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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
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 1-15967
THE DUN & BRADSTREET CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3725387
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
ONE DIAMOND HILL ROAD, MURRAY HILL, N.J. 07974
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (908) 665-5000.
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 31, 2000, 80,154,900 shares of Common Stock of The Dun &
Bradstreet Corporation were outstanding and the aggregate market value of such
Common Stock held by nonaffiliates* (based upon its closing transaction price on
the Composite Tape on December 29, 2000) was approximately $2,067.4 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for use in
connection with its annual meeting of shareholders scheduled to be held on April
27, 2001, are incorporated into Part III of this Form 10-K.
The Index to Exhibits is located on Pages 67-70 of this Form 10-K
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* Calculated by excluding all shares held by executive officers and directors of
the Registrant without conceding that all such persons are "affiliates" of the
Registrant for purposes of federal securities laws.
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PART I
ITEM 1. BUSINESS
The Dun & Bradstreet Corporation ("D&B") was incorporated under the laws of
the State of Delaware on April 25, 2000. D&B began operating as an independent
publicly-owned corporation on October 1, 2000 as a result of its September 30,
2000 spinoff (the "2000 Distribution") from the corporation now known as Moody's
Corporation and previously known as "The Dun & Bradstreet Corporation." Moody's
Corporation is referred to herein as "Old D&B" for periods prior to the 2000
Distribution and as "Moody's" for periods thereafter.
D&B is the accounting successor to Old D&B, which was incorporated under
the laws of the State of Delaware on April 8, 1998. Old D&B began operating as
an independent publicly-owned corporation on July 1, 1998 as a result of its
June 30, 1998 spinoff (the "1998 Distribution") from the corporation now known
as "R.H. Donnelley Corporation" and previously known as "The Dun & Bradstreet
Corporation" ("Donnelley"). Old D&B became the accounting successor to Donnelley
at the time of the 1998 Distribution.
Prior to the 1998 Distribution, Donnelley was the parent holding company
for subsidiaries then engaged in the businesses currently conducted by D&B,
Moody's and Donnelley. Prior to November 1, 1996, it also was the parent holding
company of subsidiaries conducting business under the names Cognizant
Corporation ("Cognizant") and ACNielsen Corporation ("ACNielsen"). On that date
Donnelley effected a spinoff of the capital stock of Cognizant and ACNielsen to
its stockholders (the "1996 Distribution"). Cognizant subsequently changed its
name to Nielsen Media Research, Inc. in connection with its 1998 spinoff of the
capital stock of IMS Health Incorporated ("IMS Health").
The corporate and financial characteristics of D&B have developed, in part,
as a result of the 1996, 1998 and 2000 Distributions and D&B's relationships
with the other parties to those transactions. The terms of the transactions are
briefly outlined below.
1996 DISTRIBUTION
For purposes of effecting the 1996 Distribution and governing certain of
the continuing relationships among Donnelley, Cognizant and ACNielsen
thereafter, the three companies entered into various agreements, including a
Distribution Agreement (the "1996 Distribution Agreement"), a Tax Allocation
Agreement (the "1996 Tax Allocation Agreement"), an Employee Benefits Agreement
(the "1996 Employee Benefits Agreement") and an Indemnity and Joint Defense
Agreement (the "Indemnity and Joint Defense Agreement"). The following
descriptions summarize some of the material terms of such agreements but are
qualified by reference to the texts of such agreements, which are attached as
exhibits to this Form 10-K.
The 1996 Distribution Agreement provided for, among other things,
assumptions of liabilities and cross indemnities designed generally to allocate
to Donnelley, effective as of November 1, 1996, financial responsibility for all
liabilities of the companies, except for certain liabilities arising out of or
in connection with the businesses that became part of Cognizant or ACNielsen as
a result of the 1996 Distribution. Similarly, the 1996 Distribution Agreement
provided for the allocation generally to Donnelley of the financial
responsibility for the liabilities arising out of or in connection with
then-former businesses, including those formerly conducted by or associated with
Cognizant or ACNielsen, with certain exceptions such as described in Note 15
(Contingencies) in Part II, Item 8 on pages 56-58 of this Form 10-K.
The 1996 Tax Allocation Agreement generally allocated financial
responsibility to Donnelley for the entire consolidated tax liability for the
tax years that Cognizant and ACNielsen were included in Donnelley's consolidated
Federal income tax return. For periods prior to November 1, 1996, Donnelley also
is generally liable for state and local income taxes. The 1996 Tax Allocation
Agreement allocated liability to Donnelley, Cognizant and ACNielsen for their
respective shares of other state and local taxes, as well as any foreign taxes
attributable to periods prior to November 1, 1996.
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The 1996 Employee Benefits Agreement generally allocated responsibility
among the companies for benefits accrued for their current and former employees
as of November 1, 1996.
Pursuant to the Indemnity and Joint Defense Agreement, Donnelley, Cognizant
and ACNielsen agreed: (i) to certain arrangements allocating potential
liabilities arising out of the legal action filed by Information Resources, Inc.
("IRI") on July 29, 1996 and (ii) to conduct a joint defense of such action. See
Note 15 (Contingencies) in Part II, Item 8 on pages 56-58 of this Form 10-K for
additional information with respect to this agreement.
Pursuant to the terms of the 1996 Distribution Agreement, as a condition to
the 1998 Distribution, Old D&B undertook to be jointly and severally liable with
Donnelley to Cognizant and ACNielsen for any liabilities arising under the 1996
Distribution Agreement and related agreements. Pursuant to the 1998 Distribution
Agreement, as between Donnelley and Old D&B, all liabilities and rights of
Donnelley under the 1996 Distribution Agreement and related agreements became
liabilities and rights of Old D&B, and Old D&B agreed to indemnify Donnelley
against any such liabilities.
Pursuant to the terms of the 1996 Distribution Agreement, as a condition to
Cognizant's spinoff of IMS Health, IMS Health undertook to be jointly and
severally liable with Cognizant to Donnelley and ACNielsen for any liabilities
arising under the 1996 Distribution Agreement and related agreements.
Donnelley's rights under this undertaking were assigned to Old D&B in connection
with the 1998 Distribution.
1998 DISTRIBUTION
For purposes of effecting the 1998 Distribution and of governing certain of
the continuing relationships between Old D&B and Donnelley thereafter, the two
companies entered into various agreements, including a Distribution Agreement
(the "1998 Distribution Agreement"), a Tax Allocation Agreement (the "1998 Tax
Allocation Agreement") and an Employee Benefits Agreement (the "1998 Employee
Benefits Agreement"). The following descriptions summarize some of the material
terms of such agreements. These descriptions are qualified by reference to the
texts of such agreements, which are attached as exhibits to this Form 10-K.
The 1998 Distribution Agreement provided for, among other things, certain
corporate transactions required to effect the 1998 Distribution and other
arrangements between Donnelley and Old D&B subsequent to the 1998 Distribution.
In general, pursuant to the terms of the 1998 Distribution Agreement, all assets
of Donnelley as of June 30, 1998, other than those relating to the business to
be conducted by it thereafter, became assets of Old D&B. The 1998 Distribution
Agreement also provided for assumptions of liabilities and cross indemnities
designed generally to allocate to Old D&B, effective as of June 30, 1998,
financial responsibility for substantially all liabilities of Donnelley,
excluding liabilities primarily relating to the business to be conducted by
Donnelley thereafter and certain indebtedness incurred in connection with the
1998 Distribution. The 1998 Distribution Agreement provided for the allocation
generally to Old D&B of the financial responsibility for the liabilities arising
out of or in connection with former business operations, other than those
relating to the business to be conducted by Donnelley following the 1998
Distribution.
Under the 1998 Tax Allocation Agreement, Old D&B generally assumed
liability for all income taxes of the companies and their subsidiaries
attributable to periods prior to the 1998 Distribution, provided that in the
case of any separate company state or local income taxes, Donnelley and Old D&B
remained responsible for their own liabilities arising from any audit
adjustment.
The 1998 Employee Benefits Agreement generally allocated responsibility
between Donnelley and Old D&B for benefits accrued for their current and former
employees as of June 30, 1998.
2000 DISTRIBUTION
For purposes of effecting the 2000 Distribution and of governing certain of
the continuing relationships between D&B and Moody's thereafter, the two
companies entered into various agreements, including a Distribution Agreement
(the "2000 Distribution Agreement"), a Tax Allocation Agreement (the "2000 Tax
Allocation Agreement") and an Employee Benefits Agreement (the "2000 Employee
Benefits Agreement").
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The material terms of such agreements are described below. These descriptions
are qualified by reference to the texts of such agreements, which are attached
as exhibits to this Form 10-K.
The 2000 Distribution Agreement provided for, among other things, certain
corporate transactions required to effect the 2000 Distribution and other
arrangements between D&B and Moody's subsequent to the 2000 Distribution. In
particular, the 2000 Distribution Agreement defined the assets and liabilities
that were allocated to and assumed by D&B and those that remained with Moody's.
The 2000 Distribution Agreement also defines what constitutes the "D&B Business"
and what constitutes the "Moody's Business."
