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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, 1999
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 29, 2000 was $226,056,677, 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 29, 2000 was 20,268,221.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Primark's 1999 Annual Report are incorporated by reference in
Part II, Items 5, 6, 7 and 8. Portions of Primark's 2000 Proxy Statement for its
2000 Annual Meeting of Shareholders, which will be filed within 120 days of
December 31, 1999, 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.................................................. 15
Item 3. Legal Proceedings........................................... 16
Item 4. Submission of Matters to a Vote of Security Holders......... 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 16
Item 6. Selected Financial Data..................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 8. Financial Statements and Supplementary Data................. 17
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 17
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 17
Item 11. Executive Compensation...................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 18
Item 13. Certain Relationships and Related Transactions.............. 18
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K.................................................... 18
Signatures.................................................. 22
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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 US, 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 US 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 securities 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 our three
divisions.
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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:
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 50,000 stocks from 64 developed and emerging
countries, over 200,000 corporate and government bonds from 32 countries
and more than 1,500 major indices.
- ICV. ICV, acquired in 1996, is a leading provider in the UK of on-line
equity trading products. In 1999, ICV had a market share of approximately
70% of on-line UK equities trading.
- Primark Investment Management Services. Primark Investment Management
Services ("PIMS"), acquired as part of Datastream in 1992, is a leading
supplier of computer-based investment valuations and fund management
services in the UK and continental Europe. PIMS provides investment
accounting, portfolio valuation and performance measurement to financial
managers, unit trusts, mutual funds and portfolio managers.
- Disclosure/Worldscope. Disclosure, acquired in 1995, and Worldscope,
acquired 20% in June 1999, 30% in 1996 and 50% 1995, 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 12,000 US companies dating back to 1986, as well as
foreign company filings from more than 20,000 companies in 50 countries.
- Primark Research Centers. Acquired as part of Disclosure in 1995, the
Primark Research Centers ("PRC") provide a full range of research
solutions from personalized research support to fast and convenient
document retrieval. Researchers utilize a repository of documents, online
tools and a network of affiliates to guarantee the accurate and immediate
delivery of virtually any type of information. The Primark Research
Centers are primarily located in the United States and the United
Kingdom.
- A-T Financial Information. A-T Financial Information, Inc ("A-T"),
acquired in February 1999, is a real-time financial information content
provider servicing institutional and retail markets with global
securities information and attendant display and distribution technology.
A-T provides value through creating proprietary content, consolidating
disparate third party data sets and disseminating high performance,
mission-critical data feeds supported by a series of display and
programmatic interfaces to institutional trading and analytical front-end
products, various on-line retail brokerage service providers and Internet
web sites.
- Extel. Primark acquired the company fundamental data business and the
Extel brand name ("Extel") in February 1999. Extel, a widely recognized
brand name in the European and Asian markets, provides "as reported"
company fundamental data covering 15,000 quoted companies in over 55
countries as well as 800 private UK and European companies. Delivery
platforms are Windows-based and provide Internet or direct dial access to
datasets for real-time updates to reports, charts, images and news
through Global Access, a direct datafeed, or leading redistributors.
- ScoreLab. ScoreLab is an Internet business developed by Primark in
mid-1999. Applying patented data mining and ranking methodologies,
ScoreLab's products analyze a wide range of historical financial data
including insider information, earnings estimates, analyst reports and
institutional ownership to create returns, scores or ratings and other
empirical signals about stock performance. ScoreLab generates
subscription-based revenues from institutions and active traders, as well
as e-commerce and advertising revenues.
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PRIMARK FINANCIAL ANALYTICS DIVISION
- I/B/E/S. I/B/E/S, acquired in 1995, is a leading source for analyst
estimates, brokerage research, tools and applied intelligence to the
institutional investor marketplace. I/B/E/S databases are among the most
comprehensive in the industry, covering 18,000 companies in 59 countries,
with forecasts from 831 firms worldwide. I/B/E/S technology solutions
include Active Express and custom web development.
- Baseline. Baseline, acquired in 1997, offers a leading Windows-based,
fully integrated 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 research,
analysis and forecasts on economic information for financial
institutions, corporations, governments and universities.
- Primark Decision Economics. Primark Decision Economics, an unconsolidated
company started in 1996 in which Primark has an equity interest of 20%,
is a global economic and financial market information and advisory
service that specializes in identifying, monitoring, interpreting and
forecasting the impact of interest rates and currency rates on equity and
bond markets worldwide.
- The Yankee Group. Yankee Group, acquired in 1996, is an internationally
recognized leader in strategic planning, technology forecasting and
market analysis focusing on e-commerce, communications and computing
systems for business, industrial and consumer uses. Leveraging its core
research, the Yankee Group develops Internet-enabled market analysis and
provides industry-specific services for energy, media and entertainment
companies.
Primark had net operating revenues of $494.6 million, $434.5 million and
$397.9 million for the twelve months ended December 31, 1999, 1998 and 1997,
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 and
royalty contracts. A majority of these contracts are paid in advance either
quarterly or annually. For the twelve months ended December 31, 1999,
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 has been working to introduce a
comprehensive global equities service by integrating real-time prices,
comprehen-
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sive news and our historical content and analytic capabilities with electronic
trading systems -- all within one seamless product to be delivered to the
market. With GlobalTOPIC and SpeedFeed, we have now achieved this -- the Primark
Global Equities Service. We believe our ability to add new products will
continue to provide us with a competitive advantage.
Leveraging introduction of the euro. In 1999, more than 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 UK
equities trading and provides one of the most comprehensive databases of
European company filings available electronically. Management has capitalized on
these trends first with the introduction of EuroTOPIC, and then with
GlobalTOPIC, both powerful and flexible international equities information
products that combine real-time prices, news and Primark proprietary databases
with investment analytics and trading capabilities.
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 the Internet based
distribution channels and introduce new products and services to both existing
and new customers by concentrating in the following areas.
RETAIL INTERNET. A major retail initiative targeted to the individual
investor is ScoreLab, which currently has operational its insiderSCORES.com
site and is planning to add several additional sites during 2000, such as
scores for Asian insiders, UK insiders, fund managers, analysts and venture
capitalists. These sites will combine Primark data with applications that
give the individual investor unique perspectives on changes to various
real-time data sets. The Company also has its MarketEye product, which
provides real-time prices and news as an Internet service that will be
expanded in the UK and introduced in Continental Europe and the US
throughout 2000. In addition, a retail version of I/B/E/S' Trapeze.net is
being developed to bring global investment research to the individual
investor.
BUSINESS-TO-BUSINESS INTERNET. Most of Primark's core products are
business to business applications that will be transitioned into Internet
based products. Global Access is an example of Primark's transition to a
business-to-business Internet investment information service. Global Access
was a dedicated on-line reference service that has been expanded for
content and functionality over the last several years and is now an
Internet information investment product available to all of our
subscription based customers. Other Primark businesses, such as Baseline,
will also introduce an Internet delivered product set during 2000.
REAL-TIME INTERNET. Several of the Company's products within the
Primark Global Equities Service are Internet-based. GlobalTOPIC, as a
browser-based real-time product, was initially rolled out in the UK and
will be introduced to Continental Europe in 2000. On a worldwide basis,
Primark SpeedFeed is now available for customer Internet sites, from major
financial institutions serving day trading activities.
INTERNET TRADING. Primark will actively participate, either as an
investor or acquirer, in Internet-based direct access trading. The Company
has a business relationship with TradePortal, an Internet company providing
direct access trading. TradePortal uses Primark SpeedFeed and A-T
Financial's software and provides Primark with a share of its transaction
revenues. Separately, an order routing network will be built in Europe that
connects money managers to sell-side institutions, institutions to each
other, and institutions to exchanges and ECNs to permit seamless electronic
trading.
INTERNET DATA SYNDICATION. Internet retail and e-commerce business
will be aggressively pursued by licensing certain portions of Primark's
data for redistribution through other financial Internet sites, as has been
done with AOL, Microsoft Investor and Yahoo!.
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WEB SITE DEVELOPMENT. The web site development business will be
expanded through Primark's leading software technology, along with
providing appropriate data to these new sites.
WIRELESS. The Primark Financial Channel is currently being developed
and will be sold to both the retail and institutional marketplace in
cooperation with a third party developer.
Leveraging technology. We will continue to use advanced information
technology to increase the efficiency, speed and flexibility of our data
gathering, database construction, customer delivery efforts and Internet
capabilities. For example, our new technology facilitates the integration of
multiple databases maintained in diverse computer systems for use by our
analytics packages. This will allow us to continue to leverage existing brands
and databases to provide new products to new and existing customers. Through the
use of advanced information technology, Primark has transformed Disclosure from
a primarily paper-based business to one that now derives approximately 57% of
its revenues from electronic delivery to the desktop and further anticipates
moving even more business to new web based technology platforms conducive for
Internet delivery.
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 1999, 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 seven years. In order to capitalize
on the advantages expected to result from the integration of these acquired
businesses, in mid-1998 we reorganized our twelve operating units into an
integrated company totally and solely committed to financial, economic and
market research content and applications. We believe that the restructuring has
enabled 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.
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For example:
ASSET DEPLOYMENT CRITERIA. The allocation of resources across
different asset categories -- equity versus fixed income and international
versus domestic, as well as industry selection. Our products that serve
these activities are from Vestek and I/B/E/S (Primark Financial Analytics
Division) and WEFA and Primark Decision Economics (Primark Decision
Information Division).
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 products that serve these
activities are from Datastream, Disclosure, Worldscope, Extel and ICV
(Primark Financial Information Division) and Baseline, I/B/E/S and Vestek
(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 TOPIC, GlobalTOPIC 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 products that serve these
activities are from Datastream and Primark Investment Management Services
within the Financial Information Division and Vestek within the 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 TOPIC, GlobalTOPIC, 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 TOPIC and
GlobalTOPIC 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 with
fundamental information, analyses and forecasts from our other business
units. Similarly A-T's products fulfill the same role in North America.
Primark SpeedFeed provides real-time securities prices sourced directly
from the world's major markets.
CORPORATE FINANCE. The traditional investment banking functions
involving the underwriting of securities, determining capital structure and
merger and acquisition activity are very information
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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, governmental organizations and retail customers.
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
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 the
Yankee Group.
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 the Yankee Group.
RETAIL CUSTOMERS. The following Internet and wireless initiatives
demonstrate our strategy to introduce many new Internet-based products for
self-directed investors. Our new retail web site, insiderSCORES.com, is the
first of a series of "person-centric" scoring sites from our new
subsidiary, ScoreLab. MarketEye.com delivers real-time and delayed
securities prices, company news, market reports, historical information,
charting and portfolio management capabilities primarily to the individual
investor. Through a new strategic alliance, Primark is the exclusive
provider of financial information to The Money Channel, the UK's first
dedicated TV channel for finance and investment. In addition to these
Internet initiatives, Primark is also investing in products for wireless
distribution. Our alliance with MicroStrategy, the Primark Financial
Channel will be syndicated and will combine the wireless delivery
technology of MicroStrategy with the global financial and economic
information of Primark to deliver up-to-the-minute investment, economic and
corporate information to all types of wireless devices as well as faxes and
email.
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 $347.5 million of
revenues for the 1999 fiscal year. This represented 70.3% of Primark's total
revenues. Primark Financial Information Division generated $239.0 million of
revenues outside of North America with $135.3 million of those revenues coming
from Datastream products, $54.0 million from ICV, $28.8 million from Primark
Investment Management Services, $12.7 million for Extel and the remaining $8.2
from Disclosure. The $108.5 million generated in North America represented $67.1
million from Disclosure, $11.3 million from Worldscope, $17.1 million from
Datastream sales and $13.0 million for A-T Financial. The Primark Research
Centers accounted for $17.6 million of the Division's revenues during 1999.
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
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all major markets, and to produce graphics, statistics, time series analysis and
other research. Datastream's products and services fall into two principal
categories, investment research and fund management services.
Investment research services accounted for approximately 81% of
Datastream's total revenues for the year ended December 31, 1999, 82% for the
year ended December 31, 1998 and 85% for the year ended December 31, 1997. 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 our 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 19% of Datastream's
total revenues for the year ended December 31, 1999, 18% of Datastream's total
revenues for the year ended December 31, 1998 and 15% for the year ended
December 31, 1997. 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 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 50,000 stocks from 64 developed and 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 200,000 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 Extel, I/B/E/S, Disclosure,
Worldscope and WEFA as an integral part of its investment research services.
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 UK
equities market as well as systems for order entry and trade reporting. ICV's
software combines real-time prices with news and other data in a unique format,
which we believe, has become the standard presentation for UK equity data. ICV
has incorporated Datastream's historical information as an add-on to its major
products, TOPIC and GlobalTOPIC, 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
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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 an
UK-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 64%, 60% and 53% of ICV's total revenue for
the years ended December 31, 1999, 1998 and 1997, respectively. Primark
EuroTOPIC provides real-time UK equities prices and news and can also deliver
North American real-time data through SpeedFeed. The GlobalTOPIC product suite
delivers quotes, news, indices, historical data, company accounts and broker
research to buy and sell side equity professionals via Internet, networks and
workstations. GlobalTOPIC represents the culmination of Primark's goal to
produce the Primark Global Equities Service.
Market-Eye services accounted for 10% of ICV's revenue for each of the
years ended December 31, 1999 and 1998 and 12% for the year ended December 31,
1997. Market-Eye delivers real-time prices, news and investment research
information on the UK market, both through satellite broadcast and the Internet
and is well positioned to take advantage of demographic trends and the
increasing popularity of personal investment activity.
Disclosure. Disclosure is a leading provider of "as reported" and
abstracted financial information throughout the world, distributing information
on more than 12,000 US companies and 20,000 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 US 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
57% 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 Global Access Pro 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 US and foreign stock exchanges. Laser D was phased out at
the end of 1999 and replaced with Global Access Pro, an Internet-delivered
service designed to meet the needs of major clients that require high volume
document support. Successful migrations were completed for over 200 clients. 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 86%, 84% and 82% of
Disclosure's total revenues were derived from document services for the twelve
months ended December 31, 1999, 1998 and 1997, 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 US
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 14%, 16%, and 18% of Disclosure's total revenues were derived from
database services for the years ended December 31, 1999, 1998 and 1997,
respectively.
Worldscope. Worldscope contains a collection of descriptive profiles and
standardized financial statements on more than 20,000 companies in 50 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 June 1999, Primark acquired the
remaining 20% minority interest in Worldscope, giving Primark 100% ownership.
Extel. Acquired February 1999, Extel is a widely recognized brand name in
the European and Asian markets that provides "as reported" company fundamental
data covering 15,000 quoted companies in over 55 countries as well as 800
private UK and European companies. Delivery platforms are Windows-based and
provide Internet or direct dial access to datasets for real-time updates to
reports, charts, images and news through Global Access, a direct datafeed or
leading redistributors. Extel added $12.7 million of revenue to the Primark
Financial Information Division for the year ended December 31, 1999.
A-T Financial Information. Acquired in February 1999, A-T is a real-time
financial information content provider servicing institutional and retail
markets with global securities information and attendant display and
distribution technology. A-T Financial provides value through creating
proprietary content, consolidating disparate third party data sets and
disseminating high performance, mission-critical data feeds supported by a
series of superior display and programmatic interfaces to institutional trading
and analytical front-end products, various on-line retail brokerage service
providers and Internet web sites. In 1999, A-T completed Primark SpeedFeed,
covering all exchange data from all North American exchanges. This market
datafeed combines information from more than 35 sources, including North
American equities, futures and options exchanges, major newswires and exchange
traded data, along with data from I/B/E/S, Disclosure and Worldscope. A-T added
$13 million of revenue to the Primark Financial Information Division for the
year ended December 31, 1999.
PRIMARK FINANCIAL ANALYTICS DIVISION
The Primark Financial Analytics Division generated $92.6 million of
revenues for the 1999 fiscal year. This represented 19% of Primark's total
revenues. Within Primark Financial Analytics Division, I/B/E/S accounted for
$47.3 million, Baseline $32.5 million and Vestek $12.8 million of revenues.
I/B/E/S. I/B/E/S is a leading source of global analyst estimates for
institutional investors, financial institutions and portfolio managers
worldwide. I/B/E/S collects, processes and disseminates analyst forecasts from
over 9,200 individual securities analysts covering 18,000 companies in 59
countries globally. The estimates, derived content and research are delivered
via Internet, I/B/E/S products such as Active Express, a proprietary software
delivery system and through third party distributors. Many I/B/E/S products
permit the customer to perform analytical functions and are enhanced by reports
and graphics.
I/B/E/S enjoys complementary strengths in data, applications and
consulting, leveraging its own propriety financial database architecture in the
development of the state of the art Active Express platform and custom
development activities for clients.
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Baseline. Baseline provides portfolio managers at investment companies,
banks, investment consulting firms and other institutional investors with online
evaluation graphics that portray critical financial information on more than
8,000 US 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 daily transmission to customers for use within Baseline's applications.
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
instruments. Vestek also provides consulting services for investment managers
and plan sponsors. Vestek Select, a comprehensive mutual fund research program,
provides mutual fund organizations and third-party fund distributors with
detailed, forward-looking analysis based on actual monthly fund holdings using
more than 100 characteristics, such as forecast earnings growth, forward P/E,
price/book, expected return and forward-looking risk measures. Through its
international sales force, Vestek currently serves more than 350 clients in nine
countries.
PRIMARK DECISION INFORMATION DIVISION
The Primark Decision Information Division generated $54.5 million of
revenues for the 1999 fiscal year, representing 11% of Primark's total revenues.
Within Primark Decision Information Division, WEFA accounted for $25.3 million
and the Yankee Group $29.2 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 over 100 industries across 100 countries through its Global
Industrial Outlook Service, its electronic database and a semi-annual
publication. WEFA data, analysis, forecasts and reports are primarily delivered
via the Internet. The new myWEFA and myData allow users to pick and choose WEFA
services that meet their individual needs. More than 800 businesses, financial
institutions and government agencies around the world us myWEFA.
Primark Decision Economics. In August 1996, Primark Decision Economics
("PDE") was formed as a joint venture between Primark and Dr. Allen Sinai, Chief
Executive Officer and Chief Global Economist. Dr. Sinai was recognized in 1997
by BusinessWeek as the leading economic forecaster in the US. PDE brings value
to financial market professionals by providing timely value-added economic
forecasts, analysis and commentaries covering the world's major economies and
markets.
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 e-commerce communications and computing 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 68% of total revenue for the year ended
December 31, 1999 and 66% for each of the years ended December 31, 1998 and
1997. An annually renewable planning service subscription provides a customer
with consultation time with a research analyst, quarterly audio conferences,
access to the
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Yankee Group's published research reports and white papers through both the
Internet and paper formats as well as 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 32% of total revenue for the year ended December 31, 1999 and 34%
for each of the years ended December 31, 1998 and 1997. 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 10 to 15 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
the Company's consolidated revenues.
