1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 1-8260
PRIMARK CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2383282
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 WINTER STREET, SUITE 4300N, WALTHAM, MA 02451-1241
(Address of principal executive offices) (Zip Code)
781-466-6611
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Number of shares outstanding of each of the registrant's classes of common
stock, as of July 31, 1999:
Common Stock, without par value: 20,439,292
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2
PRIMARK CORPORATION
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
PAGE
NUMBER
------
COVER....................................................... i
INDEX....................................................... ii
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements............................. 1
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.......... 11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................ 17
PART II -- OTHER INFORMATION
Item 4. Results of Votes of Security Holders............. 18
Item 6. Exhibits and Reports on Form 8-K................. 19
SIGNATURE................................................... 20
ii
3
PART I
FINANCIAL INFORMATION
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
JUNE 30, DECEMBER 31,
1999 1998
--------- -------------
(IN THOUSANDS OF DOLLARS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates
market value)........................................... $ 21,873 $ 51,630
Billed receivables less allowance for doubtful accounts of
$4,679 and $3,762, respectively......................... 99,441 88,770
Unbilled and other receivables............................ 13,445 13,203
Other current assets...................................... 20,762 15,806
Net assets of discontinued operations..................... -- 8,900
-------- --------
155,521 178,309
-------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $89,099 and
$81,048, respectively................................... 597,754 526,624
Capitalized data and other intangible assets, less
accumulated amortization of $32,864 and $29,670,
respectively............................................ 38,682 38,703
Capitalized software, less accumulated amortization of
$22,963 and $18,578, respectively....................... 47,604 37,765
Other..................................................... 12,960 9,797
-------- --------
697,000 612,889
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment........................................ 73,675 79,837
Leasehold improvements.................................... 17,288 19,267
Other..................................................... 27,971 10,901
-------- --------
118,934 110,005
Less-accumulated depreciation............................. (66,254) (58,649)
-------- --------
52,680 51,356
-------- --------
$905,201 $842,554
======== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable............................................. $ 92,073 $ 6,750
Accounts Payable.......................................... 9,016 12,059
Accrued employee payroll and benefits..................... 31,387 31,924
Taxes payable............................................. 25,204 41,318
Deferred income........................................... 102,097 80,004
Current portion of long-term debt, including capital lease
obligations............................................. 425 640
Other..................................................... 49,304 53,441
-------- --------
309,506 226,136
-------- --------
LONG-TERM DEBT AND OTHER NON-CURRENT LIABILITIES
Long-term debt, including capital lease obligations....... 151,143 151,489
Deferred income taxes..................................... 11,432 9,599
Other..................................................... 15,518 15,152
-------- --------
178,093 176,240
-------- --------
Total liabilities....................................... 487,599 402,376
COMMITMENTS AND CONTINGENCIES (NOTE 6)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital............... 68,957 90,239
Retained earnings......................................... 362,040 355,380
Accumulated other comprehensive income (loss)............. (13,395) (5,441)
-------- --------
Total common shareholders' equity....................... 417,602 440,178
-------- --------
Total liabilities and shareholders' equity................ $905,201 $842,554
======== ========
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
1
4
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE
AMOUNTS)
OPERATING REVENUES.......................................... $122,170 $108,874 $239,514 $213,285
OPERATING EXPENSES
Cost of services.......................................... 50,173 43,252 99,340 84,201
Selling, general and administrative....................... 45,592 41,555 91,174 80,649
Depreciation.............................................. 5,030 4,397 10,016 8,503
Amortization of goodwill.................................. 4,709 3,813 8,867 7,935
Amortization of other intangible assets................... 4,386 4,350 8,377 9,173
Restructuring Charge...................................... (4) 68,677 (4) 68,677
-------- -------- -------- --------
Total operating expenses................................ 109,886 166,044 217,770 259,138
-------- -------- -------- --------
Operating income........................................ 12,284 (57,170) 21,744 (45,853)
-------- -------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest income and expense -- net........................ (4,727) 363 (8,144) (3,594)
Other income and expense -- net........................... (340) 613 (177) 310
-------- -------- -------- --------
Total other income and (deductions)..................... (5,067) 976 (8,321) (3,284)
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES..................................................... 7,217 (56,194) 13,423 (49,137)
INCOME TAX EXPENSE (BENEFIT)................................ 3,026 (8,217) 6,544 (4,782)
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................... 4,191 (47,977) 6,879 (44,355)
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax expense of $0
and $883 and $0 and $4,607, respectively................ -- 1,214 -- 6,112
Gain on disposal of discontinued operations net of income
tax expenses of $0 and $101,053 and $0 and $101,053,
respectively............................................ -- 173,225 -- 173,225
-------- -------- -------- --------
Total discontinued operations........................... -- 174,439 -- 179,337
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............................ 4,191 126,462 6,879 134,982
Extraordinary item-loss on early extinguishment of debt,
net of income tax benefit of $0 and $3,614 and $0 and
$3,614, respectively.................................... -- (5,121) -- (5,121)
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE................................................. 4,191 121,341 6,879 129,861
Cumulative effect of change in accounting principle, net
of income tax benefit of $109........................... -- -- (219) --
-------- -------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK....................... $ 4,191 $121,341 $ 6,660 $129,861
======== ======== ======== ========
EARNINGS PER COMMON SHARE -- BASIC
Income (loss) from continuing operations.................. $ 0.20 $ (1.77) $ 0.33 $ (1.64)
Discontinued operations................................... -- 6.45 -- 6.64
Extraordinary item........................................ -- (0.19) -- (0.19)
