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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
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(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, 1998
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OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ________________________
Commission file number 001-12275
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NIELSEN MEDIA RESEARCH, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 06-1450569
- - ------------------------ -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
299 PARK AVENUE NEW YORK, NEW YORK 10171
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 708-7500
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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:
TITLE OF CLASS SHARES OUTSTANDING
------------------------ ------------------
Common Stock, at July 31, 1998
par value $.01 per share 167,722,935
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NIELSEN MEDIA RESEARCH, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE(S)
-------
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended June 30, 1998 and 1997 ............................. 3
Six Months Ended June 30, 1998 and 1997 ............................... 4
Condensed Consolidated Statements of Financial Position (Unaudited)
June 30, 1998 and December 31, 1997 ................................... 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1998 and 1997 ............................... 6
Notes to Condensed 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
-2-
PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
Three Months Ended
June 30,
----------------------------
1998 1997
------------ -------------
Operating Revenue ................................................. $ 97,931 $ 87,184
Operating Costs ................................................... 46,118 39,169
Selling and Administrative Expenses ............................... 21,009 18,068
Depreciation and Amortization ..................................... 7,791 6,967
------------ ------------
Operating Income .................................................. 23,013 22,980
Gains from Dispositions ........................................... 2,415 0
------------ ------------
Non-Operating Income .............................................. 2,415 0
------------ ------------
Income Before Provision for Taxes ................................. 25,428 22,980
Provision for Income Taxes ........................................ 10,654 9,629
------------ ------------
Net Income ........................................................ $ 14,774 $ 13,351
============ ============
Earnings Per Share of Common Stock - Basic ........................ $ 0.09 $ 0.08
Earnings Per Share of Common Stock - Diluted ...................... $ 0.08 $ 0.08
============ ============
Average Number of Shares Outstanding - Basic ...................... 163,612,000 165,526,000
============ ============
Dilutive Effect of Shares Issuable as of June 30, 1998 Under Stock
Option Plans .................................................... 9,219,000 1,269,000
Adjustment of Shares to Reflect Options Exercised During the Period 4,528,000 965,000
============ ============
Average Number of Shares Outstanding - Diluted .................... 177,359,000 167,760,000
============ ============
See accompanying notes to the condensed consolidated
financial statements (unaudited).
-3-
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollar amounts in thousands, except per share data)
Six Months Ended
June 30,
----------------------------
1998 1997
------------- ------------
Operating Revenue .......................................... $ 193,995 $ 173,455
Operating Costs ............................................ 93,312 78,422
Selling and Administrative Expenses ........................ 41,440 36,543
Depreciation and Amortization .............................. 14,913 13,600
------------ ------------
Operating Income ........................................... 44,330 44,890
Gains from Dispositions .................................... 5,600 0
------------ ------------
Non-Operating Income ....................................... 5,600 0
------------ ------------
Income Before Provision for Taxes .......................... 49,930 44,890
Provision for Income Taxes ................................. 20,921 18,809
------------ ------------
Net Income ................................................. $ 29,009 $ 26,081
============ ============
Earnings Per Share of Common Stock - Basic ................. $ 0.18 $ 0.16
Earnings Per Share of Common Stock - Diluted ............... $ 0.16 $ 0.15
============ ============
Average Number of Shares Outstanding - Basic ............... 163,029,000 167,556,000
============ ============
Dilutive Effect of Shares Issuable as of June 30, 1998 Under
Stock Option Plans ....................................... 9,053,000 768,000
Adjustment of Shares to Reflect Options Exercised During the
Period ................................................... 6,861,000 606,000
============ ============
Average Number of Shares Outstanding - Diluted ............. 178,943,000 168,930,000
============ ============
See accompanying notes to the condensed
consolidated financial statements (unaudited).