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, 61%
were derived from the UK, 23% were from Europe, 9% from Asia and 7% from North
America. These contracts are automatically renewed unless notice of cancellation
is given two to three months before the annual renewal date. In 1999, the
renewal rate was approximately 93%.
Disclosure's, Worldscope's and Extel's customer base includes the majority
of US and UK 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%, 69%, and 62% of
Disclosure/Worldscope's revenues for the fiscal years ended December 31, 1999,
1998 and 1997, respectively. In 1999, Disclosure/Worldscope experienced a
renewal rate for its subscription services of approximately 85%.
A-T's customers include large financial institutions, such as international
investment banks, clearing firms, on-line and regional brokerage firms, private
banks and mutual fund managers, as well as individual investors. For the year
ended December 31, 1999 approximately 76% of A-T's revenue was derived from
licensing and delivery of various types of software and market data to
institutional customers, 17% from its Internet business and 7% from royalties.
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' 1999 revenues were
derived through annual subscription contracts of which 7% were through soft
dollar arrangements. In 1999, I/B/E/S experienced a renewal rate for its
subscription services of approximately 87%.
Baseline serves over 8,000 portfolio managers in more than 700
organizations, including investment companies, banks, investment consulting
firms and other institutional investors located throughout the US and Canada who
typically subscribe through bi-annual and annual contracts. These contracts are
automatically
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renewed unless notice of cancellation is given before the renewal date. In 1999,
Baseline experienced a renewal rate for its subscription services in excess of
approximately 94%.
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 1999, Vestek experienced a renewal rate for its
subscription services of approximately 92%.
Primark Decision Information Division
WEFA has approximately over 1,000 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 1999, WEFA experienced a
renewal rate for its subscription services of approximately 85%.
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.
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 UK. 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 US, 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,
Tokyo and Brazil, delivers its products directly to customers via
state-of-the-art electronic delivery media. I/B/E/S Active Express is a new
powerful equity workstation that is capable of seamlessly integrating any type
of data from practically anywhere in the world. At the core of Active Express is
a virtual, real-time financial data integration engine developed by I/B/E/S.
This same technology is also licensed to third parties and leveraged by I/B/E/S
for custom development and consulting activities.
I/B/E/S also offers its quality data and content through a network of more
than 50 electronic third-party distributors including Bloomberg L.P., FactSet,
FAME, Data Downlink, Reuters Group PLC, S & P Compustat and Datastream/ICV.
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 I/B/E/S', Disclosure's and Primark
Decision Economics' data as part of its product offering.
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Baseline delivers its product directly to customers via an 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 US cities and in the
UK, 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 US cities, London and Tokyo.
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
euro and Y2K compliance achieved. 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
PrimarkNet, a worldwide network for Primark that integrates all
telecommunications capabilities in a common architecture, providing greater
capacity and a higher level of service at lower costs. We anticipate that the
PrimarkNet will also facilitate the delivery of new products to our entire
customer base. PrimarkNet will provide facilities such as
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high-speed image transmission, bulk data downloading and voice/data transmission
on the same lines. Elements of PrimarkNet 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 essentially creates 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, 1999, Primark and its subsidiaries employed approximately
3,458 people. We believe our relationship with our employees is excellent.
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. In addition, Primark accounting services occupies 13,094 square feet of
office space in Bedford, Massachusetts under a lease that expires in 2004.
A-T Financial occupies 6,356 square feet of space at its Naperville
Illinois headquarters under a lease agreement that expires January 2001. A-T's
regional offices occupy approximately 24,288 square feet of office space under
various leases. These offices are located in Naperville and Lisle, Illinois,
Chicago, New York, San Francisco and Boston.
Baseline occupies 58,566 square feet of space at its New York headquarters
at New York's World Trade Center under a lease agreement, 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 100,779 square feet, these facilities are
occupied under lease agreements that expire in 2005 and 2017. Through its
affiliates, Datastream also occupies, under short-term leases through 2020, an
aggregate total of approximately 90,406 square feet of office space, principally
located in Australia, Belgium, Canada, Denmark, England, France, Germany, Hong
Kong, Italy, Japan, Luxembourg, the Netherlands, Singapore, South Korea,
Scotland, Philippines, Poland, Spain, Sweden, Switzerland, Thailand and the
United States.
Disclosure/Worldscope's headquarters, comprised of approximately 99,640
square feet, is located in Bethesda, Maryland. The property is occupied under
lease agreements that expire in 2006. Disclosure's regional offices occupy
approximately 57,909 square feet of office space under various lease terms.
These offices are located in Arizona, California, Colorado, the District of
Columbia, Georgia, Illinois, Massachusetts, New York and Texas. Worldscope's
regional offices occupy approximately 45,178 square feet of office space under
various lease terms and are located in Ireland, India and the United States.
I/B/E/S occupies 43,859 square feet of space at its New York City
headquarters under a lease agreement that expires in 2007. Additional office
space totaling 13,700 square feet is located in England, Hong Kong, Brazil and
Japan.
ICV's facilities occupy approximately 18,916 square feet of space that
expires in 2018, and are located primarily in England.
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Vestek occupies approximately 17,000 square feet of space at its San
Francisco headquarters under a lease agreement that expires in 2002 with
provision for one five-year renewal option.
WEFA occupies 39,885 square feet of space at its Pennsylvania headquarters
under a lease agreement that expires in 2005. Additional office space of
approximately 16,351 square feet is leased in Canada, Europe, South Africa, Hong
Kong and the United States.
The Yankee Group occupies approximately 25,000 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
The New York Board of Trade, ("NYBT") has submitted to Primark's
subsidiary, A-T Financial Information, Inc., a claim for approximately $3.8
million based primarily on an allegation that, over a five-year period, A-T
insufficiently delayed the distribution of information received from NYBT and
therefore should have paid fees to NYBT applicable to real-time distribution of
that information. Management believes that the allegation is without merit and
intends to vigorously contest the claim.
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 1999.
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 51 of the
Company's 1999 Annual Report is incorporated by reference herein.
Since 1988, the Company has not paid cash dividends on common stock to its
shareholders in order to reinvest available cash in the Company's operations.
Information regarding restrictions on the Company's ability to pay cash
dividends on its common stock is incorporated by reference herein from Note 6 to
the Consolidated Financial Statements entitled "Short-Term and Long Term Debt"
on page 32 of the Company's 1999 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in the section entitled "Selected Financial
Information -- Five Year Data" on page 50 of the Company's 1999 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 43
through 49 of the Company's 1999 Annual Report is incorporated by reference
herein.
ITEM 7A. MARKET RISK DISCLOSURES
Information regarding Market Risk is incorporated by reference herein from
the section entitled "Market Risk" included in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 47 through
49 of the Company's 1999 Annual Report incorporated by reference herein.
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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 24 through 42 of the
Company's 1999 Annual Report, and the "Supplementary Financial Information
- -- Quarterly Data," as contained on page 51 of the Company's 1999 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 2000 Proxy Statement for its May 2000 Annual Meeting of
Shareholders is incorporated by reference herein. Information with respect to
the executive officers of the Company as of February 11, 2000 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, 2000.
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 63, 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 52, 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 52, 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 42, 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 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 48, has served as Vice President and Tax Counsel
of Primark since 1988. In 1998 he was elected Senior Vice President.
Linda Luke Lee, age 43, has served as Vice President, Associate General
Counsel and Assistant Secretary since April 1, 1999. She has been a member of
Primark's legal staff in various senior level capacities since 1985.
Bruce Fraser, age 50 has served as a member of Primark's tax department in
various senior level capacities since 1988. In 1999 he was appointed Vice
President of Tax.
17
<PAGE> 20
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 2000 Proxy Statement for its May 2000
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 2000 Proxy Statement for its May 2000 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," "Employment Agreements and Other Arrangements" and
"Certain Transactions" of the Company's 2000 Proxy Statement for its May 2000
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 1999
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, 1999.
- Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1999.
- Consolidated Statements of Financial Position as of December 31, 1999
and 1998.
- Consolidated Statements of Common Shareholders' Equity for each of the
three years in the period ended December 31, 1999.
- Consolidated Statements of Comprehensive Income for each of the three
years in the period ended December 31, 1999.
- Notes to the Consolidated Financial Statements.
- Independent Auditors' Report.
- Management's Discussion and Analysis of Results of Operations and
Financial Condition.
- Selected Financial Information Five Year Data.
- Supplementary Financial Information -- Quarterly Data.
2. 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 23.
Independent Auditors' Report on Financial Statement Schedule on page 24.
3. The Exhibits filed as part of this Annual Report on Form 10-K are
listed in the Index to Exhibits on pages 19 to 21, and are incorporated by
reference herein.
18
<PAGE> 21
(B) REPORTS ON FORM 8-K
During the quarter ended December 31, 1999 the Company filed no Current
Reports on Form 8-K.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
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 UK Limited and Litton
Industries, Inc. and Litton UK 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).
2.7 Stock Option Agreement between the Company and David Taylor
dated February 24, 1999 (Exhibit 2.1 to the Company's June
30, 1999 Form 10-Q)).
Articles of Incorporation and By-Laws
3.1 Restated Articles of Incorporation of the Company (Exhibit
3.1 to the Company's June 30, 1999 Form 10-Q).
3.2 By-Laws of the Company, as amended (Exhibit 3.1 to the
Company's September 30, 1990 Form 10-Q). 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).
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).
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
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); Amendment dated November 16, 1999*. Amendment
dated December 10, 1998*.
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).
10.14 Credit Agreement dated 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).
10.15 Primark Corporation 1999 Stock Option Plan for Non-Employee
Directors dated May 26, 1999 (Exhibit 4.1 to the Company's
Registration Statement on Form S-8 dated July 28, 1999).
10.16 Memorandum of Understanding between the Company and David
Taylor dated March 15, 1999 (Exhibit 10.2 to the Company's
June 30, 1999 Form 10-Q).
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.17 Employment extension between the Company and John C. Holt
dated July 9, 1999 (Exhibit 10.3 to the Company's June 30,
1999 Form 10-Q).
10.18 ScoreLab, Inc 1999 Stock Option Plan.*
Annual Report to Security Holders
13.1* Primark Corporation 1999 Annual Report (which is not deemed
to be "filed" except to the extent that portions thereof are
expressly incorporated by reference in this Annual Report on
Form
10-K) filed herewith.
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,
1999.
</TABLE>
- ---------------
* Indicates document filed herewith.
For the Company's documents incorporated by reference, references are to File
No. 1-8260.
21
<PAGE> 24
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, 2000.
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, 1999, 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 8, 2000
- --------------------------------------------------- Executive Officer (Principal
JOSEPH E. KASPUTYS Executive Officer)
/s/ STEPHEN H. CURRAN Executive Vice President and Chief January 31, 2000
- --------------------------------------------------- Financial Officer
STEPHEN H. CURRAN
/s/ KEVIN J. BRADLEY Director January 7, 2000
- ---------------------------------------------------
KEVIN J. BRADLEY
/s/ JOHN C. HOLT Director January 10, 2000
- ---------------------------------------------------
JOHN C. HOLT
/s/ STEVEN LAZARUS Director January 10, 2000
- ---------------------------------------------------
STEVEN LAZARUS
/s/ PATRICIA MCGINNIS Director January 7, 2000
- ---------------------------------------------------
PATRICIA MCGINNIS
/s/ JONATHAN NEWCOMB Director January 10, 2000
- ---------------------------------------------------
JONATHAN NEWCOMB
/s/ CONSTANCE K. WEAVER Director January 7, 2000
- ---------------------------------------------------
CONSTANCE K. WEAVER
/s/ STEPHEN H. CURRAN January 31, 2000
- ---------------------------------------------------
STEPHEN H. CURRAN
ATTORNEY-IN-FACT
</TABLE>
22
<PAGE> 25
SCHEDULE II
PRIMARK CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
OF CONTINUING OPERATIONS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT
BEGINNING OF CHARGED FROM END OF
PERIOD TO INCOME RESERVES(1) PERIOD
------------ --------- ----------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Reserves deducted from assets to which they apply:
Allowance for Doubtful Accounts:
Year ended December 31, 1997.................... 2,234 843 (321) 2,756
Year ended December 31, 1998.................... 2,756 1,979 (973) 3,762
Year ended December 31, 1999.................... 3,762 4,106 (2,711) 5,157
</TABLE>
- ---------------
(1) Accounts written off.
23
<PAGE> 26
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, 1999 and 1998 and for each of
the three years in the period ended December 31, 1999, and have issued our
report thereon dated February 11, 2000, 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)2 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 11, 2000
24
<PAGE> 1
EXHIBIT 10.12
AMENDMENT TO TRANSACTION DOCUMENTS
THIS AMENDMENT (referred to herein as this "Amendment"), dated as of
November 16, 1999, by and among PRIMARK CORPORATION, a Michigan corporation (the
"Borrower"), the Lenders party to the Revolving Credit Agreement referred to
below, the Lenders party to the Note Backup Agreement referred to below (such
agreements being referred to collectively as the "Credit Facilities"), and
MELLON BANK, N.A., a national banking association, as Agent under each such
Credit Facility.
RECITALS:
A. The Borrower has entered into (a) a Revolving Credit Agreement (as
amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among
Primark Corporation (the "Borrower"), the Lenders parties thereto from time to
time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent,
and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated
as of February 7, 1997 among the Borrower, the Lenders parties thereto from time
to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent
(collectively, the "Credit Facilities"). The Credit Facilities have been amended
by a letter agreement dated February 21, 1997, an Amendment to Transactions
Documents dated as of May 1, 1997, an Amendment to Transaction Documents dated
as of June 30, 1997, an Amendment to Transaction Documents dated as of December
1, 1997, an Agreement dated as of March 6, 1998 (which restated and superseded
all such prior amendments), an Amendment to Transaction Documents dated as of
May 8, 1998, an Amendment to Transaction Documents dated as of June 15, 1998, an
Amendment to Transaction Documents dated as of September 10, 1998 and a Consent
and Amendment to Transaction Documents dated as of December 10, 1998.
B. The parties hereto desire to amend further the Credit Facilities as
set forth herein. Capitalized terms used herein and not otherwise defined shall
have the meanings given them in, or by reference in, the Collateral Agency
Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. LOANS, ADVANCES AND INVESTMENTS.
(a) Section 7.05 of each Credit Facility is amended by (i) relettering existing
clauses (k) and (l) as clauses (l) and (m) and (ii) by inserting the following
new clause (k):
(k) Equity investment of up to [pound]3,500,000 in The Money Channel;
SECTION 2. EFFECTIVENESS AND EFFECT, ETC.
(a) EFFECTIVENESS. This Amendment shall become effective on the date
when Mellon Bank, N.A., as Agent under each of the Revolving Credit Agreement
and the Note Backup Agreement, shall have received counterparts hereof duly
executed by the Borrower and by the "Required Lenders" and the "Agent" under
each of the Revolving Credit Agreement and the Note Backup Agreement.
(b) EFFECT. The Revolving Credit Agreement and the Note Backup
Agreement, in the forms initially executed and as previously amended and as
amended hereby, are and shall continue to be
<PAGE> 2
in full force and effect, and are hereby in all respects ratified and confirmed.
Except to the extent expressly set forth herein, the execution delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy under any of the foregoing agreements and instruments or
constitute a waiver of any provision of any of the foregoing agreements and
instruments.
SECTION 3. MISCELLANEOUS. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same document.
Section and other headings herein are for reference purposes only and shall not
affect the interpretation of this Amendment in any respect. This agreement shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to choice of law rules. This Amendment is a
requested amendment within the meaning of Section 10.06(a) of each Credit
Facility.
[Remainder of page intentionally left blank]
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRIMARK CORPORATION
By /s/ Stephen H. Curran
--------------------------------------------------
Name: Stephen H. Curran
Title: EVP & CFO
MELLON BANK, N.A.,
Individually and as Agent under each
Credit Facility
By /s/ R.Jane Westrich
--------------------------------------------------
R. Jane Westrich
Vice President
CONSENTED AND AGREED:
BANKBOSTON, N.A.
By /s/ Jorge A. Schwarz
--------------------------------
Title: Director
NATIONSBANK, N.A.
By /s/ Michael R. Heredia
--------------------------------
Title: Managing Director
THE CHASE MANHATTAN BANK
By /s/ Robert Dellatorre
--------------------------------
Title: Asst. Vice President
3
<PAGE> 4
FIRST AMERICAN NATIONAL BANK
By /s/ Hope Stewart
--------------------------------
Title:
WACHOVIA BANK, N.A.
By /s/ John Rafferty
--------------------------------
Title: SVP
FLEET NATIONAL BANK
By /s/ Deanne Horn
--------------------------------
Title: Vice President
THE HUNTINGTON NATIONAL BANK
By /s/ Robert Friend
--------------------------------
Title: Vice President
<PAGE> 5
AMENDMENT TO TRANSACTION DOCUMENTS AND WAIVER
THIS AMENDMENT TO TRANSACTION DOCUMENTS AND WAIVER (referred to herein as
this "Amendment"), dated as of December 31, 1999, by and among PRIMARK
CORPORATION, a Michigan corporation (the "Borrower"), the Lenders party to the
Revolving Credit Agreement referred to below, the Lenders party to the Note
Backup Agreement referred to below (such agreements being referred to
collectively as the "Credit Facilities"), and MELLON BANK, N.A., a national
banking association, as Agent under each such Credit Facility.
RECITALS:
A. The Borrower has entered into (a) a Revolving Credit Agreement (as
amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among
Primark Corporation (the "Borrower"), the Lenders parties thereto from time to
time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent,
and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated
as of February 7, 1997 among the Borrower, the Lenders parties thereto from time
to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent
(collectively, the "Credit Facilities"). The Credit Facilities have been amended
by a letter agreement dated February 21, 1997, an Amendment to Transactions
Documents dated as of May 1, 1997, an Amendment to Transaction Documents dated
as of June 30, 1997, an Amendment to Transaction Documents dated as of December
1, 1997, an Agreement dated as of March 6, 1998 (which restated and superseded
all such prior amendments), an Amendment to Transaction Documents dated as of
May 8, 1998, an Amendment to Transaction Documents dated as of June 15, 1998, an
Amendment to Credit Facilities dated as of September 10, 1998, a Consent and
Amendment to Transaction Documents dated as of December 10, 1998 and an
Amendment to Transaction Documents dated as of November 16, 1999.
B. The parties hereto desire to provide for the consent of the Required
Lenders to amend further the Credit Facilities as set forth herein. Capitalized
terms used herein and not otherwise defined shall have the meanings given them
in, or by reference in, the Credit Facilities.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. CERTAIN AMENDMENTS TO THE CREDIT FACILITIES.
(a) AMENDMENTS RELATING TO SCORELAB STOCK OPTIONS.
