Datastream's databases for access and manipulation through
Datastream's applications and value-added software programs. Data suppliers
generally retain ownership of the raw data, but allow Datastream and its
customers the use of such data. Datastream places great importance on the
quality of its data and has
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developed a program to continuously review its data sources to ensure quality,
control and continuity. Wherever possible, Datastream develops multiple sources
of data to provide backup and cross checking.
Data relating to equities include pricing information for earnings and
dividends on approximately 45,000 stocks from 59 countries, including all major
markets and many emerging markets. This data includes historical earnings and
dividend data, as well as forecast data supplied by market specialists. Data
relating to bonds include maturity and yield on approximately 97,000 corporate
and government bonds from 32 countries, all Eurobonds and related indices. Data
relating to futures and options includes current prices, previously traded
prices, trading volume and intra-day high and low values from the international
options and futures exchanges, including LIFFE (London), MONEP and MATIF
(Paris), SOFFEX (Switzerland), EOE (Amsterdam), DTB (Germany), Chicago and
Philadelphia.
Datastream has included databases from I/B/E/S, Disclosure, Worldscope and
WEFA as an integral part of its investment research services and will integrate
information from Extel. Consequently, it helps these Primark companies gain
additional customers, as well as customers new to Datastream. Datastream has
also installed the full Disclosure index on its online system and offers index
searches and electronic ordering of hard copy documents to Datastream users.
Vestek is also developing investment management software products that have been
marketed and supported by Datastream's European sales and service personnel.
This responsibility for the European sales and service of Vestek products has
now been shifted to I/B/E/S' European operations as part of the initiatives to
integrate operations within Primark Financial Analytics Division.
ICV. ICV provides real-time, on-line prices, news and research on the U.K.
equities market as well as systems for order entry and trade reporting. Our
software combines real-time prices with news and other data in a unique format,
which we believe has become the standard presentation for U.K. equity data. ICV
has incorporated Datastream's historical information as an add on to its major
product, TOPIC, and is continuing to integrate both Primark company fundamental
data and third party data into its major products.
The core of ICV products is its central systems that take real-time data
from several exchanges and combine the prices with news. The information is then
broadcast to a customer base of nearly 9,000 terminals using the datacast
bandwidth on terrestrial television, leased telecommunication circuits or via
satellite. The data is broadcast to customers' systems, the signal is decoded,
stored on a local database and presented on user screens utilizing software
designed and maintained by ICV. Timeliness and reliability are important aspects
of ICV's service. ICV's central systems are designed to provide state-of-the-art
timeliness by handling incoming data within a few milliseconds through a program
code that resides in memory. Reliability is provided through several back-up
sites. Our investment in trading systems has allowed for the set up of a
U.K.-wide interactive network that can be used to link customers' offices and
provide a future conduit to any new data sources ICV may acquire or develop in
the future. ICV's two principal products are TOPIC and Market-Eye.
TOPIC services accounted for 60%, 53%, and 47% of ICV's total revenue for
the fiscal years ended December 31, 1998, 1997 and 1996, respectively. TOPIC
services provide real-time data on prices and comparative quotes from market
makers combined with historical data and broker research. During 1997, the
London Stock Exchange moved to an electronic order driven market. In connection
with this change, ICV was able to meet its customers' requirements for an
interactive trade execution and reporting system through extensions to its TOPIC
product. The TOPIC services are used by traders and fund managers, stockbrokers,
U.K. clearing banks and major publicly traded corporations.
Market-Eye services accounted for 10%, 12%, and 11% of ICV's revenue for
the fiscal years ended December 31, 1998, 1997 and 1996, respectively.
Market-Eye is predominantly used by small brokers, financial planners and
private investors and is accessible via the Internet. The data include prices
and news and may be combined with analytical and charting packages supplied by
third parties.
ICV has leveraged its existing technology through alliances with other
information companies, providing access to new markets. During 1996, ICV entered
into an agreement with Merrill Lynch to leverage its technology with Merrill
Lynch's expertise in live trading systems. Also during 1996, Primark and ICV
entered into an agreement with Dow Jones & Company, Inc. and its subsidiary Dow
Jones Markets to develop an
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international equity trading information product by combining ICV's technology,
Datastream and other Primark subsidiaries' historical databases, the global news
capability of Dow Jones and the data capability of Dow Jones Markets. The
product was named the Primark/Dow Jones Equities Service.
On May 29, 1998, Dow Jones & Company Inc. announced that it had closed the
sale of its wholly owned subsidiary Dow Jones Markets to Bridge Information
Systems, Inc. Although both Dow Jones & Company and Dow Jones Markets are
separately contractually obligated to provide news and financial information for
the Primark/Dow Jones Equities Service product, we did not begin to sell that
product in mid-1998 as originally planned. This suspension of sales occurred
even though development work on the Primark/Dow Jones Equities Service and
client testing was completed with positive reactions. Since Bridge is both a
competitor and also a supplier, we wanted to ascertain whether the change in the
ownership of Dow Jones Markets would adversely affect the performance of the
Primark/Dow Jones Equities Service in any way before placing the Primark/Dow
Jones Equities Service in operational use at client sites. On September 9, 1998,
Dow Jones Markets advised ICV that it would change the datafeed for the
Primark/Dow Jones Equities Service from the original "Marketfeed" supplied by
Dow Jones Markets to a datafeed provided by Bridge. In our opinion, considerable
cost and time would be required to reprogram the Primark/Dow Jones Equities
Service to use this new Bridge feed and the resulting product would not work as
well. We are renegotiating and expect to provide the market with a successor
product that is wholly owned and controlled by Primark, but including news from
Dow Jones and Company, Inc. and possibly certain data from Bridge Information
Systems, Inc.
Disclosure. Disclosure is a leading provider of "as reported" and
abstracted financial information throughout the world, distributing information
on more than 16,000 U.S. companies and 13,000 foreign companies, derived from a
variety of government and third-party sources. Disclosure's proprietary content
is provided on a subscription and per use basis through electronic media such as
online services and compact laser discs, as well as through printed products.
Disclosure's customers include investment and commercial banks, money managers,
corporations, law, accounting and consulting firms, libraries and universities.
Disclosure's financial information products and services are based upon a
wide spectrum of SEC documents such as Forms 10-K and 10-Q, proxy statements,
registration statements and material event reports, and increasingly non-SEC
documents such as foreign company financial filings, news, economic data,
pricing information and U.S. and foreign annual reports. The information
included in Disclosure's products is obtained through contractual relationships
with the SEC and major stock exchanges, from other Primark companies and through
commercial acquisition of the information. Once acquired, Disclosure indexes,
tags, abstracts and formats the information to allow for ease in navigation,
searches and analysis.
Primark considers Disclosure's electronic media business, comprised of
Global Access, Worldscope, compact discs and revenues from third party
distributors of its value-added database products, as representing Disclosure's
next generation of product offerings. These products now represent approximately
45% of Disclosure's overall revenues, up from less than 20% in the beginning of
1996.
Disclosure's image-based services are delivered through the Global Access
and Laser D products as well as through Research Centers located in major
cities. Global Access is a web-based front end that offers: on-line and
real-time access to Disclosure's proprietary electronic index of public company
documents; on-line delivery of Disclosure's value-added EDGAR database; access
to over ten years of data on 29,000 companies in the Worldscope and SEC
databases; institutional and corporate ownership data; and links to third-party
content such as I/B/E/S, WEFA and industry news. Global Access provides
real-time broadcast alert functionality as well as desktop full text and field
searching and screening of company and industry information with direct
downloading to spreadsheets and word processors. Laser D is a multi-disc CD-ROM
document database that provides a desktop library of information to high volume
document users who require immediate access to documents filed with the SEC,
banking agencies and U.S. and foreign stock exchanges. The Research Centers are
staffed by research specialists who assist customers in locating requested
information and produce alert services for customers who want early
identification of specified documents. Approximately 84%, 82%, and 81% of
Disclosure's total revenues were derived from document services for the twelve
months ended December 31, 1998, 1997 and 1996, respectively.
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Disclosure also provides products that access value added databases that
can be machine read and manipulated by end users. Disclosure's Global Researcher
and Compact D products provide the capability to perform sophisticated searching
of financial and text information on more than 29,000 companies. These products
also provide reporting and graphing functionality. Proprietary Disclosure
databases include: EdgarPlus (SEC filings with value-added navigational and
style tags); the Securities Exchange Act database, with more than 11,000 U.S.
company profiles and financial statement abstracts dating back more than 10
years; and other databases on institutional corporate insider transactions.
These proprietary databases are offered directly by Disclosure and also by
third-party vendors, which target both the commercial and consumer markets,
enhancing Disclosure's product through their hardware, software and market
focus. Such vendors include America Online Inc.: Bridge Information Systems,
Inc., FactSet Research Corp., Lexis-Nexis, UMI Inc. and West Publishing Co.
Approximately 16%, 18%, and 19% of Disclosure's total revenues were derived from
database services for the years ended December 31, 1998, 1997 and 1996,
respectively.
Worldscope. Worldscope contains a collection of descriptive profiles and
standardized financial statements on more than 20,000 companies in 45 countries
and has been fully integrated into Disclosure's product line. The Worldscope
database is standardized to a common definition of generally accepted accounting
principles across all major countries, indexed and organized for cross-border
screening and searching. In addition to its global database, Worldscope offers
an emerging market database. Worldscope products are delivered via third-party
distributors, CD-ROM and online platforms. In October 1996, Primark acquired an
additional 30% ownership in Worldscope, giving Primark an 80% controlling
interest. Primark is presently in negotiations to acquire the remaining 20%
interest in Worldscope.
PRIMARK FINANCIAL ANALYTICS DIVISION
The Primark Financial Analytics Division generated $75.7 million of
revenues for the 1998 fiscal year. This represented 17% of Primark's total
revenues. Within Primark Financial Analytics Division, I/B/E/S accounted for
$40.4 million, Baseline $24.9 million and Vestek $10.5 million of revenues.
I/B/E/S. I/B/E/S is a leading source of global earnings expectational
information for investors, financial institutions and portfolio managers
worldwide. I/B/E/S collects and processes earnings per share estimates provided
by more than 7,000 individual securities analysts, representing approximately
800 firms, on more than 17,000 companies globally. The estimates and related
data are delivered through third party distributors and I/B/E/S Express, a
proprietary software delivery system. Many I/B/E/S products permit the customer
to perform analytical functions and are enhanced by reports and graphics.
I/B/E/S has expanded its product line by launching I/B/E/S Trapeze, a
real-time, electronic brokerage research distribution system. This
state-of-the-art technology delivers brokerage reports to managers' desks in New
York, London and other financial centers within a few moments, complete with
color graphics, audio and video capabilities.
Baseline. Baseline provides portfolio managers at investment companies,
banks, investment consulting firms and other institutional investors with online
valuation graphics that portray critical financial information on more than
7,000 U.S. companies. The Baseline product consists of data and software that
manipulates, analyzes and graphically presents company financial information to
end users through personal computers, typically linked by computer networks.
Baseline's principal supply requirements are for raw financial data which
is acquired from numerous data suppliers including other Primark companies. Once
acquired, the data is verified, manipulated and stored in Baseline's database
for manipulation through Baseline's applications and daily transmission to
customers. Baseline places great importance on the quality of its data and has
developed a program to review its data sources continuously to guarantee quality
control and continuity. Wherever possible, Baseline develops multiple sources of
data to provide backup and cross checking.
Vestek. Vestek develops, markets and supports investment information
services and application software used to manage, analyze and optimize
institutional portfolios of equity, fixed income and other financial
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instruments. Vestek also provides consulting services for investment managers
and plan sponsors. Through its international sales force, Vestek currently
serves more than 250 clients in nine countries.
PRIMARK DECISION INFORMATION DIVISION
The Primark Decision Information Division generated $52.5 million of
revenues for the 1998 fiscal year, representing 12% of Primark's total revenues.
Within Primark Decision Information Division, WEFA accounted for $29.0 million,
and the Yankee Group $23.4 million. Revenues from Primark Decision Economics are
not included in the Primark Division Information Division totals as Primark
Decision Economics is not a majority owned operation and is accounted for on the
equity method.
WEFA. Founded by Nobel Laureate Economist Lawrence R. Klein, who remains
active in the business, WEFA is a leading provider of international value-added
economic information, software and consulting services to companies,
governments, universities and financial institutions. WEFA provides analysis and
forecasts for 60 industries across 60 countries through its Global Industrial
Outlook Service, its electronic database and a semi-annual publication. WEFA
recently introduced the World Market Monitor, a desktop application for tracking
and analyzing global economic conditions. Targeted to financial institutions and
corporations, the product provides users with economic, demographic and
financial information on 175 countries.
Primark Decision Economics. In August 1996, Primark invested in a joint
venture with noted economist Dr. Allen Sinai. This joint venture is called
Primark Decision Economics, Inc. and Dr. Sinai has been its Chief Executive
Officer and Chief Global Economist from the outset. The purpose of this venture
is to disseminate timely value-added economic forecasts, analysis and
commentaries covering the world's major economies and markets, and to support
real-time and longer-term decision-making by financial institutions,
corporations and governments engaged in trading, investing and planning.
The Yankee Group. The Yankee Group consists of a global team of highly
skilled technology and market experts who focuses on identifying current trends
and future directions in the communications and computer industries for business
and consumer markets. The Yankee Group markets these insights by providing
strategic planning, technology forecasting, consulting and market research to
clients worldwide, including vendors and users of major computer and
communications systems and services. The Yankee Group's products and services
fall into three principal categories -- planning services, custom consulting
engagements, and seminars and conferences.
Planning services accounted for 66% of total revenues for each of the years
ended December 31, 1998 and 1997 and 71% for the year ended December 31, 1996.
An annually renewable planning service subscription provides a customer with
consultation time with a research analyst, quarterly audio conferences, access
to the Yankee Group's published research reports and white papers in both
electronic and paper formats and discounts on seminars. The Yankee Group
currently offers 22 planning service packages covering a broad variety of topics
in communications and computing.
Custom consulting engagements, seminars and conferences, and reports
accounted for 34% of total revenues for each of the years ended December 31,
1998 and 1997 and 29% for the year ended December 31, 1996. Custom consulting
engagements often result as an extension of planning services when an inquiry or
a study is more extensive than that offered through a planning service
subscription. Custom consulting contracts are also entered into with external
parties when the company considers the study to be of strategic importance. The
Yankee Group holds an average of 15 to 20 seminars or conferences a year, often
in collaboration with industry publication houses.
CUSTOMERS
No single customer of the information business accounts for more than 2% of
our Company's consolidated revenues.
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Primark Financial Information Division
Datastream/ICV's customers include approximately 5,000 financial
organizations in 52 countries, including investment bankers, brokers, investors,
fund managers, insurance companies and market makers that use financial and
economic information. Other users include publishers of financial journals and
daily newspapers, business schools and universities. Datastream/ICV's customers
typically subscribe through annual contracts. Of Datastream/ICV's revenues, 62%
were derived from the UK, 22% were from Europe, 10% from Asia and 6% from North
America. These contracts are automatically renewed unless notice of cancellation
is given two to three months before the annual renewal date. In 1998, the
renewal rate was 93%.
Disclosure's and Worldscope's customer base includes the majority of U.S.
investment banks, money managers, corporations, law and accounting firms,
together with other institutions and individuals performing financial research.
Disclosure also distributes its information through over 50 third party vendors.
Subscription services accounted for 69%, 62%, and 53% of Disclosure/Worldscope's
revenues for the fiscal years ended December 31, 1998, 1997 and 1996,
respectively. In 1998, Disclosure/Worldscope experienced a renewal rate for its
subscription services of 90%.
Primark Financial Analytics Division
I/B/E/S directly serves more than 2,250 customers worldwide and thousands
more through its distribution networks. I/B/E/S' customers are represented by
financial institutions and portfolio managers worldwide, with particular
interest by the quantitative analysts who access and download information
directly into analytic models. I/B/E/S products are also sold to end users, such
as management consultants and traditional investment analysts who utilize
I/B/E/S for general research. Approximately 84% of I/B/E/S' 1998 revenues were
derived through annual subscription contracts of which 10% were through soft
dollar arrangements. In 1998, I/B/E/S experienced a renewal rate for its
subscription services of 92%.
Baseline serves over 6,000 portfolio managers in nearly 600 organizations,
including investment companies, banks, investment consulting firms, and other
institutional investors located throughout the U.S. and Canada who typically
subscribe through bi-annual and annual contracts. These contracts are
automatically renewed unless notice of cancellation is given before the renewal
date. In 1998, Baseline experienced a renewal rate for its subscription services
in excess of 95%.
Vestek's clients include major banks, plan sponsors, consultants, insurers
and investment managers. The majority of Vestek's revenues are derived from
online subscription services. In 1998, Vestek experienced a renewal rate for its
subscription services of 92%.
Primark Decision Information Division
WEFA has approximately 1,600 customers operating in corporations, financial
services, governments, utilities and other businesses. WEFA performs consulting
and planning services to analyze the potential impact of various economic
alternatives faced by its customers. In 1998, WEFA experienced a renewal rate
for its subscription services of 86%.
The Yankee Group's customers consist primarily of suppliers and users of
computer and communication technology. Yankee's customer base includes major
consulting firms, telecommunications companies, computer hardware manufacturers,
software companies, research analysts and the information technology departments
of major corporations.
MARKETING
The products and services of Primark's information companies are marketed
worldwide. Increasingly, the individual Primark companies are offering each
other's data through their own delivery platforms.
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Primark Financial Information Division
Datastream is located in London, England and has sales personnel which
support the full spectrum of Primark Financial Information Division product
offerings through offices located in Australia, Belgium, Canada, England,
France, Germany, Hong Kong, Italy, Japan, Luxembourg, the Netherlands,
Singapore, South Korea, Spain Sweden, Switzerland, Thailand and the United
States. ICV is located in London, England and has sales and support offices
throughout the U.K. The products of Primark Financial Information Division
include data from I/B/E/S and WEFA.
Disclosure and Worldscope market and distribute their products
predominately in the U.S. Disclosure extends its sales and marketing reach with
Research Centers and through the combined Primark Financial Information Division
sales force. Disclosure has incorporated I/B/E/S and WEFA data in its Global
Access platform.
Since the creation of Primark Financial Information Division, the sales and
customer support operations of all Primark Financial Information Division units
have been integrated with separate managers for the overall range of activities
for North America and for the rest of the world.