Cumulative effect of change in accounting for derivative
financial instruments................................... -- -- (0.01) --
-------- -------- -------- --------
Total earnings per share................................ $ 0.20 $ 4.49 $ 0.32 $ 4.81
======== ======== ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION
Income from continuing operations......................... $ 0.20 $ (1.77) $ 0.33 $ (1.64)
Discontinued operations................................... -- 6.45 -- 6.64
Extraordinary item........................................ -- (0.19) -- (0.19)
Cumulative effect of change in accounting for derivative
financial instruments................................... -- -- (0.01) --
-------- -------- -------- --------
Total earnings per share................................ $ 0.20 $ 4.49 $ 0.32 $ 4.81
======== ======== ======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
Basic..................................................... 20,592 27,054 20,656 26,998
Effect of Dilutive Securities............................. 497 -- 477 --
-------- -------- -------- --------
Diluted................................................... 21,089 27,054 21,133 26,998
-------- -------- -------- --------
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
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5
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
-------------------------
1999 1998
----------- ----------
(IN THOUSANDS OF DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 6,660 $129,861
Adjustments to reconcile net income to net cash flows from
operating activities:
Discontinued operations................................... -- (6,112)
Gain on sale of subsidiary................................ -- (173,225)
Restructuring Charge -- intangible assets................. -- 60,650
Extraordinary loss on early extinguishment of debt........ -- 5,121
Cash (contributed to) discontinued operations............. -- (7,066)
Depreciation and amortization............................. 27,260 25,611
Other charges and credits -- net.......................... 2,496 2,318
Changes in operating working capital, excluding the effect
of acquisitions:
(Increase) in billed, unbilled and other
receivables-net....................................... (8,507) (30,094)
(Increase) in other current assets..................... (2,863) (7,521)
(Decrease) in accounts payable......................... (2,738) (1,426)
Increase in accrued payroll and benefits............... 360 388
Increase in income and other taxes payable -- net...... 4,168 4,191
Increase in deferred income............................ 10,566 14,074
(Decrease) increase in other current liabilities....... (7,126) 9,808
--------- --------
Net cash provided from operating activities.......... 30,276 26,578
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable...................... 460,010 215,405
Repayment of short-term notes payable..................... (381,687) (128,312)
Repayment of long-term debt............................... -- (332,503)
Common stock repurchased and retired...................... (25,653) (154,383)
Common stock issuance..................................... 4,371 8,188
Debt issue costs and other................................ (1,492) (745)
Call premium.............................................. -- (2,873)
--------- --------
Net cash provided by (used for) financing
activities.......................................... 55,549 (395,223)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (13,452) (9,716)
Capitalized software...................................... (10,192) (9,163)
Purchase of subsidiaries -- net of acquired cash.......... (79,118) (2,271)
Proceeds from sale of discontinued operations............. 8,900 432,000
Tax paid on disposal of discontinued operations........... (21,381) (30,000)
Other -- net.............................................. -- (191)
Cash (contributed to) discontinued operations............. -- (2,628)
--------- --------
Net cash (used for) provided by investing
activities.......................................... (115,243) 378,031
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... (339) 106
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (29,757) 9,492
CASH AND CASH EQUIVALENTS, JANUARY 1........................ 51,630 12,780
--------- --------
CASH AND CASH EQUIVALENTS, JUNE 30.......................... $ 21,873 $ 22,272
========= ========
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
3
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PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
SIX MONTHS ENDED
JUNE 30, 1999
----------------
(IN THOUSANDS OF
DOLLARS)
COMMON STOCK
Balance -- beginning of period.............................. $ 425
Issued for employee stock purchase and option plans......... 5
Retirement of common stock.................................. (21)
--------
Balance at June 30.......................................... 409
--------
ADDITIONAL PAID IN CAPITAL
Balance -- beginning of period.............................. 89,814
Tax benefit relating to stock option plans.................. 842
Issued for employee stock purchase and option plans......... 3,524
Retirement of common stock.................................. (25,632)
--------
Balance at June 30.......................................... 68,548
--------
RETAINED EARNINGS
Balance -- beginning of period.............................. 355,380
Net income.................................................. 6,660
--------
Balance at June 30.......................................... 362,040
--------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance -- beginning of period.............................. (5,441)
Net gain on derivative instruments designated as cash flow
hedges.................................................... 336
Foreign currency translation adjustments.................... (8,290)
--------
Balance at June 30.......................................... (13,395)
--------
TOTAL COMMON SHAREHOLDERS' EQUITY........................... $417,602
========
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
4
7
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1999 1998 1999 1998
------- --------- ------- --------
(IN THOUSANDS OF DOLLARS)
NET INCOME.............................................. $4,191 $121,341 $ 6,660 $129,861
------ -------- ------- --------
Other comprehensive income, net of tax:
Net gain on derivative instruments designated as cash
flow hedges........................................... 230 -- 336 --
Cumulative translation adjustment....................... (1,929) (869) (8,290) (677)
------ -------- ------- --------
OTHER COMPREHENSIVE INCOME (LOSS)....................... (1,699) (869) (7,954) (677)
------ -------- ------- --------
COMPREHENSIVE INCOME (LOSS)............................. $2,492 $120,472 $(1,294) $129,184
====== ======== ======= ========
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
5
8
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ACQUISITIONS
During 1999, the Company made the acquisitions described below, each of
which has been accounted for as a purchase. Accordingly, the purchase price has
been allocated on a preliminary basis to the identifiable net assets acquired
based upon estimates of their fair market values as of the acquisition dates and
the excess of purchase price over the estimated fair value of total net assets
acquired was allocated to goodwill. The consolidated financial statements
include the operating results of each business from the date of acquisition.