(i) Section 7.05 of each of the Revolving Credit Agreement and the Note Backup
Agreement is amended by relettering subsections (l) and (m) as subsections (m)
and (n), and by adding the following new subsection (l):
(l) Ownership of Shares of Capital Stock of, and capital
contributions, loans and Advances to, Scorelab, Inc. so long as Primark
and its Wholly-Owned Subsidiaries own 85% or more the Shares of Capital
Stock of Scorelab, Inc.
(ii) Section 7.06 of each of the Revolving Credit Agreement and the Note Backup
Agreement is amended by (A) deleting the "and" at the end of subsection (b), (B)
deleting the period and substituting a semi-colon at the end of subsection (c)
and (C) adding the following new subsection (d):
(d) Scorelab, Inc. may (i) issue to employees up to 15% of its
Shares of Capital Stock on a fully diluted basis pursuant to options
granted pursuant to the Scorelab Stock Option Plan, (ii) repurchase
such shares of Capital Stock from such employees to the extent required
by the Scorelab Stockholders' Agreements and (iii) so long as no Event
of Default or Potential Default shall exist on the date of such
repurchase, or immediately thereafter and after giving effect thereto,
repurchase such Shares of Capital Stock from such employees to the
extent permitted by the Scorelab Stockholders' Agreements.
<PAGE> 6
(iii) Section 7.09 of each of the Revolving Credit Agreement and the Note Backup
Agreement is amended by relettering subsection (g) as subsection (h) and by
adding the following new subsection (g)
(g) Issuance of stock options by Scorelab, Inc. for up to 15%
of its Shares of Capital Stock on a fully diluted basis pursuant to the
Scorelab Stock Option Plan, issuance of Shares of Capital Stock by
Scorelab, Inc. pursuant to such options and repurchase of Shares of
Capital Stock of Scorelab, Inc. to the extent permitted by Section
7.06.
(iv) The following new definitions are added to Annex A to each of the Revolving
Credit Agreement and the Note Backup Agreement
"Scorelab Stock Option Plan" shall mean the 1999 Scorelab
Stock Option Plan as in effect on the date hereof.
"Scorelab Stockholders' Agreement" shall mean stockholders agreements
between Scorelab and a Person acquiring Shares of Capital Stock of
Scorelab pursuant to the Scorelab Stock Option Plan in the form
attached to the Scorelab Stock Option Plan.
(b) EVERGREEN LETTERS OF CREDIT. Section 3.01(b) of the Revolving Credit
Agreement is deleted and the following is substituted:
(b) TERMS OF LETTERS OF CREDIT. The Borrower shall not request
any Letter of Credit to be issued, nor shall the Issuing Banks be
obligated to issue any Letter of Credit, except within the following
limitations: each Letter of Credit (i) shall have an expiration date no
later than the earlier of (A) 12 months after the date of issuance
thereof, or (B) ten days before the Revolving Credit Maturity Date,
(ii) shall be denominated in Dollars, (iii) shall be payable only
against sight drafts (and not time drafts), and (iv) shall be in a
minimum stated amount of $50,000. Letter of Credit Exposure with
respect to evergreen Letters of Credit shall not exceed $1,500,000 in
the aggregate at any time.
SECTION 2. WAIVER OF CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Lenders
hereby waive compliance with the requirements of Section 7.01(b) of each Credit
Facility at December 31, 1999, PROVIDED, the foregoing waiver will be effective
only if the Consolidated Fixed Charge Coverage Ratio for the period of four
consecutive fiscal quarters ending on December 31, 1999 shall not be less than
1.0 to 1.
SECTION 3. EFFECTIVENESS AND EFFECT, ETC.
(a) EFFECTIVENESS. This Amendment shall become effective as of December 31,
1999, on the date (the "Effective Date") when each of the following conditions
has been satisfied:
(i) Mellon Bank, N.A., as Agent under each of the Revolving
Credit Agreement and the Note Backup Agreement and as Collateral Agent,
shall have received counterparts hereof duly executed by the Borrower,
by each of the "Required Lenders" and the "Agent" under each of the
Revolving Credit Agreement and the Note Backup Agreement.
(ii) The Borrower shall have paid to the Agent, for the
account of each Lender that executes and delivers a copy of this
Amendment, an amendment and waiver fee equal to .05% of such Lender's
Revolving Credit Committed Amount under the Revolving Credit Agreement
as in effect on January 1, 2000.
In the event that the Effective Date occurs, the Agent shall promptly notify
each of the Lenders of such fact.
(b) EFFECT. The Revolving Credit Agreement, the Note Backup Agreement, the
Collateral Agency Agreement and the Borrower Pledge Agreement, in the forms
initially executed and as previously amended and as amended hereby, are and
shall continue to be in full force and effect, and are hereby in all respects
ratified and confirmed. Except to
2
<PAGE> 7
the extent expressly set forth herein, the execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right, power or remedy
under any of the foregoing agreements and instruments or constitute a waiver of
any provision of any of the foregoing agreements and instruments.
SECTION 4. MISCELLANEOUS. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same document.
Section and other headings herein are for reference purposes only and shall not
affect the interpretation of this Amendment in any respect. This Amendment shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to choice of law rules. This Amendment is a
requested amendment within the meaning of Section 10.06(a) of each Credit
Facility.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRIMARK CORPORATION
By
--------------------------------------------------
Name: Stephen H. Curran
Title: EVP & CFO
MELLON BANK, N.A.,
individually and as Agent under each
Credit Facility
By
--------------------------------------------------
R. Jane Westrich
Vice President
CONSENTED AND AGREED:
BANKBOSTON, N.A.
By
--------------------------------
Title:
BANK OF AMERICA, N.A.
By
--------------------------------
Title:
THE CHASE MANHATTAN BANK
By
--------------------------------
Title:
FIRST AMERICAN NATIONAL BANK
By
--------------------------------
Title:
4
<PAGE> 9
WACHOVIA BANK, N.A.
By
--------------------------------
Title:
FLEET NATIONAL BANK
By
--------------------------------
Title:
THE HUNTINGTON NATIONAL BANK
By
--------------------------------
Title:
5
<PAGE> 1
EXHIBIT 10.18
SCORELAB, INC.
1999 STOCK OPTION PLAN
(Effective November 17, 1999)
1. PURPOSE OF PLAN
The purpose of the Plan is to assist ScoreLab, Inc. (the "Sponsor"),
Primark Corporation and their Affiliates to retain valued employees, officers,
directors and other consultants and advisors by offering them a greater stake in
the success of the Sponsor and a closer identity with it, and to aid in
attracting individuals whose services would be helpful to the Sponsor and would
contribute to its success.
2. DEFINITIONS
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of the Plan (other than the definition
of the term "Change of Control"), the term "control," including its correlative
terms "controlled by" and "under common control with," mean, with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"BOARD" means the board of directors of the Sponsor.
"CHANGE OF CONTROL."
(a) A "SPONSOR CHANGE OF CONTROL" means any transaction or series of
transactions as a result of which any Person who was a Third Party immediately
before such transaction or series of transactions owns then-outstanding
securities of the Sponsor having more than fifty percent (50%) of the voting
power for the election of directors of the Sponsor.
(b) A "PRIMARK CHANGE OF CONTROL" means any transaction or series of
transactions as a result of which any Person who was a Third Party immediately
before such transaction or series of transactions owns then-outstanding
securities of Primark Corporation having more than fifty percent (50%) of the
voting power for the election of directors of Primark Corporation.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee described in Paragraph 5.
"COMMON STOCK" means the common stock of the Sponsor.
"DATE OF GRANT" means the date as of which an Option is granted, as
determined by the Committee.
<PAGE> 2
"FAIR MARKET VALUE" means:
(i) If Shares are listed on a stock exchange or trades of Shares are
reported on the NASDAQ National Market, Fair Market Value shall be determined
based on the last reported sale price of a Share on the principal exchange on
which Shares are listed or, if not so listed, the last quoted sale price of a
Share on the NASDAQ National Market, in either case on the Date of Grant, or, if
no trading occurred on that date, then the last trading day prior to the Date of
Grant.
(ii) Except as otherwise provided in subparagraph (i) above, the amount
most recently determined by an independent valuation advisor appointed by the
Company's Board of Directors to determine Fair Market Value for purposes of this
Agreement and approved by the Committee, provided, however, that if, since the
date of that valuation, an unrelated third party has purchased equity in the
Sponsor equal to ten percent (10%) or more of all the issued and outstanding
equity, then the price paid by that third party shall be the measure of the Fair
Market Value.
"NON-QUALIFIED OPTION" means an Option granted under the Plan.
"OPTION" means any stock option granted under the Plan and described in
Paragraph 3.
"OPTION AGREEMENT" means the written agreement described in
Paragraph 7.
"OPTION PRICE" means the price per Share for an Optionee to exercise an
Option, as determined pursuant to Paragraph 7(b).
"OPTIONEE" means a person to whom an Option has been granted under the
Plan, which Option has not been exercised in full and has not expired or
terminated.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization.
"PLAN" means this ScoreLab, Inc. 1999 Stock Option Plan.
"PRIMARK COMPANIES" means Primark Corporation, a Michigan corporation,
or its successors, by merger, consolidation, sale of substantially all of its
business and assets or otherwise, to all or substantially all of its business
and assets, and the Sponsor, and any Affiliate of either. "Primark Company"
means any one of the foregoing.
"PUBLIC OFFERING" means any public offering of a common equity security
of Sponsor pursuant to an effective registration statement under the Securities
Act of 1933, as amended, as a result of which the Sponsor first becomes subject
to the reporting obligations of the Securities Exchange Act of 1934, as amended.
"SHARE" or "SHARES" means a share or shares of Common Stock, including
a fractional share, or such other securities issued by the Sponsor as may be the
subject of an adjustment under Paragraph 9.
2
<PAGE> 3
"SPONSOR" means ScoreLab, Inc., a Delaware corporation, or its
successors, by merger, consolidation, sale of substantially all of its business
and assets or otherwise, to all or substantially all of its business and assets.
"STOCKHOLDER'S AGREEMENT" means the agreement between the Sponsor and a
stockholder who acquired the Shares subject to that agreement upon the exercise
of an Option, in the form attached as an exhibit hereto and incorporated herein
by reference.
"SUBSIDIARY COMPANIES" means all Affiliates that are controlled by the
Sponsor.
"TERMINATING EVENT" means any of the following events:
(a) the Sponsor's cessation of substantially all business
activities;
(b) Board action to dissolve or liquidate the Sponsor;
(c) a Sponsor Change of Control;
(d) a Primark Change of Control; or
(e) Board action to terminate Plan.
"THIRD PARTY" means any Person other than a Primark Company.
3. OPTIONS TO BE GRANTED
Rights that may be granted under the Plan are Non-Qualified Options
which give the Optionee the right for a specified time period to purchase a
specified number of Shares for a price determined by the Committee.
4. SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Paragraph 9 and the last sentence
of this Paragraph 4, not more than 150,000 Shares in the aggregate may be issued
pursuant to the Plan upon exercise of Options. Shares delivered pursuant to the
exercise of an Option may, at the Sponsor's option, be either treasury Shares or
Shares originally issued for such purpose. If an Option covering Shares
terminates or expires without having been exercised in full, other Options may
be granted covering the Shares as to which the Option was not exercised.
5. ADMINISTRATION OF PLAN
(a) COMMITTEE. The Plan shall be administered by a committee of the
Board, which shall be composed of three or more individuals appointed by the
Board.
3
<PAGE> 4
(b) MEETINGS. The Committee shall hold meetings at such times and
places as it may determine. Actions approved at a meeting by a majority of the
members of the Committee or actions approved in writing by the unanimous consent
of the members of the Committee shall be the valid actions of the Committee.
(c) EXCULPATION. No member of the Committee shall be personally
liable for monetary damages for any action taken or any failure to take any
action in connection with the administration of the Plan or the granting of
Options hereunder.
(d) INDEMNIFICATION. Service on the Committee shall constitute
service as a member of the Board. Each member of the Committee shall be entitled
without further act to indemnity from the Sponsor to the fullest extent provided
by applicable law and the Sponsor's by-laws in connection with or arising out of
any actions, suit or proceeding with respect to the administration of the Plan
or the granting of Options hereunder in which he or she may be involved by
reason of being or having been a member of the Committee, whether or not he or
she continues to be such member of the Committee at the time of the action, suit
or proceeding.
6. ELIGIBILITY
Eligible persons to whom Options may be granted shall be employees,
officers or directors of a Primark Company who are selected by the Committee for
the grant of Options. In addition, Options may be granted to such consultants
and advisors to a Primark Company as may be selected by the Committee for such a
grant.
7. OPTION AGREEMENTS AND TERMS
All Options shall be evidenced by Option Agreements, which are
agreements that shall be executed on behalf of the Sponsor and by the respective
Optionees, containing terms determined from time to time by the Committee,
consistent, however, with the following:
(a) TIME OF GRANT. All Options shall be granted within ten (10)
years from the date of adoption of the Plan by the Board.
(b) OPTION PRICE. The Option Price per Share with respect to any
Option shall be the Fair Market Value of a Share on the Date of Grant.
(c) RESTRICTIONS ON TRANSFERABILITY. No Option shall be
transferable otherwise than by will or the laws of descent and distribution and,
during the lifetime of the Optionee, shall be exercisable only by him or her, or
for his or her benefit by his or her attorney-in-fact or guardian. Upon the
death of an Optionee, the person to whom the Option has been transferred may
exercise any Options only in accordance with the provisions of Paragraph 7(f).
4
<PAGE> 5
(d) PAYMENT UPON EXERCISE OF OPTIONS. Full payment for Shares
purchased upon the exercise of an Option shall be made in cash or, at the
election of the Optionee and as the Committee may, in its sole discretion,
approve, by surrendering Shares held for six months or more on the date of
exercise with an aggregate Fair Market Value equal to the aggregate option
price, or by delivering such combination of Shares and cash as the Committee
may, in its sole discretion, approve.
(e) ISSUANCE OF CERTIFICATE UPON EXERCISE OF OPTIONS. Whole Shares
shall be issuable upon exercise of Options. Upon satisfaction of the conditions
of Paragraph 7(g), a certificate for the number of Shares to which the Optionee
is entitled shall be delivered to such Optionee by the Sponsor. Cash shall be
paid in lieu of fractional Shares.
(f) PERIODS OF EXERCISE OF OPTIONS. An Option shall be exercisable
in whole or in part at such time or times as may be determined by the Committee
and stated in the Option Agreement; PROVIDED, HOWEVER, that except as otherwise
provided by the Committee in its discretion, no Option or part thereof shall
first become exercisable following an Optionee's termination of employment for
any reason;
(i) Provided further, that:
(w) Except as otherwise provided in Paragraph
7(f)(i)(z), in the event of termination of an Optionee's
employment with the Primark Companies for any reason other
than death, disability retirement, or for "cause," any Option
held by such Optionee and which is then exercisable shall be
exercisable for a period of three months following the date
the Optionee terminates employment with the Primark Companies
(unless a longer period is established by the Committee);
PROVIDED, HOWEVER, that in no event shall an Option be
exercisable after ten years from the Date of Grant.
(x) Except as otherwise provided in Paragraph
7(f)(i)(z), in the event that an Optionee terminates
employment with the Primark Companies by reason of death,
disability or retirement, any Option held at death or
retirement by such Optionee which is then exercisable shall be
exercisable for a period of one year from the date of death
disability or retirement (unless a longer period is
established by the Committee) by the Optionee (or in the case
of death, by the person to whom the rights of the Optionee
shall have passed by will or by the laws of descent and
distribution); PROVIDED, HOWEVER, except as otherwise provided
in Paragraph 7(f)(i)(z), in no event shall an Option be
exercisable after ten years from the Date of Grant.
(y) In the event that an Optionee's employment with
the Primark Companies terminates for "cause" (as defined by
the Committee, or, if the Optionee is a party to an employment
agreement with the employing Primark Company that provides for
a definition of the term "cause," "cause" as so defined), any
unexercised Option shall terminate on the date of termination
of employment.
5
<PAGE> 6
(z) No Option shall be exercisable if the issuance of
Shares pursuant to the exercise of such Option would violate
the provisions of any loan agreement to which the Sponsor or
any Subsidiary Company is a party, provided that if no
violation of such loan agreement would occur if the Optionee
were to pledge the Shares issuable pursuant to the exercise of
such Option in accordance with a pledge and security agreement
in a form acceptable under such loan agreement and reasonably
satisfactory to the Sponsor and the Optionee, the Optionee may
elect to exercise such Option and pledge the Shares issuable
pursuant to the exercise of such Option accordingly. If, as of
the date an Option would otherwise cease to be exercisable
under Paragraphs 7(f)(i)(w), 7(f)(i)(x) and 7(f)(i)(y) because
of the passage of time, an Option is not exercisable solely
because the exercise of such Option would violate the
provisions of any loan agreement to which the Sponsor or any
Subsidiary Company is a party (whether or not the Optionee
were to pledge the Shares issuable pursuant to the exercise of
such Option), the periods during which such Option may be
exercised under Paragraphs 7(f)(i)(x) and 7(f)(i)(y) shall be
extended to the close of the 30-day period beginning on the
date on which the exercise of such Option would not violate
the provisions of any loan agreement to which the Sponsor or
any Subsidiary Company is a party, provided however that in no
event shall any Option be exercisable after ten years from the
Date of Grant.
(ii) For purposes of this Paragraph 7(f), an Optionee's
termination of employment shall be deemed to occur on the date
of termination of employment as determined in accordance with
the Optionee's employer's standard personnel policies or, if
the Optionee is a party to an employment agreement with a
Primark Company, the date of termination of employment for
purposes of the Plan shall be as determined under such
agreement, or on the date the Optionee's service as a director
terminates for any reason, or on the date the Optionee's
service pursuant to his or her engagement as a consultant or
advisor terminates for any reason, as applicable.
(g) MANNER AND DATE OF EXERCISE. The Optionee shall exercise the
Option by delivering to the Company at the address specified below the
following: (a) written notice that specifies the Option being exercised, the
number of Shares being acquired, and the manner of payment; (b) payment in full
of the Option Price for such Shares and all applicable withholding taxes as
stated in Paragraph 14; and (c) a fully executed Stockholder's Agreement. In
case these separate conditions are fulfilled on different dates, the Date of
Exercise shall be the date on which all the conditions to exercise are
fulfilled. Exercise shall be irrevocable once all the conditions are fulfilled.
(h) TERMINATION OF EMPLOYMENT. For purposes of the Plan, a
transfer of service between two employers, each of which is a Primark Company,
or a change of relationship to a Primark Company from "employee" to
"consultant," shall not be deemed a termination of employment.