Primark Financial Analytics Division
I/B/E/S, headquartered in New York City, with offices in London, Hong Kong
and Tokyo, delivers its products directly to customers via state-of-the-art
electronic delivery media. I/B/E/S Active Express is a PC-based proprietary
software, database management and communications package. The I/B/E/S Active
Express platform separately provides portions of the data from Disclosure, WEFA
and Vestek. I/B/E/S also offers its products through a network of more than 30
electronic third-party distributors including Bloomberg L.P., Bridge Information
Systems, Inc., Datastream/ICV, FactSet Research Corp., FAME, Onesource, Reuters
Group PLC, S & P Compustat and Vestek. These third-party distributors offer
I/B/E/S a mechanism to reach new markets and link I/B/E/S data to other
databases and applications software.
Baseline's product is targeted primarily toward portfolio managers of
domestic equities and carries portions of both I/B/E/S' and Disclosure's data as
part of its product offering. Baseline delivers its product directly to
customers via an online advanced electronic delivery platform. Baseline markets
its product through its own domestic sales force.
Headquartered in San Francisco, Vestek's products are marketed through its
sales force located in New York, Los Angeles and Japan. Vestek's European sales
operations are integrated within I/B/E/S, covering all of Europe from I/B/E/S'
London office. Vestek includes data from I/B/E/S, Worldscope and Datastream in
portions of its product line.
Primark Decision Information Division
WEFA markets its products through its international sales force. With
headquarters in Philadelphia, WEFA has offices in several U.S. cities and in the
U.K., Germany, France, South Africa and Mexico. WEFA also employs analysts in
other countries. WEFA delivers its data online through I/B/E/S, Disclosure and
Datastream/ICV, as well as through its own electronic distribution platform.
WEFA believes its historical association with the Wharton School of Business and
with Nobel Laureate Lawrence R. Klein gives it a distinct advantage in the
marketplace.
The Yankee Group markets its services internationally primarily through its
own sales force. We consider its historic record of accurately forecasting the
general direction of communication and computing technology, together with its
focus on customer support, as its greatest competitive advantages. The Yankee
Group's industry analysts are the company's critical resource. These individuals
have significant expertise in their areas of concentration, gained through
industry experience, constant study of the technology market and ongoing
dialogue with vendors and consumers in the industry. The Yankee Group
headquarters are in Boston, with offices in other U.S. cities, London and Tokyo.
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COMPETITION
The global information industry is highly competitive. There are many large
and successful companies in the information services industry that supply
financial, economic and market research data that compete with products and
services provided by Primark's information businesses.
Principal competitive factors include the quality, reliability and
comprehensiveness of the analytical services and data provided, flexibility in
tailoring services to client needs, experience, innovation, the capability of
technical and client service personnel, data processing and decision support
software, reputation, price and geographic coverage. We distinguish our products
through our broad international coverage, wide range of databases, accuracy of
data, proprietary software applications, reputation, experience and quality of
customer support provided.
Our ability to remain competitive in the information market will depend
largely upon our ability to maintain and develop new products and access new
markets in a cost efficient manner, as well as the integration of all our
information products and services.
TECHNOLOGY DEVELOPMENT
An essential element in our strategy has been to offer proprietary
value-added content through state-of-the-art delivery systems that incorporate
the latest improvements in information technology. Over the past several years,
through selected acquisitions and internal development, the information
technology organizations of our financial, economic and market research
businesses have been strengthened, operations and reliability have been
improved, software development and maintenance procedures have been upgraded and
major steps have been taken toward euro and Y2K compliance. We believe that our
information technology resources provide us with enhanced capabilities. In
addition, we intend to take additional steps to further integrate these
information technology functions.
One of the most promising areas for immediate integration is in building
the Primark Telecommunications Network, a worldwide network for Primark that
integrates all telecommunications requirements in a common architecture,
providing greater capacity and a higher level of service at lower costs. We
anticipate that the Primark Telecommunications Network will also facilitate the
delivery of new products to our entire customer base. The Primark
Telecommunications Network will provide facilities such as high-speed image
transmission, bulk data downloading and voice/data transmission on the same
lines. Elements of the Primark Telecommunications Network will also allow for
the internal data exchange needed to share data effectively for the creation of
new products.
We have developed a database and software capability called the Primark
Information Optimizer. The Primark Information Optimizer is essentially creating
a unified and integrated database for all of Primark, while each of its
components remain as independent databases compatible with existing legacy
products. The Primark Information Optimizer will enable the rapid development of
new products and allow each Primark company to readily deliver all relevant
Primark data to our customers. We plan to use the capabilities of the Primark
Information Optimizer in a data and software product that can be offered to
financial clients for their internal use in retrieving and standardizing
information in multiple formats and stored in multiple databases.
TRADEMARKS
Primark's information companies hold numerous trademarks worldwide that are
subject to continuous renewal. These trademarks are significant to our business,
and are registered in all of our major markets to ensure recognition among our
many global trading customers.
EMPLOYEES
At December 31, 1998, Primark and its subsidiaries employed approximately
2,900 people. We believe our relationship with our employees is excellent.
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ITEM 2. PROPERTIES
We currently occupy our principal executive offices, comprised of
approximately 17,848 square feet, in Waltham, Massachusetts under lease
agreements that expire in July 2001 with provision for two five-year renewal
options.
Baseline occupies 23,000 square feet of space at its New York headquarters.
Baseline's lease for its New York headquarters expires in 1999. Baseline has
signed a lease for 59,000 square feet at New York's World Trade Center which
expires in 2015. Baseline also has an office in Philadelphia.
Datastream's two principal office facilities are located in London,
England. Comprised of an aggregate of 100,995 square feet, these facilities are
occupied under lease agreements that expire in 2005 and 2018. Through its
affiliates, Datastream also occupies, under short-term leases, an aggregate
total of approximately 55,000 square feet of office space, principally located
in Australia, Belgium, Canada, England, France, Germany, Hong Kong, Italy,
Japan, Luxembourg, the Netherlands, Singapore, South Korea, Spain, Sweden,
Switzerland, Thailand and the United States.
Disclosure's headquarters, comprised of approximately 99,640 square feet,
are located in Bethesda, Maryland. The property is occupied under lease
agreements that expire in 2006. Disclosure's regional offices occupy
approximately 63,900 square feet of office space under various lease terms.
These offices are located in California, the District of Columbia, Georgia,
Illinois, Massachusetts, New York and Texas.
I/B/E/S occupies 39,800 square feet of space at its New York City
headquarters under a lease agreement that expires in 2007. Additional office
space totaling 10,950 square feet is located in England, Hong Kong and Japan.
ICV's facilities occupy approximately 36,000 square feet of space that
expires in 2003, and are located primarily in England.
Vestek occupies approximately 13,555 square feet of space at its San
Francisco headquarters under a lease agreement that expires in 1999 with
provision for one five-year renewal option.
WEFA occupies 45,550 square feet of space at its Pennsylvania headquarters
under a lease agreement that expires in 2005. Additional office space of
approximately 29,700 square feet is leased in Canada, Europe and South Africa.
The Yankee Group occupies approximately 23,600 square feet of space at its
Boston headquarters under a lease agreement that expires in 2003 and has
international offices located in London and Tokyo.
ITEM 3. LEGAL PROCEEDINGS
Our management believes that the outcome of all pending legal proceedings
will not, individually, or in the aggregate, have a material adverse effect on
our business, results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed and traded on the New York Stock
Exchange and the Pacific Exchange Inc. Other information set forth in the
section entitled "Supplementary Information -- Quarterly Data" on page 43 of the
Company's 1998 Annual Report is incorporated by reference herein.
Since 1988, the Company has not paid cash dividends on common stock to its
shareholders in order to reinvest available cash in the Company's operations.
Information regarding restrictions on the Company's
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ability to pay cash dividends on its common stock is incorporated by reference
herein from Note 6 to the Consolidated Financial Statements entitled "Short-Term
and Long Term Debt" on page 27 of the Company's 1998 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the section entitled "Selected Financial
Information -- Five Year Data" on page 42 of the Company's 1998 Annual Report is
incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information set forth in the section entitled "Management's Discussion
and Analysis of Results of Operations and Financial Condition" on pages 37
through 41 of the Company's 1998 Annual Report is incorporated by reference
herein.
ITEM 7A. MARKET RISK DISCLOSURES
Foreign exchange Market Risk
A significant portion of Primark's revenues is denominated in currencies
other than the U.S. Dollar. The majority of Primark's revenues are generated
from subscription arrangements of up to two years in duration. Additionally, a
significant percentage of Primark's operating costs is denominated in foreign
currencies. Foreign currency denominated expenses contains a different mix from
foreign revenues. The primary market risk that Primark faces is the risk of the
U.S. Dollar strengthening versus the Euro, Swiss Franc, Swedish Krona and
Japanese Yen.
Derivatives related to the foreign exchange market risk category are
utilized to reduce the exposure of the Company's operating income to excessive
foreign currency fluctuations. Certain principles underlying Primark's foreign
exchange risk management strategy include:
- - Derivative contracts should be assigned to an identified cash flow exposure
and the notional amount of such derivative will not exceed the amount of the
underlying exposure.
- - Levels of foreign exchange hedging will not exceed 90% for exposures with a
horizon within the next 12 months and 75% for the following 12 months.
- - Options can only be written as part of a matched combination strategy or
collar with no net premium received.
Primark Corporation has adopted value at risk ("VAR") analysis as a
management tool to quantify the potential impact of exchange rate volatility on
future operating income. VAR is a measure of the potential loss on a portfolio
within a specified time horizon, at a specified confidence interval. The Company
defines loss as the reduction in the value of operating income denominated in
U.S. Dollars. The VAR calculation parameters and assumptions are as follows:
- - Daily volatility and correlation data.
- - Portfolio data is the four-quarter estimated operating income foreign currency
exposures of each Primark subsidiary.
- - Horizon is one fiscal quarter (65 business days)
- - Home currency is U.S. Dollar
- - Confidence Interval is 95%
- - VAR Method is Monte Carlo using historical correlation and volatility data
sets
- - Periodicity of VAR calculation is quarterly.
Based on the VAR model, Primark estimates there is a 5% chance that the
forecast for operating income for the coming four quarters will deteriorate due
to foreign currency movements over the next calendar quarter by more than $2.43
million before hedging and $2.32 million after taking into account the Company's
hedging portfolio. Hedging instruments included in the VAR calculation include
all foreign currency forward and option contracts held at December 31, 1998.
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Interest Rate Market Risk -- Not for Trading
The Company has an undrawn revolver of $225 million, which carries an
interest rate that varies with LIBOR. In December 1998, the Company issued $150
million, 9 1/4% subordinated debt due December of 2008. An increase in interest
rates would increase the cost to borrow funds under the revolver. An increase in
interest rates would cause the market value of an investment in the Company's
fixed debt to decrease which would benefit the shareholders of the Company.
The Company does not enter into interest rate derivatives for trading
purposes. Derivatives contracts entered into relate to specific financial
liabilities or assets with either fixed or floating interest rates attached. The
objective of the Company's interest rate risk management program is to optimize
and regulate the mix of fixed and floating rate assets and liabilities recorded
on the Company's balance sheet with consideration given to management's plans
for future investments, divestitures and financing. To manage its interest rate
exposures, the Company typically utilizes rate agreements, swaps and options. At
December 31, 1998, the Company was not a party to any outstanding interest rate
derivative agreements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and the related notes thereto and the
Report of Independent Auditors, as contained on pages 18 through 36 of the
Company's 1998 Annual Report, and the "Supplementary Financial Information
- -Quarterly Data," as contained on page 43 of the Company's 1998 Annual Report,
are incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth in the section entitled "Election of Directors"
in the Company's 1999 Proxy Statement for its May 1999 Annual Meeting of
Shareholders is incorporated by reference herein. Information with respect to
the executive officers of the Company as of February 16, 1999 is set forth
below. The Company's Board of Directors elect officers generally for one-year
terms expiring at the next organizational meeting to be held in May, 26 1999.
The term for Mr. Kasputys is governed by his employment agreement. Under this
agreement, Mr. Kasputys is employed as the Chairman, President and Chief
Executive Officer of Primark through December 31, 2001.
Joseph E. Kasputys, age 62, has served as Chairman, President and Chief
Executive Officer of Primark since May 1988. From June 1987 until May 1988, he
served as President and Chief Operating Officer of Primark. Prior to joining
Primark in June 1987, he was Executive Vice President of The McGraw-Hill
Companies, Inc., a publishing and information services company. Prior to joining
McGraw-Hill in 1985, he was President and Chief Executive Officer of Data
Resources, Inc., an economic forecasting and consulting firm. Mr. Kasputys has
been a Primark director since 1987. He is a member of the Nominating Committee
of the Board. Mr. Kasputys is also a director of Lifeline Systems, Inc., a
company that develops and manufactures personal response products and provides
related monitoring and other services and New Era of Networks, Inc., a company
that develops, markets and supports application integration software and
provides application services.
Stephen H. Curran, age 51, has served as Senior Vice President and Chief
Financial Officer of Primark since 1988. In 1997 he was elected Executive Vice
President and Chief Financial Officer.
Michael R. Kargula, age 51, has served as Senior Vice President, General
Counsel and Secretary of Primark since 1988. In 1997 he was elected Executive
Vice President, General Counsel and Secretary.
Steven L. Schneider, age 41, has served as President and Chief Executive
Officer of the Primark Financial Information Division since July, 1998. From
July, 1995 through June 1998, Mr Schneider served as President
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and Chief Executive Officer of Disclosure Incorporated and from February, 1992
to July, 1995 he served as Vice President of Investor Relations for the Company.
William J. Swift III, age 46, has served as Vice President and Tax Counsel
of Primark since 1988. In 1998 he was elected Senior Vice President and Tax
Counsel.
Paul Sandford, age 37, has served in various treasury and accounting
functions of Primark since 1986. Effective April 1, 1999, he was elected to
serve as Vice President and Treasurer.
Linda Luke Lee, age 42, has served as a member of Primark's legal staff in
various senior level capacities since 1985. Effective April 1, 1999, she was
elected to serve as Vice President, Associate General Counsel and Assistant
Secretary.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the sections entitled: "Executive
Compensation," "Directors' Compensation," "Compensation Committee Interlocks and
Insider Participation," "Compensation Committee Report," "Employment Agreements
and Other Arrangements," in the Company's 1999 Proxy Statement for its May 1999
Annual Meeting of Shareholders is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth in the sections entitled "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" in the
Company's 1999 Proxy Statement for its May 1999 Annual Meeting of Shareholders
is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the sections entitled "Executive
Compensation," "Directors' Compensation," "Compensation Committee Interlocks and
Insider Participation" and "Employment Agreements and Other Arrangements" of the
Company's 1999 Proxy Statement for its May 1999 Annual Meeting of Shareholders
is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) LIST OF DOCUMENTS FILED AS PART OF FORM 10-K
1. The following Financial Statements are contained in Primark's 1998
Annual Report filed as Exhibit 13.1 to this report:
- Consolidated Statements of Income for each of the three years in the
period ended December 31, 1998.
- Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1998.
- Consolidated Statements of Financial Position as of December 31, 1998
and 1997.
- Consolidated Statements of Common Shareholders' Equity for each of the
three years in the period ended December 31, 1998.
- Consolidated Statement of Comprehensive Income for each of the three
years in the period ended December 31, 1998.
- Notes to the Consolidated Financial Statements.
- Independent Auditors' Report.
- Management's Discussion and Analysis of Results of Operations and
Financial Condition.
- Supplementary Financial Information-Quarterly Data.
17
<PAGE> 20
The following financial statement schedule is filed as part of this report
and is located on page:
Schedule II Valuation and Qualifying Accounts on page 30.
Independent Auditors' Report on Financial Statement Schedule on page 31.
The Exhibits filed as part of this Annual Report on Form 10-K are listed in
the Index to Exhibits on pages 24 to 27, and are incorporated by reference
herein.
(b) REPORTS ON FORM 8-K
On March 3, 1998, the Company filed a report on Form 8-K under Item 2
related to the acquisition of the EXTEL name and its company fundamental data
business.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession
2.1 Stock Purchase Agreement between the Company and Howard
Anderson dated as of August 9, 1996 (Exhibit 2.1 to the
Company's August 15, 1996 Form 8-K).
2.2 Stock Purchase and Sale Agreement dated as of September 30,
1996, between the Company and American Natural Resources
Company (Exhibit 2.3 to the Company's September 30, 1996
Form 10-Q).
2.3 Amended and Restated Partnership Agreement for Worldscope/
Disclosure International Partners; Irish Partnership
Interest Purchase and Sale Agreement; and Partnership
Interest Purchase and Sale Agreement; dated as of October
15, 1996 (Exhibit 2.5 to the Company's 1996 Form 10-K).
2.4 Stock Purchase Agreement by and among Primark Corporation,
Primark Information Services U.K. Limited and Litton
Industries, Inc. and Litton U.K. Limited dated as of
December 8, 1997 (Exhibit 2.1 to the Company's Form 8-K
filed December 10, 1997).
2.5 Information Technology Services Agreement by and among
Primark Corporation, TASC, Inc. and Litton Industries, Inc.
(Exhibit 2.2 to the Company's Form 8-K filed December 10,
1997).
2.6 Stock Purchase Agreement between Primark Corporation and
Aviation Sales Maintenance, Repair & Overhaul Company, a
division of Aviation Sales Company dated as of August 10,
1998. (Exhibit 99.1 to the Company's Form 8-K filed October
6, 1998).
Articles of Incorporation and By-Laws
3.1 Restated Articles of Incorporation of the Company (Exhibit
3.1 to the Company's Registration Statement No. 333-71183).
3.2 By-Laws of the Company, as amended (Exhibit 3.1 to the
Company's September 30, 1990 Form 10-Q). Instruments
defining the rights of security holders, including
indentures.
Instruments Defining the Rights of Security Holders,
Including Indentures
4.1 Rights Agreement dated May 29, 1997 between Primark
Corporation and Bank Boston, N.A., as Rights Agent, which
includes, 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).
4.2 Indenture dated as of December 21, 1998 between the Company
and State Street Bank and Trust, as Trustee for the 9 1/4 %
Senior Subordinated Notes due 2008. (Exhibit 4.2 to the
Company's Form S-4 dated March 12, 1999).
4.3 Registration Rights Agreement dated January 7, 1997 between
the Company and Joseph E. Kasputys (Exhibit 4.1 to the
Company's 1996 Form 10-K).