REMAINING
20%
INTEREST IN
WORLDSCOPE A-T EXTEL
----------- ------- -------
(IN THOUSANDS)
Cash................................................ $ 9,000 $35,306 $30,669
Convertible Notes Issued............................ 7,000
Acquisition Fees.................................... 825 1,250
Other............................................... -- 34 --
------- ------- -------
Total Consideration............................ $16,000 $36,165 $31,919
Acquired Cash....................................... -- (1,253) --
------- ------- -------
Net Consideration.............................. $16,000 $34,912 $31,919
======= ======= =======
Excess of Purchase Price over Fair Value............ $16,566 $30,029 $30,283
======= ======= =======
a. A-T
On February 5, 1999 Primark acquired all of the outstanding shares of A-T
for $34.9 million, which is net of acquired cash. The excess of purchase price
over fair value of net assets acquired of approximately $30.0 million is being
amortized on a straight-line basis over 40 years. Founded in 1987, A-T's
customers are users of real time information, such as money managers, traders,
banks and other institutional investors.
b. 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 $30.3 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.
c. 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 notes pay 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 Primark common shares at a price of $30 per share. The
notes are callable by Primark in the event of a change in control. 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. Worldscope produces a leading database covering global company financial
information on over 24,000 companies from 53 countries. A special feature of the
Worldscope database is the standardization of company account information to a
common format for meaningful cross-border comparisons and analysis.
6
9
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. RESTRUCTURING AND INTEGRATION CHARGES
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. The restructuring
charge included the write-off of intangible assets for (i) $25.0 of previously
capitalized software related to the planned integration of several product
offerings on common software platforms, (ii) $1.5 million of data determined to
be duplicative and not usable as a result of database integration, (iii)
write-off of $23.9 million of goodwill associated with software and data, which
was established as part of purchase accounting, (iv) write-off of $7.2 of
goodwill related to DAFSA, and (v) write-off of $3.1 of a trademark no longer
used in the restructured organization. The level of impairment was determined
based upon the discounted value of estimated future cash flows.
An additional $8.0 million of the charge 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.
During the second quarter of 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 in the second quarter of approximately $2,986,000. Also during the
second quarter the Company wrote off leasehold improvements and amortized
unfavorable leases in an amount equal to approximately $177,000.
During the second quarter of 1999, as part of its integration program, an
additional $3,051,000 was incurred of which $2,875,000 was paid to 56 employees
notified, and terminated in the second quarter of 1999.
The severance accrual was changed by $332,000 in the second quarter due to
$69,000 for amounts settled favorably, $439,000 for severance amounts paid
offset by $176,000 related to severance for under accruals and for people
notified in the second quarter who will be terminated in the third quarter.
As of June 30, 1999 the restructuring program was substantially complete
and the remaining accrual totaled $837,000. This amount represents $90,000 of
real estate brokerage fees to be paid in the third quarter of 1999, $457,000
related to the abandonment of leased facilities expected to be utilized over the
remainder of the applicable lease, and $290,000 related to four staff reductions
to be completed in the third quarter. As of August 11, 1999, there are two
remaining employees to be terminated associated with the restructuring.
Details of activity related to the restructuring and integration costs in
1998 and 1999 are as follows:
UTILIZED IN UTILIZED IN
1998 UTILIZED QUARTER ENDING QUARTER ENDING JUN. 30, 1999
PROVISION IN 1998 MAR. 31, 1999 JUN. 30, 1999 ACCRUAL
--------- -------- -------------- -------------- -------------
(AMOUNTS IN 000'S)
Abandonment of leased
facilities, including
leasehold improvements....... $5,156 $ 883 $563 $3,163 $547
Salaries and termination
benefits..................... 2,871 1,890 359 332 290
------ ------ ---- ------ ----
Total.......................... $8,027 $2,773 $922 $3,495 $837
------ ------ ---- ------ ----
7
10
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the effect to the income statement for
restructuring and integration items in the second quarter of 1999:
Salaries and termination benefits........................... $3,051
Leasehold and related items not abandoned due to recent
acquisitions or items settled for amounts less than
originally anticipated.................................... (2,986)
Salaries and termination benefits settled for amounts less
than anticipated.......................................... (69)
------
Total....................................................... (4)
======
3. REPURCHASE OF COMMON STOCK
On July 3, 1998, the Company implemented an open market purchase program to
buy up to 2,000,000 shares of its common stock from time to time, depending on
market conditions. On November 10, 1998, the Board of Directors approved an
expansion of the open market purchase program by an additional 2,000,000 shares,
bringing the total potential buyback to 4,000,000 shares. As a result, under the
two repurchase programs totaling 4,000,000 shares, the Company has purchased
2,646,246 shares through June 30, 1999, and had authority remaining to buy back
up to 1,353,754 additional shares of its common stock. For the six months ended
June 30, 1999, 1,077,746 shares were purchased at a total cost of $25.7 million.
During July 1999, the Company did not repurchase any additional shares.
4. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 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, changes in the fair value of derivatives are
either recognized in the statement of operations or other comprehensive income.
The ineffective portion of a derivative's change in fair value is recognized in
the statement of operations. In accordance with the Company's risk management
policy, Primark uses foreign currency options and foreign currency forward
contracts. The Company does not hold or issue derivative instruments for trading
purposes.
