SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 1-7155
THE DUN & BRADSTREET CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-2740040
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(State of Incorporation) (I.R.S. Employer Identification No.)
One Diamond Hill Road, Murray Hill, NJ 07974
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 665-5000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Shares Outstanding
Title of Class at July 31, 1997
Common Stock, 170,479,479
par value $1 per share
THE DUN & BRADSTREET CORPORATION
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1997 and 1996 3
Six Months Ended June 30, 1997 and 1996 4
Consolidated Balance Sheets (Unaudited)
June 30, 1997 and December 31, 1996 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements (Unaudited) 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
Three Months Ended
June 30
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Dollar amounts in millions, except per share data 1997 1996
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Operating Revenues $ 498.3 $ 505.1
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Operating Costs 132.9 220.1
Selling and Administrative Expenses 232.8 250.4
Depreciation and Amortization 39.5 41.2
Reorganization Costs - 7.6
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Operating Income (Loss) 93.1 (14.2)
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Interest Expense (11.1) (6.2)
Other Expense - Net (5.5) (11.2)
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Non-Operating Expense - Net (16.6) (17.4)
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Income (Loss) from Continuing Operations before
Provision for Income Taxes 76.5 (31.6)
Provision for Income Taxes 26.3 12.3
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Income (Loss) from Continuing Operations 50.2 (43.9)
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Income from Discontinued Operations, Net of Income
Tax Benefit of $12.9 million for 1996 - 0.3
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Net Income (Loss) $ 50.2 $ (43.6)
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Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ 0.29 $ (0.26)
Discontinued Operations 0.00 -
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Net Earnings (Loss) Per Share of Common Stock $ 0.29 $ (0.26)
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Dividends Paid Per Share of Common Stock $ 0.22 $ 0.66
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Weighted Average Number of Shares Outstanding 171.0 170.0
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
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The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
Six Months Ended
June 30,
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Dollar amounts in millions, except per share data 1997 1996
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Operating Revenues $ 957.3 $ 955.5
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Operating Costs 270.7 367.0
Selling and Administrative Expenses 432.9 461.1
Depreciation and Amortization 80.3 80.3
Reorganization Costs - 9.0
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Operating Income 173.4 38.1
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Interest Expense (32.3) (12.5)
Other Expense - Net (6.8) (22.8)
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Non-Operating Expense - Net (39.1) (35.3)
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Income from Continuing Operations before
Provision for Income Taxes 134.3 2.8
Provision for Income Taxes 46.1 24.8
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Income (Loss) from Continuing Operations 88.2 (22.0)
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Income from Discontinued Operations, Net of Income
Tax Benefit of $2.7 million for 1996 - 42.6
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Net Income $ 88.2 $ 20.6
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Earnings (Loss) Per Share of Common Stock:
Continuing Operations $ 0.52 $ (0.13)
Discontinued Operations - 0.25
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Net Earnings Per Share of Common Stock $ 0.52 $ 0.12
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Dividends Paid Per Share of Common Stock $ 0.44 $ 1.32
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Weighted Average Number of Shares Outstanding 171.1 169.8
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
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The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Balance Sheets (unaudited)
June 30, December 31,
Dollar amounts in millions, except per share data 1997 1996
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Assets
Current Assets
Cash and Cash Equivalents $134.6 $127.9
Accounts Receivable---Net of Allowance of $42.2 in 1997 and $38.1 in 1996 518.1 600.7
Other Current Assets 217.5 188.8
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Total Current Assets 870.2 917.4
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Non-Current Assets
Investments and Notes Receivable 234.5 292.2
Property, Plant and Equipment 354.9 373.1
Prepaid Pension Costs 175.9 172.1
Computer Software 154.2 150.7
Goodwill 200.9 218.4
Other Non-Current Assets 233.2 170.3
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Total Non-Current Assets 1,353.6 1,376.8