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
4.4 Offer to exchange 9 1/4% Senior Subordinated Notes due 2008
for 9 1/4% Senior Subordinated Exchange Notes due 2008 dated
March 19, 1999 (Registration Statement No. 333-71183).
Material Contracts
10.1 Primark Corporation 1992 Stock Option Plan dated March 2,
1992 (Exhibit 10.26 to the Company's 1991 From 10-K);
Amendment dated September 28, 1995 (Exhibit 10.22 to the
Company's 1995 Form 10-K)
10.2 Primark Corporation Stock Option Plan for Non-Employee
Directors as amended, dated January 12, 1988 (Exhibit 10.57
to the Company's 1987 Form 10-K); Amendment dated February
21, 1992 (Exhibit 10.24 to the Company's 1991 Form 10-K);
Amendment dated September 28, 1992 (Exhibit 28.3 to the
Company's September 30, 1992 Form 10-Q); Amendment dated
September 22, 1995 (Exhibit 10.2 to the Company's 1996 Form
10-K).
10.3 Primark Corporation Executive Share Option Scheme (Exhibit
10.26 to the Company's 1992 Form 10-K); Amendment dated
September 28, 1995 (Exhibit 10.24 to the Company's 1995 Form
10-K).
10.4 Primark Corporation Savings and Stock Ownership Plan as
amended and restated, effective January 1, 1997; (filed as
Exhibit 4.4 to the Company's Registration Statement on Form
S-8 dated December 10, 1996).
10.5 Primark Corporation 1992 Employee Stock Purchase Plan dated
March 2, 1992 (Exhibit 10.27 to the Company's 1991 Form
10-K); Amended and Restated Stock Purchase Plan and related
Prospectus as filed under the Securities Act of 1933
(Exhibit 10.27 to the Company's 1993 Form 10-K); Amendment
dated October 4, 1995 (Exhibit 10.26 to the Company's 1995
Form 10-K).
10.6 Form of promissory note to be issued to the Company by
executive officers in connection with the Company's 1988
Management Incentive Plan (Exhibit 10.1 to the Company's
March 31, 1989 Form 10-Q).
10.7 Promissory notes dated September 30, 1988 issued to the
Company by executive officers (Exhibit 10.1 to the Company's
September 30, 1988 Form 10-Q).
10.8 Employment and Option agreements between the Company and
Joseph E. Kasputys dated January 7, 1997 (Exhibit 10.11 to
the Company's 1996 Form 10-K).
10.9 Supplemental Death Benefit and Retirement Income Plan
Agreement as amended and restated, dated March 25 1986
(Exhibit 19.1 to the Company's March 31, 1985 Form 10-Q);
Certified Copy of Resolution amending the Supplemental Death
Benefit and Retirement Income Plan Agreement (Exhibit 10.17
to the Company's 1991 Form 10-K; Amendment dated September
28, 1992 (Exhibit 29.4 to the Company's September 30, 1992
Form 10-Q).
10.10 Supplemental Medical Reimbursement Insurance Plan (Exhibit
10.15 to the Company's 1996 Form 10-K).
10.11 Form of Change of Control Compensation Agreement entered
into between the Company and selected executive officers
(Exhibit 10.60 to the Company's 1996 Form 10-K).
10.12 Refinancing Agreements (Revolving Credit Agreement, Term
Loan Agreement, Pledge Agreement, Collateral Agency
Agreement, and Note Backup Agreement) dated as of February
7, 1997, by and among Primark Corporation, Lenders Parties,
Mellon Bank, N.A. and other related documents (Exhibit 10.17
to the Company's 1996 Form 10-K); Amendment dated May 1,
1997 (Exhibit 10.1 to the Company's June 30, 1997 Form
10-Q); Amendment dated June 30, 1997 (Exhibit 10.2 to the
Company's June 30, 1997 Form 10-Q); Amendment dated December
1, 1997 (Exhibit 10.16 to the Company's 1997 Form 10-K);
Amendment dated March 6, 1998 (Exhibit 10.16 to the
Company's 1997 Form 10-K); Amendment dated May 8, 1998;
Amendment dated June 15, 1998 (incorporated by reference to
the Company's Schedule 13E-4 dated June 26, 1998); Amendment
dated September 10, 1998; Amendment dated December 10, 1998
(Exhibit 10.13 to the Company's Registration Statement No.
333-71183).
10.13 Form of variable rate unsecured loan notes dated October 24,
1996 between the Company and the former shareholders of ICV,
Ltd. (Exhibit 10.18 to the Company's 1996 Form 10-K).
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.14 Credit Agreement date October 23, 1996, by and among the
Company, Lenders Parties and Mellon Bank, N.A. (Exhibit 10.1
to the Company's Form 8-K dated November 13, 1996);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Company's 1996 Form 10-K); Amendment dated December 18, 1996
(Exhibit 10.21 to the Company's 1996 Form 10-K); Amendment
dated January 9, 1997 (Exhibit 10.19 to the Company's 1996
Form 10-K); as amended by the Note Backup Agreement dated
February 7, 1997 (Exhibit 10.17 to the Company's 1996 Form
10-K).
Annual Report to Security Holders
13.1* Primark Corporation 1998 Annual Report (which is not deemed
to be 'filed' except to the extent that portions thereof are
expressly incorporated by reference in this Annual Report on
Form10-K) filed herewith.
Subsidiaries of Registrant
21.1* Subsidiaries of Primark Corporation.
Consents of Experts and Counsel
23.1* Independent Auditors' Consent.
24.1* Powers of Attorney (Included herein from Signature Page).
27.1* Financial Data Schedule for the year ended December 31,
1998.
</TABLE>
- ---------------
* Indicates document filed herewith.
For the Company's documents incorporated by reference, references are to File
No. 1-8260.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 29th day of
March, 1999.
PRIMARK CORPORATION
By: /s/ STEPHEN H. CURRAN
------------------------------------
STEPHEN H. CURRAN
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
The undersigned directors and officers of Primark Corporation, a Michigan
corporation, do hereby severally constitute and appoint Joseph E. Kasputys,
Stephen H. Curran and Michael R. Kargula, and each of them, his or her true and
lawful attorneys-in-fact and agents, each with full power and authority (acting
alone and without the others) to execute in the name and on behalf of the
undersigned as such Director or Officer, an Annual Report on Form 10-K, for the
year ended December 31, 1998, under the Securities and Exchange Act of 1934, of
said Corporation, and all amendments to such Annual Report on Form 10-K; hereby
granting to such attorneys and agents, and each of them full power of
substitution and revocation in the premises; and hereby ratifying and confirming
all that such attorneys and agents, or any of them may do or cause to be done by
virtue of these presents.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOSEPH E. KASPUTYS Chairman, President and Chief January 11, 1999
- --------------------------------------------------- Executive Officer (Principal
JOSEPH E. KASPUTYS Executive Officer)
/s/ STEPHEN H. CURRAN Executive Vice President and Chief January 13, 1999
- --------------------------------------------------- Financial Officer
STEPHEN H. CURRAN
/s/ KEVIN J. BRADLEY Director January 12, 1999
- ---------------------------------------------------
KEVIN J. BRADLEY
/s/ JOHN C. HOLT Director January 12, 1999
- ---------------------------------------------------
JOHN C. HOLT
/s/ STEVEN LAZARUS Director January 10, 1999
- ---------------------------------------------------
STEVEN LAZARUS
/s/ PATRICIA MCGINNIS Director January 12, 1999
- ---------------------------------------------------
PATRICIA MCGINNIS
/s/ JONATHAN NEWCOMB Director January 12, 1999
- ---------------------------------------------------
JONATHAN NEWCOMB
/s/ CONSTANCE K. WEAVER Director January 12, 1999
- ---------------------------------------------------
CONSTANCE K. WEAVER
/s/ STEPHEN H. CURRAN
- ---------------------------------------------------
STEPHEN H. CURRAN
ATTORNEY-IN-FACT
</TABLE>
21
<PAGE> 24
SCHEDULE II
PRIMARK CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
OF CONTINUING OPERATIONS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
BEGINNING OF CHARGED TO FROM END OF
PERIOD INCOME RESERVES(1) PERIOD
------------ ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Reserves deducted from assets to which they
apply:
Allowance for Doubtful Accounts:
Year ended December 31, 1996............. 1,730 943 (439) 2,234
Year ended December 31, 1997............. 2,234 843 (321) 2,756
Year ended December 31, 1998............. 2,756 1,979 (974) 3,761
</TABLE>
- ---------------
(1) Accounts written off.
22
<PAGE> 25
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Primark Corporation
We have audited the consolidated financial statements of Primark
Corporation and subsidiaries as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998, and have issued our
report thereon dated February 16, 1999, which is incorporated by reference in
this Annual Report on Form 10-K. Our audits also included the financial
statement schedule listed in Item 14(a)1 of this Annual Report on Form 10-K.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 1999
23
<PAGE> 1
EXHIBIT 13
18|Primark Annual Report
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
In Thousands Except Per Share Amounts For Years Ended December 31 1998 1997 1996
- ----------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES $ 434,540 $ 397,875 $ 277,063
- ----------------------------------------------------------------- --------- --------- ---------
OPERATING EXPENSES
Cost of services 174,825 157,327 104,479
Selling, general and administrative 165,884 151,309 111,463
Depreciation 17,221 17,371 12,318
Amortization of goodwill 15,625 15,805 10,616
Amortization of other intangible assets 15,969 17,029 10,348
Restructuring charge (Note 4) 67,970 6,800 --
- ----------------------------------------------------------------- --------- --------- ---------
Total operating expenses 457,494 365,641 249,224
- ----------------------------------------------------------------- --------- --------- ---------
OPERATING INCOME (LOSS) (22,954) 32,234 27,839
- ----------------------------------------------------------------- --------- --------- ---------
OTHER INCOME AND (DEDUCTIONS)
Interest expense (9,491) (15,986) (12,468)
Foreign currency gain 263 1,831 1,836
Other 1,391 (784) 2,741
- ----------------------------------------------------------------- --------- --------- ---------
Total other income and (deductions) (7,837) (14,939) (7,891)
- ----------------------------------------------------------------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (30,791) 17,295 19,948
INCOME TAX EXPENSE 2,579 12,441 7,432
- ----------------------------------------------------------------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS (33,370) 4,854 12,516
- ----------------------------------------------------------------- --------- --------- ---------
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax expense of
$5,614, $12,510 and $14,005, respectively 7,927 16,816 16,192
Gain on disposal of discontinued operations, net of income tax
expense of $108,376 and $5,407, respectively 187,286 -- 8,400
- ----------------------------------------------------------------- --------- --------- ---------
Total Discontinued Operations (Note 3) 195,213 16,816 24,592
- ----------------------------------------------------------------- --------- --------- ---------
INCOME BEFORE EXTRAORDINARY LOSS 161,843 21,670 37,108
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT (NOTE 6),
net of income tax benefit of $3,614 in 1998 and $1,379 in 1997 (5,121) (1,955) --
- ----------------------------------------------------------------- --------- --------- ---------
NET INCOME 156,722 19,715 37,108
DIVIDENDS ON PREFERRED STOCK -- -- (359)
- ----------------------------------------------------------------- --------- --------- ---------
NET INCOME APPLICABLE TO COMMON STOCK $ 156,722 $ 19,715 $ 36,749
================================================================= ========= ========= =========
BASIC EARNINGS (LOSS) PER COMMON SHARE (NOTE 8)
Income (loss) from continuing operations $ (1.37) $ 0.18 $ 0.49
Discontinued operations 8.03 0.64 0.99
Extraordinary loss (0.21) (0.07) --
- ----------------------------------------------------------------- --------- --------- ---------
Net income $ 6.45 $ 0.75 $ 1.48
================================================================= ========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION (NOTE 8)
Income (loss) from continuing operations $ (1.37) $ 0.17 $ 0.46
Discontinued operations 8.03 0.61 0.92
Extraordinary loss (0.21) (0.07) --
- ----------------------------------------------------------------- --------- --------- ---------
Net income $ 6.45 $ 0.71 $ 1.38
================================================================= ========= ========= =========
</TABLE>
<PAGE> 2
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 3
19|Primark Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In Thousands For Years Ended December 31 1998 1997 1996
- -------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 156,722 $ 19,715 $ 37,108
Adjustments to reconcile net income to net cash flows from operating activities:
Discontinued operations (7,927) (16,816) (16,192)
Gain on sale of subsidiary (187,286) -- (8,400)
Restructuring charge - intangible assets 60,673 -- --
Extraordinary loss on early extinguishment of debt 8,735 3,334 --
Cash provided by (contributed to) discontinued operations (6,306) 23,380 13,915
Depreciation and amortization 48,815 50,205 33,282
Other charges and credits - net (28,166) (12,471) 12,442
Changes in operating working capital, excluding the effect of acquisitions:
(Increase) in billed, unbilled and other receivables - net (17,462) (5,366) (27,531)
Decrease in other current assets and liabilities 26,478 3,717 3,823
Decrease in accounts payable (817) (2,896) (1,954)
Increase in accrued payroll and benefits 6,719 2,515 3,310
Increase (decrease) in income and other taxes payable - net 3,397 (5,506) 5,056
Increase (decrease) in deferred income 9,127 (1,787) 10,848
- -------------------------------------------------------------------------------- --------- --------- ---------
Net change in operating working capital 27,442 (9,323) (6,448)
- -------------------------------------------------------------------------------- --------- --------- ---------
Net cash provided from operating activities 72,702 58,024 65,707
- -------------------------------------------------------------------------------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable 919,171 225,304 2,598
Repayment of short-term notes payable (946,773) (197,702) (2,598)
Issuance of long-term debt 150,000 100,000 --
Repayment of long-term debt (332,504) (5,000) --
Common stock repurchased and retired (197,263) (56,238) --
Common stock issuance 12,131 12,235 8,264
Debt issue costs and other (2,112) (3,853) (711)
Call premium (4,900) -- (2,804)
- -------------------------------------------------------------------------------- --------- --------- ---------
Net cash provided from financing activities (402,250) 74,746 4,749
- -------------------------------------------------------------------------------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (22,812) (23,965) (19,412)
Capitalized software (17,587) (19,971) (16,916)
Purchase of subsidiaries - net of acquired cash (19,225) (88,089) (71,084)
Proceeds from disposal of discontinued operations 502,000 -- 14,300
Tax paid on disposal of discontinued operations (62,000) -- --
Other - net 171 (4,514) (8,503)
Cash provided by (contributed to) discontinued operations (12,395) (7,965) (4,374)
- -------------------------------------------------------------------------------- --------- --------- ---------
Net cash used for investing activities 368,152 (144,504) (105,989)
- -------------------------------------------------------------------------------- --------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 246 (762) 927
- -------------------------------------------------------------------------------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 38,850 (12,496) (34,606)
CASH AND CASH EQUIVALENTS, JANUARY 1 12,780 25,276 59,882
- -------------------------------------------------------------------------------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 51,630 $ 12,780 $ 25,276
================================================================================ ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID FOR:
Income taxes, including amounts paid for discontinued operations $ 95,431 $ 12,834 $ 12,863
Interest $ 12,638 $ 25,512 $ 20,664
================================================================================ ========= ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 4
20|Primark Annual Report
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
In Thousands At December 31 1998 1997
- ------------------------------------------------------------------------------------------ ----------- -----------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents, at cost (which approximates market value) $ 51,630 $ 12,780
Billed receivables less allowance for doubtful accounts of $3,762 and $2,756, respectively 88,770 70,084
Unbilled and other receivables 13,203 9,546
Federal and state income tax benefit -- 21,304
Other current assets 15,806 24,036
Net assets of discontinued operations 8,900 197,330
- ------------------------------------------------------------------------------------------ ----------- -----------
Total current assets 178,309 335,080
- ------------------------------------------------------------------------------------------ ----------- -----------
INTANGIBLE AND OTHER ASSETS
Goodwill, less accumulated amortization of $81,048 and $41,834,respectively 526,624 556,737
Capitalized data and other intangible assets, less accumulated amortization
of
$29,670 and $20,710, respectively 38,703 47,512
Capitalized software, less accumulated amortization of $18,578 and $20,162, respectively 37,765 48,645
Other 9,797 8,980
- ------------------------------------------------------------------------------------------ ----------- -----------
Total intangible and other assets 612,889 661,874
- ------------------------------------------------------------------------------------------ ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment 79,837 63,773
Leasehold improvements 19,267 17,647
Other 10,901 9,186
- ------------------------------------------------------------------------------------------ ----------- -----------
110,005 90,606
Less - Accumulated depreciation (58,649) (43,751)
- ------------------------------------------------------------------------------------------ ----------- -----------
Net property, plant and equipment 51,356 46,855
- ------------------------------------------------------------------------------------------ ----------- -----------
Total assets $ 842,554 $ 1,043,809
========================================================================================== =========== ===========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ -- $ 27,602
ICV Purchase Notes 6,750 --
Accounts payable 12,059 14,125
Accrued employee payroll and benefits 31,924 24,585
Taxes payable 41,318 10,717
Deferred income 80,004 69,931
Current portion of long-term debt, including capital lease obligations 640 11,301
Other accrued expenses 53,441 43,814
- ------------------------------------------------------------------------------------------ ----------- -----------
Total current liabilities 226,136 202,075
- ------------------------------------------------------------------------------------------ ----------- -----------
LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt, including capital lease obligations 151,489 331,260
Deferred income taxes 9,599 21,133
Other 15,152 18,370
- ------------------------------------------------------------------------------------------ ----------- -----------
Total long-term debt and other liabilities 176,240 370,763
- ------------------------------------------------------------------------------------------ ----------- -----------
Total liabilities 402,376 572,838
- ------------------------------------------------------------------------------------------ ----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
- ------------------------------------------------------------------------------------------ ----------- -----------
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital 90,239 275,370
Retained earnings 355,380 198,658
Accumulated other comprehensive income (5,441) (3,057)
- ------------------------------------------------------------------------------------------ ----------- -----------
Total common shareholders' equity 440,178 470,971
- ------------------------------------------------------------------------------------------ ----------- -----------
Total liabilities and common shareholders' equity $ 842,554 $ 1,043,809
========================================================================================== =========== ===========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 5
21|Primark Annual Report
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
In Thousands For Years Ended December 31 1998 1997 1996
- ---------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK, without par value - authorized 100,000,000 shares,
issued 21,251,455; 26,800,399 and 27,067,951 shares,
respectively, at $0.02 stated value
Balance - beginning of year $ 536 $ 541 $ 489
Issued for employee stock purchase and option plans 11 36 2
Retirement of common stock (122) (41) --
Purchase of subsidiary -- -- 44
Conversion of preferred stock to common -- -- 6
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year 425 536 541
- ---------------------------------------------------------------- --------- --------- ---------
ADDITIONAL PAID-IN CAPITAL
Balance - beginning of year 274,834 296,005 226,005
Tax benefit relating to stock option plans 2,837 22,827 3,218
Issued for employee stock purchase and option plans 9,284 12,198 1,557
Retirement of common stock (197,141) (56,196) --
Purchase of subsidiary -- -- 59,906
Conversion of preferred stock to common - net of costs -- -- 4,738
Gain on treasury shares -- -- 581
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year 89,814 274,834 296,005
- ---------------------------------------------------------------- --------- --------- ---------
RETAINED EARNINGS
Balance - beginning of year 198,658 178,943 141,846
Net income 156,722 19,715 37,108
Dividends on preferred stock -- -- (359)
Change in year-end of subsidiaries -- -- 348
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year 355,380 198,658 178,943
- ---------------------------------------------------------------- --------- --------- ---------
TREASURY STOCK
Balance - beginning of year -- -- (14,814)
Conversion of preferred stock to common -- -- 10,878
Reissued for stock purchase and option plans -- -- 3,936
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year -- -- --
- ---------------------------------------------------------------- --------- --------- ---------
UNEARNED COMPENSATION
Balance - beginning of year -- -- (709)
Amortization of unearned compensation -- -- 709
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year -- -- --
- ---------------------------------------------------------------- --------- --------- ---------
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance - beginning of year (3,057) 341 1,245
Translation adjustment 1,658 (5,221) (1,378)
Income tax benefit (expense) on adjustment (576) 1,823 474
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year (1,975) (3,057) 341
- ---------------------------------------------------------------- --------- --------- ---------
ADDITIONAL MINIMUM PENSION LIABILITY
Balance - beginning of year -- -- --
Additional minimum pension liability (3,466) -- --
- ---------------------------------------------------------------- --------- --------- ---------
Balance - end of year (3,466) -- --
- ---------------------------------------------------------------- --------- --------- ---------
TOTAL COMMON SHAREHOLDERS' EQUITY $ 440,178 $ 470,971 $ 475,830
================================================================ ========= ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 6
22|Primark Annual Report
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
In Thousands For Years Ended December 31 1998 1997 1996
- ---------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Net income $ 156,722 $ 19,715 $ 36,749
Cumulative translation adjustment $ 1,082 $ (3,398) $ (904)
Additional minimum pension liability $ (3,466) $ -- $ --
- ---------------------------------------- --------- --------- ---------
COMPREHENSIVE INCOME $ 154,338 $ 16,317 $ 35,845
======================================== ========= ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BUSINESS
The Company is a global information services company with businesses
strategically focused in supplying financial, economic and market research
information to financial and corporate markets.