6
<PAGE> 7
8. RIGHTS AS STOCKHOLDERS
An Optionee shall not have any right as a stockholder with respect to
any Shares subject to his or her Option until all the conditions in Paragraph
7(g) hereof and the Option Agreement shall have been fulfilled.
9. CHANGES IN CAPITALIZATION; ANTI-DILUTION PROVISIONS
The Board of Directors of the Company shall make appropriate
adjustments to the number and class of shares of Common Stock available for
issuance under the Plan, and/or to the number, class and Option Price of
outstanding Options in the event that:
(a) Shares are changed into or exchanged for a different number or
kind of shares of stock or other securities of the Sponsor, whether through
merger, consolidation, reorganization, recapitalization, reclassification, stock
dividend, stock split-up, issuance of warrants, rights, or options (other than
pursuant to the Plan) or change in corporate structure or otherwise; or
(b) A Public Offering has not previously been consummated when
Common Stock (or any security convertible into Common Stock) shall be issued
(other than upon the exercise of Options issued under the Plan) at a price or
for consideration less than the Fair Market Value at the time the Shares are
issued.
Any reference to the Option Price in the Plan and Option Agreements shall be a
reference to the Option Price as so adjusted. Any reference to the term "Shares"
in the Plan and Option Agreements shall be a reference to the appropriate number
and class of shares of Common Stock available for issuance under the Plan, as
adjusted pursuant to this Paragraph 9. The Committee's adjustment shall be
effective and binding for all purposes of this Plan. The adjustment provided for
in this Paragraph 9 may require the Sponsor to issue fractional shares, and the
total adjustment with respect to the Plan shall be determined accordingly.
10. TERMINATING EVENTS
(a) IN GENERAL. The Sponsor shall give Optionees at least fifteen
(15) days' notice (or, if not practicable, such shorter notice as may be
reasonably practicable) prior to the anticipated date of the consummation of a
Terminating Event other than a Primark Change of Control. Upon receipt of such
notice, and continuing to the date of consummation of the Terminating Event (or
such earlier date as the Board shall reasonably determine in its discretion and
set forth in such notice), each Optionee shall be permitted to exercise all
Options then held by such Optionee, whether or not then otherwise vested,
PROVIDED THAT, in the event of a Terminating Event in which the Optionee would
be required to participate pursuant to Section 2.7 of the Stockholder's
Agreement were the Optionee then a party to such agreement, the Sponsor may, by
similar notice, require the Optionee to exercise the Option, to the extent the
Option is then exercisable, or to forfeit the Option (or portion thereof, as
applicable). Upon the close of the period described in this Paragraph 10(a)
during which an Option may be exercised in connection with a Terminating Event,
such Option (including such portion thereof that is not exercisable) shall
terminate.
7
<PAGE> 8
(b) PRIMARK CHANGE OF CONTROL. The Sponsor shall give Optionees at
least fifteen (15) days' notice (or, if not practicable, such shorter notice as
may be reasonably practicable) prior to the anticipated date of the consummation
of a Primark Change of Control. Upon receipt of such notice, and continuing to
the date of consummation of the Primark Change of Control (or such earlier date
as the Board shall reasonably determine in its discretion and so notify the
Optionees), each Optionee shall be permitted to exercise the Option for all
Options then held by such Optionee, whether or not then otherwise exercisable.
Upon the close of the period described in this Paragraph 10(b) during which an
Option may be exercised in connection with a Terminating Event, such Option
(including such portion thereof that is not exercisable) shall terminate.
(c) IF THE TERMINATING EVENT IS NOT CONSUMMATED. Notwithstanding
Paragraphs 10(a) and 10(b), in the event the Terminating Event is not
consummated, the Option shall be deemed not to have been exercised, any notice
of exercise shall be void, any consideration delivered to the Sponsor shall be
returned to the Optionee, and any certificate for Shares that may have been
issued shall be returned to the Sponsor, and the Option shall be exercisable
thereafter to the extent it would have been exercisable if no such notice had
been given. Notwithstanding the above, to the extent any Option exercised
pursuant to Paragraph (a) or (b) would have been exercisable without the notice
of a Terminating Event, the Optionee may elect to treat the exercise as valid,
with respect to any vested portion of the Option.
11. INTERPRETATION
The Committee shall have the power to interpret the Plan and to make
and amend rules for putting it into effect and administering it. It is intended
that Options shall be Non-Qualified Options, and that Shares transferred
pursuant to their exercise shall constitute property subject to federal income
tax pursuant to the provisions of section 83 of the Code, and that Options not
be treated as "incentive stock options" described in section 422 of the Code.
The provisions of the Plan shall be interpreted and applied insofar as possible
to carry out such intent.
12. AMENDMENTS:
The Plan may be amended by the Board, provided that no outstanding
Option shall be adversely affected by any such amendment without the written
consent of the Optionee or other person then entitled to exercise such Option.
13. SECURITIES LAW
The Committee shall have the power to make each grant under the Plan
subject to such conditions as it deems necessary or appropriate to comply with
the then-existing requirements of law, including the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, including Rule
16b-3 (or any similar rule) of the Securities and Exchange Commission.
8
<PAGE> 9
14. WITHHOLDING OF TAXES ON EXERCISE OF OPTION
Except as otherwise provided below, any tax liabilities incurred in
connection with the exercise of an Option under the Plan shall be satisfied by
the withholding of a portion of the Shares underlying the Option exercised
having a Fair Market Value approximately equal to the minimum amount of taxes
required to be withheld under applicable law. Notwithstanding the foregoing, the
Committee may permit an Optionee to pay to the Sponsor in cash all or a portion
of the taxes to be withheld upon the exercise of an Option. In all cases, the
Shares so withheld shall have a Fair Market Value that does not exceed the
amount of taxes to be withheld minus the cash withholding payment, if any, made
by the Optionee. Any election pursuant to this Paragraph 14 must be delivered at
the time of delivery of the notice of exercise. Shares withheld pursuant to this
Paragraph 14 shall be available for subsequent grants under the Plan. The
Committee may add such other reasonable requirements and limitations regarding
elections pursuant to this Paragraph 14 as it deems appropriate. The Sponsor's
obligation to make any delivery or transfer of Shares shall be conditioned on
the recipient's compliance, to the Sponsor's satisfaction, with any withholding
requirement.
15. EFFECTIVE DATE AND TERM OF PLAN
The effective date of Plan is the date on which it was adopted by the
Board, as set forth below. The Plan shall expire no later than the tenth
anniversary of the date the Plan was initially adopted by the Board, unless
sooner terminated by the Board.
16. GENERAL
The issuance of Shares on the exercise of an Option shall be subject to
all of the applicable requirements of the corporation law of the Sponsor's state
of incorporation and other applicable laws, including federal or state
securities laws, and all Shares issued under the Plan shall be subject to the
terms and restrictions contained in the Certificate of Incorporation of the
Sponsor, as amended from time to time.
Adopted by the Board on the 17th day of November, 1999.
SCORELAB, INC.
BY: /s/ JOSEPH E. KASPUTYS
--------------------------------------------
Joseph E. Kasputys, Chairman
ATTEST: /s/ MICHAEL R. KARGULA
----------------------------------------
Michael R. Kargula, Secretary
9
<PAGE> 1
Exhibit 13
- -------------------------------------------------------
FINANCIAL CONTENTS
- -------------------------------------------------------
24 Consolidated Financial Statements
- -------------------------------------------------------
28 Notes to Consolidated Financial Statements
- -------------------------------------------------------
42 Report of Management
- -------------------------------------------------------
42 Independent Auditors' Report
- -------------------------------------------------------
43 Management's Discussion and Analysis
- -------------------------------------------------------
50 Selected Financial Information - Five Year Data
- -------------------------------------------------------
51 Supplementary Financial Information - Quarterly Data
- -------------------------------------------------------
[PRIMARK LOGO] PRIMARK
GLOBAL INFORMATION SERVICES
<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
In Thousands Except Per Share Amounts for Years Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $494,619 $434,540 $397,875
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of services 200,158 174,825 157,327
Selling, general and administrative 188,191 165,884 151,309
Depreciation 20,843 17,221 17,371
Amortization of goodwill 18,850 15,625 15,805
Amortization of other intangible assets 17,199 15,969 17,029
Restructuring and other charges (4) 67,970 6,800
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 445,237 457,494 365,641
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 49,382 (22,954) 32,234
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSE
Interest expense - net (19,091) (6,275) (14,901)
Other expense - net (513) (1,562) (38)
- -----------------------------------------------------------------------------------------------------------------------------------
Total other expense (19,604) (7,837) (14,939)
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 29,778 (30,791) 17,295
INCOME TAX EXPENSE 12,887 2,579 12,441
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS 16,891 (33,370) 4,854
- -----------------------------------------------------------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax expense of
$5,614 in 1998 and $12,510 in 1997 -- 7,927 16,816
Gain on disposal of discontinued operations, net of income tax
expense of $108,376 in 1998 -- 187,286 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Discontinued Operations -- 195,213 16,816
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS AND CHANGE IN ACCOUNTING PRINCIPLE 16,891 161,843 21,670
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT,
net of income tax benefit of $3,614 in 1998 and $1,379 in 1997 -- (5,121) (1,955)
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE 16,891 156,722 19,715
CHANGE IN ACCOUNTING PRINCIPLE, --
net of income tax benefit of $109 in 1999 (219) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 16,672 $156,722 $ 19,715
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS (LOSS) PER COMMON SHARE
Income (loss) from continuing operations $ 0.82 $ (1.37) $ 0.18
Discontinued operations -- 8.03 0.64
Extraordinary loss -- (0.21) (0.07)
Change in accounting principle (0.01) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.81 $ 6.45 $ 0.75
- -----------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Income (loss) from continuing operations $ 0.80 $ (1.37) $ 0.17
Discontinued operations -- 8.03 0.61
Extraordinary loss -- (0.21) (0.07)
Change in accounting principle (0.01) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.79 $ 6.45 $ 0.71
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 20,472 24,302 26,348
Dilutive effect of stock options 519 -- 1,596
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted shares outstanding (1998 excludes effect of options to purchase 929 shares) 20,991 24,302 27,944
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
In Thousands For Years Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 16,672 $ 156,722 $ 19,715
Adjustments to reconcile net income to cash flows provided by operating activities:
Discontinued operations -- (7,927) (16,816)
Gain on sale of subsidiary -- (187,286) --
Restructuring charge - intangible assets -- 60,673 --
Extraordinary loss on early extinguishment of debt -- 8,735 3,334
Change in accounting principle 219
Cash provided by (contributed to) discontinued operations -- (6,306) 23,380
Depreciation and amortization 56,892 48,815 50,205
Other charges and credits - net (2,673) (28,166) (12,471)
Changes in operating working capital, excluding the effect of acquisitions:
(Increase) in accounts receivable, unbilled and other receivables - net (11,848) (17,462) (5,366)
(Increase) decrease in other current assets and liabilities (999) 26,478 3,717
(Decrease) in accounts payable (1,535) (817) (2,896)
Increase in accrued payroll and benefits 11,140 6,719 2,515
Decrease (increase) in income and other taxes payable - net (14,633) 3,397 (5,506)
Decrease (increase) in deferred revenue (10,108) 9,127 (1,787)
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in operating working capital (27,983) 27,442 (9,323)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 43,127 72,702 58,024
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable 1,075,526 919,171 225,304
Repayment of short-term notes payable (942,526) (946,773) (197,702)
Issuance of long-term debt -- 150,000 100,000
Repayment of long-term debt (5,500) (332,504) (5,000)
Common stock repurchased and retired (39,306) (197,263) (56,238)
Common stock issuance and related tax benefit 4,514 12,131 12,235
Debt issue costs and other (1,060) (2,112) (3,853)
Call premium -- (4,900) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 91,648 (402,250) 74,746
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (35,136) (22,812) (23,965)
Software capitalized (31,714) (17,587) (19,971)
Purchase of subsidiaries - net of acquired cash (79,118) (19,225) (88,089)
Proceeds from disposal of discontinued operations 8,900 502,000 --
Tax paid on disposal of discontinued operations (30,738) (62,000) --
Other - net 226 171 (4,514)
Cash contributed to discontinued operations -- (12,395) (7,965)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities (167,580) 368,152 (144,504)
- -----------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (390) 246 (762)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,195) 38,850 (12,496)
CASH AND CASH EQUIVALENTS, JANUARY 1 51,630 12,780 25,276
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 18,435 $ 51,630 $ 12,780
- -----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID FOR:
Income taxes, including amounts paid on discontinued operations $ 53,450 $ 95,431 $ 12,834
Interest $ 18,157 $ 12,638 $ 25,512
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
In Thousands At December 31 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,435 $ 51,630
Accounts receivable, less allowance for doubtful accounts of $5,157 and $3,762, respectively 108,116 88,770
Unbilled and other receivables 11,992 13,203
Federal and other income tax receivable 20,448 7,914
Other current assets 16,940 15,806
Net assets of discontinued operations -- 8,900
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 175,931 186,223
- ---------------------------------------------------------------------------------------------------------------------------------
INTANGIBLE AND OTHER ASSETS
Goodwill, less accumulated amortization of $99,327 and $81,048, respectively 583,371 526,624
Capitalized data and other intangible assets, less accumulated amortization of
$36,984 and $29,670, respectively 36,418 38,703
Capitalized software, less accumulated amortization of $23,899 and $18,578, respectively 66,640 37,765
Other 10,665 9,797
- ---------------------------------------------------------------------------------------------------------------------------------
Total intangible and other assets 697,094 612,889
- ---------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Computer equipment 75,432 79,837
Leasehold improvements 20,568 19,267
Other 21,937 10,901
- ---------------------------------------------------------------------------------------------------------------------------------
117,937 110,005
Accumulated depreciation (51,862) (58,649)
- ---------------------------------------------------------------------------------------------------------------------------------
Net property and equipment 66,075 51,356
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $939,100 $850,468
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving bank debt $133,000 $ --
Notes payable and current portion of capital lease obligations 8,774 7,390
Accounts payable 10,120 12,059
Accrued employee payroll and benefits 42,417 31,924
Income taxes payable 14,672 49,232
Deferred revenue 82,109 80,004
Other accrued expenses 54,457 53,441
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 345,549 234,050
- ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT AND OTHER LIABILITIES
Senior subordinated notes 150,000 150,000
Deferred income taxes 14,484 9,599
Other liabilities 11,142 16,641
- ---------------------------------------------------------------------------------------------------------------------------------
Total long-term debt and other liabilities 175,626 176,240
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 521,175 410,290
- ---------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital 55,447 90,239
Retained earnings 372,052 355,380
Accumulated other comprehensive income (9,574) (5,441)
- ---------------------------------------------------------------------------------------------------------------------------------
Total common shareholders' equity 417,925 440,178
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and common shareholders' equity $939,100 $850,468
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
In Thousands For Years Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK, without par value - authorized 100,000,000 shares, issued
19,990,124; 21,251,455 and 26,800,399 shares, respectively, at $0.02 stated
value
Balance - beginning of year $ 425 $ 536 $ 541
Issued for employee stock purchase and option plans 7 11 36
Retirement of common stock (32) (122) (41)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of year 400 425 536
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance - beginning of year 89,814 274,834 296,005
Tax benefit relating to stock option plans 75 2,837 22,827
Issued for employee stock purchase and option plans 4,432 9,284 12,198
Retirement of common stock (39,274) (197,141) (56,196)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of year 55,047 89,814 274,834
- -----------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance - beginning of year 355,380 198,658 178,943
Net income 16,672 156,722 19,715
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of year 372,052 355,380 198,658
- -----------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance - beginning of year (1,975) (3,057) 341
Translation adjustment (11,235) 1,658 (5,221)
Related income tax benefit (expense) 3,932 (576) 1,823
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of year (9,278) (1,975) (3,057)
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL MINIMUM PENSION LIABILITY
Balance - beginning of year (3,466) -- --
Additional minimum pension liability 3,966 (4,951) --
Related income tax benefit (expense) (1,190) 1,485
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of year (690) (3,466) --
- -----------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON DERIVATIVE INSTRUMENTS DESIGNATED AS CASH FLOW HEDGES
Balance - beginning of year -- -- --
Net gain on derivative instruments designated as cash flow hedges 668 -- --
Related income tax benefit (expense) (274)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance - end of year 394 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income (9,574) (5,441) (3,057)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON SHAREHOLDERS' EQUITY $417,925 $ 440,178 $470,971
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
In Thousands For Years Ended December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INCOME $ 16,672 $ 156,722 $ 19,715
- -----------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
Cumulative translation adjustment (7,303) 1,082 (3,398)
Net gain on derivative instruments designated as cash flow hedges 394 -- --
Additional minimum pension liability 2,776 (3,466) --
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE LOSS (4,133) (2,384) (3,398)
- -----------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 12,539 $ 154,338 $ 16,317
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
<PAGE> 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BUSINESS
Primark Corporation and its majority-owned subsidiaries ("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 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 year statements to conform to
the 1999 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 a
component of 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.
d. CHANGE IN ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS
Effective January 1, 1999, the Company adopted Statement of Financial Accounting
Standards 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." FAS 133 requires the Company to recognize all derivatives on the
balance sheet at fair value. Depending on the nature of the underlying exposure
being hedged, the effective portion of changes in the fair value of derivatives
are either recognized in the consolidated statement of income or as a component
of accumulated other comprehensive income. The ineffective portion of a
derivative's change in fair value is recognized in the consolidated statement of
income. In accordance with its risk management policy, the Company uses foreign
currency options and foreign currency forward contracts. 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 instruments for trading purposes. The cumulative
effect of a change in accounting principle due to adoption of FAS 133 as of
January 1, 1999 was a charge to income of $219,000.
Prior to January 1, 1999, the Company applied the principles of Statements of
Financial Accounting Standards 52 ("FAS 52"), "Foreign Currency Translation,"
and 119 ("FAS 119"), "Disclosure about Derivative Financial Instruments and Fair
Value of Financial Instruments," when accounting for derivative financial
instruments.
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.
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 ranging 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
During 1999, the Company adopted AICPA SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which requires
certain expenditures made for internal use software to be capitalized.
Capitalized software is amortized on a straight-line basis over periods ranging
from 3 to 5 years. The adoption of these provisions did not materially impact
the Company's consolidated results.
<PAGE> 7
NOTES CONTINUED
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 primarily 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.
l. ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion 25, "Accounting for
Stock Issued to Employees," and related interpretations. The impact of recording
stock-based compensation under the method prescribed by Statement of Financial
Accounting Standards 123 ("FAS 123"), "Accounting for Stock-Based Compensation,"
is disclosed in Note 9.
m. 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.