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Total Assets $2,223.8 $2,294.2
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Liabilities and Shareholders' Equity
Current Liabilities
Notes Payable $701.5 $1,120.7
Accrued and Other Current Liabilities 499.5 599.9
Unearned Subscription Income 391.8 297.0
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Total Current Liabilities 1,592.8 2,017.6
Postretirement and Postemployment Benefits 341.1 354.1
Other Non-Current Liabilities 431.7 354.2
Minority Interest 301.6 -
Shareholders' Equity
Preferred Stock, par value $1 per share, authorized---10,000,000 shares;
outstanding---none
Common Stock, par value $1 per share, authorized---400,000,000 shares;
issued---188,420,996 shares for 1997 and 1996 188.4 188.4
Capital Surplus 70.0 72.6
Retained Earnings 456.2 480.3
Treasury Stock, at cost, 17,835,017 and 17,612,776 shares
for 1997 and 1996, respectively (991.6) (1,019.7)
Cumulative Translation Adjustment (166.4) (153.3)
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Total Shareholders' Equity (443.4) (431.7)
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Total Liabilities and Shareholders' Equity $2,223.8 $2,294.2
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<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
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The Dun & Bradstreet Corporation and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended
June 30,
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Dollar amounts in millions 1997 1996
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Cash Flows from Operating Activities:
Net Income $88.2 $20.6
Less: Income from Discontinued Operations - 42.6
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Income from Continuing Operations 88.2 (22.0)
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 80.3 80.3
Losses from Sale of Businesses, Net of Taxes - 56.4
Distributions Received in Excess of Equity Earnings 57.8 (4.8)
Restructuring Payments - (26.3)
Postemployment Benefit Payments (18.5) (5.7)
Net Decrease in Accounts Receivable 70.4 13.1
Accrued Income Taxes (63.9) 40.5
Increase in Long Term Liabilities 30.7 -
Net Decrease in Other Working Capital Items 35.4 93.0
Other 2.9 (7.6)
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Net Cash Provided by Operating Activities 283.3 216.9
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Cash Flows from Investing Activities:
Proceeds from Marketable Securities 0.2 16.2
Payments for Marketable Securities (1.5) (1.7)
Capital Expenditures (30.1) (26.4)
Additions to Computer Software and Other Intangibles (36.6) (29.2)
Other 0.8 (0.6)
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Net Cash Used In Investing Activities (67.2) (41.7)
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Cash Flows from Financing Activities:
Payment of Dividends (75.3) (224.2)
Payments for Purchase of Treasury Shares (30.9) (3.3)
Net Proceeds from Exercise of Stock Options 19.1 38.3
Increase/(Decrease) in Commercial Paper Borrowings 649.7 (4.5)
Increase in Minority Interest 300.0 -
Decrease in Short-term Borrowings (1,067.6) (1.7)
Other (0.6) (2.6)
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Net Cash Used in Financing Activities (205.6) (198.0)
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Effect of Exchange Rate Changes on Cash and Cash Equivalents (3.8) (2.4)
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Increase (Decrease) in Cash and Cash Equivalents 6.7 (25.2)
Net Cash Provided By Discontinued Operations - 25.6
Cash and Cash Equivalents , Beginning of Year 127.9 147.1
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Cash and Cash Equivalents, End of Period $134.6 $147.5
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<FN>
The accompanying notes are an integral part of the consolidated financial statements.
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</FN>
THE DUN & BRADSTREET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Interim Consolidated Financial Statements
These interim consolidated financial statements have been prepared in accordance
with the instructions to Form 10-Q and should be read in conjunction with the
consolidated financial statements and related notes of The Dun & Bradstreet
Corporation's (the "Company") 1996 Annual Report on Form 10-K, as amended by
Form 10-K/A-1. The consolidated results for interim periods are not necessarily
indicative of results for the full year or any subsequent period. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of financial position, results of
operations and cash flows at the dates and for the periods presented have been
included. Certain prior-year amounts have been reclassified to conform with the
1997 presentation.
Note 2 - Reorganization and Discontinued Operations
On November 1, 1996, the Company reorganized into three publicly traded
independent companies by spinning off through a tax-free distribution two new
companies, (1) Cognizant Corporation ("Cognizant") and (2) ACNielsen Corporation
("ACNielsen") to shareholders. In conjunction with the reorganization, the
Company also disposed of Dun & Bradstreet Software ("DBS") and NCH Promotional
Services ("NCH"). The Company's continuing operations consist of Dun &
Bradstreet, the operating company ("D&B"), Moody's Investors Service ("Moody's")
and Reuben H.Donnelley ("RHD").