B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Primark
Corporation and its majority-owned subsidiaries (the "Company"). All significant
intercompany transactions and balances have been eliminated. Investments in
companies of less than 50 percent are accounted for using the equity method.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior years' statements to conform
to the 1998 presentation.
C. FOREIGN CURRENCY TRANSLATION
The functional currency for most of the Company's foreign operations is the
applicable local currency. Foreign currency accounts are translated into US
dollars using current exchange rates in effect at the balance sheet date for
assets and liabilities, and weighted average monthly exchange rates during the
period for revenues and expenses. Adjustments resulting from translating foreign
functional currency financial statements into US dollars are reported as
accumulated other comprehensive income (loss). Gains and losses resulting from
transactions and certain balance sheet accounts denominated in currencies other
than the applicable functional currency are included in income. The net effect
of changes in cash are separately identified in the consolidated statements of
cash flows.
D. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into currency exchange and interest rate swap agreements to
minimize interest rate and foreign exchange risk. Gains and losses related to
qualifying accounting hedges of firm commitments are deferred and recognized in
income when the hedged transaction occurs. Gains and losses from financial
instruments that do not qualify for hedge accounting are marked to market and
recognized as a gain or loss in the current period. The Company does not hold or
issue derivative financial instruments for trading purposes.
E. REVENUE RECOGNITION
Revenue derived from subscription contracts is generally billed in advance of
services provided. Amounts billed in advance are recorded as deferred income and
recognized ratably over the periods in which services are performed. Revenue
derived from consulting services is recognized based upon time and out-of-pocket
expense or by percentage of completion, depending on the contract terms.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 7
23|Primark Annual Report
NOTES CONTINUED
F. CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term, highly liquid
investments with original maturities of three months or less.
G. GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net
identifiable assets acquired and is amortized on a straight line basis over
estimated useful lives from 5 to 40 years. The Company regularly evaluates the
net carrying value of all long-lived assets, including intangibles and goodwill,
for recoverability based upon the undiscounted future cash flows associated with
these assets.
H. CAPITALIZED SOFTWARE
Effective January 1, 1998, the Company adopted the provisions of the AICPA SOP
No. 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use." Adoption of this pronouncement did not have a material effect
on the reported results of operations or financial position. Costs related to
the conceptual formulation and design of software developed for internal use are
expensed as incurred. Costs to support or service software are expensed as
incurred.
I. CAPITALIZED DATA AND OTHER INTANGIBLES
Costs incurred to maintain the Company's database assets are expensed as
incurred. Costs associated with the purchase of historical data not currently
part of the Company's database assets, as well as the cost of developing the
history for new database content, are capitalized. Other intangible assets and
liabilities consist of non-compete covenants, trademarks and unfavorable lease
commitments. Data and other intangibles are amortized on a straight line basis
over periods ranging from 3 to 20 years.
J. PROPERTY AND EQUIPMENT
Computer equipment and other property are recorded at cost and depreciated on a
straight line basis over their estimated useful lives, ranging from 3 to 10
years. Leasehold improvements are amortized over the shorter of the remaining
life of the lease or the estimated useful life of the improvement.
K. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between assets
and liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. Deferred tax balances are adjusted to reflect
changes in tax rates expected to be in effect during the periods in which the
temporary differences reverse. As temporary differences reverse, the related
deferrals are recorded to income.
L. ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. The impact of recording
stock-based compensation under a method prescribed by FASB No. 123 is disclosed
in Note 10.
M. REPORTING COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of FASB SFAS No.
130, "Reporting Comprehensive Income." This standard requires companies to
report and display comprehensive income and its components in a full set of
general-purpose financial statements. A consolidated statement of comprehensive
income has been prepared to reflect the implementation of this statement.
N. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND
RELATED INFORMATION
Effective January 1, 1998, the Company adopted the provisions of FASB SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." The
standard requires the reporting of certain information about operating segments
including the basis for the presentation, geographic information and segment
profit or loss. The disclosures relating to this SFAS are included in Note 12.
O. DISCLOSURES ABOUT PENSIONS AND OTHER POST-RETIREMENT BENEFITS
Effective January 1, 1998, the Company adopted the provisions of FASB SFAS No.
132, "Employers Disclosures about Pensions and other Post-Retirement Benefits."
This statement standardizes the disclosure requirements for pensions and other
post-retirement benefits. The disclosures relating to this SFAS are included in
Note 10.
P. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. The standard requires that all companies record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The Company will adopt this statement during fiscal 1999
and is currently assessing the impact the statement will have on the financial
statements.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 8
24|Primark Annual Report
NOTES CONTINUED
2. ACQUISITIONS
During the three years ending December 31, 1998, the Company made the
acquisitions set forth below, each of which has been accounted for as a
purchase. Accordingly, the purchase price has been allocated to the identifiable
net assets acquired. The excess of the purchase price over the net identifiable
assets acquired has been allocated to goodwill and is amortized on a straight
line basis. 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.
A. FISCAL 1998
During 1998, the Company acquired four companies for an aggregate purchase price
of approximately $8,800,000. Goodwill associated with these acquisitions of
approximately $3,450,000 is being amortized over five years. The companies
acquired supplement and enhance existing product offerings and capabilities. Due
to the relative size of the acquisitions made in 1998, no pro forma information
is required for 1998.
B. FISCAL 1997
<TABLE>
<CAPTION>
Summary of Acquisition Costs (000s) WEFA Baseline
- ---------------------------------------- -------- --------
<S> <C> <C>
Cash $ 45,000 $ 40,963
Acquisition Fees 204 233
- ---------------------------------------- -------- --------
Total Consideration $ 45,204 $ 41,196
Acquired Cash (308) (2)
- ---------------------------------------- -------- --------
Consideration Paid $ 44,896 $ 41,194
- ---------------------------------------- -------- --------
Excess of Purchase Price over Fair Value $ 44,979 $ 39,431
======================================== ======== ========
</TABLE>
WEFA
On February 7, 1997, the Company acquired all of the outstanding stock of WEFA
Holdings, Inc. ("WEFA") for $45,000,000 in cash. Headquartered in Pennsylvania,
WEFA is an international provider of value added economic information and
consulting services to Fortune 500 companies, governments, universities and
financial institutions.
Baseline
On January 6, 1997, the Company purchased all of the outstanding stock of
Baseline Financial Services, Inc. ("Baseline") for $40,963,000 in cash. Baseline
provides institutional investors with visual valuation graphics of financial
market information.
C. FISCAL 1996
<TABLE>
<CAPTION>
Summary of Acquisition Costs The Yankee
(000s) ICV Worldscope Group DAFSA
- ---------------------------------------- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Cash $ 40,316 $ 5,000 $ 48,442 $ 9,000
Stock Issued 59,950 -- -- --
Note Issued 8,250 -- -- --
Receivable Forgiven -- 3,889 -- --
Acquisition Fees 3,765 237 119 199
- ---------------------------------------- --------- ------- -------- -------
Total Consideration $ 112,281 $ 9,126 $ 48,561 $ 9,199
Acquired Cash (16,309) (353) (1,600) --
Purchase Price Adjustment -- -- -- (1,316)
- ---------------------------------------- --------- ------- -------- -------
Consideration Paid $ 95,972 $ 8,773 $ 46,961 $ 7,883
- ---------------------------------------- --------- ------- -------- -------
Excess of Purchase Price over Fair Value $ 112,348 $ 3,926 $ 45,025 $ 7,229
======================================== ========= ======= ======== =======
</TABLE>
ICV
On October 24, 1996, the Company acquired all the outstanding stock of ICV
Limited. The purchase price, excluding fees, consisted of $24,007,000 in net
cash, 2,200,000 shares of Primark common stock at a $27.25 market value and
$8,250,000 in six year notes (the "ICV Notes"), issued by the Company to the
sellers (Note 6). ICV supplies a variety of real-time data and news products to
equity traders and investors in London and throughout the United Kingdom. In
accordance with the terms of the purchase agreement, the Company registered the
2,200,000 shares of its common stock in 1998.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 9
25|Primark Annual Report
NOTES CONTINUED
Worldscope
On October 15, 1996, the Company acquired an additional 30% ownership interest
in Worldscope for $5,000,000 in cash, giving Primark a controlling ownership
interest of 80%. Prior to the transaction, Worldscope was a 50% partnership
accounted for under the equity method. In connection with the transaction,
Primark and the previous 50% owner each forgave working capital advances equal
to $3,889,000. The sellers of the 30% interest in Worldscope have a non-expiring
option to sell their remaining 20% ownership to Primark, in increments of 5% or
15%. The price of a 5% increment would be at 5 times the most recent 12 months
of revenue multiplied by the 5% ownership. The price of a 15% increment would be
at 4 times revenue multiplied by the 15% ownership. As of October 15, 2006,
Primark will have the right to purchase an additional 15% of Worldscope.
The Yankee Group
On August 9, 1996, the Company acquired all the outstanding stock of Yankee
Group Research, Inc. (the "Yankee Group"), pursuant to the terms of a stock
purchase agreement by and between the Company and the shareholders of the Yankee
Group. The purchase price included cash payments of $48,442,000 ($10,442,000 was
paid in October of 1998) and a future contingent payment between $0 and
$3,500,000 to the former Yankee shareholders based upon future operating
results. Future contingent payments, if any, are due in the year 2000 and will
be recorded to goodwill when incurred. The Yankee Group provides market research
on telecommunications and computer systems.
DAFSA
On June 18, 1996, Datastream International (France) SA acquired all of the
outstanding stock of Groupe DAFSA ("DAFSA"), for $7,883,000 in cash, net of
purchase price adjustments. DAFSA supplies studies of major sectors of the
French economy such as banking and aerospace to investors. All goodwill
associated with the DAFSA acquisition has been written off as part of the
restructuring charge taken on June 30, 1998.
3. DISCONTINUED OPERATIONS AND DISPOSITIONS
A. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating results
of three discontinued operations separately from the Company's continuing
operations for all periods presented. Consolidated interest expense has been
allocated to discontinued operations based upon their ratio of net assets to
total consolidated net assets. Net assets of discontinued operations represent
the net book value of the Company's investment and consist principally of
working capital, fixed assets and other non-current assets and liabilities.
<TABLE>
<CAPTION>
Discontinued Operations (000s) 1998 1997 1996
- ------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Income/(loss):
TASC $ 3,735 $ 17,086 $ 13,028
TIMCO 4,192 (270) 2,411
PSLC -- -- 753
- ------------------------------ --------- --------- ---------
Total $ 7,927 $ 16,816 $ 16,192
- ------------------------------ --------- --------- ---------
Gain on disposal:
TASC $ 171,115 $ -- $ --
TIMCO 16,171 -- --
PSLC -- -- 8,400
- ------------------------------ --------- --------- ---------
Total $ 187,286 $ -- $ 8,400
- ------------------------------ --------- --------- ---------
Net assets:
TASC $ 8,900 $ 155,376 $ 152,505
TIMCO -- 41,954 39,930
- ------------------------------ --------- --------- ---------
Total $ 8,900 $ 197,330 $ 192,435
============================== ========= ========= =========
</TABLE>
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 10
26|Primark Annual Report
NOTES CONTINUED
TASC
On April 1, 1998, the Company completed the sale of TASC and its affiliated
weather information companies to Litton Industries for $432,000,000 in cash plus
an equity adjustment of $8,900,000. The equity adjustment was originally
estimated at $11,500,000. This amount was disputed by Litton Industries and
subsequently settled in the fourth quarter for $8,900,000.
The Company recorded a gain on the sale of $171,115,000 which includes the
$8,900,000 closing adjustment, transaction costs of $6,137,000, taxes of
$99,856,000 and the net book value of TASC's assets. The cash, net of all
transaction costs and taxes, received by the Company from the foregoing sale was
approximately $334,907,000; $8,900,000 of which was received in January of 1999.
TIMCO
On September 22, 1998, the Company completed the sale of all of the outstanding
common stock of its heavy aircraft maintenance unit, the Triad International
Maintenance Corporation ("TIMCO"), to Aviation Sales Maintenance, Repair &
Overhaul Company ("AVS"), a division of Aviation Sales Company. The transaction
was executed in accordance with a Stock Purchase Agreement dated August 10, 1998
for a cash purchase price of $70,000,000 and resulted in a gain of $16,171,000.
Pursuant to the Stock Purchase Agreement, a working capital adjustment of
$1,300,000 was based upon TIMCO's closing balance sheet as of September 22,
1998, and was received in November, 1998.
PSLC
On September 30, 1996, the Company sold all of the outstanding stock of Primark
Storage Leasing Corporation ("PSLC") for $14,300,000 in cash. The disposal of
PSLC resulted in an after tax gain of approximately $8,400,000 and eliminated
$28,700,000 of non-recourse debt from the Company's balance sheet. The purchaser
has agreed to indemnify the Company from and against all expenses and
liabilities that Primark may incur with respect to any adverse environmental
condition relating to PSLC's natural gas storage fields.
4. RESTRUCTURING AND INTEGRATION CHARGES
A. REORGANIZATION
Effective June 1, 1998, the Company was reorganized in order to focus solely on
its information services businesses. In connection with this reorganization, the
Company recorded in June $68,700,000 in operating expenses for direct and other
reorganization related costs. In addition, an extraordinary loss of $8,735,000
($5,121,000 after tax) was recorded in connection with the early extinguishment
of debt.
The restructuring charge included the write-off of intangible assets for (i)
$25,000,000 of previously capitalized software related to the planned
integration of several product offerings on common software platforms, (ii)
$1,500,000 of data that has been determined to be duplicative and will not be
used as a result of the software platform integration, (iii) write-off of
$23,900,000 of goodwill associated with software and data, which was established
as part of purchase accounting, (iv) write-off of $7,200,000 of goodwill related
to DAFSA, and (v) write-off of $3,100,000 of a trademark no longer used in the
restructured organization. The level of impairment as well as the fair value of
liabilities accrued has been determined based upon the discounted value of
estimated future cash flows.
An additional $8,027,000 of the charge relates primarily to the integration of
domestic and international sales offices and efficiencies gained from
technological advancements that will result in the phased reduction of
approximately 61 employees. In December of 1998, $707,000 of restructuring
accruals was reversed into income for a lease which was bought out by a third
party at terms more favorable than what was originally estimated. As of December
31, 1998, the Company has 52 employees still to be terminated under the
restructuring program.
These employees work in management, sales and administrative support. Details of
the unutilized restructuring and integration costs as of December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
1998 Utilized Dec. 31, 1998
(000s) Provision to Date Accrual
- ------------------------ --------- -------- -------------
<S> <C> <C> <C>
Abandonment of leased
facilities, including
leasehold improvements $5,156 $ 883 $4,273
Salaries and termination
benefits 2,871 1,890 981
- ------------------------ ------ ------ ------
Total $8,027 $2,773 $5,254
======================== ====== ====== ======
</TABLE>
The restructuring accrual is recorded in other current liabilities. The
liability for leasehold improvements and employee severance costs will be
utilized by June 30 of 1999. The liability associated with abandoned lease space
will be amortized over the life of the lease starting on the date of
abandonment.
B. DISCLOSURE
During the first quarter of 1997, the Company recorded a $1,800,000 charge 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 included estimated costs for
employee severance and other benefits of $981,200, asset write-downs of $713,600
and idle facility related costs of $105,200. As part of the restructuring, 114
employees were terminated. The spending for these accrued restructuring costs
was completed in June 1997.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 11
27|Primark Annual Report
NOTES CONTINUED
C. DAFSA
During the second quarter of 1997, the Company recorded a restructuring charge
of $5,000,000 related to the integration and downsizing of operations at DAFSA.