-4-
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited)
(Dollar amounts in thousands)
June 30, December 31,
1998 1997
--------- ----------
ASSETS
Current Assets
Cash and Cash Equivalents ........................ $ 17,715 $ 5,993
Marketable Securities ............................ 2,830 0
Accounts Receivable - Net ........................ 58,061 51,986
Other Current Assets ............................. 6,698 4,551
--------- ---------
Total Current Assets .......................... 85,304 62,530
--------- ---------
Property, Plant and Equipment - Net ................. 62,439 55,050
Computer Software ................................... 48,757 43,093
Intangibles ......................................... 15,058 10,649
Other Assets ........................................ 19,997 21,112
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Total Assets ........................................ $ 231,555 $ 192,434
========= =========
LIABILITIES AND SHAREHOLDERS'/DIVISIONAL EQUITY
Current Liabilities
Accounts Payable ................................. $ 16,709 $ 14,355
Accrued and Other Current Liabilities ............ 38,252 23,629
Accrued Income Taxes ............................. 4,696 5,475
Deferred Revenues ................................ 903 1,153
Short-term Debt .................................. 225,000 0
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Total Current Liabilities ..................... 285,560 44,612
--------- ---------
Postretirement Benefits ............................. 8,751 11,845
Deferred Income Taxes ............................... 38,978 34,394
Long-term Debt ...................................... 75,000 0
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Total Liabilities ................................... 408,289 90,851
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Shareholders'/Divisional Equity
Divisional Equity ................................ 0 101,583
Common Stock ..................................... 1,711
Capital Surplus .................................. 0
Distribution in Excess of Net Book Value ......... (160,356)
Treasury Stock ................................... (20,756)
Retained Earnings ................................ 0
Cumulative Translation Adjustment ................ 1,023
Unrealized Gains on Investments - Net ............ 1,644
--------- ---------
Total Shareholders'/Divisional Equity ......... (176,734) 101,583
--------- ---------
Total Liabilities and Shareholders'/
Divisional Equity ................................ $ 231,555 $ 192,434
========= =========
See accompanying notes to the condensed
consolidated financial statements (unaudited).
-5-
NIELSEN MEDIA RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollar amounts in thousands)
Six Months Ended
June 30,
-----------------------
1998 1997
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................. $ 29,009 $ 26,081
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization .......................... 14,913 13,600
(Increase)/Decrease in Accounts Receivable ............. (6,075) 593
Increase in Accounts Payable ........................... 2,354 2,779
(Decrease)/Increase in Postretirement Benefits ......... (3,094) 1,240
Increase/(Decrease) in Deferred Income Taxes ........... 4,584 (397)
Decrease in Accrued Income Taxes ....................... (779) (2,742)
Decrease in Other Assets ............................... 1,866 2,994
Decrease/(Increase) in Other Working Capital Items ..... 12,240 (2,273)
- --------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities .................. 55,018 41,875
- --------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ....................................... (15,839) (13,846)
Additions to Computer Software ............................. (13,292) (7,306)
Additions to Intangibles ................................... (6,024) (3,483)
Other ...................................................... (801) 1,996
- --------------------------------------------------------------------------------------
Net Cash Used in Investing Activities ...................... (35,956) (22,639)
- --------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Third Party Limited Partnership Investment ................. 25,000
Bank Borrowings ............................................ 275,000
Transfers to Cognizant Corporation ......................... (307,326) (15,363)
- --------------------------------------------------------------------------------------
Net Cash Used in Financing Activities ...................... (7,326) (15,363)
- --------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (14) (15)
- --------------------------------------------------------------------------------------
Increase in Cash and Cash Equivalents ...................... 11,722 3,858
Cash and Cash Equivalents, Beginning of Year ............... 5,993 5,557
- --------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period ................... $ 17,715 $ 9,415
======================================================================================
See accompanying notes to the condensed
consolidated financial statements (unaudited).
-6-
NIELSEN MEDIA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(UNAUDITED)
Dollar amounts in thousands
NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
These interim condensed 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
Nielsen Media Research, Inc. (the "Company" or "Nielsen Media Research") in the
Report on Form 8-K dated July 20, 1998. In the opinion of management, all
adjustments considered necessary for a fair presentation of financial position,
results of operations and cash flows for the periods presented have been
included. Certain prior-period amounts have been reclassified to conform with
the 1998 presentation.
NOTE 2. BASIS OF PRESENTATION
Until June 30, 1998, Nielsen Media Research was operated as part of
Cognizant Corporation ("Cognizant"), which also included the business of IMS
Health Incorporated ("IMS HEALTH"). On June 30, 1998, Cognizant (which is now
the Company) distributed to all holders of common stock the shares of IMS HEALTH
(the "Distribution"). Because of the relative significance of the IMS HEALTH
business to Cognizant, IMS HEALTH was treated as the "accounting successor" to
Cognizant and the financial statements of Nielsen Media Research have been
prepared on a standalone basis.