Pursuant to the 2000 Distribution Agreement, Moody's transferred or caused
to be transferred all its right, title and interest in the assets comprising the
D&B Business to D&B, and D&B transferred or caused to be transferred all its
right, title and interest in the assets comprising the Moody's Business to
Moody's. All assets were transferred without any representation or warranty. In
general, pursuant to the terms of the 2000 Distribution Agreement, all assets
that relate primarily to the D&B Business were allocated to D&B, all assets that
relate primarily to the Moody's Business were allocated to Moody's, and all
remaining assets (other than cash, which was allocated along with indebtedness
as described below) were allocated equally between D&B and Moody's. The 2000
Distribution Agreement also provided for assumptions of liabilities and cross-
indemnities designed to allocate generally, effective as of September 30, 2000,
financial responsibility for: (i) all liabilities arising out of or in
connection with the businesses conducted by D&B to D&B, (ii) all liabilities
arising out of or in connection with the businesses conducted by Moody's to
Moody's, and (iii) substantially all other liabilities as of September 30, 2000
equally between D&B and Moody's. The liabilities that were allocated equally
include contingent and other liabilities relating to former businesses and
certain prior business transactions, which consist primarily of potential
liabilities of Old D&B arising from the legal action initiated by IRI and
potential tax liabilities of Old D&B that may arise with respect to reviews by
tax authorities of global tax planning initiatives, both of which are described
in Note 15 (Contingencies) in Part II, Item 8 of pages 56-58 of this Form 10-K.
Pursuant to the terms of the 1998 Distribution Agreement, as a condition to
the 2000 Distribution, D&B undertook to be jointly and severally liable with
Moody's to Donnelley for any liabilities arising under the 1998 Distribution
Agreement and related agreements. The 2000 Distribution Agreement generally
allocates financial responsibility for such liabilities equally between D&B and
Moody's, except that any such liabilities that relate primarily to the D&B
Business will be D&B liabilities and any such liabilities that relate primarily
to the Moody's Business will be Moody's liabilities. Among other things, D&B and
Moody's agreed that, as between themselves, they will each be responsible for
50% of any payments to be made in respect of the IRI action under the 1998
Distribution Agreement, including any legal fees and expenses related thereto.
In connection with the 2000 Distribution, D&B assumed a portion of the
indebtedness of Old D&B and received a portion of the cash of Old D&B in amounts
such that, at the time of the 2000 Distribution and before giving effect to the
agreement discussed below and certain other factors, the net indebtedness of D&B
(plus the obligations also assumed by D&B under the minority interest financing
relating to the investment partnership described in Note 12 (Investment
Partnership) in Part II, Item 8 of pages 54-55 of this Form 10-K) approximated
the net indebtedness of Moody's. Substantially all unexercised Old D&B stock
options were adjusted as of the date of the 2000 Distribution to comprise
options to purchase Moody's common stock and separately exercisable options to
purchase D&B common stock. In light of, among other things, the numbers of
optionees employed by D&B and Moody's, respectively, this adjustment resulted in
a substantially greater number of outstanding options to purchase Moody's common
stock than would have been the case if options were adjusted so as to become
solely options to purchase common stock of the optionee's employer. Due to this
fact and the fact that, consistent with past practice, each of D&B and Moody's
was expected to maintain a stock purchase program designed to offset the
increased number of shares otherwise attributable to option exercises, D&B
agreed to adjust the net indebtedness of the two companies to compensate Moody's
for the disproportionate amount of its estimated future cash costs in this
regard. The amount of this adjustment was determined on a formula basis and is
reflected in D&B's consolidated balance sheet.
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The 2000 Distribution Agreement includes provisions governing the
administration of certain insurance programs and the procedures for making
claims. The 2000 Distribution Agreement also allocates the right to proceeds,
and the obligation to incur deductibles, under certain insurance policies.
The 2000 Distribution Agreement provides that Moody's and D&B will comply
with and otherwise not take action inconsistent with each representation and
statement made to the Internal Revenue Service (the "IRS") in connection with
Old D&B's requests for ruling letters as to certain tax aspects of the 2000
Distribution and certain internal restructuring transactions. Each of Moody's
and D&B agreed, among other things, to maintain its status as a company engaged
in the active conduct of a trade or business, as defined in Section 355(b) of
the Internal Revenue Code, to continue to own stock of certain operating
subsidiaries constituting control (within the meaning of Section 368(c) of the
Internal Revenue Code) of such operating subsidiaries and to maintain at least
90% of the fair market value of its assets in the form of stock and securities
of certain operating subsidiaries, in each case until the second anniversary of
the 2000 Distribution. D&B does not expect this limitation to inhibit its
financing or other activities or its ability to respond to unanticipated
developments. Under the 2000 Distribution Agreement, each of D&B and Moody's
agreed that, until two years after the 2000 Distribution, it will not: (i) merge
or consolidate with another corporation, (ii) liquidate or partially liquidate,
(iii) sell or transfer all or substantially all of its assets, (iv) redeem or
repurchase its stock (except in certain limited circumstances), or (v) take any
other action that would result in one or more persons acquiring a 50% or greater
interest in Moody's or D&B, as the case may be, unless, prior to taking such
action, it obtains a written opinion of a law firm reasonably acceptable to
Moody's or D&B, as the case may be, or a supplemental ruling from the IRS that
such action will not affect the tax-free treatment of the 2000 Distribution. As
a result of the representations in the requests for ruling letters and the
covenants in the 2000 Distribution Agreement, the acquisition of control of D&B
prior to the second anniversary of the 2000 Distribution may be more difficult
or less likely to occur because of the potential substantial liabilities
associated with a breach of such representations or covenants. The 2000
Distribution Agreement requires any party thereto that takes or fails to take
any action which contributes to a determination that the 2000 Distribution is
not tax-free to Moody's or any of its affiliates, D&B or any of its affiliates
or their respective stockholders to indemnify the other party and its
stockholders against any taxes arising therefrom. The 2000 Distribution
Agreement also includes similar indemnification provisions with respect to
actions taken that affect the tax treatment of certain internal restructuring
transactions.
Under the 2000 Distribution Agreement, each of D&B and Moody's agreed to
provide to the other party, subject to certain conditions, access to certain
corporate records and information and to provide certain transitional services
on such terms as were set forth in a data services agreement, a shared
transaction services agreement, an insurance and risk management services
agreement and a transition services agreement between such parties. D&B and
Moody's also entered into an intellectual property assignment providing for the
allocation of rights under patents, copyrights, software, technology, trade
secrets and certain other intellectual property owned by D&B and Moody's and
their respective subsidiaries as of September 30, 2000. The texts of each of the
foregoing agreements are attached as exhibits to this Form 10-K.
The 2000 Distribution Agreement also provided generally that costs or
expenses in connection with the 2000 Distribution incurred on or prior to
September 30, 2000 will be borne equally by D&B and Moody's. Except as set forth
in the Distribution Agreement or any related agreement, each party is required
to bear its own costs and expenses incurred after September 30, 2000.
Pursuant to the 2000 Tax Allocation Agreement, D&B and Moody's will each
pay 50% of any taxes, or receive 50% of any refunds of taxes, shown as due on
any consolidated or combined U.S. federal, state, local or foreign income or
franchise tax return for taxable periods beginning prior to September 30, 2000
(including the current taxable period to the extent such taxes, refunds or
credits are attributable to the portion of such taxable period up to and
including September 30, 2000). Any subsequent adjustment of such taxes will be
allocated to D&B if such adjustment relates to the businesses conducted by D&B,
to Moody's if such adjustment relates to the businesses conducted by Moody's,
and otherwise allocated equally between D&B and Moody's. All taxes other than
consolidated or combined U.S. federal, state, local or foreign income and
franchise taxes will be the responsibility of D&B if they are attributable to
the D&B Business, and the responsibility of Moody's if they are attributable to
the Moody's Business. For taxable periods beginning on or
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after September 30, 2000 (and the portion of the current taxable period
beginning after September 30, 2000), D&B and Moody's will each be responsible
for their own taxes.
The 2000 Employee Benefits Agreement generally allocates responsibility for
certain employee benefits matters on and after October 1, 2000. Under the 2000
Employee Benefits Agreement, Moody's adopted a new defined benefit pension plan
for its employees, and D&B assumed and became the sponsor of the pre-existing
plan for the benefit of D&B's employees and, in general, former employees who
terminated employment on or prior to September 30, 2000, who were not Moody's
employees immediately after September 30, 2000. Assets and liabilities of the
pre-existing pension plan that were attributable to Moody's employees are to be
transferred to the new Moody's plan, along with an amount of surplus under the
pre-existing pension plan, such that the total value of the amount to be
transferred to the new Moody's plan equaled $88 million as of September 30,
2000. In accordance with the 2000 Employee Benefits Agreement, Moody's bears the
investment risk and the plan and retiree expenses with respect to such assets as
of October 1, 2000. This transfer is to be made in accordance with Section
414(l) of the Internal Revenue Code.
In addition, Moody's adopted a new savings plan for its employees, and D&B
assumed and became the sponsor of the pre-existing savings plan for the benefit
of D&B's employees and former employees who terminated employment on or prior to
September 30, 2000. Unless otherwise elected by Moody's employees, the account
balances of Moody's employees were transferred to the new Moody's plan.