Forward and option contracts related to foreign exchange market risk are
utilized to reduce the exposure of the Company to excessive foreign currency
fluctuations. Significant portions of Primark's revenues are denominated in
currencies other than the U.S. Dollar. For the quarter ended June 30, 1999,
approximately 58% of total revenues were denominated in non-U.S. Dollar
currencies. Approximately 35%, 17% and 6% were denominated in U.K. Sterling,
currencies of Continental Europe, and Asian currencies, respectively. The
majority of Primark's revenues are generated from subscription arrangements of
up to two years in duration.
Additionally, a significant percentage of Primark's operating costs are
denominated in foreign currencies. Primark maintains significant production,
product development, sales and administrative functions in the United Kingdom.
Also, Primark maintains local sales and customer service functions in most
financial centers of Europe and Asia. For the quarter ended June 30, 1999,
approximately 42% of operating income exclusive of goodwill amortization was
denominated in non-U.S. Dollar currencies. This 42% can be broken down between a
negative margin of (2%) in U.K Sterling, 37% in Continental Europe and 7% in
Asia. The primary market risk that Primark faces is the U.S. Dollar
strengthening versus the Euro, Swiss Franc, Swedish Krona and Japanese Yen.
The Company principally enters into contracts to deliver foreign currencies
for U.K. Sterling at agreed-upon exchange rates with maturities not exceeding
two years. 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. Unrealized gains and losses on cash
flow hedges accumulate in other comprehensive income and are
8
11
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reclassified into earnings when the forecasted transaction affects earnings.
During the quarter ended June 30, 1999, there was no ineffective portion of
derivative gains or losses reported in earnings. Net gains from hedge
transactions expiring during the quarter ended June 30, 1999 totaling $147,000
were reclassified from other comprehensive income to revenues. At June 30, 1999,
the fair value of outstanding instruments was $336,000, recorded in other
current assets with the offset to other comprehensive income. The gain will be
recognized in revenues over the next 12 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 U.K., under intercompany
loan agreements or other financial transactions. The Company accounts for these
instruments as fair value hedges and changes in the fair market value of such
contracts are recorded each period in non-operating income or loss. During the
quarter ended June 30, 1999, a net gain on fair value hedging contracts of
$24,000 was recorded to non operating income.
Certain foreign subsidiaries of the Company loan excess cash to the U.K. as
part of the Company's cash management program. All such loans are denominated in
the currency of the lending entity. The Company's U.K. subsidiary designates
such foreign currency loans as hedges in its net investment in foreign
subsidiaries, and the gain or loss resulting from periodic revaluation of such
loans is recorded to a separate component of the cumulative translation
adjustment. For the quarter and year to date periods ended June 30, 1999, $1.2
million and $3.4 million of net gains, respectively, from revaluation of
intercompany loans were recorded to the cumulative translation adjustment.
The cumulative effect of a change in accounting principle due to adoption
of FAS 133 as of January 1, 1999 had a $219 thousand negative impact on
earnings.
5. 1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
On May 26, 1999 the Company 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 plans: (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.
As of June 30, 1999, 167,070 options have been granted under this plan.
6. CONTINGENCIES
There have been no other significant developments with respect to the
Company's contingent liabilities which were disclosed in the Company's 1998
Annual Report on Form 10-K. Management cannot predict the final disposition of
such issues, but believes that adequate provision has been made in the financial
statements and that the ultimate resolution of any outstanding issues will not
have a material adverse effect on the Company's financial condition.
7. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating
results of TASC and TIMCO separately from the Company's continuing operations
for 1998. Interest expense has been allocated to discontinued operations based
upon the ratio of net assets to total consolidated net assets. The net assets of
discontinued operations represent the net book value of the Company's investment
in TASC and TIMCO and consist principally of working capital, fixed assets,
goodwill and other non-current assets and liabilities. A purchase price
adjustment of $8.9 million associated with the sale of TASC was received by
Primark in January of 1999.
9
12
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTER ENDED YEAR TO DATE
DISCONTINUED OPERATIONS JUNE 30, 1998 JUNE 30, 1998
----------------------- ------------- -------------
(AMOUNTS IN 000'S)
INCOME
TASC........................................................ $ -- $ 3,755
TIMCO....................................................... 1,214 2,357
------ -------
Total.................................................. $1,214 $ 6,112
====== =======
NET ASSETS
TASC........................................................ $ --
TIMCO....................................................... 43,915
-------
Total.................................................. $43,915
=======
8. EARNINGS PER SHARE
Due to the loss from continuing operations for the three and six months
ended June 30, 1998, the Earnings Per Common Share -- Basic and Dilutive
included within the Company's Statements of Income exclude the dilutive effect
of options and other potential common shares. If options and other potential
common shares were included, weighted average common equivalent shares
outstanding would have been as follows:
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------------ ----------------
(AMOUNTS IN 000'S)
Basic............................................... 27,054 26,998
Effect of Dilutive.................................. 1,066 1,187
------ ------
Diluted............................................. 28,120 28,185
9. GENERAL
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments (consisting
only of normal recurring items) necessary for their fair presentation in
conformity with generally accepted accounting principles. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. Examples include
provision for bad debts and the length of asset lives. Actual results may differ
from these estimates. Interim results are not necessarily indicative of results
for a full year. The information included in this Form 10-Q should be read in
conjunction with Management's Discussion and Analysis and financial statements
and notes thereto included in the Primark Corporation 1998 Annual Report on Form
10-K.