2. ACQUISITIONS
During the three year period ended December 31, 1999, 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. The consolidated financial statements include the operating
results of each business from the date of acquisition.
a. 1999
<TABLE>
<CAPTION>
Remaining 20%
Interest in
Summary of Acquisition Costs (000s) Worldscope Extel A-T
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash $ 9,000 $30,669 $35,306
Convertible Notes Issued 7,000 -- --
Acquisition Fees -- 1,249 825
Other -- -- 34
-----------------------------------------------------------------------------------------------------------
Total Consideration $16,000 $31,918 $36,165
Acquired Cash -- -- (1,253)
-----------------------------------------------------------------------------------------------------------
Consideration Paid $16,000 $31,918 $34,912
-----------------------------------------------------------------------------------------------------------
Excess of Purchase Price over Fair Value $16,566 $31,532 $29,028
-----------------------------------------------------------------------------------------------------------
</TABLE>
Worldscope
On June 1, 1999, the Company acquired the remaining 20% minority interest in
Worldscope for $16.0 million, giving Primark 100% ownership of this business.
The purchase price consisted of a $9.0 million cash payment and two $3.5 million
convertible subordinated notes. The excess of the purchase price over the fair
market value of net assets acquired of approximately $16.6 million is being
amortized on a straight line basis over 25 years. Future adjustments to the
total purchase price allocation, if any, are not expected to materially affect
the Company's financial statements. Worldscope produces a leading database
covering global company financial information on over 24,000 companies from 53
countries.
Extel
On February 19, 1999, the Company acquired the Company Fundamental Data business
and the Extel brand name ("Extel") from The Financial Times Group, part of
Pearson plc, for $31.9 million, subject to certain post closing adjustments. The
excess of purchase price over fair value of net assets acquired of approximately
$31.5 million is being amortized on a straight-line basis over 25 years. Extel
is a widely recognized brand name in the European and Asian markets and provides
summarized company "tear sheets" for rapid corporate analysis, historical
company fundamental information, image-based data, textual corporate profiles
and company news to the investment industry worldwide.
A-T Financial
On February 5, 1999, Primark acquired all of the outstanding shares of A-T
Financial Information ("A-T") for $34.9 million, which is net of acquired cash.
During the fourth quarter of 1999, the Company reallocated the purchase price
based on an appraisal increasing certain identifiable intangibles, reducing the
preliminary allocation of the excess purchase price over the fair value of net
assets acquired of approximately $31.1 million to $29.0 million and decreasing
the estimated life of goodwill from 40 years to 20 years. These
<PAGE> 8
NOTES CONTINUED
changes in purchase price allocation and estimated life of goodwill have the
effect of decreasing net income by $304,000 in the fourth quarter of 1999.
Founded in 1987, A-T is a real-time financial information content provider
servicing institutional and retail markets with timely, high quality, global
securities information and attendant display and distribution technology.
OnPoint
Also during 1999, the Company acquired OnPoint Technologies, Inc. for an
aggregate purchase price of approximately $3.3 million. Goodwill associated with
this acquisition of approximately $3.3 million is being amortized over five
years. OnPoint specializes in developing Internet-based financial applications
and software products for the financial services sector.
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company for the years ended December
31, 1999 and 1998 as though the acquisitions had occurred on January 1 of the
respective year. This information has been prepared for comparative purposes
only and does not necessarily represent actual operating results that may be
achieved in the future or that would have occurred had the acquisitions been
consummated on January 1, 1998.
(000s) except Earnings Per Share 1999 1998
- ------------------------------------------------------------------------------
Operating revenues $497,462 $ 463,696
- ------------------------------------------------------------------------------
Income (loss) from continuing operations 16,006 (40,713)
- ------------------------------------------------------------------------------
Net income 15,787 149,379
- ------------------------------------------------------------------------------
Diluted earnings (loss) per share from
continuing operations $ 0.76 $ (1.68)
- ------------------------------------------------------------------------------
b. 1998
During 1998, the Company acquired four companies for an aggregate purchase price
of approximately $8.8 million. Goodwill associated with these acquisitions of
approximately $3.5 million 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.
c. 1997
Summary of Acquisition Costs (000s) WEFA Baseline
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
WEFA
On February 7, 1997, the Company acquired all of the outstanding stock of WEFA
Holdings, Inc. ("WEFA") for $45.0 million 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. The excess of purchase price over fair
value of net assets acquired of approximately $45.0 million is being amortized
on a straight-line basis over 35 years.
Baseline
On January 6, 1997, the Company purchased all of the outstanding stock of
Baseline Financial Services, Inc. ("Baseline") for $41.0 million in cash.
Baseline provides institutional investors with visual valuation graphics of
financial market information. The excess of purchase price over fair value of
net assets acquired of approximately $39.4 million is being amortized on a
straight-line basis over 30 years.
3. DISCONTINUED OPERATIONS AND DISPOSITIONS
The accompanying consolidated financial statements reflect the operating results
of two discontinued operations separately from the Company's continuing
operations for 1998 and 1997. Consolidated interest expense has been allocated
to discontinued operations based upon their ratio of net assets to total
consolidated net assets.
Discontinued Operations (000s) 1998 1997
- -------------------------------------------------------------------------
Income (loss):
TASC $ 3,735 $17,086
TIMCO 4,192 (270)
- -------------------------------------------------------------------------
Total $ 7,927 $16,816
- -------------------------------------------------------------------------
Gain on disposal:
TASC $171,115 $ --
TIMCO 16,171 --
- -------------------------------------------------------------------------
Total $187,286 $ --
- -------------------------------------------------------------------------
TASC
On April 1, 1998, the Company completed the sale of TASC and its affiliated
weather information companies to Litton Industries for $432.0 million in cash
plus an equity adjustment of $8.9 million.
The Company recorded a gain on the sale of $171.1 million which includes the
$8.9 million closing adjustment, transaction costs of $6.1 million, taxes of
$99.9 million 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 $334.9 million; $8.9 million of which was received in January of
1999.
<PAGE> 9
NOTES CONTINUED
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 $70.0 million and resulted in a gain of $16.2
million. Pursuant to the Stock Purchase Agreement, a working capital adjustment
of $1.3 million was based upon TIMCO's closing balance sheet as of September 22,
1998, and was received in November 1998.
4. RESTRUCTURING AND OTHER 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 $68.7 million in operating expenses for direct and other
reorganization related costs in June 1998. In addition, an extraordinary loss of
$8.7 million ($5.1 million after tax) was also recorded in June 1998 in
connection with the early extinguishment of debt.
The restructuring charge included the write-off of intangible assets for: (i)
$25.0 million of previously capitalized software related to the planned
integration of several product offerings on common software platforms; (ii) $1.5
million of data that was determined to be duplicative and not used as a result
of the software platform integration; (iii) write-off of $23.9 million of
goodwill associated with software and data, established as part of purchase
accounting; (iv) write-off of $7.2 million of goodwill related to DAFSA; and (v)
write-off of $3.1 million of a trademark no longer used in the restructured
organization. The level of impairment as well as the fair value of liabilities
accrued was determined based upon the discounted value of estimated future cash
flows.
The $68.7 million charge included $8.0 million related primarily to termination
benefits in the phased reduction of employees and the abandonment of leased
facilities, including leasehold improvements. Salaries and termination benefits,
either in the form of one-time or periodic payments, were made when the employee
ceased employment. These employees were in management, sales and administrative
support. In December of 1998, $707,000 of restructuring accruals was reversed
into income for a lease that was bought out by a third party at terms more
favorable than originally estimated.
During 1999, the Company decided not to abandon certain leased space, primarily
as a result of acquisitions made since the restructuring charge was recorded in
June of 1998. Also, the Company was able to sub-lease or otherwise abandon
certain leases for less than was originally estimated. This resulted in a
reduction of restructuring expense and the related accrual of approximately $3.0
million. The Company also wrote off leasehold improvements and amortized leases
associated with abandoned space in an amount equal to approximately $877,000.
The severance accrual was reduced by $780,000 during 1999, $711,000 for
severance amounts paid to 49 employees and $69,000 for amounts settled
favorably. An additional amount of approximately $3.1 million of severance was
also incurred and paid to 45 employees notified and terminated in 1999.
As of December 31, 1999, the remaining accrual totaled $611,000 and is recorded
in other liabilities. Approximately $410,000 of this amount represents the
liability associated with abandoned lease space to be paid out over the next 3
years and $201,000 represents severance related to two staff reductions to be
paid in the first quarter of 2000.
Details of activity related to the restructuring and other costs in 1998 and
1999 are as follows:
<TABLE>
<CAPTION>
ABANDONMENT OF
LEASED FACILITIES, SALARIES AND
INCLUDING LEASEHOLD TERMINATION
1998 PLAN (000s) IMPROVEMENTS BENEFITS TOTAL
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance January 1, 1998 $ -- $ -- $ --
Expensed 5,156 2,871 8,027
Paid (176) (1,890) (2,066)
Reversed (707) -- (707)
- -------------------------------------------------------------------------------------------------
December 31, 1998 Accrual $ 4,273 $ 981 $ 5,254
Expensed -- -- --
Paid / write-off of related assets (877) (711) (1,588)
Reversed (2,986) (69) (3,055)
- -------------------------------------------------------------------------------------------------
DECEMBER 31, 1999 ACCRUAL $ 410 $ 201 $ 611
- -------------------------------------------------------------------------------------------------
</TABLE>
SALARIES AND
1999 PLAN (000s) TERMINATION BENEFITS
- ------------------------------------------------------------------------
Balance January 1, 1999 $ --
Expensed 3,051
Paid (3,051)
- ------------------------------------------------------------------------
December 31, 1999 Accrual $ --
- ------------------------------------------------------------------------
The following table summarizes the effect to the income statement for
restructuring items for the year ended December 31, 1999.
(000s)
- ------------------------------------------------------------------------
Salaries and termination benefits $ 3,051
Leasehold and related items not abandoned or items
settled for amounts less than originally anticipated (2,986)
Salaries and termination benefits settled for amounts
less than anticipated (69)
- ------------------------------------------------------------------------
Total $ (4)
- ------------------------------------------------------------------------
<PAGE> 10
NOTES CONTINUED
b. DISCLOSURE
During the first quarter of 1997, the Company recorded a $1.8 million 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.
b. DAFSA
During the second quarter of 1997, the Company recorded a restructuring charge
of $5.0 million related to the integration and downsizing of operations at
DAFSA. Due to DAFSA's unprofitable condition, tax benefits associated with
losses incurred during 1997, including the restructuring charge, were not
recognized. In addition to the $5 million restructuring charge noted above, when
the Company acquired DAFSA in June of 1996, approximately $1.5 million 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 $6.5 million total restructuring provision was completed in
early 1997 and included: (i) approximately $1.7 million of costs for exiting a
line of business; (ii) the future rent cost of abandoned space of $1.0 million;
(iii) employee severance and other benefits of $1.4 million; (iv) asset
write-downs of $1.2 million; and (v) legal, professional and other related costs
of $1.2 million.
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
2015. Total rent expense for all operating leases was $17.9 million, $16.7
million and $15.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
Future Minimum Lease Commitments (000s) Capital Operating
- ------------------------------------------------------------------------------
2000 $ 559 $17,568
2001 278 16,616
2002 54 14,582
2003 6 12,646
2004 6 8,892
Thereafter -- 28,129
- ------------------------------------------------------------------------------
Total minimum lease payments $ 903 $98,433
--------
Amounts representing interest and other (59)
- ---------------------------------------------------------------
Present value of net minimum payments $ 844
Less: current portion (524)
- ---------------------------------------------------------------
Long-term obligations $ 320
- ------------------------------------------------------------------------------
6. SHORT-TERM AND LONG-TERM DEBT
On December 16, 1998, the Company issued $150.0 million of 91/4% 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 in 2003 and thereafter at redemption
prices ranging from 104.625% to 100.000% 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) $25.0 million; (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; and (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; (ii) to
repurchase stock; and (iii) for other general corporate purposes. The Company
incurred costs of $4.4 million in conjunction with the arrangement, which are
being amortized over the term of the debt.
In conjunction with the above, the Company replaced its outstanding $75.0
million credit facility with a $225.0 million revolving credit facility (the
"Credit Facility") which expires in 2002. The aggregate credit committed amount
reduces semi-annually on June 30 and December 31 of each year. As of December
31, 1999 the total revolving credit committed was $205.0 million which will be
reduced by $20.0 million during 2000. Interest on the borrowings under the new
revolving credit facility is payable at rates ranging from 0.375% to 1.50% 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
$2.0 million.
<PAGE> 11
NOTES CONTINUED
In connection with the purchase of the remaining 20% minority interest in
Worldscope on June 1, 1999, the Company issued two $3.5 million Convertible
Subordinated Notes. The notes bear interest at 5%, have a maturity date of June
1, 2014, are due upon demand at any time after January 1, 2000 and are
convertible into the Company's common shares at a price of $30 per share. The
Notes are callable by the Company in the event of a change in control.
The ICV Purchase Notes are currently callable by the owners and must be paid by
the Company no later than October 24, 2002. Interest on the ICV Purchase Notes
is payable quarterly at the current prevailing LIBOR rate. Through 1999, the
Company has paid $7.0 million of the ICV Purchase Notes and $1.3 million remains
outstanding.
a. SHORT-TERM DEBT
December 31 (000s) 1999 1998
- -----------------------------------------------------------------------------
Outstanding bank borrowings $133,000 $ --
Available bank borrowings $ 72,000 $220,000
Effective interest rate at December 31 7.78% --
- -----------------------------------------------------------------------------
Worldscope 5% Convertible Subordinated Notes $ 7,000 $ --
ICV Variable Purchase Notes $ 1,250 $ 6,750
- -----------------------------------------------------------------------------
b. LONG-TERM DEBT
The Company's outstanding long-term debt, including capital lease obligations,
is shown below.
December 31 (000s) 1999 1998
- -----------------------------------------------------------------------------
Primark 9 1/4% Senior Subordinated Notes
Due 2008 $150,000 $150,000
Capital lease obligations 844 2,129
- -----------------------------------------------------------------------------
Total debt and capital lease obligations $150,844 $152,129
Less current maturities (524) (640)
- -----------------------------------------------------------------------------
Long-term debt and capital lease obligations $150,320 $151,489
- -----------------------------------------------------------------------------
7. FINANCIAL INSTRUMENTS
The Company enters into a variety of financial instruments, including foreign
currency forward and call option contracts and interest rate swaps, to manage
currency and interest rate risk. The Company does not hold or issue derivative
contracts for trading purposes.
The Company is exposed to credit losses in the event of non-performance by
counterparties to these financial instruments, but it does not expect any of the
counterparties to fail to meet their obligations. To manage credit risks, the
Company selects counterparties based on credit ratings and monitors the exposure
with each counterparty.
a. FOREIGN EXCHANGE MARKET RISK
Forward and option contracts related to foreign exchange market risk are
utilized to reduce the exposure of the Company's anticipated foreign revenues,
net of cash operating expenses, to excessive foreign currency fluctuations. A
significant portion of the Company's revenues are denominated in currencies
other than the US dollar. For the twelve months ended December 31, 1999,
approximately 57.8% of total revenues, including intercompany sales, were
denominated in non-US dollar currencies of which approximately 33.8%, 17.6% and
6.4% are denominated in UK sterling, currencies of Continental Europe and Asian
currencies, respectively. The majority of the Company's revenues are
subscription-based arrangements of up to two years in duration.
Additionally, a significant percentage of the Company's operating costs are
denominated in foreign currencies. The Company maintains significant production,
product development, sales and administrative functions in the United Kingdom.
Also, the Company maintains local sales and customer service functions in most
financial centers of Europe and Asia. For the twelve months ended December 31,
1999, approximately 52.5% of operating income, excluding goodwill amortization,
was denominated in non-US dollar currencies of which approximately 3.3%, 42.0%
and 7.2% are denominated in UK sterling, currencies of Continental Europe and
Asian currencies, respectively. The primary market risk that the Company faces
is the US dollar strengthening against the euro, Swiss franc, Swedish krona and
Japanese yen. The use of domestic investment and borrowing facilities eliminates
foreign currency exposures related to financial instruments.
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 the Company's foreign
exchange risk management strategy include: (i) derivative contracts are assigned
to an identified cash flow exposure and the notional amount of such derivatives
will not exceed the amount of the underlying exposure; (ii) levels of cover for
foreign exchange hedging will not exceed 90% for exposures with a horizon within
the next 12 months, and 75% for the following 12 months; (iii) derivatives
linked to a cash flow exposure will not exceed 24 months in duration; and (iv)
options can only be written as part of a matched combination strategy or collar
with no net premium received.
The Company principally enters into contracts to deliver foreign currencies for
UK sterling at agreed-upon exchange rates with maturities not exceeding two
years. The underlying transactions typically represent estimated future service
fees from the Company's network of global sales organizations. The Company
accounts for these instruments as cash flow hedges. In accordance with FAS
<PAGE> 12
NOTES CONTINUED
133, the fair value of changes of derivative instruments related to the
effective portion of cash flow hedges are initially recorded as a component of
other comprehensive income. Hedging transactions are typically set up with a
notional principal less than the principal of the underlying transaction.
At December 31, 1999 the notional value of foreign exchange contracts to deliver
UK sterling is shown below.
(000s) Notional Amounts
- ----------------------------------------------------------------------------
FAIR VALUE FORWARD EXCHANGE CONTRACTS:
Euro $ 8,058
Japanese Yen 3,901
Swiss Franc 1,748
- ----------------------------------------------------------------------------
$13,707
- ----------------------------------------------------------------------------
Effectiveness of these contracts is measured as the first units of currency of
the underlying exposure being hedged and is reviewed quarterly to ensure that
the estimated amount of the exposure being hedged does not decline below the
notional principal of the respective hedging transactions.
Unrealized gains and losses on cash flow hedges accumulate in other
comprehensive income and are reclassified into earnings when the forecasted
transaction affects earnings. For the year ended December 31, 1999, there was no
ineffective portion of derivative gains or losses reported in earnings, and net
gains from hedge transactions reclassified from other comprehensive income to
revenues totaled $710,000. At December 31, 1999, the fair value of derivative
instruments designated as cash flow hedges is $394,000 and is recorded in other
current assets with the offset to other comprehensive income. This gain will be
recognized in revenues over the next 24 months as the forecasted revenues are
recognized.
Forward and option contracts are also entered into to protect anticipated
repatriations of excess cash flow, primarily from the UK, under intercompany
loan agreements or other financial transactions. The Company accounts for these
instruments at fair market value, recording each period's gains or losses in
non-operating income or loss. For the year ended December 31, 1999, the net gain
on these instruments recorded in non-operating income was $486,000. Foreign
exchange contracts with a value of $160,000 are recorded on the balance sheet in
other current assets at December 31, 1999.
The notional value of these foreign exchange contracts at December 31, 1999 is
shown below.
(000s) Notional Amounts
- ----------------------------------------------------------------------------
CASH FLOW FORWARD EXCHANGE CONTRACTS:
Euro $2,681
UK Sterling 7,051
- ----------------------------------------------------------------------------
$9,732
- ----------------------------------------------------------------------------
b. INTEREST RATE MARKET RISK
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 may utilize forward rate agreements, swaps and options.