Generally, D&B assumed and became the sponsor of the pre-existing
nonqualified supplemental pension plans for the benefit of persons who, prior to
September 30, 2000, were participants thereunder. However, with respect to
Moody's employees, D&B generally retained only those liabilities that were
vested prior to September 30, 2000. Moody's has guaranteed payment of the
benefits under these plans to its employees in the event that D&B is unable to
satisfy its obligations. D&B assumed liabilities relating to the account
balances as of September 30, 2000 of retired directors and D&B directors, and
Moody's assumed liabilities relating to the account balances as of September 30,
2000 with respect to Moody's directors.
The 2000 Employee Benefits Agreement also provides that Moody's will
continue to sponsor its welfare plans for its employees. As of October 1, 2000,
D&B became the sponsor of welfare plans for the benefit of its employees and
former employees who terminated employment on or prior to September 30, 2000.
Moody's is responsible for providing retiree welfare benefits, where applicable,
to its employees, and D&B is responsible for providing retiree welfare benefits,
where applicable, to its employees and eligible former employees who terminated
employment on or prior to September 30, 2000.
D&B and Moody's generally retained the severance liabilities of their
respective employees who terminated employment prior to September 30, 2000.
With respect to equity-based plans, the 2000 Employee Benefits Agreement
generally provided that outstanding Old D&B equity-based awards (e.g., options,
restricted stock, phantom units) as of September 30, 2000, were adjusted to
comprise comparable equity-based grants in Moody's common stock and D&B common
stock. The adjustments were intended to preserve, as closely as possible, the
economic value of the pre-2000 Distribution grants.
Except as otherwise provided in the 2000 Employee Benefits Agreement, as of
September 30, 2000, Moody's employees generally ceased participation in existing
employee benefit plans, and Moody's will generally recognize, among other
things, their respective employees' past service under their respective employee
benefit plans. Except as specifically provided therein, nothing in the 2000
Employee Benefits Agreement restricts Moody's or D&B's ability to amend or
terminate any of their respective employee benefit plans after September 30,
2000.
OVERVIEW OF D&B'S BUSINESS
D&B, the world's leading provider of business information, has been
enabling business-to-business commerce for 159 years. D&B's information and
technology solutions help businesses reduce credit risk, find profitable
customers, manage customer and vendor relationships more efficiently and collect
cash and receivables. Businesses also use D&B's information and technology to
authenticate and verify potential trading
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partners online, increasing their trust and confidence in e-commerce business
transactions. D&B had approximately $1.4 billion in revenue in 2000. D&B
operates offices in 33 countries, conducts operations in six other countries
through minority interests in joint venture companies and operates through
independent correspondents in more than 150 additional countries. At the core of
D&B's business is the world's largest and most comprehensive database of its
kind, containing information on more than 62 million public and private business
entities located in more than 200 countries. The database is also the source
from which D&B offers a sophisticated array of products, services and
applications to its business information customers.
D&B uses multiple channels to deliver its information-based products and
services to its customers through a sales force of approximately 2,600
personnel. Information and reports are available via D&B's Internet-based access
tools and from D&B's website, dnb.com. D&B also delivers its products and
services via online information services, telephone, fax, and customized
connections with D&B's computer systems. Customers may also access D&B
information through software applications scalable for use on individual
desktops, in networks and on computer hosts. In addition, through alliances with
major enterprise application software providers such as Oracle Corporation
("Oracle"), Siebel Systems, Inc. ("Siebel") and SAP AG ("SAP"), customers can
obtain real-time, online access to D&B's global database through enterprise
application software.
D&B provides its customers with the tools to understand and manage their
business information. D&B's customers use the internationally recognized
D-U-N-S(R) Number to identify companies and company affiliations and to provide
links to D&B's database and other data. As a unique, universal identifier of
more than 62 million business entities around the world, the D-U-N-S Number can
help customers tap opportunities by linking related customer accounts,
identifying cross-selling opportunities within the same corporate family,
eliminating duplicate file entries in customer and supplier databases, and
reducing operating costs and increasing purchasing power by linking interrelated
suppliers. The D-U-N-S Number is recommended or endorsed by the U.S. Government,
the European Commission, the International Standards Organization, the United
Nations Edifact Council and other global standard-setting organizations.
D&B combines its global database, various distribution channels,
application software solutions, D-U-N-S Number's "family tree" hierarchical
information and expertise to provide its customers with tools to determine
creditworthiness, predict market demand, pinpoint prospective clients and
increase purchasing efficiency. D&B's services are designed to help customers
grow profitably by providing them a consistent flow of reliable and actionable
business information. D&B is also committed to developing information sources
and applications to facilitate faster, smarter decisions in e-commerce business
transactions.
BUSINESS STRATEGY
D&B recognizes that its challenge is to transform itself from an
underperforming company with underleveraged assets into a growth company with an
important presence on the Web. The path to achievement of this aspiration
presents a two-fold challenge for D&B. In the near- to medium-term, D&B must
invest to grow revenues in its current businesses. In the longer term, D&B must
extend the leadership position it has earned in its current business to the
emerging electronic commerce environment. D&B has developed a program to meet
this two-fold challenge, which it refers to as its "Blueprint for Growth"
strategy. The Blueprint for Growth was publicly announced in October 2000, and
the five components of the strategy are as follows:
- LEVERAGE THE BRAND: In its traditional operating environments, D&B
believes that the Dun & Bradstreet brand name has come to represent trust
and confidence in products and services that help customers reduce risk
in decision-making and improve financial performance. Key attributes of
the brand include: (i) D&B's 159-year operating history in
business-to-business ("B2B") commerce, (ii) its base of over 150,000
customers, including 92% of the Business Week Global 1000, (iii) its
database on over 62 million business entities covering 200 countries,
which D&B updates over a million times each day, (iv) its D-U-N-S
numbering system, which is widely recognized as the global standard for
identifying businesses and establishing linkages between related
entities, (v) its trade data on how businesses pay their suppliers, (vi)
its decision-support tools, scoring models and other actionable
information that
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enable businesses to make better decisions, and (vii) its software integration
tools to enable D&B information to be integrated into customers' systems or
combined with customer information. One of the fundamental objectives of the
Blueprint for Growth is to leverage these core brand assets in a manner
designed to assure that the Dun & Bradstreet name continues to engender
the same level of trust and confidence in B2B e-commerce transactions,
where issues of trust and confidence are of paramount concern, that it
does in the traditional marketplace. In sum, D&B's brand mission is to be
"The most trusted source for information you need to make your business a
success."
- CREATE FINANCIAL FLEXIBILITY: The implementation of the Blueprint for
Growth will require significant investments. In order to fund these
investments, D&B has identified opportunities to reallocate spending to
areas representing growth opportunities, and to support shareholder value
through sustained growth in earnings per share. During the fourth quarter
of 2000, D&B announced the first phase of its financial flexibility
program, which will affect 1,500 positions and result in the elimination
of 1,300 positions worldwide. These actions are expected to generate
approximately $100 million for investment in 2001. D&B recorded a $41.5
million charge in connection with the actions announced in the fourth
quarter of 2000. Under the first phase of financial flexibility, spending
will be reallocated by: (i) globalizing administrative functions, which
is expected to produce $23 million for reallocation, (ii) streamlining
data collection and fulfillment while enhancing the quality of the
operation, which is expected to yield $26 million for reallocation, (iii)
rationalizing sales and marketing functions, including simplifying
product offerings and eliminating unnecessary overlaps, which is expected
to produce $22 million worth of savings for reallocation, and (iv)
consolidating and simplifying the company's technology function while
maximizing its effectiveness, which is expected to produce $29 million in
funds for reallocation. D&B anticipates that the details of the next
phase of the financial flexibility program will be announced in June
2001. This phase is expected to produce on an annualized basis
approximately $50 million in funds that will be reallocated to growth
areas of the business. A charge is expected to be taken in connection
with the actions to be announced in June 2001. In addition to the
foregoing initiatives, D&B is reviewing its business and prospects in
each country to determine where it should maintain, increase or scale
down its presence and where it should leverage partnerships to fulfill
basic requirements (e.g., information collection). D&B is also
considering the monetization of certain non-strategic assets and
businesses, and intends to complete this review in the first half of
2001. Certain asset monetization transactions may be announced and/or
completed prior to that date. Funds generated from these transactions may
be utilized to invest in the current business, invest in the B2B
strategy, or to repurchase stock.
- ENHANCE THE CURRENT BUSINESS: An important element of the Blueprint for
Growth is D&B's belief that there continue to be opportunities in its
current business to generate revenue growth and increase profitability.
D&B believes it can further develop its relationships with its over
150,000 customers worldwide and expand its customer base by making
selected investments. For example, an analysis of D&B's current business
has identified opportunities for up to $75 million in revenue growth over
the next three years through increasing D&B's penetration of the small
business market and its deepening of existing relationships with global
businesses. D&B also intends to accelerate the utilization of the Web as
a distribution channel for its products and services.