The consolidated financial statements generally reflect the financial
position, results of operations, and cash flows of the Company as if it were a
separate entity for all periods presented. The consolidated financial statements
include allocations of certain Cognizant corporate headquarters assets and
liabilities and an allocation of Cognizant corporate and other expenses relating
to Nielsen Media Research's business for the three and six months ended June 30,
1998 and 1997. Management believes that these allocations are reasonable.
However, the financial information included herein may not necessarily reflect
the consolidated financial position, results of operations, and cash flows of
the Company in the future or what they would have been if the Company had been a
separate entity during the periods presented.
NOTE 3. RETROACTIVE RESTATEMENT OF DILUTED EARNINGS PER SHARE DATA
In accordance with the methodology provided for in the Distribution, each
unexercised Cognizant stock option held by a Nielsen Media Research employee was
converted into 12.3275 Nielsen Media Research stock options. Diluted earnings
per share data for the three and six-month periods ended June 30, 1998 and 1997
were adjusted to reflect the conversion of the unexercised Cognizant stock
options held by Nielsen Media Research employees.
-7-
NIELSEN MEDIA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -
(UNAUDITED)
DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
NOTE 4. PROFORMA EARNINGS PER SHARE DATA
On July 8, 1998, the Board of Directors of Nielsen Media Research approved
a one- for three reverse stock split which is subject to approval by
shareholders of record as of July 31,1998, at a special meeting to be held on
August 26, 1998. If approved, shareholders at the close of business on that date
will receive one new share of Nielsen Media Research common stock in exchange
for three old shares. As a result of the reverse stock split, basic and diluted
earnings per share reflected on a proforma basis would be as follows (after
giving effect to the conversion of the unexercised Cognizant stock options to
Nielsen Media Research stock options referred to above).
Three Months Six Months
Ended June 30, Ended June 30,
------------------ ---------------------
1998 1997 1998 1997
------- ------- ------- -------
(Unaudited) (Unaudited)
Proforma Basic Earnings Per Share ....... $ 0.27 $ 0.24 $ 0.53 $0.47
Proforma Diluted Earnings Per Share ...... $ 0.25 $ 0.24 $ 0.49 $0.46
NOTE 5. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDs
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income", which requires presentation
of information on comprehensive income and its components in the financial
statements. Comprehensive income includes net income and changes in foreign
currency translation adjustments and unrealized holding gains on securities.
Total comprehensive income and its components for the three and six months ended
June 30, 1998 and 1997 are as follows:
Three Months Six Months
Ended June 30, Ended June 30
----------------------- ----------------------
1998 1997 1998 1997
------ ------ ------- -------
Net Income ................................ $14,774 $13,351 $29,009 $26,081
Foreign Currency Translation Adjustment ... 380 (39) 218 323
Unrealized Gains on Investments ........... 1,644 -- 1,644 --
------- ------- ------- -------
Total Comprehensive Income ................ $16,798 $13,312 $30,871 $26,404
======= ======= ======= =======
-8-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -
(UNAUDITED)
DOLLAR AMOUNTS IN THOUSANDS
NOTE 5. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes accounting and reporting standards for derivative instruments
imbedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value . If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of an exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment
in a foreign operation, or an unrecognized foreign-currency-denominated
forecasted transaction. The Company will be required to implement SFAS 133 for
all fiscal quarters of fiscal years beginning after June 15, 1999. The Company
expects that the adoption of this pronouncement will not have a material effect
on the Company's financial position, results of operations or cash flows.
NOTE 6. DISPOSITIONS
During the first quarter of 1998, the Company recorded a $3,185 pre-tax
gain on the sale of an investment in Aspect Development, Inc. During the second
quarter of 1998, the Company recorded a $2,415 pre-tax gain on the sale of
shares in Cognizant Technology Solutions Corporation ("CTS"), a subsidiary of
Cognizant, which had an initial public offering in June 1998.
NOTE 7. DEBT
In connection with the Distribution, the Company borrowed $275,000 under an
unsecured revolving credit facility ("Revolving Credit Facility") provided by a
group of lenders led by The Chase Manhattan Bank. The Revolving Credit Facility
consists of two tranches: a 364-Day $225,000 tranche (all of which was drawn)
and a Three-Year $100,000 tranche ($50,000 of which was drawn). The outstanding
commitments under the Three-Year tranche will mature on June 15, 2001. Interest
under the Revolving Credit Facility is based upon the London Interbank Offered
(LIBO) Rate plus a spread. The weighted average interest rate on the Revolving
Credit Facility was 6.4% on June 30, 1998. The Revolving Credit Facility
contains certain restrictive covenants and requires the Company to maintain
certain specified minimum ratios.