Due to DAFSA's unprofitable condition, tax benefits associated with losses
incurred during 1997, including the restructuring charge, were not recognized.
When the Company acquired DAFSA in June of 1996, approximately $1,500,000 of
integration costs were recorded in determining the purchase accounting. The
subsequent restructuring charge is the result of a plan to further integrate
DAFSA's personnel, space and products with those of the Company's other
subsidiaries. The $6,500,000 total restructuring provision was completed in
early 1997 and included approximately $1,700,000 of costs for exiting a line of
business; the future rent cost of abandoned space of $1,000,000; employee
severance and other benefits of $1,400,000; asset write-downs of $1,200,000; and
legal, professional and other related costs of $1,200,000. The accrual for
abandoned space will be utilized over the remaining life of the lease.
5. Leases
The Company leases a variety of assets principally under non-cancelable
operating lease agreements, including office facilities, real property, and
computer and office equipment. These leases expire at various dates through
2014. Total rent expense for all operating leases was $16,658,000, $15,105,000
and $11,563,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
<TABLE>
<CAPTION>
Future minimum lease commitments (000s) Capital Operating
- --------------------------------------- ------- ---------
<S> <C> <C>
1999 $1,508 $ 16,327
2000 517 16,563
2001 242 15,878
2002 -- 14,180
2003 -- 13,438
Thereafter -- 37,509
- --------------------------------------- ------ --------
Total minimum lease payments 2,267 $113,895
========
Amounts representing interest and other (138)
- --------------------------------------- ------
Present value of net minimum payments 2,129
Current portion (640)
- --------------------------------------- ------
Long-term obligations $1,489
======================================= ======
</TABLE>
6. Short-Term and Long Term Debt
On December 16, 1998, the Company issued $150,000,000 of 9.25% Senior
Subordinated Notes (the "Subordinated Notes") due 2008. The Subordinated Notes
are carried at their principal amount due at maturity. Interest only is due on
the Subordinated Notes and is payable semi- annually on June 15 and December 15.
The Subordinated Notes are unsecured obligations of the Company, contain no
mandatory sinking fund or redemption requirements, and are redeemable in whole
or in part at the option of the Company at redemption prices ranging from
104.625% to 100.00% in 2003 and thereafter, plus accrued interest. In addition,
prior to December 15, 2001, the Company may redeem up to 35% of the principal
amount of the Subordinated Notes with the net cash proceeds of one or more sales
by the Company of its capital stock at a redemption price of 109.250% plus
accrued interest. This redemption may occur provided that at least 65% of the
aggregate principal amount of the Subordinated Notes originally issued remains
outstanding after each such redemption. The Subordinated Notes are subject to
various restrictive covenants. The Company is restricted from paying cash
dividends on its common stock, repurchasing its common stock or making certain
other payments which in the aggregate exceed the sum of: (i) $25,000,000; (ii)
50% of the Company's consolidated net income (cumulative from October 1, 1998);
(iii)100% of the net proceeds received from sales of the Company's common stock
for cash; plus (iv) 100% of the net reduction in investments resulting from
payments of interest, dividends or repayments of debt to the Company, or from
the net cash proceeds from the sale of any such investments. The Company used a
portion of the net proceeds: (i) to repay outstanding borrowings under the
Credit Facility, (ii) to repurchase stock and (iii) for other general corporate
purposes. The Company incurred costs of $4,400,000 in conjunction with the
arrangement, which will be amortized over the term of the debt.
On April 1, 1998, the Company amended the terms of its revolving credit facility
and term loan agreement. Under the terms of the revised agreement, which
became effective April 1, 1998, the Company used the proceeds from the sale of
TASC to (i) prepay all amounts outstanding on the Company's $112,000,000 senior
callable bonds, including a 4.375% premium aggregating $4,900,000, (ii) prepay
$220,000,000 of the Company's outstanding term loan together with accrued
interest thereon, and (iii) prepay approximately $500,000 of the Company's other
indebtedness.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 12
28|Primark Annual Report
NOTES CONTINUED
As a result of the prepayment of debt and amended terms of the revolving credit
facility, the Company wrote off the associated deferred financing costs of
$3,835,000. This cost, plus the call premium of $4,900,000 resulted in an
extraordinary loss of $8,735,000 or $5,121,000 on an after tax basis for the
year ended December 31, 1998.
In conjunction with the above, the Company replaced its outstanding $75,000,000
credit facility with a $225,000,000 revolving credit facility (the "Credit
Facility") which expires in 2002. Interest on the borrowings under the new
revolving credit facility is payable at rates ranging from 0.375% to 1.00% above
the current prevailing LIBOR rate of interest.
On February 7, 1997, the Company entered into a refinancing agreement to replace
funds expended for acquisitions, resulting in an extraordinary after tax loss of
$1,955,000.
On October 24, 1996, the Company entered into five loan agreements totaling
$8,250,000 in connection with the purchase of ICV (Note 2c). The ICV Purchase
Notes are currently callable by the owners and will be paid by Primark no later
than October 24, 2002. Interest on the ICV Purchase Notes is payable quarterly
at the current prevailing LIBOR rate. In November 1997 and April 1998, the
Company paid $500,000 and $1,000,000 respectively, of the ICV Purchase Notes.
Standby letters of credit totaling $8,382,000 were issued to provide credit
enhancement for the payment of the Notes.The standby letters of credit are
secured by a Note Backup Agreement dated February 7, 1997, both of which expire
on November 8, 2002. Under the Note Backup Agreement, Primark is required to
reimburse the bank on demand in the case of a draw under any letter of credit.
Prior to an amendment to the Note Backup Agreement in 1998, Primark was required
to reimburse the bank on October 16, 2000. Letter of Credit fees are based upon
performance pricing and are payable quarterly at rates ranging from 0.625% to
1.25% per annum on the average daily unused portion of the facility.
A. SHORT-TERM DEBT
<TABLE>
<CAPTION>
Short-term bank borrowings (000s) 1998 1997 1996
- ----------------------------------- -------- ------- -------
<S> <C> <C> <C>
Outstanding borrowings at
December 31 $ -- $27,602 $ --
Available for borrowings at
December 31 $225,000 $47,398 $74,650
Weighted average effective interest
rate on average bank borrowings 6.62% 7.74% 8.3%
Aggregate borrowings:
Maximum outstanding $143,716 $32,695 $ 1,871
Average outstanding $ 53,300 $ 5,115 $ 17
ICV Notes $ 6,750 $ -- $ --
=================================== ======== ======= =======
</TABLE>
The Credit Facility expires in 2002 and bears interest on outstanding borrowings
based upon performance pricing which results in rates ranging from 0.375% to
1.00% above the current prevailing LIBOR rate.
B. LONG-TERM DEBT
The Company's outstanding long-term debt, including capital lease obligations,
is shown below.
<TABLE>
<CAPTION>
Long-term debt December 31 (000s) 1998 1997
- -------------------------------------------- --------- ---------
<S> <C> <C>
Primark 9.25% Senior Notes
due 2008 $ 150,000 $ --
Primark 8.75% Senior Notes -- 111,455
Primark bank Term Loan -- 220,000
ICV Purchase Notes due 2002 -- 7,750
Capital lease obligations 2,129 3,356
- -------------------------------------------- --------- ---------
Total debt and capital lease obligations 152,129 342,561
Less current maturities (640) (11,301)
- -------------------------------------------- --------- ---------
Long-term debt and capital lease obligations $ 151,489 $ 331,260
============================================ ========= =========
</TABLE>
7. FINANCIAL INSTRUMENTS
A. FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into forward exchange and currency option contracts to reduce
the exposure of foreign currency fluctuations associated with certain firm
commitments and anticipated cash flows. The Company's principal strategy is to
protect the net cash flow from foreign customers' contracts. As these contracts
are typically under two years in length, most of the derivative financial
instruments are similarly two years or less in duration. The Company principally
enters into contracts to deliver foreign currencies for US dollars at
agreed-upon exchange rates.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 13
29|Primark Annual Report
NOTES CONTINUED
Other contracts include the purchase of British pounds and Irish punts for US
dollars. Counterparties to these agreements are major international financial
institutions. The tables below illustrate the US dollar equivalent of foreign
exchange contracts at December 31, 1998 and 1997 along with unrecorded gross
unrealized gains and losses.
<TABLE>
<CAPTION>
December 31 (000s) 1998
- --------------------------- ----------------------------------
Gross Gross
Unrealized Unrealized
Notional Gains Losses
Amount Deferred Deferred
- --------------------------- -------- ---------- ----------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen $ 3,363 $ -- $ (291)
US Dollars/Irish Punt (112) -- --
Swedish Krona 724 6_
Other 88 21 (11)
$ 4,063 $ 27 $ (302)
- --------------------------- ------- ------- -------
Option Contracts Purchased:
Swedish Krona $ 1,591 $ -- $ (3)
$ 1,591 $ -- $ (3)
=========================== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31 (000s) 1997
- ---------------------------- ------------------------------------
Gross Gross
Unrealized Unrealized
Notional Gains Losses
Amount Deferred Deferred
- ---------------------------- -------- ---------- ----------
<S> <C> <C> <C>
Forward Exchange Contracts:
Japanese Yen $ 2,684 $ 57 $(19)
US Dollars/UK Pound Sterling 5,087 -- --
US Dollars/Irish Punt 5,895 -- --
Deutsche Mark 518 -- --
Swiss Franc 1,061 15 --
French Franc 172 3 --
Swedish Krona 3,588 54 (21)
Other 3,264 254 (9)
- ---------------------------- ------- ---- ----
$22,269 $383 $(49)
============================ ======= ==== ====
Option Contracts Purchased:
Japanese Yen $ 2,903 $193 $ --
US Dollars/UK Pound Sterling 10,665 56 (63)
Deutsche Mark 5,562 22 (16)
Swiss Franc 1,563 14 --
Other 2,048 105 (2)
- ---------------------------- ------- ---- ----
$22,741 $390 $(81)
============================ ======= ==== ====
Option Contracts Sold:
Japanese Yen $ 1,495 $ 3 $ --
US Dollars/UK Pound Sterling 3,520 -- (28)
Deutsche Mark 2,781 12 --
Swiss Franc 735 1 --
- ---------------------------- ------- ---- ----
$ 8,531 $ 16 $(28)
============================ ======= ==== ====
</TABLE>
B. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying and estimated fair values of certain of the Company's financial
instruments are shown below.
<TABLE>
<CAPTION>
Carrying Value Estimated Fair Value
December 31 (000s) 1998 1997 1998 1997
- ------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
Forwards $ 192 $ 753 $ (83) $ 1,087
Options $ 14 $ 195 $ 11 $ 492
Interest rate swaps $ -- $ -- $ -- $ (23)
8.75% Senior Notes $ -- $ 111,455 $ -- $ 115,220
9.25% Senior Notes $ 150,000 $ -- $ 150,000 $ --
=================== ========= ========= ========= =========
</TABLE>
Estimated fair values of these financial instruments were based upon quotations
obtained from investment and commercial bankers using comparable securities. The
fair values of currency forward contracts and currency options were estimated
based on quoted market prices of contracts with similar terms. Other financial
instruments have been excluded as their carrying value approximates their market
value.
8. Earnings Per Share
Basic EPS is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if options to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock.
Options to purchase 785,000 and 227,000 shares of common stock were outstanding
for the years ended 1997 and 1996, respectively, but were excluded in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of common shares. The conversion of preferred stock
outstanding during the first quarter of 1996 was excluded from the computation
of diluted EPS as its effect was anti-dilutive. Because 1998 reflected a loss
from continuing operations,
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 14
30|Primark Annual Report
NOTES CONTINUED
all 2,088,045 options outstanding were excluded. The 1998 options include
1,169,103 which had exercise prices below market. A reconciliation of the
numerators and denominators of the basic and diluted EPS computations for income
from continuing operations is shown below.
SFAS No. 128, "Earnings Per Share," provides that if there is a loss from
continuing operations, a company should not include options and other potential
common shares in the denominator of a dilutive per share computation, even if
including those potential common shares in other dilutive per share computations
may be dilutive to their comparable basic per share amounts. Therefore, in 1998,
Earnings Per Share excludes the dilutive effect of options.
<TABLE>
<CAPTION>
(000s except per share) Income Shares Earnings
December 31, 1998 (Numerator) (Denominator) per Share
- ------------------------------- ----------- ------------- ---------
<S> <C> <C> <C>
BASIC EPS:
Income available to common
shareholders from
continuing operations $(33,370) 24,302 $(1.37)
EFFECT OF DILUTIVE OPTIONS -- -- --
-------- ------ ------
DILUTED EPS:
Income available to common
shareholders from
continuing operations $(33,370) 24,302 $(1.37)
December 31, 1997
- ------------------------------- --------- ------ ------
BASIC EPS:
Income available to common
shareholders from
continuing operations $ 4,854 26,348 $ 0.18
EFFECT OF DILUTIVE OPTIONS -- 1,596 --
-------- ------ ------
DILUTED EPS:
Income available to common
shareholders from
continuing operations $ 4,854 27,944 $ 0.17
December 31, 1996
- ------------------------------- --------- ------ ------
BASIC EPS:
Income from continuing
operations $ 12,516 -- --
Less: preferred stock dividends (359) -- --
-------- ------ ------
Income available to common
shareholders from
continuing operations $ 12,157 24,813 $ 0.49
EFFECT OF DILUTIVE OPTIONS -- 1,758 --
-------- ------ ------
DILUTED EPS:
Income available to common
shareholders from
continuing operations $ 12,157 26,571 $ 0.46
=============================== ======== ====== ======
</TABLE>
9. SHAREHOLDERS' EQUITY
A. COMMON STOCK
On May 20, 1998, the Company announced a "Dutch Auction" self-tender offer,
which expired on June 17, 1998. The Company purchased 4,540,000 shares at $34
per share under this arrangement. Total cost of these shares was $154,987,000,
including legal and accounting fees. In addition, on July 3, 1998, the Company
implemented an open market purchase program to buy up to 2,000,000 shares of its
common stock from time to time, depending on market conditions. During 1998, the
Company purchased a total of 6,108,500 shares at a total cost of $197,263,000,
representing approximately 22.8% of its total outstanding common stock. The
Company issued approximately 560,000 shares of common stock during 1998, in
connection with its stock option and employee stock purchase plan. The Board of
Directors has approved an expansion of the open market purchase program by an
additional 2,000,000 shares. As of December 31, 1998, the Company had authority
to buy back up to 2,431,500 shares of its common stock. However, the Company is
limited to approximately $52,700,000 of additional repurchases under its
existing bank covenants.
On May 28, 1997, the shareholders of the Company approved a resolution that
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.
In December of 1997, the Company received 722,000 shares of its common stock to
satisfy the exercise price of stock options and payment of withholding taxes due
on option exercises totaling $29,604,000. The Company drew on its revolving
credit facility to satisfy the withholding tax payment. In connection with these
option exercises, Primark received a tax deduction related to the option
exercises which resulted in a $25,000,000 refund and reduction in taxes paid.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 15
31|Primark Annual Report
NOTES CONTINUED
In April 1997, the Company's Board of Directors authorized the repurchase of up
to 2,200,000 shares of the Company's common stock from time to time through open
market and/or privately negotiated transactions. During the second quarter of
1997, the Company repurchased 1,349,000 shares of its outstanding common stock
in the open market at a total cost of $26,633,000. Additional purchases under
this authorization have been superceded by the 1998 Board of Directors Stock
Purchase authorizations.
On October 24, 1996, the Company issued 2,200,000 shares of its common stock as
part of the purchase price for ICV Limited (Note 2c).
On May 2, 1996, the Company received notification to convert the total
outstanding shares of Primark Series A, 8.5% Cumulative Convertible Preferred
Stock into shares of Primark common stock. The 674,943 preferred shares plus
accrued and unpaid dividends were converted into 1,164,276 shares of Primark
common stock based upon the stated conversion rate of $14.49. The preferred
shares were held entirely by the Profit Sharing and Stock Ownership Plan of
TASC, a discontinued subsidiary (Note 3).
B. RIGHTS AGREEMENT
The Company's Rights Agreement (the "Rights Agreement") is designed to deter
coercive or unfair takeover tactics, and to prevent a buyer from gaining control
of the Company without offering a fair price to all of its shareholders. The
Rights Agreement generally becomes effective when a potential acquirer
beneficially owns 15% or more of the outstanding shares of Primark's common
stock. Each Right represents the right to purchase one share of Common Stock of
the Company at a price per share of $138.00, subject to adjustment. The Rights,
which do not have voting privileges, are redeemable under certain circumstances
at $0.01 per Right and will expire on January 25, 2008, unless previously
redeemed. At December 31, 1998, common stock reserved for issuance under the
Rights Agreement was 21,251,455 shares.
10. RETIREMENT AND BENEFIT PLANS
A. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Primark Corporation Savings and Stock Ownership Plan was amended and revised
effective January 1, 1997 ("ESSOP") to provide for 401(K) contributions,
employer matching contributions and certain other changes.
Under the 401(K) provisions of the ESSOP, the Company matches 50% of an
employee's contribution up to a maximum of 3% of each participant's
compensation. Participating employees' future benefits are based on their vested
portion of contributions, plus their pro rata share of subsequent fund
investment gains or losses. Under the 401(K) provisions, the Company contributed
$1,427,000 in 1998 and $1,629,000 during 1997. The Company made no contributions
during 1996.
B. FOREIGN PLANS
Substantially all employees in foreign countries
who are not US citizens are covered by various retirement benefit arrangements,
some of which are considered to be defined benefit pension plans for accounting
purposes. Benefits are based primarily on years of service and employees'
salaries near retirement. In general, plans are funded based upon legal
requirements, tax considerations, local practices and investment opportunities.
Plan assets are generally held in restricted trusts or foundations that are
segregated from the assets of the plan sponsor and consist primarily of common
stock and fixed income securities. The changes in benefit obligations and plan
assets are shown below.