During 1999 and 1998, the Company was not a party to any outstanding interest
rate derivative agreements.
c. DEBT
The fair value of the Company's $150.0 million 91/4% Subordinated Notes was
approximately $141.0 million and $150.0 million at December 31, 1999 and 1998,
respectively, and the book value was $150.0 million as of each of these
respective dates. Estimated fair value of these financial instruments was based
upon quotations obtained from investment and commercial bankers using comparable
securities.
d. 1998
Prior to January 1, 1999, the Company applied the principles of FAS 52 when
accounting for derivative financial instruments. The table below illustrates the
US dollar equivalent of foreign exchange contracts at December 31, 1998 along
with unrecorded gross unrealized gains and losses.
Gross
Notional Unrealized Gross Unrealized
(000s) Amounts Gains Deferred Losses Deferred
- ------------------------------------------------------------------------------
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)
- ------------------------------------------------------------------------------
The carrying and estimated fair values of certain of the Company's financial
instruments at December 31, 1998 are shown below.
(000s) Carrying Value Estimated Fair Value
- ------------------------------------------------------------------------------
Forwards $192 $(83)
Options $ 14 $ 11
- ------------------------------------------------------------------------------
<PAGE> 13
NOTES CONTINUED
8. SHAREHOLDERS' EQUITY
a. COMMON STOCK
In June 1998, the Company purchased 4,540,000 shares at $34 per share in a
"Dutch Auction" self-tender offer for $155.0 million, including legal and
accounting fees. In addition, in July 1998, the Company implemented an open
market purchase program to buy up to 4,000,000 shares of its common stock from
time to time, depending on market conditions. As a result, during 1999 and 1998,
the Company purchased a total of 1,582,046 and 6,108,500 shares at a total cost
of $39.3 million and $197.3 million, representing approximately 5.9% and 22.8%
of its total outstanding common stock, respectively. As of December 31, 1999,
the Company had authority remaining to buy back up to 849,454 additional shares
of its common stock, however, the Company is limited to approximately $13.4
million of additional repurchases under its existing bank covenants.
In 1997, the Company repurchased 1,349,000 shares of its outstanding common
stock in the open market at a total cost of $26.6 million under a prior
authorization.
The Company issued approximately 320,715 and 560,000 shares of common stock
during 1999 and 1998, respectively, in connection with its stock option and
employee stock purchase plan.
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 $29.6 million. The Company drew on its revolving
credit facility to satisfy the withholding tax payment. In connection with these
option exercises, the Company received a tax deduction related to the option
exercises which resulted in a $25.0 million refund and reduction in taxes paid.
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 the Company'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, 1999, common stock reserved for issuance under the
Rights Agreement was 19,990,124 shares.
9. RETIREMENT AND BENEFIT PLANS
a. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Under the 401(K) provisions of the Primark Corporation Employee Savings and
Stock Ownership Plan ("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. The Company contributed $1.7 million in 1999 and $1.4 million during
1998.
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) 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of year $28,956 $20,508
Service cost 2,070 1,589
Interest cost 1,698 1,589
Net actuarial loss (gain) (2,458) 5,839
Benefits paid (420) (569)
- -----------------------------------------------------------------------------------------------
Benefits obligation, end of year $29,846 $28,956
- -----------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of fund assets, beginning of year $23,877 $19,661
Actual return on fund assets 1,375 3,463
Employer contribution 1,472 1,322
Benefits paid (420) (569)
- -----------------------------------------------------------------------------------------------
Fair value of fund assets, end of year $26,304 $23,877
- -----------------------------------------------------------------------------------------------
Funded status $(3,542) $(5,079)
Unrecognized net actuarial loss 4,625 7,555
Unrecognized prior service cost 81 100
Unrecognized transition (asset) (1,197) (1,489)
- -----------------------------------------------------------------------------------------------
Net amount recognized $ (33) $ 1,087
- -----------------------------------------------------------------------------------------------
Amounts recognized in the statement of financial position consist of:
Accrued benefit liability $ (804) $(2,479)
Intangible assets 81 100
Additional minimum pension liability 690 3,466
- -----------------------------------------------------------------------------------------------
Net amount recognized $ (33) $ 1,087
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
NOTES CONTINUED
The following assumptions were used in accounting for foreign defined benefit
plans.
December 31 1999 1998 1997
- -------------------------------------------------------------------------------
Discount rate 6.8% 6.1% 7.8%
Rate of increase in future compensation 4.5% 4.0% 5.0%
Rate of return on plan assets 8.3% 7.8% 9.3%
- -------------------------------------------------------------------------------
The components of net periodic benefit cost for foreign defined benefit plans
are shown below.
December 31 (000s) 1999 1998 1997
- -------------------------------------------------------------------------------
Service cost $ 2,070 $ 1,589 $ 1,345
Interest cost 1,698 1,589 1,362
Expected return on
plan assets (1,633) (1,706) (1,627)
Amortization of the
transition amount (243) (251) (249)
Amortization of prior
service cost 16 33 33
Amortization of loss 663 318 133
- -------------------------------------------------------------------------------
Net periodic benefit cost $ 2,571 $ 1,572 $ 997
- -------------------------------------------------------------------------------
c. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS
Established in 1992, the Primark Corporation Employee Stock Purchase Plan is
available to all employees of the Company 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 1992 Stock Option Plan (the "1992 Plan") provides for
the granting of options to purchase common stock to officers and certain key
employees of the Company 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 the 1992
Plan may not exceed 1.5% of the Company's outstanding common stock as of January
1 of each year, plus any excess of available stock options not granted from
previous years. 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 from the date of grant.
In May 1999, the Company terminated its Stock Option Plan for Non-Employee
Directors and established the 1999 Stock Option Plan for Non-Employee Directors,
which provides for the granting of 200,000 options to purchase shares of Primark
common stock. Options under this new plan: (i) are granted at prices equal to
the fair market value of the stock on the date of grant; (ii) vest immediately;
and (iii) expire ten years from the date of grant.
Changes in the number of options granted under the Company's various stock
option plans are shown below.
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
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 4,082,815 $22.96 4,116,406 $20.71 4,375,865 $12.51
Granted at
market value 936,250 24.20 598,375 34.39 1,056,875 24.89
Granted above
market value -- -- -- -- 500,000 33.34
Granted below
market value 14,200 9.02 -- -- -- --
Exercised (284,731) 12.91 (476,671) 15.52 (1,692,663) 5.68
Canceled (144,579) 28.53 (155,295) 30.00 (123,671) 23.36
- ----------------------------------------------------------------------------------------------------------------------
Outstanding at
December 31 4,603,955 $23.62 4,082,815 $22.96 4,116,406 $20.71
- ----------------------------------------------------------------------------------------------------------------------
Available for
future grant at
December 31 425,585 538,297 657,361
Exercisable at
December 31 3,073,565 2,358,483 1,213,263
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth information regarding options outstanding at
December 31, 1999.
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- -------------------------------------------------------------------------------
$ 7.63 - $12.88 563,909 2.42 $11.37 563,909 $11.37
$13.50 - $14.00 795,500 4.48 $13.69 795,500 $13.69
$14.05 - $24.25 1,117,930 7.69 $22.67 784,506 $23.03
$25.00 - $33.25 1,566,291 8.08 $28.31 633,060 $27.41
$36.38 - $42.50 560,325 7.00 $38.85 296,590 $40.77
- -------------------------------------------------------------------------------
$ 7.63 - $42.50 4,603,955 6.54 $23.62 3,073,565 $21.09
- -------------------------------------------------------------------------------
<PAGE> 15
NOTES CONTINUED
Effective November 17, 1999, ScoreLab, Inc., a subsidiary of the Company
established its 1999 Stock Option Plan. This Plan is available to employees,
officers and directors of the Company and its subsidiaries and consultants and
advisors of the Company and provides such individuals options to purchase shares
of ScoreLab, Inc. Pursuant to the 1999 ScoreLab Plan, up to 150,000 shares in
the aggregate may be issued under this Plan, which represents 15% of ScoreLab's
issued and outstanding common stock. The options granted under the 1999 ScoreLab
Plan: (i) are granted at fair value; (ii) vest within a two-year period; and
(iii) expire ten years subsequent to grant date. On December 6, 1999, 113,250
options were granted at a fair value of $8. These were the only options granted
during 1999. There were no options exercised or canceled in 1999. At December
31, 1999, there are 38,208 options exercisable and 36,750 shares available for
future grants. To date, this plan has not been dilutive to the Company's
interest in the earnings of this subsidiary.
Effective December 23, 1999, the Yankee Group, a subsidiary of the Company,
established its 1999 Stock Option Plan. This Plan is available to employees,
officers and directors of the Company and its subsidiaries and consultants and
advisors of the Company and provides such individuals with the option to
purchase shares of the Yankee Group Research, Inc. Pursuant to the 1999 Yankee
Plan, up to 600,000 shares in the aggregate may be issued under this Plan, which
represents 15% of Yankee's issued and outstanding common stock. The options
granted under the 1999 Yankee Plan: (i) are granted at a fair value; (ii) vest
within a three-year period; and (iii) expire ten years subsequent to grant date.
On December 23, 1999, 447,750 options were granted at a fair value of $15. These
were the only options granted during 1999. There were no options exercised or
canceled in 1999. At December 31, 1999, there are no options exercisable and
152,250 shares available for future grants. To date, this plan has not been
dilutive to the Company's interest in the earnings of this subsidiary.
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 weighted average value of options on
their grant date and key assumptions used to apply this model are shown below.
<TABLE>
<CAPTION>
December 31 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average grant date fair value $9.99 $15.59 $12.21
Range of risk-free
interest rates 4.40% to 6.54% 4.63% to 5.85% 5.51% to 6.82%
Range of expected life
of option grants 4 to 9 years 3 to 9 years 3 to 9 years
Expected volatility of
underlying stock 37.3% 37.8% 37.5%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The value of options on their grant date for the ScoreLab, Inc. 1999 Stock
Option Plan was also measured using the Black-Scholes option-pricing model. The
value of options on their grant date and key assumptions used to apply this
model were: (i) a grant date fair value of $8; (ii) range of risk-free interest
rates of 4.40% to 6.54%; (iii) expected life of option grants of 10 years; and
(iv) an expected volatility of underlying stock of 37.3%.
The value of options on their grant date for the Yankee Group 1999 Stock Option
Plan was also measured using the Black-Scholes option-pricing model. The value
of options on their grant date and key assumptions used to apply this model
were: (i) a grant date fair value of $15; (ii) range of risk-free interest rates
of 4.40% to 6.54%; (iii) expected life of options grants of 10 years; and (iv)
an expected volatility of underlying stock of 37.3%.
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.
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.
December 31 (000's except per share) 1999 1998 1997
- -------------------------------------------------------------------------------
Net income $10,105 $149,269 $12,351
Basic EPS $ 0.49 $ 6.14 $ 0.47
Diluted EPS $ 0.48 $ 6.14 $ 0.44
- -------------------------------------------------------------------------------
<PAGE> 16
NOTES CONTINUED
10. INCOME TAXES
<TABLE>
<CAPTION>
December 31 (000s) 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FEDERAL AND OTHER INCOME
TAXES CONSISTED OF:
Current provision $10,560 $ 6,756 $ 6,728
Deferred provision
(benefit) - net 2,327 (4,177) 5,713
- -------------------------------------------------------------------------------------------
Total federal and other
income tax expense $12,887 $ 2,579 $12,441
- -------------------------------------------------------------------------------------------
RECONCILIATION BETWEEN
STATUTORY AND ACTUAL
INCOME TAXES:
Income (loss) from
continuing operations $16,891 $(33,370) $ 4,854
Income tax expense 12,887 2,579 12,441
- -------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes $29,778 $(30,791) $17,295
- -------------------------------------------------------------------------------------------
Statutory federal income
taxes at a rate of 35% $10,422 $(10,777) $ 6,053
ADJUSTMENTS TO FEDERAL
INCOME TAXES:
Amortization of goodwill 5,657 4,635 4,737
Goodwill adjustment -- 8,341 --
Adjustment of federal income
taxes from prior years (787) (2,087) (1,375)
Change in valuation allowance (1,222) 2,041 2,493
State income taxes - net 1,495 (308) 545
Effect of foreign taxes (2,354) 537 (198)
Other - net (324) 197 186
- -------------------------------------------------------------------------------------------
Total federal and other
income tax expense $12,887 $ 2,579 $12,441
- -------------------------------------------------------------------------------------------
</TABLE>
The 1999 adjustment of income taxes from prior years is a result of a refund of
UK taxes from the final settlement of the 1995-1997 tax years, and a true up of
the 1998 tax expense. The 1998 and 1997 adjustments to income taxes from prior
years was 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.
December 31 (000s) 1999 1998
- ------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
State taxes $ 10,246 $ 8,053
Post-retirement benefits 1,588 1,547
Fixed assets 913 564
Unfavorable lease reserve 1,501 1,808
Net operating loss carry forward 3,262 4,560
Bad debts 1,143 769
Other 6,874 5,575
- ------------------------------------------------------------------------------
Total deferred tax assets 25,527 22,876
Valuation allowance (3,262) (4,560)
- ------------------------------------------------------------------------------
Net deferred tax assets 22,265 18,316
- ------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Intangibles (27,906) (20,289)
Fixed assets (1,995) (2,376)
Other (10,064) (5,551)
- ------------------------------------------------------------------------------
Total deferred tax (liability) (39,965) $(28,216)
- ------------------------------------------------------------------------------
Net deferred tax (liability) $(17,700) $ (9,900)
- ------------------------------------------------------------------------------
Net current asset (liability) $ 5,394 $ (301)
Net long-term (liability) (23,094) (9,599)
- ------------------------------------------------------------------------------
Net deferred tax (liability) $(17,700) $ (9,900)
- ------------------------------------------------------------------------------
The Company has net operating loss carry forwards in various jurisdictions that
expire in the years 2000 through 2004. The Company has provided a valuation
allowance against losses of $3.3 million and $4.6 million at December 31, 1999
and 1998, respectively. The decrease in the valuation allowance in 1999 results
from the use of net operating losses in 1999 that were included in the allowance
at December 31, 1998.
<PAGE> 17
NOTES CONTINUED
- --------------------------------------------------------------------------------
Primark and Corporation And Subsidiaries
11. SEGMENT AND GEOGRAPHIC INFORMATION
- --------------------------------------------------------------------------------
Based upon the different requirements of the Company's customer base, the
Company has organized itself into four 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 a very large financial market. This division also manages
the corporate network, PrimarkNet, which serves as the major delivery channel to
the Company's customers on a global basis and across all three divisions. PFID's
product offerings serve most of the Company'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
("PFAD") 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.
PRIMARK RESEARCH CENTERS. The Primark Research Centers ("PRC") provide a full
range of research solutions, from personalized research support to fast and
convenient document retrieval. Researchers utilize a repository of documents,
online tools and a network of affiliates to guarantee the accurate and immediate
delivery of virtually any type of information. The Primark Research Centers are
primarily located in the United States and the United Kingdom and although a
separate line of business, the PRC is part of PFID.
The Primark Corporate Division ("CORP") supports the all 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. The Company 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. The
previous periods have been restated to reflect a change in segments.
No single customer accounted for more than 2% of the Company's consolidated
revenues in 1999, 1998 and 1997.
COMPARATIVE SEGMENT ANALYSIS
<TABLE>
<CAPTION>
December 31, (000s) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
PFID $329,880 $282,183 $ 261,651
PFAD 92,625 75,715 60,165
PDID 54,525 52,456 44,493
PRC 17,589 24,186 31,566
CORP -- -- --
- --------------------------------------------------------------------------------
Total $494,619 $434,540 $ 397,875
- --------------------------------------------------------------------------------
EBITDA (excl. restructuring):
PFID $ 75,370 $ 59,666 $ 64,937
PFAD 25,065 21,771 16,287
PDID 5,139 11,894 4,786
PRC 5,113 7,420 9,820
CORP (4,417) (6,921) (6,591)
- --------------------------------------------------------------------------------
Total $106,270 $ 93,830 $ 89,239
- --------------------------------------------------------------------------------
Restructuring:
PFID $ (4) $ 44,866 $ 2,535
PFAD -- 225 --
PDID -- 17,778 3,450
PRC -- 2,540 815
CORP -- 2,561 --
- --------------------------------------------------------------------------------
Total $ (4) $ 67,970 $ 6,800
- --------------------------------------------------------------------------------
Depreciation and Amortization
PFID $ 40,352 $ 33,532 $ 34,833
PFAD 7,286 6,549 6,365
PDID 4,322 4,710 5,117
PRC 3,285 2,768 2,023
CORP 1,647 1,256 1,867
- --------------------------------------------------------------------------------
Total $ 56,892 $ 48,815 $ 50,205
- --------------------------------------------------------------------------------
Operating Income (Loss)
PFID $ 35,022 $(18,731) $ 27,569
PFAD 17,779 14,997 9,922
PDID 817 (10,594) (3,781)
PRC 1,828 2,112 6,982
CORP (6,064) (10,738) (8,458)
- --------------------------------------------------------------------------------
Total $ 49,382 $(22,954) $ 32,234
- --------------------------------------------------------------------------------
Capital Expenditures and Software:
PFID $ 48,709 $ 32,116 $ 34,200
PFAD 9,696 4,508 6,684
PDID 2,603 1,641 684
PRC 1,264 981 1,388
CORP 4,578 1,153 980
- --------------------------------------------------------------------------------
Total $ 66,850 $ 40,399 $ 43,936
- --------------------------------------------------------------------------------
Total Assets*:
PFID $696,214 $ 610,738 $ 607,107
PFAD 92,291 80,402 94,236
PDID 100,242 104,582 113,903
CORP 50,353 54,746 228,563
- --------------------------------------------------------------------------------
Total $939,100 $ 850,468 $1,043,809
- --------------------------------------------------------------------------------
</TABLE>
* Total assets for PRC are not allocated by the Company.
<PAGE> 18
NOTES CONTINUED
- --------------------------------------------------------------------------------
Primark and Corporation And Subsidiaries
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.
The Company's operations by geographic region are presented in the following
table. Most of the Company's international sales originate through its
affiliates, which are located throughout Europe, Asia and the United States.