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ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Earning per Share
Primark Corporation reported income from continuing operations for the
second quarter and six months ended June 30, 1999 at $4.2 million ($0.20 per
share) and $6.9 million ($0.33 per share) compared to losses of $48.0 million
($1.77 per share) and $44.4 million ($1.64 per share) for the respective periods
last year. A restructuring charge of $68.7 million was recorded in the second
quarter of 1998. Exclusive of that restructuring charge and the related tax
benefit, Primark in 1998 would have had income from continuing operations in the
second quarter and six months ended June 30, 1998 of $6.7 million ($0.24 per
share on a dilutive basis) and $10.3 million ($0.37 per share on a dilutive
basis), respectively.
Net income for the three and six months ended June 30, 1999 was $4.2
million ($0.20 per share) and $6.7 million ($0.32 per share), compared to $121.3
million ($4.49 per share) and $129.9 ($4.81 per share) for the same respective
periods last year. Included in net income for the six months ended June 30, 1999
is a loss, net of tax, of $0.2 million ($0.01 per share) associated with the
cumulative effect of a change in accounting principle for the adoption of
Statement of Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." Discontinued operations for the
three and six months ended June 30, 1998 include $174.4 million ($6.45 per
share) and $179.3 million ($6.64 per share) for operations and gains on disposal
of TASC and TIMCO, the Company's former applied technology and aircraft
maintenance operations, respectively. Also in the second quarter of 1998,
Primark used the proceeds from the sale of discontinued operations to repay $220
million of commercial bank debt and $112 million of senior notes resulting in an
extraordinary loss of $5.1 million ($0.19 per share)
Acquisitions
During the first quarter of 1999, the Company acquired the businesses of
A-T Financial Information Inc. ("A-T") for $34.9 million and the Extel company
fundamental data business, along with the Extel brand name, for $31.9 million.
During the second quarter of 1999, Primark acquired from Wright Investors'
Service its 20% minority interest in Worldscope, giving Primark 100% ownership
in this business for $16.0 million; OnPoint Technologies Inc. was also acquired
for $3.3 million.
Founded in 1987, A-T is a leading provider of Windows-compatible real time
financial market data and software to money managers, traders, banks and other
institutional investors. A-T has launched a competitive Internet site for
individual investors, which is marketed as "A-T Attitude." The company reported
approximately $13 million in revenues for 1998, which is an increase of 29% over
the prior year.
Management plans to integrate A-T's leading real-time data and software
capabilities with the full range of Primark's financial information products. In
April 1999, A-T released a new North American market datafeed, called Primark
SpeedFeed, which is collected directly from 35 sources. Management believes that
this new feed will enable Primark to offer superior quality Internet and
institutional products, especially when combined with the many unique databases
available from Primark today. For example, by combining A-T's robust North
American coverage with the European market data collected by its ICV unit in
London, Primark will have excellent real-time and historical coverage for the
world's two largest financial markets. Building on Primark's extensive presence
in Asia and developing countries, management intends to expand this capability
to the rest of the globe.
Management also intends to use the existing A-T Internet delivery system as
the foundation of a global investment service for retail and institutional
investors located in the United States, Europe, Asia and other parts of the
world. The new Internet service will combine real-time and historical securities
prices, indices, company financial reports and documents, ownership, insider
trading, earnings estimates, broker research, market-related economic analysis,
forecasts and news -- with securities trading and portfolio management
capabilities. Distinctive features of this new Internet service will be its
global coverage of countries, markets, industries and securities, together with
Primark forecasts and analytical tools. Most of the data will be drawn from
Primark's financial and economic information businesses, along with third party
information such as Dow Jones news to complete the service.
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The Primark brand and its information products are currently on the
Internet in many ways. The Disclosure Global Access product (www.disclosure.com)
is authorized to deliver company financial information through the Internet to
over 500,000 users. Broker research (www.trapeze.net), earnings estimates
(www.ibes.com), securities analysis (www.baseline.com), prices
(www.marketeye.co.uk), and economics (www.wefa.com) are other prime examples.
For the retail community, Primark proprietary data is delivered via AOL, MSN,
Stock Smart, FT.com, WSJ.com, Quote.com, E*Trade and many others.
In February 1999, the Extel company fundamental data business and the Extel
brand name were acquired from The Financial Times Group, part of Pearson plc,
for $31.9 million in cash, subject to certain post closing adjustments. Extel,
perhaps best known for its "Extel Card" company tearsheets for rapid corporate
analysis, provides historical company accounts, image-based data, and textual
corporate profiles and company news to the investment industry worldwide. The
acquired business reported revenues of approximately $18 million in 1998.
Management intends to integrate the Extel data production operation within
its Worldscope operation while leveraging the premier Extel name by providing
Extel branded information across the full range of Primark's product lines. This
will be done both by integrating Extel corporate and historical news content
with Primark's current products and through adding value to Extel products with
Primark's data and functionality. Extel's strength in the Europe and
Asia-Pacific regions complements Primark's existing North American strength.
Primark will also incorporate elements of Extel data into its existing and
planned real-time information services. These services are being strengthened
through the acquisition of real-time provider A-T Financial Information. Extel
data will be included on real-time products such as TOPIC as part of Primark's
drive to become the world's leading supplier of equity data.