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
prior year's consolidated financial statements of the Company have been
reclassified to reflect the reorganization. Accordingly, the prior year's
revenues, costs and expenses, assets and liabilities, and cash flows of
Cognizant, ACNielsen, DBS and NCH have been excluded from the respective
captions in the Consolidated Statements of Operations, Consolidated Balance
Sheets and Consolidated Statements of Cash Flows. The net operating results of
these entities have been reported, net of applicable income taxes, as "Income
from Discontinued Operations" and the net cash flows of these entities have been
reported as "Net Cash Provided by Discontinued Operations."
Summarized financial information for the Discontinued Operations was as follows
(in millions):
Three Months Six Months
Ended Ended
June 30, 1996 June 30, 1996
Operating Revenue $845.7 $1,616.9
(Loss)Income Before Provision for Income
Taxes $(12.6) $ 39.9
Income from Discontinued Operations,
net of Income Taxes $ 0.3 $ 42.6
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Note 3 - Investment Partnership
During 1993, the Company participated in the formation of a limited partnership
to invest in various securities including those of the Company. Third-party
investors held limited partner and special investors interests totaling $500.0
million. Funds raised by the partnership provided a source of financing for the
Company's repurchase in 1993 of 8.3 million shares of its common stock. During
the fourth quarter of 1996, the Company redeemed these partnership interests.
This redemption was financed with short-term borrowings.
The partnership is presently engaged in the business of licensing database
assets and computer software. One of the Company's subsidiaries serves as
managing general partner and two subsidiaries hold limited partner interests. In
April 1997, the partnership raised $300.0 million of minority interest financing
from a third-party investor. The Company's subsidiaries contributed assets to
the partnership and the third-party investor contributed cash ($300.0 million)
in exchange for a limited partner interest. Funds raised by the partnership were
loaned to the Company and used to repay existing short-term debt in April 1997.
At June 30, 1997, the third-party investment in this partnership was included in
minority interest.
For financial reporting purposes, the results of operations, the assets,
liabilities and cash flows of the partnership described above are included in
the Company's consolidated financial statements.
Note 4 - Financial Instruments with Off-Balance-Sheet Risk
At times, the Company uses forward exchange contracts and interest rate swaps to
hedge existing assets, liabilities, firm commitments and anticipated
transactions. For forward exchange contracts, the risk reduction is assessed on
a transaction basis. All hedging instruments are designated as and effective as
a hedge and are highly correlated as required by generally accepted accounting
principles.
Gains and losses on hedges of existing assets or liabilities are included in the
carrying amounts of those assets or liabilities and are ultimately recognized in
income as part of those carrying amounts. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions are also deferred and are
recognized in income or as adjustments of carrying amounts when the hedged
transaction occurs. If a hedging instrument is sold or terminated prior to
maturity, gains and losses will continue to be deferred until the hedged item is
recognized in income. If a hedging instrument ceases to qualify as a hedge, any
subsequent gains and losses are recognized currently in income.
The Company uses interest rate swaps to synthetically change its variable-rate
debt into fixed-rate debt. Periodic swap payments and receipts under the
interest rate swaps are recorded as part of interest expense. Neither the swap
contracts nor the gains or losses on these contracts are recognized in the
financial statements.
The Company does not use any derivatives for trading or speculative purposes.
If a derivative ceases to qualify for hedge accounting, it is accounted for on
a mark-to-market basis.
-8-
Note 5- Litigation
The Company and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. In the opinion of
management, the outcome of such current legal proceedings, claims and litigation
could have a material effect on quarterly or annual operating results or cash
flows when resolved in a future period. However, in the opinion of management,
these matters will not materially affect the Company's consolidated financial
position.
In addition to the litigation referred to above, on July 29, 1996, Information
Resources, Inc. ("IRI") filed a complaint in the United States District Court
for the Southern District of New York, naming as defendants the Company, A.C.
Nielsen Company (a subsidiary of ACNielsen) and IMS International, Inc.
The complaint alleges various violations of United States antitrust laws,
including alleged violations of Section 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement.