GEOGRAPHIC REGIONS
<TABLE>
<CAPTION>
(000s) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NORTH AMERICA
Operating Revenues $223,807 $189,680 $ 173,150
Operating Income (Loss)
Non-affiliate 17,154 (24,705) 20,107
Affiliate (2) (6,337) (6,082) (7,005)
Identifiable Assets $514,190 $411,317 $ 393,572
- --------------------------------------------------------------------------------
UNITED KINGDOM
Operating Revenues
Non-affiliate $130,838 $146,062 $ 131,889
Affiliate (2) 41,984 42,740 39,894
Operating Income (Loss)
Non-affiliate (16,300) (26,155) (18,933)
Affiliate (2) 42,001 42,740 39,894
Identifiable Assets $357,098 $346,711 $ 363,611
- --------------------------------------------------------------------------------
OTHER INTERNATIONAL
Operating Revenues $132,565 $ 98,798 $ 92,836
Operating Income (Loss)
Non-affiliate 51,869 36,961 36,812
Affiliate (2) (35,664) (36,658) (32,889)
Identifiable Assets $ 38,078 $ 45,609 $ 58,063
- --------------------------------------------------------------------------------
CORPORATE & OTHER
Operating Revenues
Affiliate (2) $(34,575) $(42,740) $ (39,894)
Operating Income (Loss) (3,341) (9,055) (5,752)
Identifiable Assets $ 29,734 $ 46,831 $ 228,563
- --------------------------------------------------------------------------------
CONSOLIDATED
Operating Revenues $494,619 $434,540 $ 397,875
Operating Income(Loss) (3) 49,382 (22,954) 32,234
Identifiable Assets $939,100 $850,468 $1,043,809
- --------------------------------------------------------------------------------
</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 $(4,000) in 1999, $68.0 million in 1998
and $6.8 million in 1997 (Note 4).
<PAGE> 19
NOTES CONCLUDED
- --------------------------------------------------------------------------------
Primark and Corporation And Subsidiaries
12. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
In January 2000, the Company entered into an agreement with MicroStrategy for
the development and licensing of certain software for a total consideration of
$11.0 million payable in cash, the Company's common stock, or a combination of
both as determined by the Company. On January 25, 2000, 230,770 shares of
Primark common stock were issued in connection with this agreement. Through this
alliance, the Primark Financial Channel will be syndicated and will combine the
wireless delivery technology of MicroStrategy with the global financial and
economic information of the Company to deliver up-to-the-minute investment,
economic and corporate information to all types of wireless devices as well as
faxes and email.
In February 2000, the Company invested $5.1 million in The Money Channel for a
5% equity interest. The Money Channel is the UK's first dedicated TV channel for
finance and investment information and is listed on the London Stock Exchange.
13. COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
The Board of Trade of the City of New York ("NYBT") has submitted to Primark's
subsidiary, A-T Financial Information, Inc., a claim for approximately $3.8
million based primarily on an allegation that, over a five-year period, A-T
insufficiently delayed the distribution of information received from NYBT and
therefore should have paid fees to NYBT applicable to real-time distribution of
that information. Management believes that the allegation is without
merit and intends to vigorously contest the claim.
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.
<PAGE> 20
REPORT OF MANAGEMENT
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
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 judgements and
estimates. The consolidated financial statements have been audited by Deloitte &
Touche LLP, the Company's Independent Auditors. Their audit was conducted in
accordance with generally accepted auditing standards, as indicated in their
report
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 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
- ----------------------------------------------------
Stephen H. Curran
Executive Vice President and Chief Financial Officer
February 11, 2000
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
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, 1999 and 1998,
and the related consolidated statements of operations, cash flows, common
shareholders' equity and comprehensive income for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and 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, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with generally accepted accounting principles.
As discussed in Note 1, in 1999 the Company changed its method of accounting for
derivative financial instruments to conform with Statement of Financial
Accounting Standards No. 133.
/s/ Deloitte & Touche LLP
- -----------------------------------------
Deloitte & Touche LLP
Boston, Massachusetts
February 11, 2000
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
RESULTS OF OPERATIONS
Primark reported 1999 income from continuing operations of $16.9 million or
$0.80 per share compared to a loss of $33.4 million or $1.37 per share in 1998
and income of $4.9 million or $0.17 per share in 1997. During the three years
reported, the Company purchased four significant operations, sold two operations
no longer part of its strategic focus and materially restructured its remaining
operations to align more closely with the needs of its customers. Additionally,
Primark refinanced several of its debt issues and repurchased 26% of its
outstanding common stock during this three-year period.
During 1997 Primark purchased Baseline and WEFA for a combined $86.0 million in
cash and entered into a refinancing agreement with its commercial banks to
address the funding of those acquisitions. The 1997 refinancing resulted in an
extraordinary loss on early extinguishment of debt of $2.0 million after tax or
$0.07 per share. The Company also restructured its Disclosure and DAFSA business
units in 1997 and recorded a charge of $6.8 million.
In 1998 the Company sold TASC, a government contracting business, and TIMCO, a
heavy aircraft maintenance operation, for a total of $502.0 million in cash. As
a consequence of the decision to dispose of these assets, the results of the
operations for these companies were reported in discontinued operations. The
Company reported net income from discontinued operations of $7.9 million or
$0.33 per share and $16.8 million or $0.61 per share for the years 1998 and
1997, respectively. In 1998, the Company also recorded gains of $187.3 million
or $7.71 per share on the sales of the two discontinued operations. With the
sale of TASC and TIMCO reducing the Company's size by approximately 60% in 1998
the Company restructured its remaining businesses to integrate their operations,
eliminate duplicate costs and serve customers more effectively. The
restructuring resulted in a charge of $68.0 million to operating income. The
charge included a write-off of $25.0 million of software and $31.1 million of
goodwill, with the remainder of the charge related to severance and lease
reductions necessary to integrate facilities and employee work forces. With
monies received from the sales in 1998, Primark repaid its senior notes,
resulting in a 1998 extraordinary loss on early extinguishment of debt of $5.1
million after tax or $0.21 per share.
During 1999, the restructuring program was substantially completed within the
cost levels estimated in 1998. In February of 1999, the Company acquired A-T
Financial for $34.9 million and Extel for $31.9 million. When the extraordinary
losses, net income from discontinued operations and the impact of restructuring
charges are eliminated from all years, income from continuing operations for
1998 was $20.9 million or $0.83 per share compared to 1997 income from
continuing operations which was $11.0 million or $0.39 per share. When compared
on a similar basis, 1999 income from continuing operations was $16.9 million or
$0.80 per share, $4.0 million or $0.03 per share lower than 1998. Revenues and
operating income show consistent improvement throughout the three-year period,
but the transactions noted above caused net interest expense to vary
significantly. The timing of cash received on asset sales in 1998 and cash paid
out for acquisitions in 1999, together with share repurchases made over both
periods, resulted in reduced borrowing levels in 1998 and increased debt
requirements in 1999. Consequently, net interest expense was $6.3 million in
1998 compared to $19.1 million in 1999 and $14.9 million in 1997.
Revenues for 1999 were $494.6 million compared to $434.5 million in 1998 and
$397.9 million in 1997, a 13.8% and 9.2% increase, respectively. During 1999,
50.8% of the Company's revenues were generated outside the United States and for
the most part were denominated in foreign currency. Movements of currency rates
relative to the US dollar caused revenues to be lower by $6.2 million in 1999
compared to 1998. When the effects of currency movements are eliminated, 1999
revenues grew 15.3%. Similarly, with the exclusion of currency movements, 1998
revenues grew 10.3% over 1997. The 1999 acquisitions added $25.9 million to
revenue which, when eliminated together with the effects of currency, resulted
in a 9.2% growth rate.
Because of significant amortization from the acquisition related intangible
assets, the Company uses earnings before interest, taxes, depreciation and
amortization ("EBITDA") as a measure of profitability. EBITDA for 1999,
excluding restructuring charges, was reported at $106.3 million compared to
$93.8 million in 1998 and $89.2 million in 1997, growing 13.3% in 1999 and 5.1%
in 1998. Fluctuations in currency rates had an unfavorable impact on EBITDA of
$1.4 million in 1999 and $1.1 million in 1998. The improvement in profitability
is evidence of the success of the restructuring initiated in June of 1998. When
restructuring charges are eliminated for all years, operating income for 1999
was $49.4 million compared to $45.0 million in 1998 and $39.0 million in 1997.
While operating income grew over the three-year period, it did not grow as fast
as EBITDA due to increases in the amortization of goodwill and intangible assets
created by the acquisitions of A-T Financial and Extel in 1999.
<PAGE> 22
MANAGEMENT'S DISCUSSION CONTINUED
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
The change in effective tax rates between the years ended 1999 and 1998 was
principally the result of the goodwill adjustments associated with the 1998
restructuring charge. In addition, the goodwill added through the acquisitions
of AT Financial and Extel affected the 1999 effective tax rate. Goodwill is a
significant deduction from pretax income but for the most part does not qualify
as a deduction on the tax return. Consequently additions and adjustments to
goodwill materially impact effective tax rates. To a lesser extent, the 1999
effective rate was also reduced by the use of tax benefits associated with NOL's
in France and Japan for which a valuation allowance had been provided in prior
years. The Company also received refunds for its United Kingdom tax return,
which was not previously provided for.
The Company is organized into three divisions, aligned with the major markets
served by the business units within each division. The Financial Information
Division delivers enterprise wide real-time and research data and applications,
with a concentration on the sell-side of the financial markets. The Primark
Research Centers, which are included as a separate line of business within the
Financial Information Division, provide a full range of research solutions from
personalized research support to fast and convenient document retrieval. The
Financial Analytics Division delivers data and applications principally to the
buy-side of the financial markets. The Decision Information Division provides
market research, economic and consulting products to corporate and government
customers, with some additional sales to financial institutions. All three
divisions have developed Internet applications that allow for expansion into new
markets. During 1999, Internet related businesses accounted for approximately
$40.0 million of revenues. Aggressive development is planned for both Internet
and wireless services by all divisions during 2000, which is expected to lower
reported earnings and increase capital expenditures when compared to historic
performance levels. The Company anticipates spending $60.0 million in additional
capital investment and expense, reducing 2000 operating income by approximately
$25.0 million from the level otherwise expected. The Company is in the
preliminary stages of investigating organizational changes to address the best
way to manage its current divisional segments to most efficiently manage these
new initiatives.
FINANCIAL INFORMATION DIVISION
The Financial Information Division revenues were $347.5 million in 1999 compared
to $306.4 million in 1998 and $293.1 million in 1997, representing growth rates
of 13.4% and 4.5%, respectively. The International operations grew revenues in
1999 by 11.1% and the North American operations grew 18.8%. Much of the growth
came from revenues generated by the newly acquired A-T Financial and Extel
operations. Excluding the revenue from the acquired operations and any impact of
currency movements, the Division's growth rate was 6.7%. Revenues by region
reflected 1999 growth rates of 10.7% in Continental Europe, 8.0% in the United
Kingdom, 4.6% in North America and a drop of 2.4% in Asia. The Datastream
research product accounted for $124.4 million of revenues and grew 7.8% over
1998. The PIMS product line totaled $31.6 million and the Topic line totaled
$34.5 million, growing 15.5% and 4.4%, respectively, in 1999. The Global Access
product line accounted for $21.7 million of revenues and posted 74% improvement
over 1998. The Division's Research Centers recorded revenues of $17.6 million in
1999 compared to $24.2 million in 1998 and $31.6 million in 1997, representing
declines of 26.7% and 23%, respectively. The Research Centers declines were
primarily related to the traditional document retrieval services while non-Edgar
documents and services remained flat during this three year period. The North
American operation was able to partially offset this decline with $5.0 million
of additional data and history sales in 1999.
The Financial Information Division 1999 EBITDA was $80.5 million, a 20.0%
increase over the $67.1 million recorded in 1998 and compares favorably to the
$70.2 million reported in 1997, when restructuring charges are excluded. EBITDA,
excluding restructuring charges, for the Division's Research Centers was $5.1
million, $7.4 million and $9.8 million in 1999, 1998 and 1997, respectively.
Newly acquired operations contributed $3.7 million to EBITDA. As a percentage of
revenue, the Division's EBITDA was 23.2% in 1999 compared to 21.7% in 1998.
Profitability improvement was due to the integration program initiated in June
of 1998.
The Financial Information Division was the beneficiary of all of the Company's
1999 acquisitions. On February 5, 1999, the company purchased A-T Financial for
$34.9 million in cash. A-T is a real time financial information provider
servicing institutional and retail markets with timely, high quality, global
securities information, with $13 million
<PAGE> 23
MANAGEMENT'S DISCUSSION CONTINUED
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
in revenues. The A-T acquisition was critical to expanding the real-time content
for the Division's new global equity products. At the same time, this
acquisition gives Primark the capability to include real-time information in
products across all divisions. On February 19, 1999 the Company purchased the
Extel Company Fundamental Data business for $31.9 million in cash. Extel is a
widely recognized brand name in Europe and Asia, supplying company fundamental
data in a variety of applications, with revenues of $12.7 million. The Extel
acquisition adds dramatically to our European capabilities. On June 1, 1999 the
Company also purchased the remaining 20% interest in Worldscope for $16.0
million to permit the full integration of both Worldscope and Extel into the
Division's operations. The integration is expected to be completed by the first
quarter of 2000. Significant savings are expected in product platform
applications and data aggregation functions due to synergies between these
companies and other Primark operations.
FINANCIAL ANALYTICS DIVISION
The Financial Analytics Division 1999 revenues were $92.6 million compared to
$75.7 million in 1998 and $60.2 million in 1997. This performance represents
growth rates of 22.3% and 25.7% for 1999 and 1998, respectively. Within the
division, the Baseline US equity product posted revenues of $32.5 million,
growing 30.9% in 1999, following a 36.6% growth rate in 1998. I/B/E/S revenues
were $47.3 million, led by the Active Express product line, growing 17.1% in
1999 and 23.2% in 1998. Vestek's portfolio measurement and analytic product line
grew 22.4%, with revenues of $12.8 million in 1999, compared to 13.3% growth in
1998. The markets and products within this division have remained strong over
the three years reported and the Company expects this performance to continue.
The Financial Analytic Division EBITDA was $25.1 million in 1999, with I/B/E/S
accounting for $16.3 million of the total. EBITDA grew 15.1% in 1999 and 33.7%
in 1998. As a percentage of revenue, the division's EBITDA represented 27.1% in
1999 and 28.8% in 1998. During 1999, the Division has been developing a mutual
fund warehouse product through its Vestek operations. The spending on this
development has been expensed and consequently lowered the growth in EBITDA
during 1999. The Division expects that margins will return to historical levels
as the new product is fully introduced into the market place during 2000.
DECISION INFORMATION DIVISION
The Decision Information Division revenues were $54.5 million in 1999 compared
to $52.5 million in 1998 and $44.5 million in 1997. Growth in 1999 revenues was
3.9%, while 1998 demonstrated growth of 17.9%. Within the Division, the Yankee
Group recorded revenues of $29.2 million, growing 24.6% over 1998. Yankee also
grew 23.1% in 1998. The WEFA economic business experienced lower revenues in
1999, of $25.3 million compared to $29.0 million in 1998. The fall-off
represents a combination of flat growth in its base subscription products
coupled with high consulting revenues recorded in 1998 that were not matched in
1999. WEFA has been investing in new product offerings that are mostly
Internet-based, to take advantage of emerging customer requirements. Secondly,
WEFA has been reconstructing its consulting practice to address attractive
market opportunities in 2000. With the new Internet-based product applications
and expansion of consulting capabilities, WEFA should grow again in 2000 and, as
new products are added in 2000, higher growth is expected in 2001.
The Decision Information Division EBITDA was $5.1 million compared to $11.9
million in 1998 and $8.6 million in 1997. The reduction in profitability is
mostly due to investments at WEFA to develop new product offerings that are
Internet-based and the addition of consulting staff to build that capability.
Also during the year, the Yankee Group increased expenses to build new planning
services to address attractive market opportunities in 2000. Most of the
additional spending on planning services centered around expanding the Yankee
Group's coverage of Internet applications in the industry segments it covers.
CAPITAL RESOURCES & LIQUIDITY
As of December 31, 1999, the Company had $18.4 million of cash and cash
equivalents. This compares to $51.6 million and $12.8 million at year-end 1998
and 1997, respectively. The large cash balance as of December 1998 was the
result of the issuance of the 9 1/4% Senior Subordinated Notes in December of
1998. A portion of this cash balance was applied towards the acquisitions of A-T
Financial and Extel in February of 1999. The Company's share repurchase program
also required significant cash during both 1998 and 1999.
<PAGE> 24
MANAGEMENT'S DISCUSSION CONTINUED
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
Operating activities provided $43.1 million of cash in 1999 compared to $72.7
million in 1998 and $58 million in 1997. During 1999, working capital used $28.0
million compared to the $27.4 million generated in 1998 and the $9.3 million
used in 1997. During 1998, the Company received net tax benefits of $21.3
million, principally from the exercise of significant levels of stock options.
Because of delay in the receipt of tax refunds related to the sale of TASC's
foreign operations, the Company was paid approximately $10.0 million of foreign
refunds in the first quarter of 2000. Excluding the impact of tax payments, the
Company continued to generate over $50.0 million of operating cash flows and has
not experienced significant collection issues with its receivables. Because most
of the Company's subscription contracts are billed quarterly or annually in
advance, Primark tends to exhibit negative working capital principally as a
result of currently deferred income for services that have been billed and
collected but are amortized over the period of the contract.
Financing activities provided $91.7 million of cash in 1999 compared to $402.3
million used in 1998 and the $74.8 million provided in 1997. During 1999,
Primark drew $133.0 million on its revolving credit facility to fund $39.3
million of common share repurchases and support the capital expenditure program.
The 1998 use of cash in financing activities reflects $197.3 million expended to
repurchase common stock and the repayment of debt with proceeds received from
the sale of TASC and TIMCO. Those expenditures were net of cash provided with
the December 1998 issuance of the Company's 9 1/4% Senior Subordinated Notes,
maturing in December of 2008.
At year-end, the Company's debt to total capitalization was 41.1%, with $292.0
million of funded debt outstanding. In addition to $150.0 million of Senior
Subordinated Notes, the Company had $133.0 million drawn on its revolving credit
facility with a variable interest charge of LIBOR plus 150 basis points. Also
outstanding was the $7.0 million 5% Convertible Note issued for the purchase of
the remaining 20% of Worldscope. The revolving credit facility had the capacity
for $205.0 million, leaving additional availability at year-end of $72.0
million. When considering the capital spending anticipated during 2000 to
support the introduction of real-time and wireless Internet products, the
Company anticipates requesting covenant amendments from its commercial bank
group in the first quarter of 2000. The Company is also pursuing the option of
using private equity funds to support these growth opportunities.