The purchase price for the remaining 20% stake of Worldscope was $16
million consisting of a $9 million cash payment and two $3.5 million convertible
subordinated notes. The notes pay interest at 5%, have a maturity date of June
1, 2014 and are convertible into Primark common shares at a price of $30 per
share. The notes are callable by Primark in the event of a change of control.
Worldscope produces a leading database covering global company financial
information on over 24,000 companies from 53 countries. A special feature of the
Worldscope database is the standardization of company account information to a
common format for meaningful cross-border comparisons and analysis. With 100%
ownership of Worldscope, Primark will integrate across all business units every
aspect of company account data collection, production and delivery. This
integration should allow Primark to provide its customers with more complete and
timely coverage, which will be achieved at lower costs to Primark.
Primark acquired OnPoint Technologies Inc., a firm specializing in
developing internet-based financial applications and software products for the
financial services sector. OnPoint's web-focused development team will use
Primark's information resources and technical infrastructure to develop
financial products for the Internet.
The acquired businesses of A-T Financial Information Inc., Extel and
OnPoint Technologies Inc. have been made part of the Primark Financial
Information Division (PFID) and their financial results are included with PFID.
Worldscope has always been included within PFID.
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Operating Results
The following table summarizes the operating results of Primark by
Division:
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ -----------------------------
REVENUE 1999 1998 % CHANGE 1999 1998 % CHANGE
------- ------- ------- -------- ------- ------- --------
PFID.................... 85,433 77,360 10.4% 168,455 152,559 10.4%
PFAD.................... 22,788 18,322 24.4% 44,606 35,881 24.3%
PDID.................... 13,949 13,192 5.7% 26,453 24,845 6.5%
------- ------- ------- -------
122,170 108,874 12.2% 239,514 213,285 12.3%
======= ======= ======= =======
EBITDA
PFID.................... 18,523 16,622 11.4% 35,269 35,641 (1.0)%
PFAD.................... 6,569 5,654 16.2% 12,611 10,725 17.6%
PDID.................... 2,380 3,923 (39.3)% 2,989 4,990 (40.1)%
Corp.................... (1,067) (2,132) 50.0% (1,869) (2,921) 36.0%
------- ------- ------- -------
26,405 24,067 9.7% 49,000 48,435 1.2%
======= ======= ======= =======
OPERATING INCOME
PFID.................... 7,823 7,264 7.7% 14,742 16,757 (12.0)%
PFAD.................... 4,657 3,963 17.5% 8,835 7,279 21.4%
PDID.................... 1,272 2,669 (52.3)% 798 2,411 (66.9)%
Corp.................... (1,472) (2,389) 38.4% (2,635) (3,623) 27.3%
------- ------- ------- -------
12,280 11,507 6.7% 21,740 22,824 (4.7)%
======= ======= ======= =======
The above table does not include the restructuring charge of $68.7 million
taken in the second quarter of 1998. Of this amount $50.7 million relates to
PFID, $17.8 million relates to PDID and $225,000 relates to PFAD.
EBITDA represents operating income excluding restructuring charges 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 a required disclosure under generally accepted accounting
principles, EBITDA is a widely used measure of a company's performance in its
industry. EBITDA 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.
Revenues from continuing operations for the second quarter and six months
ended June 30, 1999 were reported at $122.2 million and $239.5 million compared
to $108.9 million and $213.3 million for the same respective periods last year.
Operating and EBITDA margins in second quarter of 1999 improved compared to the
first quarter of 1999 due to revenues from new products being introduced in 1999
and further expense savings associated with completing Primark's integration
efforts.
PFID
PFID's growth in sales can be primarily attributed the following factors:
1) excellent sales of Datastream's research product in Europe and Asia,
2) strong sales in the UK of the investment accounting systems offered by the
Primark Information Management System (PIMS) product line, 3) a good reception
by the market of Disclosure's next generation electronic products line led by
Global Access and Piranha. Continued weakness in Disclosure's traditional CD Rom
and document delivery business partially offset this growth.
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Excluding Disclosure's traditional products, management expects this
division's growth to continue due to synergy created by recent acquisitions and
due to the impact of new products and enhancements to existing products released
in 1999.
PFAD
The Primark Financial Analytics Division (PFAD) had another strong quarter
of growth in revenues, EBITDA and operating income. The Baseline product leads
this growth with an increase in revenues of 34% and 37% for the quarter and year
to date, followed by IBES with growth of 18% for both the quarter and year to
date and Vestek with growth of 24% and 19% for both the quarter and year.
Management expects this performance to continue with the sale of new or recently
released products such as Trapeze, Active Express, and Vestek's mutual fund
warehouse offering.
PDID
The Primark Decision Information Division (PDID) derives revenues from two
major sources. Under the brand name of the Yankee Group, this Division sells
subscription and consulting services to both the vendors and users of
telecommunications and computing capabilities. Growth in revenues from these
services was up 24% and 26% for the quarter and year, respectively.
Under the brand name of Primark WEFA, PDID sells subscriptions to economic
services as well as economic consulting for analysis and planning. Revenues
dropped by 10% and 8% for the quarter and year primarily as a result of product
transitions. This drop in revenues is the primary reason for the deterioration
of margins within this Division. WEFA's customer base and product line is
transitioning from services provided to traditional corporate economists, a
market which is flat to down, to marketing, financial and operating
professionals, a market growing robustly. Management expects the revenues and
margins at WEFA to improve modestly for the balance of 1999 when compared to the
first half of the year.
Other comprehensive income dropped by approximately $ 8.0 million primarily
due to a change in the cumulative translation account resulting from the dollar
strengthening against the pound. The Company has a significant goodwill asset
denominated in U.K. Sterling.