On October 15, 1996, defendants moved for an order dismissing all claims in the
complaint. On May 6, 1997, the United States District Court for the Southern
District of New York issued a decision dismissing IRI's claim of attempted
monopolization in the United States, with leave to replead within sixty days.
The Court denied defendants' motion with respect to the remaining claims in the
complaint. On June 3, 1997, defendants filed an answer denying the material
allegations in IRI's complaint, and A.C. Nielsen filed a counterclaim alleging
that IRI has made false and misleading statements about its services and
commercial activities. On July 7, 1997, IRI filed an Amended and Restated
Complaint repleading its alleged claim of monopolization in the United States
and realleging its other claims.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
asked to be trebled under antitrust laws. IRI also seeks punitive damages in an
unspecified amount.
In connection with the IRI action, Cognizant, ACNielsen and the Company entered
into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint Defense
Agreement") pursuant to which they have agreed (i) to certain arrangements
allocating potential liabilities ("IRI Liabilities") that may arise out of or in
connection with the IRI Action and (ii) to conduct a joint defense of such
action. In particular, the Indemnity and Joint Defense Agreement provides that
ACNielsen will assume exclusive liability for IRI Liabilities up to a maximum
amount to be calculated at such time such liabilities, if any, become payable
(the "ACN Maximum Amount"), and that the Company and Cognizant will share
liability equally for any amounts in excess of the ACN Maximum Amount. The ACN
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Maximum Amount will be determined by an investment banking firm as the
maximum amount which ACNielsen is able to pay after giving effect to (i) any
plan submitted by such investment bank which is designed to maximize the claims
paying ability of ACNielsen without impairing the investment banking firm's
ability to deliver a viability opinion (but which will not require any action
requiring stockholder approval), and (ii) payment of related fees and expenses.
For these purposes, financial viability means the ability of ACNielsen, after
giving effect to such plan, the payment of related fees and expenses, and the
payment of the ACN Maximum Amount, to pay its debts as they become due and to
finance the current and anticipated operating and capital requirements of its
business, as reconstituted by such plan, for two years from the date any such
plan is expected to be implemented.
Management is unable to predict at this time the final outcome of the IRI Action
or whether the resolution of this matter could materially affect the Company's
results of operations, cash flows or financial position.
Note 6 - DonTech
The consolidated results of the Company include the results of DonTech, a
partnership between RHD and Ameritech Advertising Services formed in 1990 to
serve as the exclusive yellow pages publisher for Ameritech directories in
Illinois and Northwest Indiana. For the quarter ended June 30, 1997 and 1996,
DonTech's operating revenues were $60.5 million and $31.0 million, respectively,
and net income was $13.3 million and $10.6 million, respectively. For the six
months ended June 30, 1997 and 1996, DonTech's operating revenues were $71.4
million and $42.9 million, respectively, and net income was $13.6 million and
$11.5 million, respectively.
During July 1997, RHD signed a series of new agreements with Ameritech
Advertising Services changing the structure of the existing partnership by
appointing DonTech as the exclusive sales agent in perpetuity for yellow page
directories published by Ameritech in Illinois and Northwest Indiana. Under the
new sales agency agreement, DonTech will perform the advertising sales function
for the directories and earn a commission, while Ameritech will become the
directories' publisher. As a result of the transfer of publishing services to
Ameritech, RHD will receive a revenue participation interest from Ameritech.
The Company formerly recognized its profits from its partnership interest in
DonTech as revenues and operating income when the directories were published.
Under the new exclusive sales agency agreement, the sales commissions earned by
DonTech and the revenues and operating income earned by RHD under the revenue
participation agreement will be recognized as earned at the time of the
advertising sale.
As a result of the change in the partnership structure, an approximately $30
million timing shift of revenue and operating income into the third quarter from
the fourth quarter of 1997 is expected. However, the impact of these changes on
the 1997 full year results is not expected to be significant.