The Company and one of its subsidiaries participate in a limited
partnership, one of which serves as general partner. In June 1998, a third party
investor contributed $25,000 to the partnership in exchange for a limited
partner interest. The investment partnership has committed to make distributions
to the third party limited partner of approximately 6.26% per annum. The third
party limited partner has the ability to terminate the partnership at the end of
December 2000, unless, at that time, one or more of the other partners elect to
purchase the entire limited partner interest of the third party limited partner.
The partnership licenses database assets and computer software.
-9-
NIELSEN MEDIA RESEARCH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) -
(UNAUDITED)
DOLLAR AMOUNTS IN THOUSANDS
NOTE 8. LITIGATION
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 Dun & Bradstreet Corporation ("D&B"), A. C. Nielsen Company
and a predecessor of IMS HEALTH (the "IRI Action"). The complaint alleges, among
other things, various violations of the antitrust laws and damages in excess of
$350,000, which amount IRI has asked to be trebled under the antitrust laws. IRI
also seeks punitive damages in an unspecified amount. In light of the
potentially significant liabilities which could arise from the IRI Action and in
order to facilitate the D&B spin-off (as defined below) in 1996, D&B, ACNielsen
Corporation ("ACNielsen") (the parent of A. C. Nielsen Company) and Cognizant
entered into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint
Defense Agreement") pursuant to which ACNielsen agreed to be responsible for any
potential liabilities which may ultimately be incurred by D&B or Cognizant as a
result of such action, up to a maximum amount to be determined by an independent
investment bank if and when any such liabilities are incurred. The determination
of such maximum amount will be based on ACNielsen's ability to satisfy such
liabilities and remain financially viable, subject to certain assumptions and
limitations. However, Cognizant and D&B agreed that to the extent that ACNielsen
is unable to satisfy any such liabilities in full and remain financially viable,
Cognizant and D&B will each be responsible for 50% of the difference between the
amount, if any, which may be payable as a result of such litigation and the
maximum amount which ACNielsen is then able to pay as determined by such
investment bank. Under the terms of the Distribution Agreement dated as of
October 28, 1996, among Cognizant, D&B and ACNielsen ("the 1996 Distribution
Agreement"), pursuant to which shares of Cognizant and ACNielsen were
distributed to the stockholders of D&B (the "D&B spin-off"), as a condition to
the recent Distribution, IMS HEALTH and the Company were required to undertake
to be jointly and severally liable to D&B and ACNielsen for Cognizant's
obligations under the 1996 Distribution Agreement. However, pursuant to the
Distribution Agreement dated as of June 30, 1998, between Cognizant and IMS
HEALTH, IMS HEALTH and the Company have agreed that, as between themselves, IMS
HEALTH will assume 75%, and the Company will assume 25%, of any payments to be
made in respect of the IRI Action under the Indemnity and Joint Defense
Agreement or otherwise, including any legal fees and expenses related thereto
incurred in 1999 or thereafter. IMS HEALTH has agreed to be fully responsible
for any legal fees and expenses incurred during 1998. In certain circumstances,
IMS HEALTH has agreed to permit the Company to defer the payment of a portion of
its obligations for settlements in respect of the IRI Action. The Company's
aggregate liability to IMS HEALTH for payments in respect of the IRI Action and
certain other contingent liabilities shall not exceed $125,000. The Company's
management is unable to predict at this time the final outcome of the IRI Action
or whether the resolution of such matter could materially affect the Company's
results of operations, cash flows or financial position.
-10-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenue for the second quarter increased by 12.3% to $97,931 from $87,184 for
the second quarter of the prior year. National revenues increased due to demand
for custom analyses and the addition of six cable networks subscribing to
ratings services in 1997 and 1998. Local revenues also increased, reflecting the
introduction of metered market measurement in three new markets in the last 12
months. Metered market service was initiated in Greensboro and Jacksonville in
the second quarter of 1998, bringing to 40 the number of markets that employ
meters.
Operating costs and selling and administrative expenses for the second quarter
of 1998 increased by 17.3% to $67,127 from $57,237 for the second quarter of the
prior year. Excluding Year 2000 compliance costs of $2,415, operating costs and
selling and administrative expenses increased 13.1% reflecting increased
investment in the business, including the establishment of two new metered
markets.