Capital Resources and Liquidity
Primark's cash and cash equivalent balances decreased $29.8 million during
the six months ended June 30, 1999 as a result of operating activities
contributing $30.3 million, financing operations generating $55.6 million and
investing activities absorbing $115.2 million.
The $3.7 million increase in cash flows from operating activities is a
result of timing differences associated with working capital accounts.
Financing activities, for the most part, reflect a net increase of $83.8
million on Primark's revolving credit facility, resulting in $243.6 million of
funded debt outstanding as of June 30, 1999. On July 3, 1998, the Company
implemented an open market purchase program to buy up to 2,000,000 shares of its
common stock from time to time, depending on market conditions. In addition, on
November 10, 1998, the Board of Directors approved an expansion of the open
market purchase program by 2,000,000 shares, bringing the total potential
buyback to 4,000,000 shares. As a result under the two repurchase programs
totaling 4,000,000 shares, the Company had authority remaining to buy back up to
1,353,754 additional shares of its common stock as of June 30, 1999. For the six
months ended June 30, 1999, 1,077,746 shares were purchased at a total cost of
$25.7 million. Additionally, Primark received proceeds of $4.4 million on the
issuance of common stock associated with stock option and employee stock
purchase plans.
Investing activities included the use of $79.1 million for the purchase by
Primark of four companies in the first six months of 1999, Extel, A-T Financial,
the remaining 20% of Worldscope and Onpoint Technologies Inc. In addition,
investing activities included $13.5 million of capital expenditures and $10.2
million of capitalized software. The capital expenditures consisted primarily of
computer equipment purchases, which totaled $10.0 million for the six months
ended June 30, 1999. In early 1999, the Company received
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$8.9 million in cash associated with a purchase price adjustment from the sale
of its TASC subsidiary in April of 1998. This amount was offset by $21.4 million
of taxes paid in 1999 on the gains realized on the sale of discontinued
operations in 1998. Management estimates that it will be required to pay
approximately $8.0 million of additional taxes in the remainder of 1999
associated with the gain on the sale of discontinued operations realized in
1998.
Newly Adopted Accounting Standards
Effective January 1, 1999, the Company adopted Statement of Financial
Accounting Standards No. 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, changes in the fair value of derivatives are
either recognized in the statement of operations or other comprehensive income.
The ineffective portion of a derivative's change in fair value is recognized in
the statement of operations. In accordance with the Company's risk management
policy, Primark uses foreign currency options and foreign currency forward
contracts. 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 had a $219 thousand negative impact on
earnings.
Restructuring and Integration Charges
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, subsequently
adjusted to $68.0 million.
The following summarizes the second quarter activity pertaining to the
restructuring accrual:
UTILIZED IN
QUARTER
MAR. 31, 1999 ENDING JUN. 30, 1999
ACCRUAL 1999 ACCRUAL
------------- ----------- -------------
(AMOUNTS IN 000'S)
Abandonment of leased facilities, including
leasehold improvements.......................... $3,710 $3,163 $547
Salaries and termination benefits................. 622 332 290
------ ------ ----
Total........................................ $4,332 $3,495 $837
====== ====== ====
During the second quarter of 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. The remaining amounts in abandoned leased facilities represents
accrued brokerage fees for space to be abandoned in August and the difference
between the cost of the leases and the sub-lease income to be generated. As of
June 30, 1999 there are four employees still to be severed as part of the
restructuring program.
Also during the second quarter as a part of its integration program, an
additional $3.1 million was incurred of which $2.9 million was paid to 56
employees notified and terminated in the second quarter of 1999.
As of June 30, 1999 the restructuring program was substantially complete
and the remaining accrual totaled $837,000. This amount represents $90,000 of
real estate brokerage fees to be paid in the third quarter of 1999, $457,000
related to the abandonment of leased facilities expected to be utilized over the
remainder of the applicable lease, and $290,000 related to four staff reductions
to be completed in the third quarter. As of August 11, 1999, there are two
remaining employee to be terminated associated with the restructuring.
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Year 2000 Readiness Disclosure
The Year 2000 (Y2K) issue relates to a complex set of potential problems
arising from the ways in which computer software and hardware handle dates. Many
older systems use a two-digit date format that may create ambiguities once the
new century begins.
The Company has been actively addressing all known Y2K issues since 1995,
with the goal of providing continuous and reliable service to the Company's
customers and a seamless transition to the new Millennium. The Company's Y2K
plan focuses on each of the Company's internal systems, products and third
parties with which the Company has a significant business relationship. In
addition to the databases and software that the Company provides to its
customers, the Company is reviewing, fixing, and testing all aspects of its
internal operations -- from hardware systems (e.g., servers, LANs), software
(e.g., production database systems, HR and finance information systems), and
desktop PC programs to physical security systems, fire suppression, and other
building control systems. In addition to managing our internal Y2K efforts, this
program involves working with many other organizations. These include key data
suppliers, hardware manufacturers, telecommunications companies, electric
utilities, and many others.
The Company is also prepared to assist its users with Y2K issues relating
to their internal systems that directly interface with the Company's systems.
All Primark companies are working together to achieve compliance by sharing
information and resources. The Company believes that all material systems will
be Y2K compliant before the end of the third quarter of 1999.
All Primark companies dealing with the Y2K issues must address the many
effects that this issue will have on their significant business relationships,
including suppliers and customers. The Company is undertaking steps to work with
third party vendors to understand their ability to continue to provide services
and products.