-10-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
On November 1, 1996, The Dun & Bradstreet Corporation (the "Company")
reorganized into three publicly traded independent companies by spinning off
through a tax-free distribution two new companies, (1) Cognizant Corporation
("Cognizant") and (2) ACNielsen Corporation ("ACNielsen") to shareholders. In
conjunction with the reorganization, the Company also disposed of Dun &
Bradstreet Software ("DBS") and NCH Promotional Services ("NCH"). The Company's
continuing operations consist of Dun & Bradstreet, the operating company
("D&B"), Moody's Investors Service ("Moody's") and Reuben H. Donnelley ("RHD").
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
prior year's consolidated financial statements of the Company have been
reclassified to reflect the reorganization. Accordingly, the prior year's
revenues, costs and expenses, assets and liabilities, and cash flows of
Cognizant, ACNielsen, DBS and NCH have been excluded from the respective
captions in the Consolidated Statements of Operations, Consolidated Balance
Sheets and Consolidated Statements of Cash Flows. The net operating results of
these entities have been reported, net of applicable income taxes, as "Income
from Discontinued Operations" and the net cash flows of these entities have been
reported as "Net Cash Provided by Discontinued Operations."
Results of Operations
Consolidated Results
The Company's second quarter 1997 net income of $50.2 million was up $94.1
million from the prior year's second quarter loss from continuing operations of
$43.9 million which included impairment losses resulting from the decision to
dispose of two businesses and certain transaction-related expenses, as discussed
below. Earnings per share for the second quarter of $.29 was up from the prior
year's loss per share from continuing operations of $.26. Year-to-date net
income of $88.2 million in 1997 was up from prior year's loss from continuing
operations of $22.0 million and 1997 year-to-date earnings per share of $.52 was
up $.65 from prior year's loss per share from continuing operations of $.13.
Operating revenues for the second quarter were down 1.4% to $498.3 million in
1997 from $505.1 million from continuing operations in second quarter of 1996.
Excluding the results of American Credit Indemnity ("ACI") and the Proprietary
West Operations of R.H Donnelley ("P-West"), which were divested during 1996,
revenues from continuing operations increased by 3.7%, driven by growth at
Moody's and D&B U.S. Year-to-date 1997 operating revenues were $957.3 million
compared with $955.5 million in the first half of 1996. Excluding the results of
ACI and P-West, revenues from continuing operations increased by 5.1% from prior
year.
-11-
Operating income for the second quarter of 1997 of $93.1 million was $107.3
million higher than the prior year's second quarter operating loss of $14.2
million. Second quarter 1996 operating results included losses related to the
sales of P-West of $25.0 million and ACI of $63.8 million and certain
transaction related expenses. Excluding the impact of those one-time items,
operating income increased by 13.3% reflecting the revenue growth noted above,
strong cost controls, and reduced corporate expenses associated with the Company
after the reorganization. Operating income in the second quarter of 1997
included the write-off of a $5.0 million minority investment in Nets, Inc.,
which filed for bankruptcy during the quarter. On a year-to-date basis,
operating income of $173.4 million in 1997 was up from $38.1 million in 1996,
resulting from the factors cited above.
Non-operating expense-net was $16.6 million for the second quarter of 1997
compared with non-operating expense-net of $17.4 million for the second quarter
of 1996. Year-to-date 1997, non-operating expense-net was $39.1 million compared
with $35.3 million in 1996. The increase is largely attributable to a loss
recognized during the first quarter of $2.9 million as a result of canceling
$300.0 million of swap agreements.
The effective tax rate was 34.3% for the second quarter of and YTD 1997 compared
to an underlying effective tax rate of 34% for similar periods in 1996.
In the second quarter of 1996, the Company's consolidated results included
income from discontinued operations of $.3 million. On a year-to-date basis in
1996, the Company's consolidated results included income from discontinued
operations of $42.6 million or $.25 per share.