- BECOME AN IMPORTANT PLAYER IN B2B ELECTRONIC COMMERCE: D&B believes that
B2B electronic commerce is a potent opportunity, though it will likely
take at least three years to begin realizing its potential in any
significant way. Such time will be necessary to permit the integration of
all of the related systems on both the vendor and purchaser sides,
including purchasing, order entry, accounting, financing and others. In
addition to the integration challenge, the development of electronic
commerce has created a number of new challenges in B2B transactions,
relating in substantial part to issues of trust and confidence. In this
environment, for example, buyers and sellers require new and essentially
instantaneous modes of addressing fundamental concerns such as: Is my
trading partner who it claims to be? Is it qualified to complete the
transaction? Will it deliver as promised? D&B believes that the company,
with its brand, actionable information and analytical capabilities, is
well positioned to address such concerns, and several of its current
products and services are already doing so. Potential
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roles for D&B include, but are not limited to, providing e-commerce
marketplaces and participants with: (i) identification, authentication
and verification services for buyers and sellers, (ii) credit
decisioning, (iii) internal performance assessment and enterprise
resource planning refinement, (iv) directory, sourcing and prospecting
services, (v) market sizing and modeling, and (vi) collections and
receivables management. In addition to creating value for customers
through D&B products and services, D&B intends to enter into strategic
alliances that leverage D&B's strengths along with those of other market
leaders. D&B announced a strategic alliance with Open Ratings Inc. in
August 2000, through which the companies will jointly offer online
supplier performance ratings to e-commerce participants. Since forming
its alliance with D&B, Open Ratings has publicly announced 14 deals with
marketplaces and B2B e-commerce infrastructure providers. In addition, in
October 2000 D&B announced an agreement with American International
Group, Inc., a leading U.S.-based international insurance and financial
services organization, to form a joint venture known as Avantrust to
offer a suite of business information and insurance products and services
targeted to B2B e-commerce marketplaces and large buyers' and sellers'
sites. Additional alliance opportunities may be available in the buyer
financing and payment guarantee areas, among others. Because B2B
e-commerce is in the early stages of development, D&B is unable to
predict whether any such additional alliance opportunities will be
consummated or what the eventual revenue or profitability impact of
existing or future alliances might be.
- BUILD A WINNING CULTURE: D&B recognizes that successfully achieving its
Blueprint for Growth aspiration will require talented, motivated and
efficient associates aligned around a common set of strategies and goals.
To this end, the members of D&B's senior management team are jointly
goaled. Their collective goal is to enhance shareholder value through the
successful execution of the Blueprint for Growth. The program's other
winning culture initiatives include: (i) aligning goals and compensation
programs company-wide with the Blueprint strategy and the drivers of
shareholder value creation, (ii) changing the organizational structure to
foster leadership, accountability and efficiency, (iii) defining and
training associates in the use of guiding principles and rules of
engagement to guide associate behavior toward the creation of a winning
culture, (iv) more clearly defining and prioritizing operating goals and
the means of achieving them, and (v) recruiting and developing talent
from inside and outside the organization.
D&B believes that the implementation of its Blueprint for Growth should
provide the means to deliver increased shareholder value through the
transformation of D&B into a growth company with an important presence on the
Web. However, there can be no assurance of success in this regard and, in any
event, though significant progress has been made to date, the full realization
of such transformation may require a substantial period of time. Certain actions
that may be taken may result in overall profitability enhancement but lower
revenue for D&B.
PRODUCTS AND SERVICES
D&B's four product lines and their respective contributions to D&B's 2000
revenues are set forth below:
PERCENTAGE OF
PRODUCT LINE 2000 REVENUE
------------ -------------
Credit Information Solutions................................ 63%
Marketing Information Solutions............................. 24%
Purchasing Information Solutions............................ 2%
Receivable Management Services.............................. 11%
The revenues contributed by each of these product lines during each of the last
three fiscal years is included in Note 17 (Segment Information) in Part II, Item
8 on pages 59-62 of this Form 10-K.
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Credit Information Solutions
Customers use D&B's credit information solutions to help them extend
commercial credit, approve loans and leases, underwrite insurance, evaluate
clients, mitigate fraud risk and make other financial and risk assessment
decisions. D&B's largest customers for these solutions are major manufacturers
and wholesalers, insurance companies, banks and other credit and financial
institutions. Its core credit solutions are available through a variety of
products, including the D&B Business Information Report, which contains
commercial credit information that may include basic background information,
financial and public records data and information on financial strength and
payment history, and value added products like D&B Risk Assessment Manager(TM),
a software package that gives D&B customers the ability to run automated credit
decisions, customized scoring models and portfolio analysis from their own PCs.
D&B's credit information solutions are delivered primarily through electronic
methods, including desktop and enterprise application software, the Internet and
XML integration capabilities. D&B's credit information solutions are also
distributed by a number of other firms, including leading vendors of online and
Internet information services, such as OneSource and Lexis-Nexis, and through
enterprise software vendors such as Oracle, Siebel and SAP.
Marketing Information Solutions
Using information from D&B's global database, D&B's marketing information
solutions are designed to help customers conduct market segmentation, client
profiling, prospect selection and marketing list development, and maintain
updated customer relationship management systems. D&B Market Spectrum(TM), a
suite of marketing information products and services, enhances internal customer
data with information from D&B's global database and other third party data, and
provides analysis that can help customers target their most profitable clients
and prospects, analyze market penetration and market segmentation, determine
territory alignment and estimate demand. D&B Connect(TM) enables D&B and
customer data to be integrated in either an online or offline environment. D&B
also sells various directories, list/label services and other marketing
solutions, which are delivered in hard copy, on diskette or CD ROM or via the
Internet. D&B's marketing information solutions are also available through
enterprise software vendors such as Siebel and through an alliance between D&B
and Acxiom Corporation.
Purchasing Information Solutions
D&B's purchasing information solutions help customers understand their
supplier base, rationalize their supplier rosters, leverage buying power,
minimize supply-related risks and identify and evaluate new sources of supply.
Purchasing information solutions, which leverage information from D&B's global
database, include D&B Spend Analysis(TM), which integrates customers' supplier
data with information from D&B's global database and from third parties and then
applies analytical and benchmarking techniques designed to identify
opportunities for reducing purchasing costs and risks; D&B Supplier Assessment
Manager(TM), which uses decision-support software to automate the scoring and
monitoring of supplier performance, capabilities and risks using internal and
external information; Standard Product and Service Codes, which were developed
jointly by D&B and the United Nations and which help companies determine the
specific types of products and services comprising the supply base of their firm
and allow them to identify further vendor consolidation opportunities; and a
joint purchasing solution offered through an alliance with SAS Institute, which
includes D&B's purchasing information solutions and SAS's analytical products.
Receivable Management Services
D&B offers its customers a full range of accounts receivable management
services, including third party collection of accounts, letter demand services
and receivable outsourcing programs. These services substitute and/or enhance
the customer's own internal management of accounts receivable.
D&B's receivable management services ("RMS") business collects and services
delinquent commercial receivables on behalf of approximately 30,000 customers,
primarily in the B2B market. Principal markets include insurance,
telecommunications and transportation industries. RMS also provides cross-border
commercial receivables services in which the RMS worldwide offices service
cross-border claims.
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RMS also provides commercial accounts receivable servicing in the ordinary
course for customers who wish to outsource this function. Services provided in
the RMS business include debt verification and collection, customer service
functions and analytical reporting.
Certain jurisdictions require licensing for consumer and commercial debt
collection. RMS and, in some instances, the individual collectors, must be
licensed in order to conduct business in these jurisdictions. The laws under
which such licenses are granted generally require annual license renewal and
provide for denial, suspension or revocation for improper actions or other
reasons.
COMPETITION
All of D&B's businesses are highly competitive. D&B is the market leader in
credit information in North America in terms of market share and revenue. The
competitive environment varies by country in Europe, Asia and Latin America. In
some countries, leadership positions exist, whereas in others the markets are
highly fragmented. The competition is primarily local, and, because of D&B's
global database, D&B believes that it has a competitive edge with respect to
customers seeking worldwide information coverage. In certain markets (such as
Europe), D&B has experienced pricing pressures and may continue to experience
pricing pressure in the future as some of its competitors seek to obtain market
share by reducing prices.
D&B competes directly with a broad range of companies offering information
services to business customers. In addition, business information and related
products and services are becoming increasingly available, principally as a
result of the expansion of the Internet and as new providers of B2B information
products and services emerge. D&B's ability to compete effectively will be based
on a number of factors, including: the ability to attract local customers to the
worldwide information services offered by D&B's unique database; the ability to
demonstrate value through its decisioning and integration capabilities,
including the power of the D-U-N-S Number and related linkages; reliability of
information; brand perception; and the ability to deliver business information
via various media and distribution channels in formats tailored to customer
requirements. In its information services businesses, D&B also faces competition
from in-house operations of the businesses it seeks as customers, from other
general and specialized credit reporting and other business information
services, other information and professional services providers, banks, credit
insurers and the Internet.
In the commercial collection industry RMS is a leader in terms of market
share and revenue in the United States. There are several consumer collection
agencies that have larger receivables portfolios, particularly health-care and
credit card collection providers. The third-party commercial collection market
is highly fragmented, with more than 5,000 collection agencies in the United
States. The outsourcing market has relatively fewer competitors due to the need
for receivables providers to have larger-scale operations. Both markets are very
price-competitive, with status, statistical reporting and speed-of-service being
key qualitative attributes. RMS faces competition from numerous other commercial
collection agencies, attorneys who receive claims directly from clients and
companies that conduct commercial collections in-house. In addition, RMS faces
competition from the expansion of large consumer agencies into the commercial
market. Outside of the United States the competitive environment for RMS varies
by country. In some countries, leadership positions exist, whereas in others the
markets are highly fragmented.