Operating income of $23,013 for the second quarter of 1998 was essentially flat
compared with $22,980 for the second quarter of the prior year. Operating income
growth was held down by Year 2000 compliance costs of $2,415. Excluding Year
2000 compliance costs, operating income for the second quarter of 1998 increased
by 10.7%.
Non-operating income for the second quarter of 1998 of $2,415 included gains
from the disposition of investments.
The Company's effective tax rate was 41.9% for the second quarter of 1998 and
1997.
The Company's net income for the second quarter increased 10.7% to $14,774 from
$13,351 in the second quarter of the prior year, reflecting the factors
discussed above.
Basic earnings per share for the second quarter increased 12.5% to $0.09 from
$0.08 for the second quarter of the prior year. Diluted earnings per share were
$.08 in the second quarter of 1998 and 1997.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenue for the first six months of 1998 increased by 11.8% to $193,995 from
$173,455 for the first six months of the prior year. National revenues increased
due to demand for custom analyses and the addition of six cable networks
subscribing to ratings services in 1997 and 1998. Local revenues also increased,
reflecting the introduction of metered market measurement in three new markets
in the last 12 months, bringing to 40 the number of markets that employ meters.
Operating costs and selling and administrative expenses for the first six months
of 1998 increased by 17.2% to $134,752 from $114,965 for the first six months of
the prior year. Excluding Year 2000 compliance costs of $5,600, operating costs
and selling and administrative expenses increased 12.3% reflecting increased
investment in the business, including the establishment of two new metered
markets.
-11-
NIELSEN MEDIA RESEARCH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Operating income for the first six months of 1998 decreased by 1.2% to $44,330
from $44,890 for the first six months of the prior year. Operating income growth
was held down by Year 2000 compliance costs of $5,600. Excluding Year 2000
compliance expenses, operating income for the first six months of 1998 increased
by 11.2%.
Nonoperating income for the first six months of 1998 of $5,600 included gains
from the dispostion of investments.
The Company's effective tax rate was 41.9% for the first six months of 1998 and
1997.
The Company's net income for the first six months of 1998 increased 11.2% to
$29,009 from $26,081 in the first six months of the prior year, reflecting the
factors discussed above.
Basic earnings per share for the first six months of 1998 increased 12.5% to
$0.18 from $0.16 for the first six months of the prior year. Diluted earnings
per share for the first six months of 1998 increased 6.7% to $0.16 from $0.15 in
the first six months of the prior year.
CHANGES IN FINANCIAL POSITION AT JUNE 30, 1998 COMPARED WITH DECEMBER 31, 1997
Cash and cash equivalents increased to $17,715 at June 30,1998 from $5,993
at December 31, 1997 primarily due to cash retained by the Company at June 30,
1998 (the "Distribution Date") in order to fund certain liabilities assumed in
connection with the Distribution and for general working capital purposes.
Marketable Securities of $2,830 at June 30, 1998 represent the fair market
value of securities distributed to the Company at the Distribution Date.
Accounts Receivable - Net increased to $58,061 at June 30, 1998 from
$51,986 at December 31, 1997 principally due to increased revenues.
Other Current Assets increased to $6,698 at June 30, 1998 from $4,551 at
December 31, 1997 primarily due to an increase in prepaid insurance.
Property, Plant and Equipment - Net increased to $62,439 at June 30, 1998
from $55,050 at December 31, 1997 principally due to computer equipment
purchases.
Computer Software increased to $48,757 at June 30, 1998 from $43,093 at
December 31, 1997 principally due to increased investment in a new local ratings
reporting system and a new metering system.
Intangibles increased to $15,058 at June 30, 1998 from $10,649 at December
31,1997 principally due to direct costs related to the installation of new
metered markets.
-12-
NIELSEN MEDIA RESEARCH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS)
Accrued and Other Current Liabilities increased to $38,252 at June 30, 1998
from $23,629 at December 31, 1997 primarily due to the liabilities assumed by
the Company in connection with the Distribution.
Short-Term/Long-Term Debt at June 30, 1998 represents $275,000 borrowings
by Cognizant and the $25,000 third party investment in the limited partnership
used to repay intercompany liabilities. Nielsen Media Research assumed these
obligations at the Distribution Date
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Cash and cash equivalents totaled $17,715 and $9,415 at June 30, 1998 and
1997, respectively. The increase of $8,300 primarily represents cash that was
retained by the Company at the Distribution Date in order to fund certain
liabilities assumed in connection with the Distribution and for general working
capital purposes.