Segment Results
The Risk Management Services segment reported second-quarter revenue growth of
4.4% to $434.1 million from $415.8 million a year ago, excluding the results of
ACI which was divested during 1996. D&B, the operating company, reported
second-quarter revenue of $324.0 million compared with $325.0 million a year
ago. D&B U.S. posted a 2.8% increase in second-quarter revenue, a result of
strong performance in Receivable Management Services over the same quarter last
year. D&B Europe's revenue was down 3.9% in the second quarter over the previous
year reflecting unfavorable foreign exchange movement. Excluding the impact of
foreign exchange, European revenue grew by 3% in the second quarter of 1997. D&B
Asia Pacific, Latin America and Canada was down 8.0% in the second quarter from
the previous year primarily as a result of reorganizing the operations in Latin
America and lower than expected performance. Moody's Investors Service showed
the fastest growth during the second quarter, driven by double-digit growth in
its corporate bond ratings business. A favorable interest rate environment and
the continuing introduction of new fixed-income instruments throughout the world
also contributed to revenue growth. Moody's second-quarter revenue was $110.2
million in 1997, an increase of 21.3% over the prior year.
On a year-to-date basis, the Risk Management Services segment reported revenue
growth of 6.0% to $874.2 million in 1997 from $824.5 million a year ago,
excluding the results of ACI which was divested during 1996. D&B, the operating
company, reported revenue of $650.6 million in 1997, up 2.4% from the prior
year. D&B U.S.'s revenue grew 5.1%, a result of strong performance in both the
Receivable Management Services and Marketing Information Services divisions.
Europe's results were flat versus the prior year. However, after adjusting for
the negative foreign exchange impact, underlying growth for Europe was 6%. D&B
Asia Pacific, Latin America and Canada was down 7.3% from the prior year due to
the factors noted above. Moody's Investors Service reported revenue growth of
18.3% above the prior year due to gains in corporate bonds, structured ratings
and commercial paper.
-12-
The Directory Information Services segment reported second-quarter revenue of
$64.1 million compared with $64.8 million in the prior year, excluding the
second-quarter 1996 results of P-West. On a year-to-date basis, the Directory
Information Services' revenue of $83.1 million decreased 3.6% from the prior
year. Lower revenues were experienced at RHD due to the increasingly competitive
environment in the proprietary yellow pages business and a delay in the timing
of the publication of certain proprietary revenues. Higher revenues reported by
DonTech, the partnership with Ameritech Advertising Services resulted from the
production shift of several directories, which partially offset the lower
results of RHD.
During July 1997, RHD signed a series of new agreements with Ameritech
Advertising Services changing the structure of the existing partnership by
appointing DonTech as the exclusive sales agent in perpetuity for yellow page
directories published by Ameritech in Illinois and Northwest Indiana. Under the
new sales agency agreement, DonTech will perform the advertising sales function
for the directories and earn a commission, while Ameritech will become the
directories' publisher. As a result of the transfer of publishing services to
Ameritech, RHD will receive a revenue participation interest from Ameritech..
The Company formerly recognized its profits from its partnership interest in
DonTech as revenues and operating income when the directories were published.
Under the new exclusive sales agency agreement, the sales commissions earned by
DonTech and the revenues and operating income earned by RHD under the revenue
participation agreement will be recognized as earned at the time of
the advertising sale.
As a result of the change in the partnership structure, an approximately $30
million timing shift of revenue and operating income into the third quarter from
the fourth quarter of 1997 is expected. However, the impact of these changes on
the 1997 full year results is not expected to be significant.
Adoption of Statements of Financial Accounting Standards ("SFAS")
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings per Share" ("SFAS No. 128"), which simplifies existing
computational guidelines, revises disclosure requirements and increases the
comparability of earnings per share data on an international basis. This
statement is effective for financial statements for periods ending after
December 15, 1997 and requires restatement of all prior-period per share data
presented. There would have been no change in the earnings per share as
reflected in the accompanying Consolidated Statements of Operations had SFAS No.
128 been effective in the periods ended June 30, 1997 and 1996.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"), which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement is effective for fiscal years beginning
after December 15, 1997 and requires reclassification of prior period financial
statements. The Company is currently considering the various presentation
options of SFAS No. 130.
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Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"), which revises disclosure
requirements about operating segments and establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS 131 requires that public business enterprises report financial and
descriptive information about its reportable operating segments. The statement
is effective for periods beginning after December 15, 1997 and requires
restatement of prior years in the initial year of application. SFAS No. 131 will
impact the Company's segment disclosures, but will not impact the Company's
results of operations, financial position or cash flows.