GEOGRAPHIC BUSINESS SEGMENTS
D&B manages its business globally through three geographic segments: United
States and Canada ("North America"), Europe/Africa/Middle East ("Europe"), and
Asia Pacific/Latin America ("APLA"). Prior to January 1, 2000, D&B's Canadian
business was managed by its Asia Pacific/Latin America geographic segment.
Effective January 1, 2000, management of D&B's Canadian business was moved to
its U.S. geographic segment to take advantage of marketing synergies between the
U.S. and Canada. Revenues for 1999 set forth in this section have been restated
to reflect such change. None of D&B's business segments is dependent on a single
customer or a few customers, such that a loss of any one would have a material
adverse effect on that business segment. Operating segment data for the years
ended December 31, 2000, 1999
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and 1998 are included in Note 17 (Segment Information) in Part II, Item 8 on
pages 59-62 of this Form 10-K.
The operations of Europe and APLA are subject to the usual risks inherent
in doing business in certain countries outside of the U.S., including currency
fluctuations and possible nationalization, expropriation, price controls, as
well as possible changes in the availability of data from public sector sources,
limits on collecting certain types of personal information or on providing
information across borders or other restrictive governmental actions. Management
of D&B believes that the risks of nationalization or expropriation are reduced
because its basic service is the delivery of information rather than the
production of products that require manufacturing facilities or the use of
natural resources.
North America
North America had 2000 revenue of $968.3 million, comprised of credit
information solutions (60%), marketing information solutions (27%), purchasing
information solutions (3%) and receivable management services (10%). North
America had 1999 revenue of $920.0 million, comprised of credit information
solutions (63%), marketing information solutions (25%), purchasing information
solutions (3%) and receivable management services (9%).
Europe/Africa/Middle East
Europe had 2000 revenue of $382.1 million, comprised of credit information
solutions (70%), marketing information solutions (18%), purchasing information
solutions (less than 1%) and receivable management services (12%). Europe had
1999 revenue of $420.6 million, comprised of credit information solutions (71%),
marketing information solutions (17%), purchasing information solutions (less
than 1%) and receivable management services (12%). Europe began offering
purchasing information services in 1999.
Europe has operations in 19 countries and conducts operations in three
other countries through minority interests in joint venture companies. D&B is
believed to be the largest single supplier of commercial credit information
services in Europe.
Asia Pacific/Latin America
APLA had 2000 revenue of $67.2 million, comprised of credit information
solutions (59%), marketing information solutions (18%), purchasing information
solutions (less than 1%) and receivable management services (23%). APLA had 1999
revenue of $67.1 million, comprised of credit information solutions (65%),
marketing information solutions (15%), purchasing information solutions (less
than 1%) and receivable management services (20%). APLA began offering
purchasing information solutions in 1999.
APLA has operations in 12 countries and conducts operations in three other
countries through minority interests in joint venture companies. APLA provides
cross-border services originating in Latin America through local affiliates,
small local operations centers and an operations center in Florida. In the Asia
Pacific region, APLA has entered into joint venture and distribution
arrangements to leverage its staff and data sourcing and distribution
capabilities and is exploring additional such opportunities.
INTELLECTUAL PROPERTY
D&B owns and controls a number of trade secrets, confidential information,
trademarks, trade names, copyrights, patents and other intellectual property
rights that, in the aggregate, are of material importance to D&B's business.
Management of D&B believes that each of the "Dun & Bradstreet" name and related
names, marks and logos are of material importance to D&B. D&B is licensed to use
certain technology and other intellectual property rights owned and controlled
by others, and, similarly, other companies are licensed to use certain
technology and other intellectual property rights owned and controlled by D&B.
D&B considers its trademarks, service marks, databases, software and other
intellectual property to be proprietary, and D&B relies on a combination of
copyright, trademark, trade secret, patent, non-disclosure and contract
safeguards for protection.
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The names of D&B's products and services referred to herein are trademarks,
service marks or registered trademarks or service marks owned by or licensed to
D&B or one or more of its subsidiaries.
EMPLOYEES
As of December 31, 2000, the number of full-time equivalent employees of
D&B was approximately 10,100.
ITEM 2. PROPERTIES
The executive offices of D&B are located at One Diamond Hill Road, Murray
Hill, New Jersey, in a 184,000-square-foot property owned by D&B. This property
also serves as the executive offices of North America and APLA.
D&B's other properties are geographically distributed to meet sales and
operating requirements worldwide. These properties are generally considered to
be both suitable and adequate to meet current operating requirements, and
substantially all space is being utilized. The most important of these other
properties include the following sites that are owned by D&B: (i) two commercial
office buildings (totaling 114,200 square feet) in Berkeley Heights, New Jersey,
used as data processing facilities for North America and APLA operations; (ii) a
147,000-square-foot office building in Parsippany, New Jersey housing personnel
from the sales, marketing and technology groups of D&B; and (iii) a
233,000-square-foot office building in High Wycombe, England, that houses
operational and technology services for Europe. D&B's operations are also
conducted from 67 other offices located throughout the U.S. (all of which are
leased) and 95 non-U.S. office locations (89 of which are leased).
ITEM 3. LEGAL PROCEEDINGS
D&B is involved in legal proceedings of a nature considered normal to its
business. In the opinion of management, although the outcome of such legal
proceedings cannot be predicted with certainty, the ultimate liability of D&B in
connection with such legal proceedings will not have a material adverse effect
on D&B's financial position, results of operations and cash flows.
In addition to the matters referred to above, on July 29, 1996, IRI filed a
complaint in the United States District Court for the Southern District of New
York, naming as defendants Donnelley, ACNielsen and IMS Health. At the time of
the filing of the complaint, each of the other defendants was a subsidiary of
Donnelley. The complaint alleges various violations of United States antitrust
laws, including purported violations of Sections 1 and 2 of the Sherman Act
arising from tying arrangements, agreements with retailers and other customers,
predatory pricing practices and other matters alleged by IRI. In addition to the
foregoing claims, the complaint alleges a claim of tortious interference with a
contract and a claim of tortious interference with a prospective business
relationship. These claims relate to the acquisition by defendants of Survey
Research Group Limited ("SRG"). IRI alleges SRG violated an alleged agreement
with IRI when it agreed to be acquired by the defendants, and that the
defendants induced SRG to breach that agreement. IRI's complaint alleges damages
in excess of $350 million, which amount IRI has asked to be trebled under
antitrust laws. IRI also seeks punitive damages in an unspecified amount.
On October 15, 1996, defendants moved for an order dismissing all claims in
the complaint. On May 6, 1997, the United States District Court for the Southern
District of New York issued a decision dismissing IRI's claim of attempted
monopolization in the United States, with leave to replead within 60 days. The
Court denied defendants' motion with respect to the remaining claims in the
complaint. On June 3, 1997, defendants filed an answer denying the material
allegations in IRI's complaint, and ACNielsen filed a counterclaim alleging that
IRI had made false and misleading statements about its services and commercial
activities. On July 7, 1997, IRI filed an Amended and Restated Complaint
repleading its alleged claim of monopolization in the United States and
realleging its other claims. By notice of motion dated August 18, 1997,
defendants moved for an order dismissing the amended claim. On December 1, 1997,
the Court denied the motion. On December 22, 1999, defendants filed a motion for
partial summary judgment seeking to dismiss IRI's non-U.S. antitrust claims. On
July 12, 2000, the Court granted the motion dismissing claims of injury suffered
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from activities in foreign markets where IRI operates through subsidiaries or
companies owned by joint ventures or "relationships" with local companies.
Discovery in this case is ongoing.
In November 1996, Donnelley completed the 1996 Distribution. On October 28,
1996, in connection with the 1996 Distribution, Cognizant, ACNielsen and
Donnelley entered into the Indemnity and Joint Defense Agreement. See Note 15
(Contingencies) in Part II, Item 8 on pages 56-58 of this Form 10-K for
additional information with respect to this agreement.
In June 1998, Donnelley completed the 1998 Distribution. In connection with
the 1998 Distribution, Old D&B and Donnelley entered into an agreement whereby
Old D&B has assumed all potential liabilities of Donnelley arising from the IRI
action and agreed to indemnify Donnelley in connection with such potential
liabilities.
During 1998, Cognizant separated into two new companies, IMS Health and
Nielsen Media Research. IMS Health and Nielsen Media Research are each jointly
and severally liable for all Cognizant liabilities under the Indemnity and Joint
Defense Agreement.
Under the terms of the 1996 Distribution Agreement, as a condition to the
1998 Distribution, Old D&B undertook to be jointly and severally liable with
Donnelley to Cognizant and ACNielsen. Under the terms of the 1998 Distribution
Agreement, as a condition to the 2000 Distribution, D&B was required to
undertake to be jointly and severally liable with Moody's to Donnelley for Old
D&B's obligations under the 1998 Distribution Agreement, including the
liabilities relating to the IRI action. However, under the 2000 Distribution
Agreement, as between themselves, each of D&B and Moody's have agreed to be
responsible for 50% of any payments to be made in respect of the IRI action
under the 1998 Distribution Agreement or otherwise, including any legal fees or
expenses related thereto.