<TABLE>
<CAPTION>
December 31 (000s) 1998 1997
- ---------------------------------------------- -------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 20,508 $ 16,274
Service cost 1,589 1,345
Interest cost 1,589 1,362
Net actuarial loss (gain) 5,839 1,926
Benefits paid (569) (399)
- ---------------------------------------------- -------- --------
Benefits obligation at end of year $ 28,956 $ 20,508
- ---------------------------------------------- -------- --------
CHANGE IN PLAN ASSETS
Fair value of fund assets at beginning of year $ 19,661 $ 15,361
Actual return on fund assets 3,463 3,072
Employer contribution 1,322 1,627
Benefits paid (569) (399)
- ---------------------------------------------- -------- --------
Fair value of fund assets at end of year $ 23,877 $ 19,661
- ---------------------------------------------- -------- --------
Funded Status $ (5,079) $ (847)
Unrecognized net actuarial loss 7,555 3,770
Unrecognized prior service cost 100 133
Unrecognized transition (asset)/obligation (1,489) (1,744)
- ---------------------------------------------- -------- --------
Net amount recognized $ 1,087 $ 1,312
- ---------------------------------------------- -------- --------
Amounts recognized in the statement of financial position consist of:
Accrued benefit liability $ (2,479) --
Intangible asset 100 --
Additional minimum pension liability 3,466 --
- ---------------------------------------------- -------- --------
Net amount recognized $ 1,087 --
============================================== ======== ========
</TABLE>
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 16
32|Primark Annual Report
NOTES CONTINUED
The following assumptions were used in accounting for foreign defined benefit
plans.
<TABLE>
<CAPTION>
December 31 1998 1997 1996
- ----------------------------- ---- ---- ----
<S> <C> <C> <C>
Discount rate 6.1% 7.8% 8.5%
Rate of increase in future
compensation 4.0% 5.0% 5.0%
Rate of return on plan assets 7.8% 9.3% 10.0%
</TABLE>
The components of net periodic benefit cost for foreign defined benefit plans
are shown below.
December 31 (000s) 1998 1997 1996
- ------------------------- ------- ------- -------
Service cost $ 1,589 $ 1,345 $ 1,184
Interest cost 1,589 1,362 1,184
Expected return on
plan assets (1,706) (1,627) (1,421)
Amortization of the
transition amount (251) (249) (254)
Amortization of prior
service cost 33 33 34
Amortization of gain/loss 318 133 152
- ------------------------- ------- ------- -------
Net periodic benefit cost $ 1,572 $ 997 $ 879
========================= ======= ======= =======
C. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS
Established in 1992, the Primark Corporation Employee Stock Purchase Plan is
available for all employees of Primark and certain subsidiaries. Under this
plan, employees may purchase through periodic payroll deductions up to a maximum
of 3,000,000 shares of the Company's common stock at 85% of the lower of the
average market price of such shares either at the beginning or end of each six
month offering period.
The Primark Corporation Stock Option Plan for Non-Employee Directors provides
for the granting of options to purchase shares of common stock to each director
who is not an employee. The Primark Corporation 1992 Stock Option Plan provides
for the granting of options to purchase common stock to officers and certain key
employees of Primark and its subsidiaries. This plan limits the number of shares
subject to option that may be granted to any participant in any year to 100,000
shares. Stock options available for grant in any one year under Primark
Corporation's 1992 Stock Option Plan may not exceed 1.5% of the Company's
outstanding common stock as of January 1 each year, plus any excess of available
stock options not granted from previous years. At December 31, 1998, options
available for grant in 1999 included 363,149 of stock options under Primark
Corporation's 1992 Stock Option Plan. Generally, options outstanding under the
Company's stock option plans are: (i) granted at prices equal to the fair market
value of the stock on the date of grant, (ii) vest within a three year period,
and (iii) expire ten years subsequent to award.
Changes in the number of options granted under the Company's various stock
option plans are shown below.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------- --------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
- --------------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
January 1 4,116,406 $20.72 4,375,865 $12.51 4,213,718 $10.07
Granted at
market value 598,375 34.39 1,056,875 24.89 464,932 34.38
Granted above
market value -- -- 500,000 33.34 -- --
Exercised (476,671) 15.52 (1,692,663) 5.68 (251,068) 10.00
Canceled (147,040) 30.22 (123,671) 23.36 (51,717) 23.09
- --------------- --------- ------ --------- ------ --------- ------
Outstanding at
December 31 4,091,070 $22.97 4,116,406 $20.71 4,375,865 $12.51
- --------------- --------- ------ --------- ------ --------- ------
Available for
future grant at
December 31 538,297 657,361 687,560
=============== ========= ====== ========= ====== ========= ======
</TABLE>
The following table sets forth information regarding options outstanding at
December 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------
Number Weighted Weighted Number Weighted
Outstanding Average Average Exercisable Average
Range of at Remaining Exercise at Exercise
Exercise Prices 12/31/98 Life Price 12/31/98 Price
- --------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 7.63-$12.88 749,580 3.30 $11.26 749,580 $11.26
$13.50-$14.00 869,920 5.38 $13.69 869,920 $13.69
$14.63-$24.25 747,800 7.96 $23.38 147,314 $20.21
$25.00-$33.25 1,115,570 8.46 $29.09 294,619 $25.98
$36.38-$42.50 608,200 7.95 $38.94 297,050 $40.70
------------- --------- ---- ------ --------- ------
$ 7.63-$42.50 4,091,070 6.69 $22.97 2,358,483 $18.26
============= ========= ==== ====== ========= ======
</TABLE>
The value of options on their grant date, including the valuation of the option
feature implicit in the Company's stock purchase plan, was measured using the
Black-Scholes option-pricing model. The value of options on their grant date and
key assumptions used to apply this model are shown below.
<TABLE>
<CAPTION>
December 31 1998 1997 1996
- ---------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Grant date fair value $15.59 $12.21 $13.49
Range of risk-free
interest rates 4.63% to 5.85% 5.51% to 6.82% 5.03% to 6.79%
Range of expected life
of option grants 3 to 9 years 3 to 9 years 4 to 9 years
Expected volatility of
underlying stock 37.8% 37.5% 30.9%
====================== ============= ============= =============
</TABLE>
It should be noted that the option-pricing model used was designed to value
readily tradable stock options with relatively short lives. The options granted
to employees are not tradable and have contractual lives of up to ten years. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 17
33|Primark Annual Report
NOTES CONTINUED
The Company uses the intrinsic value method to measure compensation expense
associated with grants of stock options to employees. Had compensation cost been
determined, based upon the option pricing model at the grant date for awards
under these plans, reported net income and earnings per share would have been as
follows.
<TABLE>
<CAPTION>
December 31 (000s except per share) 1998 1997 1996
- ----------------------------------- -------- ------- -------
<S> <C> <C> <C>
Net income $149,269 $12,351 $33,428
Basic EPS $ 6.14 $ 0.47 $ 1.35
EPS Assuming Dilution $ 6.14 $ 0.44 $ 1.26
- ----------------------------------- -------- ------- -------
Net income applicable to
common stock $149,269 $12,351 $33,069
Basic EPS $ 6.14 $ 0.47 $ 1.33
EPS Assuming Dilution $ 6.14 $ 0.44 $ 1.24
=================================== ======== ======= =======
</TABLE>
11. Income Taxes
<TABLE>
<CAPTION>
December 31 (000s) 1998 1997 1996
- ------------------------------ -------- -------- --------
<S> <C> <C> <C>
FEDERAL AND OTHER INCOME
TAXES CONSISTED OF:
Current provision $ 6,756 $ 6,728 $ 8,311
Deferred provision
(benefit) - net (4,177) 5,713 (879)
- ------------------------------ -------- -------- --------
Total federal and other
income tax expense $ 2,579 $ 12,441 $ 7,432
- ------------------------------ -------- -------- --------
RECONCILIATION BETWEEN
STATUTORY AND ACTUAL
INCOME TAXES:
Income (Loss) from
continuing operations (33,370) $ 4,854 $ 12,516
Income tax expense 2,579 12,441 7,432
- ------------------------------ -------- -------- --------
Book pre-tax income (Loss) $(30,791) $ 17,295 $ 19,948
- ------------------------------ -------- -------- --------
Statutory federal income
taxes at a rate of 35% (10,777) 6,053 $ 6,982
ADJUSTMENTS TO FEDERAL
INCOME TAXES:
Amortization of goodwill 4,635 4,737 3,390
Write-off of goodwill 8,341 -- --
Adjustment of federal income
taxes from prior years (2,087) (1,375) (1,121)
Losses of foreign subsidiaries
without current benefit 2,041 2,493 55
State income taxes - net (308) 545 (176)
Effect of foreign tax rates 537 (198) (335)
Other - net 197 186 (1,363)
- ------------------------------ -------- -------- --------
Total federal and other
income tax expense $ 2,579 $ 12,441 $ 7,432
============================== ======== ======== ========
</TABLE>
The 1998 adjustment to federal income taxes is primarily due to a true-up of
prior year tax expense.
The tax effects of significant temporary differences that gave rise to deferred
income tax assets and liabilities are shown below.
<TABLE>
<CAPTION>
December 31 (000s) 1998 1997
- -------------------------------- -------- --------
<S> <C> <C>
Deferred tax assets:
State taxes $ 8,053 $ 9,645
Post-retirement benefits 1,547 1,509
Fixed assets 564 1,212
Unfavorable lease reserve 1,808 961
Net operating loss carry forward 4,560 7,545
Bad debts 769 486
Other 5,575 7,839
- -------------------------------- -------- --------
Total deferred tax assets 22,876 29,197
Valuation allowance (4,560) (7,199)
- -------------------------------- -------- --------
Net deferred tax assets 18,316 21,998
- -------------------------------- -------- --------
Deferred tax liabilities:
Intangibles (20,289) (20,379)
Fixed assets (2,376) (866)
Other (5,551) (11,868)
- -------------------------------- -------- --------
Total deferred tax (liability) (28,216) (33,113)
- -------------------------------- -------- --------
Net deferred tax (liability) $ (9,900) $(11,115)
================================ ======== ========
Net current asset (liability) $ (301) $ 10,018
Net long-term (liability) (9,599) (21,133)
- -------------------------------- -------- --------
Net deferred tax (liability) $ (9,900) $(11,115)
================================ ======== ========
</TABLE>
The Company has numerous carry forward losses in various jurisdictions that
expire in the years 1999 through 2003. The Company has provided a valuation
allowance of $4,560,000 and $7,199,000 in 1998 and 1997, respectively, against
these losses.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 18
34|Primark Annual Report
NOTES CONTINUED
12. Segment and Geographic Information
Based upon the different requirements of Primark's customer base, Primark
Corporation has organized itself into three operating divisions as follows:
PRIMARK FINANCIAL INFORMATION DIVISION. Primark Financial Information Division
("PFID") develops "enterprise-wide" products and services for major financial
institutions on a global basis. It also has responsibility for all transactional
products, both historical and real-time, as well as products supporting
large-scale investment accounting functions, the individual investor and the
referential needs of very large financial market customers. This division also
manages the corporate network, PrimarkNet, which serves as the major delivery
channel to Primark customers on a global basis and across all three divisions.
PFID's product offerings serve most of Primark's customer types and is a major
service provider to the "sell-side" portion of the financial market.
PRIMARK FINANCIAL ANALYTICS DIVISION. Primark Financial Analytics Division ("P
FAD") concentrates on developing and marketing a wide variety of analytical
products for money managers, fund sponsors and other investors. These products
combine the Company's databases, advanced software, analytical techniques and
forecasts for all phases of the investment process. PFAD's product offerings
concentrate on customers in the "buy-side" portion of the financial market.
PRIMARK DECISION INFORMATION DIVISION. Primark Decision Information Division (
"PDID") acquires, develops and operates information content businesses that are
primarily focused in areas other than the financial marketplace. PDID also
provides products and services for decision support to financial customers.
The Primark Corporate Division (CORP) supports the three operating divisions
with tax, accounting and legal services.
The accounting policies of each division conform to those described in the
summary of significant accounting policies. Primark evaluates the performance of
each operating division on the basis of total revenues, earnings before
interest, taxes, depreciation, and amortization (EBITDA), and funds used for the
purchase of fixed assets, including capitalized data and software.
No single customer accounted for more than 2% of Primark's consolidated revenues
in 1998.
<TABLE>
<CAPTION>
COMPARATIVE DIVISION ANALYSIS
December 31, (000s) 1998 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue: PFID $306,369 $ 293,217 $238,684
PFAD 75,715 60,165 30,621
PDID 52,456 44,493 7,758
CORP -- -- --
- ------------------------------------------------------------------------
Total $434,540 $ 397,875 $277,063
- ------------------------------------------------------------------------
EBITDA: PFID $ 67,086 $ 74,757 $ 58,383
(excl. restructuring) PFAD 21,771 16,287 6,027
PDID 11,894 4,786 1,784
CORP (6,921) (6,591) (5,073)
- ------------------------------------------------------------------------
Total $ 93,831 $ 89,239 $ 61,121
- ------------------------------------------------------------------------
Restructuring: PFID $ 47,406 $ 3,350 $ --
PFAD 225 -- --
PDID 17,778 3,450 --
CORP 2,561 -- --
- ------------------------------------------------------------------------
Total $ 67,970 $ 6,800 $ --
- ------------------------------------------------------------------------
Capital Expenditures PFID $ 33,097 $ 35,588 $ 32,457
and Software: PFAD 4,508 6,684 2,871
PDID 1,641 684 61
CORP 1,153 980 939
- ------------------------------------------------------------------------
Total $ 40,399 $ 43,936 $ 36,328
- ------------------------------------------------------------------------
Total Assets: PFID $610,738 $ 607,107 $636,039
PFAD 80,402 94,236 37,613
PDID 104,582 113,903 40,427
CORP 46,832 228,563 206,722
- ------------------------------------------------------------------------
Total $842,554 $1,043,809 $920,801
========================================================================
</TABLE>
EBITDA represents operating income plus depreciation and amortization expense
and should not be considered in isolation from, or as a substitute for,
operating income, net income or cash flows from operating activities computed in
accordance with generally accepted accounting principles. While not computed in
accordance with generally accepted accounting principles, EBITDA is a widely
used measure of a company's performance in its industry because it assists in
comparing performance on a consistent basis without regard to depreciation and
amortization, which may vary significantly depending on accounting methods
(particularly where acquisitions are involved). Management of the Company
believes that EBITDA is a meaningful measure, given its widespread industry
acceptance as a basis for financial analysis. Further, certain of the Company's
debt agreements include financial covenants that are based upon EBITDA, as
defined above. Due to the variety of methods that may be used by companies and
analysts to calculate EBITDA, the EBITDA measures presented herein may not be
comparable to that presented by other companies.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 19
35|Primark Annual Report
NOTES CONCLUDED
The Company's operations by geographic region are presented in the following
table. Most of Primark's international sales originate through its affiliates,
which are located throughout Europe, Asia and the United States.
GEOGRAPHIC REGIONS
<TABLE>
<CAPTION>
(000s) 1998 1997 1996
- ----------------------- --------- ----------- ---------
<S> <C> <C> <C>
DOMESTIC
Operating Revenues $ 189,680 $ 173,150 $ 119,728
Operating Income (Loss)
Non-affiliate $ (24,705) $ 20,107 $ 17,167
Affiliate (2) $ (6,082) $ (7,005) $ (6,374)
Identifiable Assets $ 403,403 $ 393,572 $ 297,193
- ----------------------- --------- ----------- ---------
UNITED KINGDOM
Operating Revenues
Non-affiliate $ 146,062 $ 131,889 $ 76,979
Affiliate (2) $ 42,740 $ 39,894 $ 38,711
Operating Income (Loss)
Non-affiliate $ (26,155) $ (18,933) $ (17,568)
Affiliate (2) $ 42,740 $ 39,894 $ 38,711
Identifiable Assets $ 346,711 $ 363,611 $ 353,098
- ----------------------- --------- ----------- ---------
OTHER INTERNATIONAL
Operating Revenues $ 98,798 $ 92,836 $ 80,356
Operating Income (Loss)
Non-affiliate $ 36,961 $ 36,812 $ 34,970
Affiliate (2) $ (36,658) $ (32,889) $ (32,337)
Identifiable Assets $ 45,609 $ 58,063 $ 63,788
- ----------------------- --------- ----------- ---------
CORPORATE & OTHER
Operating Revenues
Affiliate $ (42,740) $ (39,894) $ (38,711)
Operating Income/(Loss) $ (9,055) $ (5,752) $ (6,730)
Identifiable Assets $ 46,831 $ 228,563 $ 206,722
- ----------------------- --------- ----------- ---------
CONSOLIDATED
Operating Revenues $ 434,540 $ 397,875 $ 277,063
Operating Income
(Loss) (1) (3) $ (22,954) $ 32,234 $ 27,839
Identifiable Assets $ 842,554 $ 1,043,809 $ 920,801
======================= ========= =========== =========
</TABLE>
(1) Corporate and other includes corporate accounts, eliminations and
reclassifications, as well as the net assets of discontinued operations.
(2) Affiliate transfers represent service fees received by Datastream's United
Kingdom operation from its international affiliates.
(3) Includes restructuring charges of $68.0 million in 1998 and $6.8 million in
1997 (Note 4).
13. Commitments and Contingencies
The Company and its subsidiaries are involved in 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 that
the ultimate resolution of these proceedings will not have a material adverse
effect on the Company's financial condition, results of operations or financial
liquidity.
14. Subsequent Events
On December 29, 1998, the Company executed a definitive agreement (the
"Agreement") to acquire 100% of the outstanding common stock of A-T Financial
Information, Inc. ("A-T") for a total purchase price of $35,000,000. The
acquisition was completed on February 5, 1999. Founded in 1987, A-T is a
provider of Windows-compatible financial market data and software to money
managers, traders, banks and other institutional investors. A-T has launched an
Internet site for individual investors, which is marketed as "A-T Attitude."
(Unaudited) On February 22, 1999, the Company announced it had acquired the
Company Fundamental Data business and the Extel brand name ("Extel") from The
Financial Times Group, part of Pearson plc, for approximately $32 million in
cash, subject to certain post closing adjustments. Extel is a widely recognized
brand name in the European and Asian markets and provides summarized financial
statements for rapid corporate analysis, historical company accounts,
image-based data, textual corporate profiles and company news to the investment
industry worldwide.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 20
36|Primark Annual Report
REPORT OF MANAGEMENT
Management of Primark Corporation and its subsidiaries (the "Company") is
responsible for the preparation and integrity of the accompanying consolidated
financial statements and other financial information contained in this Annual
Report. Management believes that all such information has been prepared in
conformity with generally accepted accounting principles, and necessarily
includes certain amounts that are based on management's judgments and estimates.
The consolidated financial statements have been audited by Deloitte & Touche
LLP, the Company's independent Certified Public Accountants. Their audit was
made in accordance with generally accepted auditing standards, as indicated in
their report, and included a review of the Company's system of internal
accounting controls and test of transactions to the extent they considered
necessary to carry out their responsibilities.