Liquidity and Financial Position
At June 30, 1997, cash and cash equivalents totaled $134.6 million, an increase
of $6.7 million from $127.9 million held at December 31, 1996. In comparison,
during the first two quarters of 1996, cash and cash equivalents from continuing
operations decreased by $25.2 million.
Operating activities generated net cash of $283.3 million during the six months
ended June 30, 1997 compared to $216.9 million in 1996. Improved operating
results as well as timing of tax payments and distributions received from
unconsolidated subsidiaries in 1997 contributed to the increase in cash provided
by operating activities during the first half of 1997 compared to 1996.
Net cash used in investing activities was $67.2 million for the six months ended
June 30, 1997 compared to $41.7 million in 1996. In 1997 the Company invested
$66.7 million for capital expenditures and additions to computer software and
other intangibles compared to $55.6 million in 1996. Additionally, in 1996, the
Company generated $16.2 million of proceeds from marketable securities.
Net cash used in financing activities was $205.6 million during the six months
ended June 30, 1997 compared to $198.0 million in the 1996. Payments of
dividends accounted for $75.3 million during the first half of 1997 compared to
$224.2 million in 1996, which represented the dividend policy prior to the
reorganization. The Company used $30.9 million during the first half of 1997 for
the repurchase of stock compared to $3.3 million during the first half of 1996.
Proceeds from the exercise of stock options was $19.1 million for the first half
of 1997 compared to $38.3 million in 1996.
On April 1, 1997, the Company completed a $300.0 million minority interest
financing. Funds raised by the minority interest financing were loaned to the
Company and used to repay a portion of the outstanding short-term debt in April
1997. Also, during the second quarter of 1997, the Company re-entered the
commercial paper market and used the proceeds to repay the additional amounts
outstanding on the short-term debt facility. Overall, during the first half of
1997, the Company reduced its total debt outstanding by $117.9 million.
Dividends
On July 16, 1997, the Board of Directors approved a third quarter 1997 dividend
of $.22 per share, payable September 10, 1997 to shareholders of record at the
close of business August 20, 1997.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information required under this item is contained in Note 5 to the
Financial Statements, which is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of The Dun & Bradstreet Corporation
was held on May 1, 1997.
The following nominees for director named in the Proxy Statement dated
March 27, 1997, were elected at the Meeting by the votes indicated.
For Withheld
Hall Adams Jr. 146,512,312 2,015,600
Ronald L. Kuehn 147,243,306 1,284,606
Michael R. Quinlan 147,147,070 1,380,842
The votes in favor of the election of the nominees represent at least
98.6% of the shares voted for each of the nominees.
The amendment of The Dun & Bradstreet Corporation Corporate Management
Incentive Plan was approved by the following vote:
For Against Abstain
Number of shares 139,238,771 8,386,836 902,305
The amendment of The Key Employees Performance Unit Plan for The Dun &
Bradstreet Corporation and Subsidiaries was approved by the following
vote:
For Against Abstain
Number of shares 140,401,645 7,234,358 891,909
The appointment of Coopers & Lybrand L.L.P. as independent public
accountants was approved by the following vote:
For Against Abstain
Number of shares 148,114,317 217,272 196,323
The proposal on implementation of the MacBride Principles in Northern
Ireland was defeated by the following vote:
For Against Abstain Non-Votes
Number of shares 14,555,526 104,845,042 17,128,527 11,998,817
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(10q) Supplemental Executive Benefit Plan, as amended January 15, 1997.
(10u) Amended and Restated Agreement of Limited Partnership of D&B
Investors L.P., dated as April 1, 1997.
(11) Statement Re: Computation of Per Share Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June 30, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DUN & BRADSTREET CORPORATION
Date: August 13, 1997 By: FRANK S. SOWINSKI
================================================
Frank S. Sowinski
Senior Vice President - Chief Financial Officer
Date: August 13, 1997 By: CHESTER J. GEVEDA, JR.
================================================
Chester J. Geveda, Jr.
Vice President and Controller
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DUN & BRADSTREET CORPORATION
Date: August , 1997 By:
===============================================
Frank S. Sowinski
Senior Vice President - Chief Financial Officer
Date: August , 1997 By:
===============================================
Chester J. Geveda, Jr.
Vice President and Controller
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