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 D&B's
results of operations, cash flows or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers are elected by the Board of Directors to hold office until their
respective successors are chosen and qualified.
Listed below are the executive officers of D&B at February 21, 2001, and
brief summaries of their business experience during the past five years.
NAME TITLE AGE
---- ----- ---
Allan Z. Loren............... Chairman of the Board, Chief Executive Officer and 62
President
Steven W. Alesio............. Senior Vice President -- Marketing, Technology, 46
Communications and Strategy Implementation
Andre Dahan.................. Senior Vice President -- Electronic Commerce 51
Bruno de la Riviere.......... Senior Vice President -- Europe 49
Ronald D. Klausner........... Senior Vice President -- APLA, RMS and Data & Operations 47
James T. Murphy.............. Senior Vice President -- North America 41
Deborah S. Prutzman.......... Senior Vice President -- General Counsel 49
Peter J. Ross................ Senior Vice President -- Human Resources 55
Chester J. Geveda, Jr........ Vice President and Controller and Acting Chief 54
Financial Officer
David J. Lewinter............ Vice President and Corporate Secretary 39
Gary S. Michel............... Vice President -- Strategy Implementation 37
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Mr. Loren has served as chairman, chief executive officer and president of
The Dun & Bradstreet Corporation since October 2000, and as a director since May
2000. Prior thereto, he served as chairman and chief executive officer of the
Dun & Bradstreet operating company from May 2000 to September 2000. Before
joining Dun & Bradstreet, Mr. Loren served as executive vice president and chief
information officer of the American Express Company from May 1994 to May 2000,
and was also a member of the company's Planning and Policy Committee, during
that time. Before that, he served as president and chief executive officer of
Galileo International from January 1991 to May 1994, and worked at Apple
Computer from September 1987 to December 1990, starting as chief information
officer and later serving as president of Apple Computer U.S.A.
Mr. Alesio has served as senior vice president -- marketing, technology,
communications and strategy implementation since January 8, 2001. Before joining
Dun & Bradstreet, Mr. Alesio was with the American Express Company for 19 years
and most recently served as president and general manager of the Business
Services group and as a member of the company's Planning and Policy Committee, a
position he held since January 1996. In 1993 he was named executive vice
president and general manager of the Small Business Services group. In 1989 he
was named senior vice president and general manager of the Consumer Travel
Business. Before that, Mr. Alesio spent his first eight years working in the
marketing function, specifically in the business-to-business area.
Mr. Dahan has served as senior vice president -- electronic commerce of The
Dun & Bradstreet Corporation since October 2000 and as president of
eccelerate.com (a subsidiary of Dun & Bradstreet) since September 1999. Prior
thereto, he served as president of Dun & Bradstreet, North America and Global
Accounts from October 1999 to September 2000 and as president, Dun & Bradstreet
U.S. from August 1997 to October 1999. Before joining Dun & Bradstreet, Mr.
Dahan was senior vice president of worldwide operations at Sequent Computer
Systems from March 1996 to July 1997, and prior to that, he held various
positions, including sales vice president, at Teradata from May 1986 to February
1996.
Mr. de la Riviere has served as senior vice president -- Europe of The Dun
& Bradstreet Corporation since October 2000. Prior thereto, he served as
executive vice president -- Dun & Bradstreet France, Italy and Switzerland from
April 1999 to September 2000, and assumed additional leadership responsibility
for Iberia in April 2000. Mr. de la Riviere previously served as executive vice
president -- Dun & Bradstreet France and Switzerland from December 1996 to March
1999, and as vice president -- Dun & Bradstreet France, from May 1995 to
November 1996.
Mr. Klausner has served as senior vice president -- APLA and RMS and as
head of the data and operations team since October 2000. Prior thereto, he
served as president of APLA and RMS from March 2000 to September 2000 and as
senior vice president, global operations and customer service for the Dun &
Bradstreet operating company from January 2000 to September 2000. Mr. Klausner
also previously served as senior vice president of RMS from December 1996 to
December 1999, senior vice president of Dun & Bradstreet U.S. telesales and new
customer acquisition from June 1996 to December 1996, vice president of Dun &
Bradstreet U.S. telesales and new customer acquisition from November 1995 to May
1996, vice president of new customer acquisition from December 1994 to October
1995 and vice president of telesales from January 1994 to November 1994.
Mr. Murphy has served as senior vice president -- North America of The Dun
& Bradstreet Corporation since October 2000. Prior thereto, he served as
executive vice president, Dun & Bradstreet Europe and managing director, Dun &
Bradstreet U.K. and Ireland from May 1999 to September 2000, senior vice
president, D&B Europe Emerging Markets, Operations and chief financial officer
from January 1997 to April 1999 and chief financial officer of Dun & Bradstreet
Europe, Africa and Middle East from May 1993 to December 1997.
Ms. Prutzman has served as senior vice president and general counsel of The
Dun & Bradstreet Corporation since February 12, 2001. Before joining Dun &
Bradstreet, Ms. Prutzman served as general counsel of CLS Services Ltd. from
July 1999 to February 2001. Previously, while serving as managing partner of
Onward LLC from August 1997 to July 1999, Ms. Prutzman was employed as a banking
law specialist with Sullivan & Cromwell on a part-time basis. Prior thereto, she
served as a partner at Paul, Weiss, Rifkind,
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Wharton & Garrison from July 1991 to May 1997, and as a partner at Arnold &
Porter from May 1988 to July 1991.
Mr. Ross has served as senior vice president -- human resources of The Dun
& Bradstreet Corporation since October 2000. Prior thereto, he served as senior
vice president and business affairs officer of The Dun & Bradstreet Corporation
from November 1999 to September 2000, and as senior vice president and chief
human resources officer of The Dun & Bradstreet Corporation from November 1996
to November 1999. Mr. Ross also previously served as senior vice
president -- human resources of the Dun & Bradstreet operating company since
June 1988.
Mr. Geveda has served as vice president and controller of The Dun &
Bradstreet Corporation since November 1996. In September 1999 he was appointed
to the additional position of acting chief financial officer of The Dun &
Bradstreet Corporation. Prior thereto, he served as senior vice
president -- finance and planning of the Dun & Bradstreet operating company from
April 1993 to October 1996 and as senior vice president -- finance and
administration of Dun & Bradstreet Europe/Africa/Middle East from September 1990
to March 1993.
Mr. Lewinter has served as vice president of The Dun & Bradstreet
Corporation since April 2000 and as corporate secretary since November 1999.
Prior thereto, he served as assistant general counsel and assistant corporate
secretary for Philip Morris Companies Inc. from November 1995 to October 1999,
and as an attorney for Becton Dickinson & Company from June 1990 to November
1995.
Mr. Michel has served as vice president-strategy implementation of The Dun
& Bradstreet Corporation since October 2000. Prior thereto, he served as senior
vice president and chief financial officer of Dun & Bradstreet, North America
from February 2000 to September 2000, senior vice president and chief financial
officer of Dun & Bradstreet's Global Technology Organization from February 1999
to January 2000 and director-corporate audit of The Dun & Bradstreet Corporation
from October 1996 to January 1999. Before joining Dun & Bradstreet, Mr. Michel
was the director of corporate finance for The McGraw-Hill Companies from July
1995 to October 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information in response to this Item is set forth under the captions
"Dividends" and "Common Stock Information" in Part II, Item 7 on page 31 of this
Form 10-K.