In management's opinion, the Company's system of internal accounting controls,
coupled with an ongoing program of internal audits to review such controls,
provide reasonable assurance that the Company's assets are safeguarded from
material loss and the transactions are executed and recorded in accordance with
established procedures. The system is supported by formal policies and
procedures, including an active Code of Conduct program intended to ensure key
employees adhere to the highest standards of personal and professional
integrity. The concept of reasonable assurance is based on the recognition that
the cost of maintaining a system of internal accounting controls should not
exceed the related benefits to be derived.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management, internal auditors and Deloitte &
Touche LLP to review planned audit scope and results and to discuss other
matters affecting the adequacy of internal accounting controls and the quality
of financial reporting. Deloitte & Touche LLP has full and free access to the
Audit Committee and meets with the committee without management representatives
present.
/s/
-------------------------------------------------
Stephen H. Curran
Executive Vice President and Chief Financial Officer
February 16, 1999
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of Primark Corporation:
We have audited the accompanying consolidated statements of financial position
of Primark Corporation and its subsidiaries as of December 31, 1998 and 1997 and
the related consolidated statements of operations, cash flows and common
shareholders' equity and comprehensive income for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Primark Corporation and its
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles.
/s/
------------------
Deloitte & Touche LLP
Boston, Massachusetts
February 16, 1999
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 21
37|Primark Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Primark reported net income of $156.7 million ($6.45 per share) for the twelve
months ended December 31, 1998. This performance compares favorably to the $19.7
million ($0.71 per share) and the $36.7 million ($1.38 per share) reported for
the years 1997 and 1996, respectively. In accordance with SFAS No. 128, the per
share calculation for the twelve months ended December 31, 1998 excludes the
impact of dilutive securities due to the loss from continuing operations
resulting from restructuring charges. Earnings per share calculations for the
1997 and 1996 periods include the effects of dilutive securities.
Primark reported a loss from continuing operations of $33.4 million ($1.37 per
share) in 1998 compared to income of $4.9 million ($0.17 per share) in 1997 and
$12.5 million ($0.46 per share) in 1996. The three-year period includes six
significant acquisitions and two reorganizations needed to establish adequate
product offerings dedicated to the Company's targeted customer market.
The results for the year 1998 were materially affected by a series of major
strategic moves designed to focus Primark in the financial, economic and market
research information business as an efficient competitor with value-added
products and services. During 1998, 1) two operations, TASC and TIMCO, were sold
for an after tax gain of $187.3 million, 2) $332.5 million of senior debt was
repaid and $150 million of senior subordinated debt issued, 3) 6.1 million
shares of common stock were repurchased in a series of transactions, and 4) the
Company was reconfigured into three divisions from a base of twelve separate
operating units, resulting in a restructuring charge of $68.0 million.
The Company had lower margins in the second half of 1998 due to the volatility
experienced in the financial markets in the summer of that year. With a
significant number of Primark's customers directly affected by the resulting
uncertainty, orders for the Company's new product releases as well as new sales
of some of the existing products were slower than anticipated in the third and
fourth quarters of 1998. While Primark has a significant corporate and
government customer base, the financial community provides the largest single
source of new revenues of all customer types. During the third and fourth
quarters of 1998, many of Primark's customers incurred material write-offs and
enacted large layoffs. Cuts and delays in purchases of all types, including the
Company's products, were common. Because over 80% of the Company's sales are
derived from annual subscription contracts, revenues have grown by 9.2% when
compared to 1997 despite unfavorable market conditions. However, significant
infrastructure for sales, support and development was built up during 1998 to
effect the roll-out of several new products, including Global Access Piranha and
the Primark/Dow Jones Equities Service. Given customer cost controls, sales of
new products were less than anticipated. Also, the Primark/Dow Jones Equities
Service has not been introduced in the market due to the need for contractual
adjustments following the sale of a portion of Dow Jones' business which was to
supply Primark with certain data. These factors, coupled with expenses related
to the overall corporate integration efforts, resulted in lower than anticipated
margins for the last half of 1998. The Company achieved an earnings before
interest, taxes, depreciation and amortization (EBITDA) margin of 21.6% and an
operating income margin of 10.4%, excluding restructuring charges, for the year
1998. While these margins are consistent with prior years, they are lower than
the Company had expected.
The sales of TASC and TIMCO were anticipated during 1997. As a result, each
business was reclassified as a discontinued operation during 1997. TASC, a
systems engineering and weather business with sales mainly to government
clients, was sold on April 1, 1998 and TIMCO, a heavy aircraft maintenance
company, was sold on September 22, 1998. TASC was sold for $432.0 million plus
an equity adjustment of $8.9 million, which resulted in an after tax gain of
$171.1 million. TIMCO was sold for $70.0 million plus a working capital
adjustment of $1.3 million, resulting in an after tax gain of $16.2 million.
Additionally, during 1996 the Company sold PSLC, an underground natural gas
leasing operation, for $43.0 million, resulting in an after tax gain of $8.4
million. The proceeds from all sales were used to repay debt and repurchase
common stock. The application of sale proceeds from TASC and TIMCO to
outstanding debt lowered interest cost to $9.5 million in 1998, considerably
less than the $16.0 million and $12.5 million recorded in 1997 and 1996,
respectively.
With the sale of TASC during the second quarter of 1998, the Company needed to
restructure its remaining twelve separate operating units to become more
efficient and meet market requirements. Effective June 1, 1998, the Company was
reorganized to strategically focus solely on its information services
businesses. In connection with this reorganization, the Company recorded pre-tax
charges of $76.7 million,
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 22
38|Primark Annual Report
MANAGEMENT'S DISCUSSION CONTINUED
of which $8.7 million ($5.2 million net of tax) was recorded as an extraordinary
loss on early extinguishment of debt and $68.0 million was recorded as a
restructuring charge to operations. The associated tax benefit of the
extraordinary item and the restructuring charge was $3.6 million and $13.7
million, respectively.
The effect of the $68.0 million restructuring charge was to reduce 1998 earnings
per share by $2.15 per share. The restructuring primarily involved a reduction
in the number of software platforms used to produce and deliver the Company's
products. Most of the software abandoned, while functional and useful in the
previous corporate structure, did not fit in the consolidated strategy necessary
to improve organizational efficiency and integrate products to address market
requirements. The restructuring charge in 1998 includes, 1) $25.0 million of
software designated to be abandoned or integrated into the remaining
infrastructure, 2) $1.5 million of data deemed to be duplicative, 3) $23.9
million of goodwill related to the software and data written off, 4) $7.2
million of goodwill related to DAFSA, and 5) $3.1 million associated with a
trademark no longer used in the new organization. An additional $7.3 million of
the restructuring charge relates to the integration of sales offices made
possible by new technology. This action will result in costs associated with
terminating office leases and the reduction of 61 employees.
During 1997, the Company restructured its DAFSA operation located in France and
consolidated its Disclosure office configuration in the United States, recording
$6.8 million of restructuring charges. Because of the inability to receive tax
relief for the French write-off, the after tax cost of the 1997 restructuring
was $6.2 million or $0.22 per share.
Subsequent to the year ended December 31, 1998, the Company announced the
acquisition of A-T Financial Information, Inc. for a cash purchase price of
$35.0 million. A-T Financial had revenues of $13 million in 1998, principally
from delivering analytical workstations to the financial community. Primark
intends to use A-T Financial's base product to develop improved equities
services by introducing technology currently used in the Company's Financial
Information Division operation and adding content from Primark businesses to the
A-T core product line. A-T's capabilities will also contribute to a more focused
Internet strategy and better Internet products for the entire company. Because
of the opportunities the Company foresees in its new product pipeline, Primark
has decided to accept lower margins for a few quarters during new product
roll-outs in exchange for the opportunity to have increased future sales. During
this time, the Company will also be incurring costs necessary to complete the
integration program. By the second quarter of 1999, the Company expects that the
Piranha roll-out and other new products, including a successor to the
Primark/Dow Jones Equities Service, as well as the cost efficiencies from the
integration program will begin to produce margin improvement.
SUMMARY OF OPERATING RESULTS
Primark reported 1998 revenues of $434.5 million, a 9.2% increase over the
$397.9 million recorded in 1997. The 1997 revenues increased 43.6% over 1996,
due primarily to the acquisitions of Baseline and WEFA in the first quarter of
1997, as well as the acquisitions of ICV, the Yankee Group, DAFSA and the
controlling interest in Worldscope during the second half of 1996. The 1998
revenue increase was supported by 25.8% growth in the Financial Analytics
Division, 17.9% growth in the Decision Information Division and 4.5% growth in
the Financial Information Division. Excluding restructuring charges, the Company
reported EBITDA of $93.8 million in 1998 compared to $89.2 million in 1997 and
$61.1 million in 1996. As a percentage of revenue, the 1998 EBITDA margin of
21.6% compares to the 1997 and 1996 margins of 22.4% and 22.1%, respectively.
The 1997 EBITDA improvement principally reflects the acquisitions made during
1996 and 1997. The 1997 EBITDA was negatively affected by $2.6 million of
operating losses at DAFSA, Primark's French based operation. DAFSA did not have
a material impact on the 1998 operating results. Primark reported operating
income, excluding restructuring charges of $45.0 million in 1998, $39.0 million
in 1997 and $27.8 million in 1996.
PRIMARK FINANCIAL INFORMATION DIVISION
The Financial Information Division reported 1998 revenues of $306.4 million
compared to $293.2 million in 1997 and $238.7 million in 1996. The 1997 growth
rate of 22.8 % is principally a result of the second and third quarter 1996
acquisitions of ICV and 30% of Worldscope, respectively. The 1998 growth rate of
4.5% for the division reflects 10.8% growth from the division's foreign
operations offset by a 7.9% decline in US operations. The foreign operations
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 23
39|Primark Annual Report
MANAGEMENT'S DISCUSSION CONTINUED
represented $216.1 million of the division's 1998 revenue, with Datastream/ICV
as the most significant business unit. Within this sector, ICV real time
products grew 15.4%, PIMS back-office accounting products grew 17.5% and the
Datastream research and data products grew 7.7%. Research products had strong
European sales with 16.0% growth but did experience a 3.6% decline in sales to
the Pacific Basin. The Pacific Basin represents only 5% of Primark's total
revenues. The double-digit revenue growth of the foreign operations was offset
by declines in domestic revenues that are principally represented by
Disclosure's traditional products. Disclosure's electronic products had strong
growth of 16.5% but was offset by the declining traditional product line, which
fell 18.7% in 1998. The traditional product line contains Disclosure's
paper-based sales of fundamental data, which has been declining for several
years and is in fact being replaced by Disclosure's electronic product lines.
Overall growth in domestic operations is expected once the decline in paper
sales levels off, which in turn is expected during 1999.
The Division reported 1998 EBITDA of $67.1 million compared to $74.8 million in
1997 and $58.4 million in 1996. The EBITDA margins of this Division were 21.9%
in 1998, 25.5% in 1997 and 24.5% in 1996. The change in margin from 1996 to 1997
reflects the acquisition of ICV. The 1998 margin reflects the higher cost base
needed to develop and support the Disclosure Piranha and Primark/Dow Jones
Equities Service product introductions, which have been delayed until the first
half of 1999. The Division reported 1998 operating income of $29.9 million
compared to $37.5 million in 1997 and $30.6 million in 1996. This lower 1998
operating income reflects the higher cost base needed for new product
introductions and the decline in Disclosure's traditional product line revenues.
PRIMARK FINANCIAL ANALYTICS DIVISION
The Financial Analytics Division reported revenues of $75.7 million in 1998
compared to $60.2 million in 1997 and $30.6 million in 1996. The revenue growth
in 1997 reflects the acquisition of Baseline. The Division's 1998 growth rate of
25.7% was achieved in part by I/B/E/S product-line growth of 23.2% and Baseline
growth of 36.6%. Both businesses are selling into strong and growing markets and
have exhibited similar growth patterns for several years.
The Financial Analytics Division reported EBITDA of $21.8 million in 1998, $16.3
million in 1997 and $6.0 million in 1996. Revenue growth and efficiencies have
contributed to margin improvement between 1998 and 1997. In 1998, the EBITDA
margin was 28.8% compared to 27.1% in 1997. The division reported 1998 operating
income of $15.7 million compared to $9.9 million in 1997 and $3.0 million in
1996.
PRIMARK DECISION INFORMATION DIVISION
The Decision Information Division reported revenues of $52.5 million in 1998
compared to $44.5 million in 1997 and $7.8 million in 1996. The revenue growth
in 1997 reflects the acquisition of Yankee Group in 1996 and WEFA in 1997. The
1998 growth rate of 17.9% reflects the Yankee Group product line growth of 23.1%
and WEFA growth of 14.0%. The Decision Information Division reported EBITDA of
$11.9 million in 1998, $4.8 million in 1997 and $1.8 million in 1996. The 1998
EBITDA margin of 22.7% is an improvement over the 1997 margin of 10.8%,
principally due to increasing revenue over a constant cost base at Yankee Group.
The Division reported 1998 operating income of $7.5 million compared to $0.3
million in 1997 and $1.1 million in 1996.
CAPITAL RESOURCES & LIQUIDITY
Primark ended 1998 with $51.6 million in cash and cash equivalents compared to
$12.8 million in 1997 and $25.3 million in 1996. The $38.9 million increase in
1998 cash and cash equivalents represents $72.7 million from operating
activities and $368.2 million from investing activities, offset by $402.3
million from financing activities. The year 1998 reflects cash received from the
sale of TASC and TIMCO and the issuance of the 9 1/4 Subordinated Senior Notes,
offset by the repayment of debt and repurchase of common stock. Cash and cash
equivalents decreased $12.5 million between 1997 and 1996, principally as a
result of the purchases of Baseline and WEFA.
Operating activities provided increased cash due to improved operations and
contributions from working capital, which added $27.4 million to cash and cash
equivalents. Working capital used cash of $9.3 million and $6.4 million in 1997
and 1996, respectively. Most of the cash provided from working capital was the
result of the Company receiving $21.3 million of net tax benefits created
primarily by the exercise of stock
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 24
40|Primark Annual Report
MANAGEMENT'S DISCUSSION CONTINUED
options of certain employees. The remaining differences in working capital
reflect the timing of year-end billings to customers, principally at Datastream.
Financing activities for the year 1998 used $402.3 million and were affected by
the following four transactions: a) use of the proceeds from the sale of TASC
and TIMCO to pay down debt, b) amounts borrowed under the Company's line of
credit for shares repurchased under the "Dutch Auction" self tender offer and
share repurchase program, c) common stock issuance pursuant to the Company's
option plans and d) subordinated notes issued to repay bank debt and acquire A-T
Financial. The Company used the proceeds from the sale of TASC to (i) prepay all
amounts outstanding on the Company's $112 million senior callable bonds,
including a 4.375% premium aggregating $4.9 million together with the accrued
interest thereon, (ii) prepay $220 million of the Company's outstanding term
loan together with accrued interest thereon, and (iii) prepay $0.5 million of
the Company's other indebtedness. In conjunction with the sale of TASC, the
Company replaced its outstanding $75 million credit facility with a $225 million
revolving credit facility which expires in 2002. Interest on the borrowings
under the new revolving credit facility is payable at rates ranging from 0.375%
to 1.00% above the prevailing LIBOR rate of interest. The Company used the new
revolving credit facility to repurchase shares and repaid the credit facility
with proceeds from the sale of TIMCO.
On May 20, 1998, the Company announced a "Dutch Auction" self-tender offer,
which expired on June 17, 1998. The Company purchased 4,540,000 shares at $34
per share under this arrangement. Total cost of these shares was $154.9 million,
including legal and accounting fees. On July 3, 1998, the Company implemented an
open market purchase program which was subsequently expanded in the third
quarter of 1998 to buy up to 4,000,000 shares of its common stock from time to
time, depending on market conditions. As of December 31, 1998, 1,568,500 shares
had been repurchased on the open market at a total cost of $42.3 million. As of
January 4, 1999, the Company had purchased an additional 287,546 shares at a
total cost of $7.6 million. For the year, the Company purchased a total of 6.1
million shares at a total cost of $197.3 million, representing approximately
22.8% of its total outstanding common stock.
On December 16, 1998, the Company issued $150.0 million 9.25% Senior
Subordinated Notes due 2008. The Company incurred $4.4 million of costs in
conjunction with this issue, which will be amortized over the life of the issue.
The proceeds from the debt offering were used to repay outstanding borrowings
under the credit facility. Subsequent to year-end, the remaining funds from this
issue were used for the $35.0 million acquisition of A-T Financial. On December
31, 1998 the Company had a debt to total capitalization ratio of 26.5% compared
to 44.0% in 1997 and 34.3% in 1996.
Financing activities in 1997 reflect $56.2 million of share repurchases and
$100.0 million of additional debt issued under the bank credit facilities.
Financing activities in 1996 were not significant.
Investing activities for 1998 provided $368.2 million compared to cash used in
1997 and 1996 of $144.5 million and $106.0 million, respectively. During 1998
the Company received $502.0 million of proceeds from the sale of TASC and TIMCO.
Subsequent to December 31, 1998, the Company received an additional $8.9 million
related to final purchase adjustments on the sale of TASC. During 1998, the
Company also spent $8.8 million to purchase four small acquisitions and $10.8
million to complete the purchase of the Yankee Group. The Yankee Group purchase
contained a contingent pay-out provision based on performance. Investing
activities for 1997 contains the funds expended for the purchase of Baseline and
WEFA, while 1996 reflects funds used to purchase ICV, DAFSA and Worldscope, as
well as the proceeds from the sale of PSLC.
The Company spent $22.8 million on capital equipment during 1998 compared to
$24.0 million in 1997 and $19.4 million in 1996. The Financial Information
Division accounted for $16.3 million of the 1998 purchases with $10.4 million
going towards the purchase of computer equipment to support the new product
lines and to expand support of the current customer base. Primark spent $17.6
million on capitalized software during 1998 compared to $20.0 million in 1997
and $16.9 million in 1996. In 1998, $16.7 million of the software requirements
were at the Financial Information Division to support new products and to expand
operations to meet customer demands.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. The standard requires that all companies record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The Company will adopt this statement during fiscal 1999
and is currently assessing the impact it will have on the financial statements.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 25
41|Primark Annual Report
MANAGEMENT'S DISCUSSION CONCLUDED
YEAR 2000 READINESS DISCLOSURE
The Year 2000 (Y2K) issue relates to a complex set of potential problems arising
from the ways in which computer software and hardware handle dates. Many older
systems use a two-digit date format that may create ambiguities once the new
century begins.