The Company has notified all customers with older products which are not
Y2K compliant and which the Company will no longer support. All other Company
products are Y2K compliant.
The Company has undertaken a rigorous verification of suppliers. Primark
business units incorporate data derived from many different suppliers. A major
component of the Y2K project is reviewing every one of the suppliers to ensure
compliance on their part. Where there is any doubt that a supplier will not be
taking reasonable actions to ensure compliance, the Company will seek
alternatives within a suitable time frame.
The Company is preparing contingency plans to deal with major risks that
could result from Y2K problems beyond the Company's control. This includes the
failure of infrastructure support, e.g., utilities, as well as possible supplier
and customer issues.
The Company projects to incur costs related to its Y2K initiative of $5.0
million for the year ended December 31,1999. The Company expects to resolve
every known significant Y2K problem and have the solutions thoroughly tested in
the third quarter of 1999.
The Company expects its Y2K efforts will be successful. However, the
Company's products and services as well as the tools that Primark uses to
conduct its Y2K evaluation are dependent on technological components, equipment
and software that were developed by third parties and that may not be Y2K
compliant. The Company has made extensive efforts to select third party products
that meet our product requirements and that are Y2K-compliant. However, this
compliance is not within the control of the Company. Failure of such third party
components, equipment or software to operate properly with regard to the Y2K
could interrupt ongoing operations or require the company to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
the Company's business and operating results.
Certain Factors that May Affect Future Results
In addition to 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
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limited to (i) the risks associated with operating on a global basis, including
fluctuations in the value of foreign currencies relative to the U.S. dollar, and
the ability to successfully hedge such risks, (ii) the extent to which Primark
seeks growth through acquisitions, and the ability to identify and consummate
acquisitions on satisfactory terms, (iii) uncertainty regarding the development
and market acceptance of new products, (iv) loss of market share through
competition, (v) deterioration in economic conditions, particularly in the
financial services industry, and (vi) Primark's inability to complete the
implementation of its Y2K plans on a timely basis.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is provided under the caption
"Foreign Currency Exchange Risk Management" under Item 2--Management's
Discussion and Analysis of Financial Condition and Results of Operations. Also
see Item 7A. Quantitative and Qualitative Disclosures About Market Risk in
Primark's 1998 10-K.
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PART II
OTHER INFORMATION
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
The Company's Annual Meeting of shareholders was held on May 26, 1999 for
the purposes of electing a board of directors, amending the Company's Articles
of Incorporation to increase the number of directors from 7 to 8, approving the
grant of a stock option and approving the appointment of independent auditors.
Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934.
All of management's nominees for directors listed in the proxy statement
were elected with the following vote:
SHARES VOTED SHARES BROKER
"FOR" % WITHHELD % NON-VOTES %
------------ ----- -------- ---- --------- ----
Kevin J. Bradley.................... 18,735,620 90.2% 269,714 1.3% 1,068,984 5.1%
John C. Holt........................ 18,699,404 90.0% 305,930 1.5% 1,068,984 5.1%
Joseph E. Kasputys.................. 18,728,840 90.2% 276,494 1.3% 1,068,984 5.1%
Steven Lazarus...................... 18,734,692 90.2% 270,642 1.3% 1,068,984 5.1%
Patricia McGinnis................... 18,735,964 90.2% 269,370 1.3% 1,068,984 5.1%
Jonathan Newcomb.................... 18,751,483 90.3% 253,851 1.2% 1,068,984 5.1%
Constance K. Weaver................. 18,743,854 90.2% 261,480 1.3% 1,068,984 5.1%
David Taylor........................ 18,737,807 90.2% 267,527 1.3% 1,068,984 5.1%
Proposal to approve an amendment to the Company's Articles of Incorporation
to increase the number of directors from 7 to 8 was approved by the following
vote:
SHARES
SHARES VOTED VOTED SHARES BROKER
"FOR" % AGAINST % ABSTAINING % NON-VOTES %
- ------------ ----- ------------ ---- ---------- ---- --------- ----
18,363,397 88.4% 534,548 2.6% 107,389 0.5% 1,068,984 5.1%
Approval of the grant of a stock option to Mr. Steven L. Schneider,
President and CEO of Primark Financial Information Division was voted as
follows:
SHARES
SHARES VOTED VOTED SHARES BROKER
"FOR" % AGAINST % ABSTAINING % NON-VOTES %
- ------------ ----- ------------ ---- ---------- ---- --------- ----
15,562,201 74.9% 3,284,564 15.8% 158,569 0.8% 1,068,984 5.1%
The appointment of Deloitte and Touche LLP as independent auditors for the
year ended December 31, 1999 was approved by the following vote:
SHARES
SHARES VOTED VOTED SHARES BROKER
"FOR" % AGAINST % ABSTAINING % NON-VOTES %
- ------------ ----- ------------ ---- ---------- ---- --------- ----
18,817,405 90.6% 117,899 0.6% 70,030 0.3% 1,068,984 5.1%
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1* Stock Option Agreement between the Company and David Taylor dated
February 24, 1999.
3.1* Restated Articles of Incorporation of the Company.
10.1 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).
10.2* Memorandum of Understanding between the Company and David Taylor
dated March 15, 1999.
10.3* Employment extension between the Company and John C. Holt dated
July 9, 1999.
27* Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1999.
- ---------------
* Indicates document filed herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIMARK CORPORATION
By: /s/ STEPHEN H. CURRAN
----------------------------------
Stephen H. Curran
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 12, 1999
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