Net cash provided by operating activities was $55,018 and $41,875 for the
six months ended June 30, 1998 and 1997, respectively. The increase of $13,143
represents a decrease in other working capital items ($14,513), which primarily
reflects principally liabilities assumed in connection with the Distribution,
offset, in part, by an increase in accounts receivable ($6,668).
Net cash used in investing activities was $35,956 and $22,639 for the six
months ended June 30, 1998 and 1997, respectively. The increase of $13,317
primarily reflects an increase in additions to computer software ($5,986),
intangibles ($2,541) and property, plant and equipment ($1,993).
Net cash used in financing activities was $7,326 and $15,363 for the six
months ended June 30, 1998 and 1997, respectively. Excluding the $300,000
proceeds from the borrowings and third party limited partnership investment
which were remitted to Cognizant, there was a net decrease in the transfers to
Cognizant due to the cash retained by the Company at the Distribution Date in
order to fund certain liabilities assumed by the Company in connection with the
Distribution and for general working capital purposes.
-13-
NIELSEN MEDIA RESEARCH, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED) (DOLLAR AMOUNTS IN THOUSANDS)
ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes accounting and reporting standards for derivative instruments
imbedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of an exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment
in a foreign operation, or an unrecognized foreign-currency-denominated
forecasted transaction. The Company will be required to implement SFAS 133 for
all fiscal quarters of fiscal years beginning after June 15, 1999. The Company
expects that the adoption of this pronouncement will not have a material effect
on the Company's financial position, results of operations or cash flows.
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NIELSEN MEDIA RESEARCH, INC.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Cognizant Corporation ("Cognizant") was
held on April 13, 1998.
The following nominees for director named in the Proxy Statement dated March 13,
1998 were elected at the Meeting by the votes indicated.
For Withheld
------------ -----------
Clifford L. Alexander, Jr. ............ 137,473,843 1,210,300
Robert E. Weissman .................... 137,481,817 1,202,326
William C. Van Faasen ................. 137,558,538 1,125,605
The votes in favor of the election of the nominees represent at least 89.8% of
the shares present at the meeting.
On June 30, 1998, Cognizant (which is now Nielsen Media Research, Inc.)
distributed to all holders of common stock the shares of IMS Health Incorporated
(the "Distribution"), (See Note 2 to the Notes to the Condensed Consolidated
Financial Statements). In connection with the Distribution, six of the eight
members of the Cognizant Board of Directors resigned (including Messrs.
Alexander and Van Faasen) and five new members were appointed to the Nielsen
Media Research, Inc. Board of Directors.
Approval of the appointment of Coopers & Lybrand L.L.P. as Independent
Accountants was approved by the following vote:
For Against Abstain
----------- --------- ---------
Number of Shares ........... 138,270,495 110,528 303,120
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NIELSEN MEDIA RESEARCH, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10 Material Contracts
.1 Distribution Agreement between Cognizant Corporation and IMS
Health Incorporated dated June 30, 1998
.2 Tax Allocation Agreement between Cognizant Corporation and IMS
Health Incorporated dated June 30, 1998
.3 Employee Benefits Agreement between Cognizant Corporation and IMS
Health Incorporated dated June 30, 1998
.4 Amended and Restated Transition Services Agreement between The
Dun & Bradstreet Corporation, The New Dun & Bradstreet
Corporation, Cognizant Corporation, IMS Health Incorporated,
ACNielsen Corporation and Gartner Group, Inc. dated June 30, 1998
.5 Undertaking of IMS Health Incorporated dated June 29, 1998
27 Financial Data Schedule
(Filed Electronically)
(b) Reports on Form 8-K:
A report on Form 8-K was filed on June 30, 1998 to report under Item 5,
Other Events, information regarding the distribution of IMS HEALTH shares
and to report under Item 7, Financial Statements certain Proforma Financial
Statement Information and Exhibits.
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NIELSEN MEDIA RESEARCH, INC.
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.
NIELSEN MEDIA RESEARCH, INC.
Date: August 13, 1998 By: /s/
-----------------------------------------
Thomas W. Young
Executive Vice President & Chief
Financial Officer
/s/
------------------------------------------
Stuart J. Goldshein
Vice President and Controller
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