The Company has been actively addressing all known Y2K issues since 1995, with
the goal of providing continuous and reliable service to the Company's customers
and a seamless transition to the new millennium. The Company's Y2K plan focuses
on each of the Company's internal systems, products and third parties with which
the Company has a significant business relationship. In addition to the
databases and software that the Company provides to its customers, the Company
is reviewing, fixing, and testing all aspects of its internal operations - from
hardware systems, software, and desktop PC programs to physical security
systems. This effort involves key data suppliers, hardware manufacturers,
telecommunications companies and electric utilities. The Company is also
prepared to assist its users with Y2K issues relating to their internal systems
that directly interface with the Company's systems. All Primark companies are
working together to achieve compliance by sharing information and resources. The
Company believes that all material systems will be compliant by September of
1999.
All Primark companies dealing with Y2K issues must address the effect this issue
will have on their significant business relationships, including suppliers and
customers. The Company is undertaking steps to work with third party vendors to
understand their ability to continue to provide services and products.
The Company has notified all customers with older products which are not Y2K
compliant that the Company will no longer support these products. The Company
has offered assistance to upgrade such customers to compliant versions. All
other Company products are Y2K compliant. The Company is undertaking a rigorous
verification of suppliers. Primark companies incorporate data derived from many
different suppliers. A major component of the Y2K project is reviewing every one
of the suppliers to ensure compliance on their part. Where there is any doubt
that a supplier will not be taking reasonable actions to ensure compliance, the
Company will seek alternatives within a suitable time frame.
The Company incurred $1.5 million in 1997 and $3.4 million in 1998 related to
the Y2K procedures and estimates costs of $5.0 million for the year ended
December 31,1999. The Company expects to resolve every significant Y2K problem
and have the solutions thoroughly tested by September 30, 1999.
The Company expects its Y2K efforts will be successful. However, the Company's
products and services, as well as the tools that Primark uses to conduct its Y2K
evaluation, are dependent on technological components, equipment and software
that were developed by third parties and that may not be Y2K compliant. Failure
of such third party components, equipment or software to operate properly with
regard to the Y2K could interrupt ongoing operations or require the Company to
incur unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business and operating results.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to the historical information presented here, this report includes
statements that may constitute forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Re form Act of 1995.
Although Primark believes the expectations contained in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove correct. This information may involve risks and uncertainties that could
cause the actual results of Primark to differ materially from the
forward-looking statements. Factors which could cause or contribute to such
differences include, but are not limited to, (i) the risks associated with
operating on a global basis, including fluctuations in the value of foreign
currencies relative to the US dollar, and the ability to successfully hedge such
risks, (ii) the extent to which Primark seeks growth through acquisitions, and
the ability to identify and consummate acquisitions on satisfactory terms, (iii)
uncertainty regarding the development and market acceptance of new products,
(iv) loss of market share through competition, (v) deterioration in economic
conditions, particularly in the financial services industry, and (vi) Primark's
inability to complete the implementation of its Y2K plans on a timely basis.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 26
42|Primark Annual Report
SELECTED FINANCIAL INFORMATION - FIVE YEAR DATA
<TABLE>
(000s) Except Per Share Amounts 1998 1997 1996 1995 1994
- --------------------------------------------------------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL AND OPERATING DATA (1)
Operating revenues $434,540 $ 397,875 $277,063 $184,779 $111,621
Operating income (loss) $(22,954) $ 32,234 $ 27,839 $ 20,886 $ 6,225
Income (loss) from continuing operations $(33,370) $ 4,854 $ 12,516 $ 5,381 $ 1,705
Net income applicable to common stock (2) $156,722 $ 19,715 $ 36,749 $ 16,882 $ 12,316
Basic Earnings per share:
From continuing operations $ (1.37) $ 0.18 $ 0.49 $ 0.21 $ 0.01
Total earnings per share (2) $ 6.45 $ 0.75 $ 1.48 $ 0.88 $ 0.66
Earnings per share assuming dilution:
From continuing operations $ (1.37) $ 0.17 $ 0.46 $ 0.19 $ 0.01
Total earnings per share (2) $ 6.45 $ 0.71 $ 1.38 $ 0.82 $ 0.62
Total assets $842,554 $1,043,809 $920,801 $718,184 $427,950
Total debt, including capital lease obligations $158,879 $ 370,163 $248,340 $239,476 $115,573
Redeemable preferred stock $ -- $ -- $ -- $ 16,874 $ 16,874
Common shareholders' equity (4) $440,178 $ 470,971 $475,830 $354,062 $224,689
EBITDA (3) $ 25,861 $ 82,439 $ 61,121 $ 46,795 $ 24,727
Debt to total capitalization 26.5% 44.0% 34.3% 39.2% 32.4%
Capital expenditures $ 22,812 $ 23,965 $ 19,412 $ 9,803 $ 10,765
Capitalized software $ 17,587 $ 19,971 $ 16,916 $ 5,704 $ 4,372
Cash flows from operations $ 72,702 $ 58,024 $ 65,707 $ 49,305 $ 40,268
Total employees 2,300 2,328 2,025 1,588 769
- --------------------------------------------------------- -------- ---------- -------- -------- --------
COMMON STOCK DATA (4)
Actual shares outstanding 21,251 26,800 27,068 23,317 18,520
Weighted average common shares outstanding 24,302 26,348 24,813 19,150 18,510
Weighted average common and equivalent shares outstanding 24,302 27,944 26,571 20,681 19,953
Book value per share $ 20.71 $ 17.57 $ 17.58 $ 15.18 $ 12.13
Market price per share on NYSE Composite:
High $43 5/8 $ 41 5/8 $ 40 $ 30 1/4 $ 15
Low $22 9/16 $ 18 1/8 $ 21 3/8 $ 12 3/4 $ 11
Close $27 1/8 $ 40 11/16 $ 24 3/4 $ 30 $ 13 1/8
</TABLE>
================================================================================
(1) - The financial data for the Company has been restated to exclude
discontinued operations (Note 3) and includes all acquired companies from
their respective dates of acquisition.
(2) - Includes the following:
a) results of discontinued operations, along with a $187.3 million and
a $8.4 million after tax gain on the sale of discontinued operations
in 1998 and 1996, respectively;
b) an after tax extraordinary loss for the early extinguishment of debt
of $1.5 million, $2.0 million and $534 thousand for 1998, 1997 and
1996, respectively;
c) dividends on the Company's outstanding preferred stock through its
conversion to common in 1996.
(3) - EBITDA represents operating income plus depreciation and amortization
expense and should not be considered in isolation from, or as a
substitute for, operating income, net income or cash flows from operating
activities computed in accordance with generally accepted accounting
principles. While not computed in accordance with generally accepted
accounting principles, EBITDA is a widely used measure of a company's
performance in its industry because it assists in comparing performance
on a consistent basis without regard to depreciation and amortization,
which may vary significantly depending on accounting methods
(particularly where acquisitions are involved). Management of the Company
believes that EBITDA is a meaningful measure given the widespread
industry acceptance as a basis for financial analysis. Further, certain
of the Company's debt agreements include financial covenants that are
based upon EBITDA, as defined above. Due to the variety of methods that
may be used by companies and analysts to calculate EBITDA, the EBITDA
measures presented herein may not be comparable to that presented by
other companies.
(4) - During 1998 and 1997, the Company retired 6,108,500 and 2,071,483 shares
of its common stock, respectively. In May 1996, 1,164,276 shares of
common stock were issued for the conversion of preferred. In December
1995, the Company issued 4,356,200 shares of common stock.
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 27
43|Primark Annual Report
SUPPLEMENTARY FINANCIAL INFORMATION - QUARTERLY DATA
The quarterly data includes the operations of acquired businesses from their
respective dates of acquisition (Note 2). Quarterly earnings per share may not
total for the year as quarterly computations are based on weighted average
common and common equivalent shares outstanding during each quarter. The
following quarterly common stock prices set forth the intraday high and low
market prices per share on the NYSE Composite Tape. As of the close of business
on February 28, 1999, there were 7,302 holders of record of the Company's common
stock.
<TABLE>
<CAPTION>
(000s) Except Per Share Amounts First Second Third Fourth
- -------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
1998
- -------------------------------------------------------------- --------- --------- --------- ---------
Operating revenues, as reported $ 104,411 $ 108,874 $ 108,534 $ 112,721
- -------------------------------------------------------------- --------- --------- --------- ---------
Operating income (1) $ 11,317 $ (57,170) $ 12,091 $ 10,808
- -------------------------------------------------------------- --------- --------- --------- ---------
Income before extraordinary item (1) (3) $ 8,520 $ 126,462 $ 21,935 $ 4,926
- -------------------------------------------------------------- --------- --------- --------- ---------
Net income applicable to common stock (1) (2) (3) $ 8,520 $ 121,341 $ 21,935 $ 4,926
- -------------------------------------------------------------- --------- --------- --------- ---------
Basic earnings per share before extraordinary item (1) (3) $ 0.32 $ 4.49 $ 0.99 $ 0.23
- -------------------------------------------------------------- --------- --------- --------- ---------
Earnings per share before extraordinary item N diluted (1) (3) $ 0.30 $ -- $ 0.96 $ 0.22
- -------------------------------------------------------------- --------- --------- --------- ---------
Market price per share:
High $ 43 5/8 $ 43 5/8 $31 11/16 $ 30 1/8
Low $ 38 $ 31 3/16 $23 5/8 $ 23 9/16
- -------------------------------------------------------------- --------- --------- --------- ---------
1997
- -------------------------------------------------------------- --------- --------- --------- ---------
Operating revenues, as reported $ 94,681 $ 100,932 $ 99,113 $ 103,149
- -------------------------------------------------------------- --------- --------- --------- ---------
Operating income (1) $ 3,797 $ 2,433 $ 11,838 $ 14,166
- -------------------------------------------------------------- --------- --------- --------- ---------
Income before extraordinary item (1) (3) $ 4,115 $ 1,034 $ 7,603 $ 8,918
- -------------------------------------------------------------- --------- --------- --------- ---------
Net income applicable to common stock (1) (2) (3) $ 2,160 $ 1,034 $ 7,603 $ 8,918
- -------------------------------------------------------------- --------- --------- --------- ---------
Basic earnings per share before extraordinary item (1) (3) $ 0.15 $ 0.04 $ 0.29 $ 0.34
- -------------------------------------------------------------- --------- --------- --------- ---------
Earnings per share before extraordinary item N diluted (1) (3) $ 0.14 $ 0.04 $ 0.28 $ 0.32
- -------------------------------------------------------------- --------- --------- --------- ---------
Market price per share:
High $ 28 1/4 $ 26 5/8 $30 11/16 $ 42
Low $ 23 3/8 $ 17 3/8 $25 3/16 $ 26 1/2
- -------------------------------------------------------------- --------- --------- --------- ---------
</TABLE>
(1) Includes for the second and fourth quarter of 1998 restructuring charges of
$68.7 million and $(0.7) million, respectively. Includes for the first and
second quarter of 1997 restructuring charges of $1.8 million and $5.0 million,
respectively (Note 4).
(2) Includes for the 1998 second quarter an after tax extraordinary loss of $5.1
million and for the 1997 first quarter an after tax extraordinary loss of $2.0
million, both of which resulted from the extinguishment of debt (Note 6).
(3) Includes in the second and third quarter of 1998 a $171.1 million and $16.2
million gain, respectively, on the sale of discontinued operations (Note 3).
.....................PRIMARK CORPORATION AND SUBSIDIARIES.......................
<PAGE> 28
44|Primark Annual Report
SHAREHOLDER INFORMATION
1999 Annual Meeting
The Annual Meeting of Shareholders will be held at the Burlington Marriott
Hotel, 1 Mall Road, Burlington, Massachusetts on Wednesday, May 26, 1999 at 11
:00am. Information with respect to this meeting, the proxy statement and proxy
will be mailed on or about April 9, 1999.
Stock Listed
New York and Pacific Stock Exchanges
Trading Symbol: PMK
Corporate Information/Investor Inquiries
The following information is available without charge to shareholders and other
interested parties:
* Annual Report
* Annual Report on Form 10-K filed with the Securities and Exchange
Commission (exhibits filed as part of this report are available upon
payment of a specified fee)
* Quarterly Reports to Shareholders
* Quarterly Reports on Form 10-Q filed with the Securities and Exchange
Commission
To request these publications or if you have any questions about Primark, you
are invited to contact:
Primark Investor Relations
1000 Winter Street, Suite 4300N
Waltham, MA 02451-1241
(781) 466-6611
(800) 755-1032
E-mail: [email protected]
Shareholder Services
All inquiries regarding the following items should be directed to the Stock
Transfer Agent.
* Change of address
* Lost stock certificates
* Duplicate mailings
* Transfer of stock to another person
* Other administrative concerns
Stock Transfer Agent and Registrar
BankBoston
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
(781) 575-3120
(800) 730-6001
http://www.equiserve.com
Independent Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617
(617) 261-8000
The Annual Report
This report is submitted for the general information of the shareholders of
Primark Corporation and is not intended to be used in connection with any sale
or purchase of securities.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF PRIMARK CORPORATION
PRIMARK CORPORATION OWN ALL OF THE ISSUED AND OUTSTANDING COMMON STOCK OF
PRIMARK HOLDING CORPORATION, AND PRIMARK FINANCIAL TECHNOLOGIES, INC., WHICH ARE
ALL DELWARE CORPORATIONS. PRIMARK CORPORATION ALSO HOLDS A 20% INTEREST IN
PRIMARK DECISION ECONOMICS, INC., A MASSACHUSETTS CORPORATION.
Primark Holding Corporation owns all of the issued and outstanding common
stock of:
- Baseline Financial Services, Inc.; a New York Corporation.
- Primark Information Service (U.K.) Limited (U.K.) which owns all the
common stock of:
- Datastream Group (U.K.) which owns Datastream (U.K.);
- Datastream Pension Trustees Limited (U.K.);
- Primark Investment Management Services Limited (U.K.);
- Datastream International Limited (U.K.) which owns all the common
stock of Primark Netherlands B.V. (the Netherlands) and has a branch
in Malaysia.
- I/B/E/S (U.K.) Limited
-Disclosure Limited (U.K.);
-ICV Limited (U.K)
- Primark Switzerland Ltd. (Switzerland)
- Datastream International GmbH (Germany)
- Primark Hong Kong Limited
- Datastream International Inc. (Delaware)
- Datastream International (Japan) K.K. (Japan)
- Primark Australia Pty. Limited (Australia)
- Datastream International (D.C.), Inc. (Delaware)
- Datastream International (Canada) Ltd. (Canada) - Primark Italy S.r.L.
(Italy)
- Datastream International (Sweden) Aktiebolag (Sweden)
- Datastream International (South Africa) Proprietary Limited (South
Africa)
- Primark Korea Limited (Korea)
- Primark (Thailand) Limited (Thailand)
- Primark Singapore Pte., Ltd. (Singapore)
- Vestek Systems, Inc., a California corporation
- Disclosure Incorporated (Delaware) which owns all the issued and
outstanding stock of:
- Disclosure International, Inc. (Delaware) which owns 80% interest in:
- Worldscope/Disclosure LLC which owns all of the issued and outstanding
stock of Worldscope/ Disclosure India Pvt. Ltd.; and
-Worldscope/ Disclosure International Partners (Ireland)
- I/B/E/S International, Inc. (Delaware)which owns all the issued and
outstanding stock of:
- I/BE/S Inc. (Delaware)
- I/B/E/S Japan K.K. (Japan)
- Datastream International (France) SA (France) which owns all the issued
and outstanding stock of Groupe DAFSA S.A. and a 4.4% interest in Globe
On-Line. Groupe DAFSA owns DAFSA Edition SNC and a 33% interest in
Panroma.
<PAGE> 2
- WEFA, Inc. (Delaware) which owns all of the issued and outstanding common
stock of Primark Southern Africa (Pty) Ltd. (S. Africa).
- WEFA GmbH (Germany) which owns all of the issued and outstanding common
stock of WEFA - CEIS GmbH (Germany).
- WEFA S.A. (France)
- Primark Belgium SA (Belgium) - WEFA Canada, Inc. (Canada)
- WEFA (Holdings) Limited, (England), which owns WEFA Limited (England),
which in turns owns Staniland Hall Associates Limited (England)
- WEFA Inc. also owns a 45% interest in Ciemex, Inc. (Delaware), which owns
Ciemex WEFA, Inc. (Delaware)
- Primark Data Company (Delaware)
- Primark Information Service Spain S.A. (Spain)
- Primark Luxembourg SA (Luxembourg) 99% interest held by PHC; remaining 1%
held by Primark Corporation
- Primark Poland S.P. 20.0
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-77751, 2-92579, 33-6009, 33-23876, 33-49132, 33-49134, 333-17567, 333-17563,
333-17561, 333-24677, 333-50923, 333-50925 on Form S-8, in Registration
Statement No. 333-71183 on Form S-4 and Registration Statement No. 333-43299 on
Form S-3 of Primark Corporation and subsidiaries of our report dated February
16, 1999, incorporated by reference in this Annual Report on Form 10-K of
Primark Corporation and subsidiaries for the year ended December 31, 1998.
Boston, Massachusetts
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRIMARK
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
1998 INCLUDED IN THE FORM 10-K AS EXHIBIT 13.1 AND THE 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 51,630
<SECURITIES> 0
<RECEIVABLES> 101,973
<ALLOWANCES> 3,762
<INVENTORY> 0
<CURRENT-ASSETS> 178,309
<PP&E> 110,005
<DEPRECIATION> 58,649
<TOTAL-ASSETS> 842,554
<CURRENT-LIABILITIES> 226,136
<BONDS> 151,489
0
0
<COMMON> 425
<OTHER-SE> 439,753
<TOTAL-LIABILITY-AND-EQUITY> 842,554
<SALES> 0
<TOTAL-REVENUES> 434,540
<CGS> 0
<TOTAL-COSTS> 174,825
<OTHER-EXPENSES> 282,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,491
<INCOME-PRETAX> (30,791)
<INCOME-TAX> 2,579
<INCOME-CONTINUING> (33,370)
<DISCONTINUED> 195,213
<EXTRAORDINARY> (5,121)
<CHANGES> 0
<NET-INCOME> 156,722
<EPS-PRIMARY> 6.45
<EPS-DILUTED> 6.45
</TABLE>