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ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SELECTED FINANCIAL DATA
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
RESULTS OF OPERATIONS:
Operating Revenues........................... $1,417.6 $1,407.7 $1,420.5 $1,353.6 $1,397.1
Costs and Expenses(1)........................ 1,244.8 1,246.8 1,232.8 1,146.4 1,478.2
-------- -------- -------- -------- --------
Operating Income............................. 172.8 160.9 187.7 207.2 (81.1)
Non-Operating Expense -- Net(2).............. (21.1) (15.5) (30.4) (71.5) (70.8)
-------- -------- -------- -------- --------
Income from Continuing Operations before
Provision for Income Taxes................ 151.7 145.4 157.3 135.7 (151.9)
Provision for Income Taxes................... 78.1 64.1 71.1 42.5 50.1
-------- -------- -------- -------- --------
Income (Loss) from:
Continuing Operations..................... 73.6 81.3 86.2 93.2 (202.0)
Discontinued Operations, Net of Income
Taxes(3)................................ 133.0 174.7 193.9 217.8 158.2
-------- -------- -------- -------- --------
Income (Loss) before Cumulative Effect of
Accounting Changes........................... 206.6 256.0 280.1 311.0 (43.8)
Cumulative Effect of Accounting Changes, Net of
Income Tax Benefit(4)........................ -- -- -- (127.0) --
-------- -------- -------- -------- --------
Net Income (Loss).............................. $ 206.6 $ 256.0 $ 280.1 $ 184.0 $ (43.8)
======== ======== ======== ======== ========
BASIC EARNINGS (LOSS) PER SHARE OF COMMON
STOCK:
Continuing Operations........................ $ .91 $ 1.00 $ 1.02 $ 1.09 $ (2.38)
Discontinued Operations...................... 1.64 2.16 2.29 2.55 1.86
-------- -------- -------- -------- --------
Before Cumulative Effect of Accounting
Changes................................... 2.55 3.16 3.31 3.64 (.52)
Cumulative Effect of Accounting Changes, Net
of Income Tax Benefit(4).................. -- -- -- (1.49) --
-------- -------- -------- -------- --------
Basic Earnings (Loss) Per Share of Common
Stock........................................ $ 2.55 $ 3.16 $ 3.31 $ 2.15 $ (.52)
======== ======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON
STOCK:
Continuing Operations........................ $ .90 $ .99 $ 1.00 $ 1.08 $ (2.38)
Discontinued Operations...................... 1.62 2.13 2.26 2.52 1.86
-------- -------- -------- -------- --------
Before Cumulative Effect of Accounting
Changes................................... 2.52 3.12 3.26 3.60 (.52)
Cumulative Effect of Accounting Changes, Net
of Income Tax Benefit(4).................. -- -- -- (1.47) --
-------- -------- -------- -------- --------
Diluted Earnings (Loss) Per Share of Common
Stock........................................ $ 2.52 $ 3.12 $ 3.26 $ 2.13 $ (.52)
======== ======== ======== ======== ========
OTHER DATA:
Dividends Paid Per Share(5).................... $ .555 $ .74 $ .81 $ .88 $ 1.82
======== ======== ======== ======== ========
Dividends Declared Per Share(5)................ $ .555 $ .74 $ .775 $ 1.10 $ 1.82
======== ======== ======== ======== ========
Weighted Average Number of Shares Outstanding--
Basic........................................ 81.0 81.1 84.7 85.4 85.0
======== ======== ======== ======== ========
Weighted Average Number of Shares Outstanding--
Diluted(6)................................... 82.0 82.1 85.9 86.3 85.0
======== ======== ======== ======== ========
BALANCE SHEET:
Total Assets(7).............................. $1,423.6 $1,574.8 $1,574.7 $1,729.4 $1,992.9
Minority Interest Financing.................. $ 300.0 $ 300.0 $ 300.0 $ 300.0 $ --
Equity....................................... $ (51.0) $ (416.6) $ (371.0) $ (527.7) $ (455.3)
======== ======== ======== ======== ========
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---------------
(1) 2000 included charges of $41.5 million for restructuring in connection with
the new business strategy, "The Blueprint for Growth" and $29.5 million for
reorganization costs associated with the 2000 Distribution. 1999 included a
charge of $41.2 million in conjunction with restructuring. 1998 included a
charge of $28.0 million for reorganization costs associated with the 1998
Distribution. 1996 included charges of $161.2 million for reorganization
costs associated with the 1996 Distribution and a loss of $68.2 million on
the sale of American Credit Indemnity, a former subsidiary of Donnelley.
(2) 2000 and 1999 included gains related to the settlement of litigation of
$10.1 million and $11.9 million, respectively. See Note 5 to the
consolidated financial statements.
(3) Income taxes on Discontinued Operations were $86.2 million, $114.8 million,
$104.7 million, $123.1 million and $197.1 million in 2000, 1999, 1998, 1997
and 1996, respectively.
(4) 1997 included the impact of a change in revenue recognition policies.
(5) 2000 included dividends paid and declared through the first three quarters
of the year.
(6) The exercise of dilutive shares has not been assumed for the year ended
December 31, 1996, since the result is antidilutive.
(7) Included Net Assets of Discontinued Operations of $162.3 million and $459.5
million in 1997 and 1996, respectively.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
To facilitate an analysis of The Dun & Bradstreet Corporation's (herein
referred to as "D&B") operating results, certain significant events should be
considered.
2000 Distribution
On September 30, 2000, the company then known as The Dun & Bradstreet
Corporation ("Old D&B") separated into two independent, publicly traded
companies -- The New D&B Corporation ("D&B") and Moody's Corporation
("Moody's"). The separation was accomplished through a tax-free distribution to
shareholders of Old D&B (the "2000 Distribution") of all of the shares of common
stock of D&B. For every two shares of common stock of Old D&B held, shareholders
received one share of common stock of D&B. Following the 2000 Distribution, Old
D&B was renamed "Moody's Corporation" and D&B was renamed "The Dun & Bradstreet
Corporation."
Prior to the 2000 Distribution, Old D&B had completed an internal
reorganization to the effect that, at the time of the 2000 Distribution, the
business of D&B consisted solely of the business of supplying credit, marketing
and purchasing information as well as receivables management services (the "D&B
Business"), and the business of Old D&B (other than D&B and its subsidiaries)
consisted solely of the business of providing ratings and related research and
risk management services (the "Moody's Business").
Old D&B received a ruling letter from the Internal Revenue Service (the
"IRS") on June 15, 2000, to the effect that the receipt by Old D&B shareholders
of the common stock of D&B in the 2000 Distribution would be tax-free to such
stockholders and Old D&B for federal income tax purposes, except to the extent
of cash received in lieu of fractional shares of common stock of D&B.
For purposes of, among other things, governing certain ongoing relations
between D&B and Moody's as a result of the 2000 Distribution, as well as to
allocate certain tax, employee benefit and other liabilities arising prior to
the 2000 Distribution, the companies entered into various agreements, including
a Distribution Agreement (the "2000 Distribution Agreement"), Tax Allocation
Agreement, Employee Benefits Agreement, Intellectual Property Assignment, Shared
Transaction Services Agreement, Insurance and Risk Management Services
Agreement, Data Services Agreement and Transition Services Agreement.
In general, pursuant to the terms of the 2000 Distribution Agreement, all
of the assets of the D&B Business have been allocated to D&B and all of the
assets of the Moody's Business have been allocated to Moody's. The 2000
Distribution Agreement also provided for assumptions of liabilities and
cross-indemnities designed to allocate generally, as of September 30, 2000,
financial responsibility for: (i) all liabilities arising out of or in
connection with the D&B Business to D&B, (ii) all liabilities arising out of or
in connection with the Moody's Business to Moody's, and (iii) substantially all
other liabilities as of September 30, 2000, equally between D&B and Moody's. The
liabilities so allocated include contingent and other liabilities relating to
former businesses of Old D&B and its predecessor and certain prior business
transactions, which consist primarily of potential liabilities arising from a
legal action initiated by Information Resources, Inc. ("IRI") or from reviews by
tax authorities of Old D&B's global tax planning initiatives, each of which is
described in Note 15 to the consolidated financial statements.
Pursuant to the terms of a distribution agreement, dated as of June 30,
1998 (the "1998 Distribution Agreement"), between Old D&B (then known as "The
New Dun & Bradstreet Corporation") and R.H. Donnelley Corporation (then known as
"The Dun & Bradstreet Corporation" and herein referred to as "Donnelley"), as a
condition to the 2000 Distribution, D&B was required to undertake to be jointly
and severally liable with Moody's to Donnelley for any liabilities arising
thereunder. The 2000 Distribution Agreement generally allocates the financial
responsibility for liabilities of Old D&B under the 1998 Distribution Agreement
equally between D&B and Moody's, except that any such liabilities that relate
primarily to the D&B Business are liabilities of D&B and any such liabilities
that relate primarily to the Moody's Business are liabilities of Moody's. Among
other things, D&B and Moody's agreed that, as between themselves, they are each
responsible for 50% of any payments to be made under the 1998 Distribution
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Agreement in respect of the action by IRI (as described in Note 15 to the
consolidated financial statements), including any legal fees and expenses
related thereto.
Pursuant to the 2000 Distribution Agreement, immediately prior to the 2000
Distribution, a portion of Old D&B's indebtedness (plus certain minority
interest obligations) and a portion of Old D&B's cash was allocated to D&B in
amounts such that, at the time of the 2000 Distribution and before giving effect
to the agreement discussed below and certain other factors, the net indebtedness
of D&B (plus the minority interest obligations) approximated the net
indebtedness of Moody's. Under the terms of the Employee Benefits Agreement,
substantially all unexercised Old D&B stock options have been adjusted as of
September 30, 2000 to comprise options to purchase Moody's common stock and
separately exercisable options to purchase common stock of D&B. In light of,
among other things, the numbers of optionees employed by D&B and Moody's,
respectively, this adjustment resulted in a substantially greater number of
outstanding options to purchase common stock of Moody's than would be the case
if options would have been adjusted so as to become solely options to purchase
common stock of the optionee's employer. Due to this fact and the fact that,
consistent with past practice, each company was expected to maintain a stock
repurchase program designed to offset the increased number of shares outstanding
attributable to option exercises, D&B agreed to adjust the net indebtedness of
the two companies to compensate Moody's for the disproportionate amount of its
estimated future cash costs in this regard. The final amount of this adjustment
is reflected in D&B's consolidated balance sheet; was determined on a formula
basis and was dependent upon a variety of factors, including the respective
trading prices of Moody's and D&B's common stock at the time of the 2000
Distribution.
Due to the relative significance of the D&B Business as compared to the
Moody's Business, the 2000 Distribution has been accounted for as a reverse
spin-off. As such, the D&B Business has been classified as continuing operations
and the Moody's Business as discontinued operations.
Restructuring Charges
2000 Restructuring Charge
During the fourth quarter of 2000, D&B announced a new business strategy,
"The Blueprint for Growth," designed to transform D&B into a growth company with
an important presence on the Web, while also delivering shareholder value during
the transformation.