During 1999, the Company used $167.6 million of cash for investing activities
compared to $368.2 million provided in 1998 and $144.5 million absorbed by
investing activities in 1997. During 1999, the Company paid a total of $79.1
million of cash, net of cash acquired, for the acquisitions of A-T Financial,
Extel and Worldscope's remaining 20% outstanding minority interest. During 1999,
$30.7 million of taxes came due for the 1998 sale of TASC and TIMCO. During
1999, the Company spent $66.9 million on capital equipment and capitalized
software of this amount the Decision Information Division accounted for $2.6
million, principally for new product offerings at WEFA. The Financial Analytics
Division spent $9.7 million, including $6.5 million at Baseline, which included
leasehold improvements and equipment necessary to relocate operations to a new
office facility. The Financial Information Division accounted for $50.0 million
of expenditures, including $20.8 million in equipment and $27.3 million in
capitalized software. The equipment spending was evenly divided to support North
America and International operations. In North America, equipment was needed to
support new products such as Piranha, and to create back office support for
certain new electronic products, such as real-time applications. The
International expenditure was needed to build the communications and support for
the real-time EuroTopic product, as well as equipment necessary for the
integration of Extel into the Worldscope and Disclosure platforms. Software
capitalized internationally totaled $16.6 million, to support the new real-time
products and the integration of Extel into the Company's existing business. In
North America, $9.1 million was spent to support the back office operation
needed for new electronic product offerings. The large influx of cash received
from investing operations in 1998 was due to proceeds from the sale of TASC and
TIMCO in April and September of 1998.
The Company continues to generate strong cash flows from operations and has good
access to capital markets. As a consequence, the Company is confident in its
ability to provide the cash necessary to support its growth plans for 2000.
<PAGE> 25
MANAGEMENT'S DISCUSSION CONTINUED
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
NEWLY ADOPTED ACCOUNTING STANDARD
Effective January 1, 1999, the Company adopted Statement of Financial Accounting
Standards 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." FAS 133 requires the Company to recognize all derivatives on the
balance sheet at fair value. Depending on the nature of the underlying exposure
being hedged, the effective portion of changes in the fair value of derivatives
are either recognized in the consolidated statement of income or as a component
of accumulated other comprehensive income. The ineffective portion of a
derivative's change in fair value is recognized in the consolidated statement of
income. In accordance with its risk management policy, the Company uses foreign
currency options and foreign currency forward contracts. 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 instruments for trading purposes. The cumulative
effect of a change in accounting principle due to adoption of FAS 133 as of
January 1, 1999 was a charge to income of $219,000.
YEAR 2000 READINESS DISCLOSURE
Y2K issues relate 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, at and shortly after the turn
of the century. However, the Company's testing, operations and backup/recovery
procedures will ensure that the Company can deal effectively with any problems
that may arise with our products and services, operations and interfaces with
customers and suppliers.
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. To date these goals have been
met successfully. Any remaining issues can be addressed within ongoing company
operations.
The Company's Y2K program focused 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 reviewed, fixed and tested all aspects of
its internal operations. These included hardware systems (e.g., servers, LANs),
software (e.g., production database systems, human resources and finance
information systems) and desktop PC programs, as well as physical security
systems, fire suppression and other building control systems. These reviews have
included key data suppliers, hardware manufacturers, telecommunications
companies, electric utilities and many others. The issues dealt with in the Y2K
Program have now been transferred from close corporate oversight to the
respective business units within the Primark operating companies.
The Company incurred costs related to its Y2K initiative of approximately $5.0
million for the year ended December 31, 1999. The Company has resolved all known
significant Y2K problems and is continuing to have its solutions thoroughly
tested both with customers and in internal operations, as business circumstances
require.
MARKET RISK
The Company enters into a variety of financial instruments, including foreign
currency forward and call option contracts and interest rate swaps, to manage
currency and interest rate risk. Counterparties to these financial instruments
expose the Company to credit losses in the event of non-performance, but the
Company does not expect any of the counterparties to fail to meet their
obligations. To manage credit risks, the Company selects counterparties based on
credit ratings and monitors the exposure with each counterparty. The Company
does not hold or issue derivative contracts for trading purposes. There were no
material changes in market risk exposures between 1999 and 1998.
Foreign Currency Exchange Rate Risk
Forward and option contracts related to foreign exchange market risk are
utilized to reduce the exposure of the Company's anticipated foreign revenues,
net of cash operating expenses, to excessive foreign currency fluctuations.
Significant portions of the Company's revenues are denominated in currencies
other than the US dollar. For the twelve months ended December 31, 1999,
approximately 57.8% of total revenues were denominated in non-US dollar
currencies of which approximately 33.8%, 17.6% and 6.4% are denominated in UK
sterling, currencies of Continental Europe and Asian currencies, respectively.
The majority of the Company's revenues are subscription-based arrangements of up
to two years in duration.
<PAGE> 26
MANAGEMENT'S DISCUSSION CONTINUED
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
Additionally, a significant percentage of the Company's operating costs are
denominated in foreign currencies. The Company maintains significant production,
product development, sales and administrative functions in the United Kingdom.
Also, the Company maintains local sales and customer service functions in most
financial centers of Europe and Asia. For the twelve months ended December 31,
1999, approximately 52.5% of operating income, excluding goodwill amortization,
was denominated in non-US dollar currencies of which approximately 3.3%, 42.0%
and 7.2% are denominated in UK sterling, currencies of Continental Europe and
Asian currencies, respectively. The primary market risk that the Company faces
is the US dollar strengthening against the euro, Swiss franc, Swedish krona and
Japanese yen. The use of domestic investment and borrowing facilities eliminates
foreign currency exposures related to financial instruments.
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 the Company's foreign
exchange risk management strategy include: (i) derivative contracts are assigned
to an identified cash flow exposure and the notional amount of such derivatives
will not exceed the amount of the underlying exposure; (ii) levels of cover for
foreign exchange hedging will not exceed 90% for exposures with a horizon within
the next 12 months, and 75% for the following 12 months; (iii) derivatives
linked to a cash flow exposure will not exceed 24 months in duration; and (iv)
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 the rolling four-quarter forecast of
operating income denominated in US dollars. The VAR calculation parameters and
assumptions are as follows: (i) daily volatility and correlation data from
RiskMetrics; (ii) portfolio data = rolling four quarter estimated operating
income (excluding goodwill amortization) based on the transactional and
translation exposures of each Primark subsidiary; (iii) horizon = one fiscal
quarter (65 business days); (iv) home currency = US dollar; (v) confidence
interval = 95%; (vi) VAR method = Monte Carlo using RiskMetrics' correlation and
volatility data sets; and (vii) periodicity of VAR calculation = 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 over the next
calendar quarter by more than $2.45 million before hedging and $1.77 million
after taking into account the Company's hedging portfolio, representing cover of
27.6%, as of December 31, 1999. All foreign currency forward and option
contracts held at December 31, 1999 are included in the VAR calculation. Over
the each of the four quarters in 1999, the average value at risk before hedging
on operating income for the next four quarters varied between $2.32 million and
$2.74 million, averaging $2.52 million and after hedging varied between $1.68
million and $1.96 million, averaging $1.79 million.
At December 31, 1998, the Company estimated there was a 5% chance that the
forecast for operating income for the coming four quarters would deteriorate
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. All
foreign currency forward and option contracts held at December 31, 1998 are
included in the VAR calculation.
The Company principally enters into contracts to deliver foreign currencies for
UK sterling at agreed-upon exchange rates with maturities not exceeding two
years. The underlying transactions typically represent estimated future service
fees from the Company's network of global sales organizations. The Company
accounts for these instruments as cash flow hedges. In accordance with FAS 133,
the fair value of changes of derivative instruments related to the effective
portion of cash flow hedges are initially recorded as a component of other
comprehensive income. Hedging transactions are typically set up with a notional
principal less than the principal of the underlying transaction and
effectiveness of these contracts is measured as the first units of currency of
the underlying exposure being hedged. Effectiveness is reviewed quarterly to
ensure that the estimated amount of the exposure being hedged does not decline
below the notional principal of the respective hedging transactions. Unrealized
gains and losses on cash flow hedges accumulate in other comprehensive income
and are reclassified into earnings when the forecasted transaction affects
earnings. For the year ended December 31, 1999, there was no ineffective portion
of derivative gains or losses reported in earnings, and net gains from hedge
transactions reclassified from other comprehensive income to revenues totaled
$710,000. At December 31, 1999, the fair value of derivative instruments
designated as cash flow hedges is $394,000 and
<PAGE> 27
MANAGEMENT'S DISCUSSION CONCLUDED
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
is recorded in other current assets with the offset to other comprehensive
income. This gain will be recognized in revenues over the next 24 months as the
forecasted revenues are recognized.
Forward and option contracts are also entered into to protect anticipated
repatriations of excess cash flow, primarily from the UK, under intercompany
loan agreements or other financial transactions. The Company accounts for these
instruments at fair market value, recording each period's gains or losses in
non-operating income or loss. For the year ended December 31, 1999, the net gain
on these instruments recorded in non-operating income was $486,000. Foreign
exchange contracts with a value of $160,000 are recorded on the balance sheet in
other current assets at December 31, 1999.
Interest Rate Risk
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 may utilize forward rate agreements, swaps and options.
During 1999 and 1998, the Company was not a party to any outstanding interest
rate derivative agreements.
The Company's revolving credit facility carries a variable interest rate of
LIBOR plus 150 basis points. An increase in interest rates would increase the
cost to borrow funds under the revolver. In addition, an increase in interest
rates would cause the market value of an investment in the Company's $150
million, 9 1/4% Senior Subordinated Notes due December of 2008 to decrease,
which would benefit the shareholders of the Company.
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 Reform 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; and (v) deterioration in economic
conditions, particularly in the financial services industry.
<PAGE> 28
SELECTED FINANCIAL INFORMATION - FIVE YEAR DATA
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
<TABLE>
<CAPTION>
Dollars In Thousands Except Per Share Amounts 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL AND OPERATING DATA (1)
Operating revenues $ 494,619 $434,540 $ 397,875 $277,063 $184,779
EBITDA (3) 106,274 25,861 82,439 61,121 46,795
Operating income (loss) 49,382 (22,954) 32,234 27,839 20,886
Income (loss) from continuing operations 16,891 (33,370) 4,854 12,516 5,381
Net income (2) 16,672 156,722 19,715 36,749 16,882
Basic earnings per share:
From continuing operations 0.82 (1.37) 0.18 0.49 0.21
Total earnings per share (2) 0.81 6.45 0.75 1.48 0.88
Diluted earnings per share:
From continuing operations 0.80 (1.37) 0.17 0.46 0.19
Total earnings per share (2) 0.79 6.45 0.71 1.38 0.82
Total assets 939,100 850,468 1,043,809 920,801 718,184
Total debt, including capital lease obligations 292,094 158,879 370,163 248,340 239,476
Redeemable preferred stock -- -- -- -- 16,874
Common shareholders' equity (4) 417,925 440,178 470,971 475,830 354,062
Capital expenditures 35,136 22,812 23,965 19,412 9,803
Software capitalized 31,714 17,587 19,971 16,916 5,704
Cash flows from operations $ 43,127 $ 72,702 $ 58,024 $ 65,707 $ 49,305
Debt to total capitalization 41.1% 26.5% 44.0% 34.3% 39.2%
Total employees 3,458 2,933 2,328 2,025 1,588
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA (4)
Actual shares outstanding 19,990 21,251 26,800 27,068 23,317
Weighted average common shares outstanding - basic 20,472 24,302 26,348 24,813 19,150
Weighted average common shares outstanding - diluted 20,991 24,302 27,944 26,571 20,681
Market price per share on NYSE Composite:
High $28 3/4 $43 5/8 $41 5/8 $40 $30 1/4
Low $19 $22 9/16 $18 1/8 $21 3/8 $12 3/4
Close $27 13/16 $27 1/8 $40 11/16 $24 3/4 $30
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The financial data for the Company has been restated to exclude
discontinued operations and to include all acquired companies from their
respective dates of acquisition.
(2) Includes the following:
a) an after tax charge of $219,000 due to a change in accounting
principle in 1999.
b) restructuring charges of 54.3 million and 6.2 million in 1998 and
1997, respectively.
c) results of discontinued operations, along with a $187.3 million and
$8.4 million after tax gain on the sale of discontinued operations in
1998 and 1996, respectively;
d) 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;
e) 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 1999, 1998 and 1997, the Company retired 1,582,046; 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 upon conversion of the redeemable
preferred stock. In December 1995, the Company issued 4,356,200 shares
of common stock.
<PAGE> 29
SUPPLEMENTARY FINANCIAL INFORMATION - QUARTERLY DATA
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
<TABLE>
<CAPTION>
In Thousands Except Per Share Amounts First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999(5)
- ----------------------------------------------------------------------------------------------------------
Operating revenues $117,344 $122,170 $ 122,675 $132,430
- ----------------------------------------------------------------------------------------------------------
Operating income 9,460 12,284 13,371 14,267
- ----------------------------------------------------------------------------------------------------------
Income before extraordinary item and change
in accounting principle 2,688 4,191 4,772 5,240
- ----------------------------------------------------------------------------------------------------------
Net income(1) 2,469 4,191 4,772 5,240
- ---------------------------------- ----------------------------------------------------------------------
Earnings per share before extraordinary item
and change in accounting principle:
Basic 0.13 0.20 0.23 0.26
Diluted 0.13 0.20 0.23 0.25
- ----------------------------------------------------------------------------------------------------------
Market price per share:
High 26 1/2 28 1/8 28 3/4 28 3/4
Low $19 1/8 $19 $23 $24 1/4
- ----------------------------------------------------------------------------------------------------------
1998(5)
- ----------------------------------------------------------------------------------------------------------
Operating revenues $104,411 $108,874 $ 108,534 $112,721
- ----------------------------------------------------------------------------------------------------------
Operating income(2) 11,317 (57,170) 12,091 10,808
- ----------------------------------------------------------------------------------------------------------
Income before extraordinary item and change
in accounting principle(2)(4) 8,520 126,462 21,935 4,927
- ----------------------------------------------------------------------------------------------------------
Net income 8,520 121,341 21,935 4,927
- ----------------------------------------------------------------------------------------------------------
Earnings per share before extraordinary item
and change in accounting principle:
Basic(2)(4) 0.32 4.68 0.99 0.23
Diluted(2)(4) 0.30 4.68 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
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes an after tax charge of $219,000 due to a change in accounting
principle.
(2) Includes for the second and fourth quarter restructuring charges of $68.7
million and $(707,000), respectively.
(3) Includes for the second quarter an after tax extraordinary loss of $5.1
million resulting from the extinguishment of debt.
(4) Includes in the second and third quarter a $171.1 million and $16.2 million
gain, respectively, on the sale of discontinued operations.
(5) The quarterly data includes the operations of acquired businesses from
their respective dates of acquisition.
<PAGE> 30
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
Primark Corporation And subsidiaries
2000 ANNUAL MEETING
The Annual Meeting of Shareholders will be held at the Wyndham Garden Hotel, 420
Totten Pond Road, Waltham, Massachusetts on Friday, May 26, 2000 at 11:00 a.m.
Information with respect to this meeting, the proxy statement and proxy will be
mailed on or about April 9, 2000.
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 [exhibit 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]
SHAREHOLDERS SERVICES
All inquiries regarding the following items should be directed to the Stock
Transfer Agent.
- - Change of address
- - Lost stock certificate
- - 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
www.equiserve.com
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
200 Berkeley Street
Boston ,MA 02116-5022
(617) 437-2000
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 OWNS ALL OF THE ISSUED AND OUTSTANDING COMMON STOCK OF
PRIMARK HOLDING CORPORATION, AND PRIMARK FINANCIAL TECHNOLOGIES, INC., WHICH ARE
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:
* A-T Financial Information, Inc.
* Baseline Financial Services, Inc.; a New York Corporation
* Primark Information Service (UK) Limited (UK) owns all the common stock of:
- Datastream Group (UK) owns Datastream (UK)
- Datastream Pension Trustees Limited (UK)
- Primark Investment Management Services Limited (UK)
- Datastream International Limited (UK) owns all the common stock
of Primark Netherlands B.V. (the Netherlands) Primark
Philippines, Inc. and has a branch in Malaysia
- I/B/E/S (UK) Limited
- Disclosure Limited (UK)
- ICV Limited (U.K)
- marketeye.com limited
- Primark Limited
* Primark Switzerland Limited (Switzerland)
* Primark GmbH (Germany)
* Primark Hong Kong Limited
* Datastream International, Inc. (Delaware)
* Primark Japan K.K.
* Primark Australia Pty. Limited (Australia)
* Datastream International (D.C.), Inc. (Delaware)
* Primark Canada Limited
* 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) owns all the issued and outstanding
stock of:
- ScoreLab, Inc.
- Disclosure International, Inc. (Delaware) owns:
- Worldscope/Disclosure LLC owns all of the issued and outstanding
stock of Primark India Private Limited
- Worldscope/ Disclosure International Partners (Ireland)
- Disclosure Incorporated also directly owns a 20% interest in
Worldscope/Disclosure LLC.
<PAGE> 2
- Worldscope/Disclosure LLC.
* I/B/E/S International, Inc. (Delaware) owns all the issued and outstanding
stock of:
- I/B/E/S, Inc. (Delaware)
* Primark France SA (France) 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 Panorama.2
* WEFA, Inc. (Delaware) owns all of the issued and outstanding common stock
of Primark South Africa (Pty.) Ltd. (S. Africa)
* Primark Belgium SA (Belgium)
* WEFA (Holdings) Limited, (England), owns WEFA Limited (England), in turn
* WEFA Inc. also owns a 45% interest in Ciemex, Inc. (Delaware), 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 SP 20.0
* Primark do Brazil S/C LTDA (Brazil)
* Yankee Group Research, Inc. (MA)
<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 (amended by 333-83909),
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 in Amendment No. 3 to
Registration Statement No. 333-43299 on Form S-3 of Primark Corporation and
subsidiaries of our report dated February 11, 2000, incorporated by reference in
this Annual Report on Form 10-K of Primark Corporation and subsidiaries for the
year ended December 31, 1999.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 11, 2000
<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,
1999 INCLUDED IN THE FORM 10-K AS EXHIBIT 13.1 AND THE 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 18,435
<SECURITIES> 0
<RECEIVABLES> 120,108
<ALLOWANCES> 5,157
<INVENTORY> 0
<CURRENT-ASSETS> 175,931
<PP&E> 117,937
<DEPRECIATION> 20,843
<TOTAL-ASSETS> 939,100
<CURRENT-LIABILITIES> 345,549
<BONDS> 150,000
0
0
<COMMON> 400
<OTHER-SE> 417,525
<TOTAL-LIABILITY-AND-EQUITY> 939,100
<SALES> 0
<TOTAL-REVENUES> 494,619
<CGS> 0
<TOTAL-COSTS> 200,158
<OTHER-EXPENSES> 245,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,091<F1>
<INCOME-PRETAX> 29,778
<INCOME-TAX> 12,887
<INCOME-CONTINUING> 16,891
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (219)
<NET-INCOME> 0
<EPS-BASIC> 0.81
<EPS-DILUTED> 0.79
<FN>
<F1>Net of interest income.
</FN>
</TABLE>