One component of the strategy is the reallocation of approximately $100
million from D&B's cost base to create the financial flexibility needed to
implement the new strategy. In the fourth quarter of 2000, D&B announced actions
designed to create approximately $100 million in financial flexibility in 2001,
which include globalizing administrative functions, streamlining data collection
and fulfillment, rationalizing sales and marketing functions and consolidating
and simplifying technology functions. D&B will utilize the newly created
financial flexibility to enhance its current business, fund its strategy to
become an important player in B2B e-commerce and support annual earnings per
share growth of 10%. In total approximately 1,500 positions were affected and
1,300 positions were eliminated by the plan announced in the fourth quarter of
2000, including approximately 270 positions which were part of the 1999
restructuring actions described below and finalized as part of the Blueprint for
Growth. Certain positions were open when they were eliminated.
During the fourth quarter of 2000, D&B recorded a restructuring charge of
$41.5 million, ($30.3 million after tax, $.37 per share diluted and basic), in
connection with the Blueprint for Growth. For management reporting purposes
these charges were not allocated to any of D&B's business segments. The charge
included $28.2 million related to severance costs in connection with the
termination of approximately 880 associates. The costs were determined based on
amounts that will be paid pursuant to D&B's policies and certain non-U.S.
governmental regulations. Leasehold termination obligations arising from office
closures represent $8.8 million, and the write-off of certain assets made
obsolete or redundant and abandoned as a result of the plan represent $4.5
million. As of December 31, 2000, D&B had terminated approximately 100 of the
affected employees and had made $.8 million of payments in connection with the
actions. D&B anticipates that all actions under this plan will be completed by
the end of 2001. The restructuring charge recorded by D&B in
20
21
the fourth quarter of 2000 was lower than preliminary estimates as a result of
managing open positions and turnover during the process.
As part of the new strategy, D&B also is evaluating opportunities to
monetize certain non-strategic assets and businesses and change the
international business model to align investment and infrastructure levels with
revenue growth and profit potential. In furtherance of this strategy, D&B
contributed its Singapore business to a joint venture during the third quarter
of 2000 and completed other transactions in Japan and Malaysia during December
2000.
D&B expects to announce the details of the next phase of its financial
flexibility program in June 2001. These actions are expected to produce on an
annualized basis approximately $50 million in additional financial flexibility
and will involve an additional restructuring charge.
1999 Restructuring Charge
During the fourth quarter of 1999, Old D&B's board of directors approved
plans to restructure D&B's operations. The restructuring included: (1) office
consolidations and organization changes in both Europe and other international
locations and improvements in sales and data collection operations in Europe,
(2) realigning and streamlining D&B's global technology organization and
outsourcing certain software and product development to resources outside the
United States and Europe, and (3) migrating data collection in the U.S. to
telephonic data collection and closing 15 U.S. field data collection offices.
As a result of these actions, a pre-tax restructuring charge of $41.2
million ($27.9 million after-tax, $.34 per share basic and diluted) was included
in operating income in 1999. For management reporting purposes these charges
were not allocated to any of D&B's business segments. Employee severance costs
from planned terminations of approximately 700 employees totaled $32.7 million
(including severance for two former corporate executives). The costs were
determined based on amounts that will be paid pursuant to D&B's policies and
certain non-U.S. governmental regulations. The balance of the charge related to
the write-off of certain assets made obsolete or redundant and abandoned by the
restructuring and leasehold termination obligations arising from office
closures. The restructuring actions were designed to strengthen customer service
worldwide, improve operating efficiencies and lower structural costs. As of
December 31, 2000, D&B has terminated approximately 530 employees out of the
approximately 700 originally contemplated. During 2000, D&B made payments of
$21.0 million in connection with the 1999 actions. The remaining terminations
will be completed by the end of January 2001. D&B achieved the expected savings
of approximately $30 million in 2000 resulting from these actions.
1998 Distribution
On June 30, 1998, Donnelley separated into two publicly traded
companies -- Old D&B and Donnelley. The 1998 Distribution was accomplished
through a tax-free dividend by Donnelley of Old D&B, which was a new entity
comprised principally of Moody's and the D&B operating company. The New Dun &
Bradstreet Corporation changed its name to "The Dun & Bradstreet Corporation,"
and the continuing entity (i.e., Donnelley), consisting of R.H. Donnelley Inc.
and the DonTech partnership, changed its name to R.H. Donnelley Corporation. Due
to the relative significance of Old D&B, the transaction was accounted for as a
reverse spin-off, and, as such, Old D&B was classified as continuing operations,
and R.H. Donnelley Inc. and DonTech were classified as discontinued operations.
For purposes of effecting the 1998 Distribution and of governing certain of the
continuing relationships between Old D&B and Donnelley after the transaction,
Donnelley and Old D&B have entered into various agreements as described in Note
2 to D&B's consolidated financial statements and notes thereto.
1996 Distribution
On November 1, 1996, Donnelley (then known as "The Dun & Bradstreet
Corporation") reorganized into three publicly traded independent companies by
spinning off to stockholders through a tax-free distribution (the "1996
Distribution") two new companies, Cognizant Corporation and ACNielsen
Corporation. In conjunction with the 1996 Distribution, Donnelley also disposed
of Dun & Bradstreet Software and
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NCH Promotional Services. After the transaction was completed, Donnelley's
continuing operations consisted principally of the D&B, Moody's and R.H.
Donnelley businesses.
Reclassification of Discontinued Operations
Pursuant to Accounting Principles Board Opinion ("APB") No. 30, "Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the consolidated financial statements have been reclassified to
reflect the 2000 Distribution and the 1998 Distribution. Accordingly, revenues,
costs and expenses, and cash flows of Moody's and Donnelley have been excluded
from the respective captions in the Consolidated Statements of Operations and
Consolidated Statements of Cash Flows of D&B. The net operating results of these
entities have been reported, net of applicable income taxes, as "Income from
Discontinued Operations, Net of Income Taxes", and the net cash flows of these
entities have been reported as "Net Cash (Used in) Provided by Discontinued
Operations". The assets and liabilities of the Moody's Business have been
excluded from the respective captions in the Consolidated Balance Sheet of D&B
and have been reported as "Net Liabilities of Discontinued Operations" for the
year ended December 31, 1999.
RESULTS OF OPERATIONS
Operating Segments
D&B, which provides a comprehensive array of information-based products and
services, is managed on a geographical basis. Effective January 1, 2000,
responsibility for the management of the Canadian business was moved from the
Asia Pacific/Latin America segment to its U.S. segment, which is presently
called North America, to take advantage of marketing synergies. In each of the
three geographic segments, North America, Europe/Africa/Middle East ("Europe")
and Asia Pacific/Latin America ("APLA"), D&B offers credit information
solutions, marketing information solutions, purchasing information solutions and
receivables management services. D&B evaluates performance and allocates
resources based on segment revenues and operating income.
Year Ended December 31, 2000 Compared with Year Ended December 31, 1999
For the year ended December 31, 2000, D&B reported income from continuing
operations of $73.6 million, or $.91 per share basic and $.90 per share diluted.
This compares with 1999 income from continuing operations of $81.3 million and
earnings per share from continuing operations of $1.00 basic and $.99 diluted.
2000 results included the $41.5 million pre-tax restructuring charge discussed
above ($30.3 million after-tax, $.37 per share basic and diluted), pre-tax
reorganization costs in connection with the 2000 Distribution of $29.5 million
($25.6 million after-tax, $.32 per share basic and $.31 per share diluted) and a
$10.1 million pre-tax gain on the settlement of litigation ($6.2 million
after-tax, $.08 per share basic and diluted). 1999 results included the $41.2
million pre-tax restructuring charge discussed above ($27.9 million after-tax,
$.34 per share basic and diluted), and an $11.9 million pre-tax gain relating to
the settlement of litigation ($6.6 million after-tax, $.08 per share basic and
diluted). Excluding these items, income from continuing operations would have
increased 20% and earnings per share from continuing operations would have
increased 21% for basic earnings and 20% for diluted earnings. 2000 net income
of $206.6 million included income from discontinued operations of $133.0
million, while 1999 net income of $256.0 million included income from
discontinued operations of $174.7 million. For the year ended December 31, 2000,
earnings per share of $2.55 basic and $2.52 diluted included earnings per share
from discontinued operations of $1.64 basic and $1.62 diluted. For the year
ended December 31, 1999, earnings per share of $3.16 basic and $3.12 diluted
included earnings per share from discontinued operations of $2.16 basic and
$2.13 diluted.
Operating revenues grew 1% to $1,417.6 million in 2000, compared with
$1,407.7 million in 1999. Revenue growth in North America of 5% was offset by a
decline in Europe of 9%, while revenue growth was flat in APLA. Before the
effect of foreign exchange, operating revenues increased 4% in 2000 compared to
1999, with European revenues growing 3% and APLA's revenues growing 1% from the
prior year. D&B's results, before the effect of foreign exchange, reflect a 2%
decline in revenues from traditional credit
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information solutions, offset by 9% growth in revenues from value added credit
information solutions such as decision-support tools and services, 11% growth in
marketing information solutions and 16% growth in receivable management
services. D&B intends to expand its customer base by targeting the small
business market and deepening the penetration of global accounts in order to
sustain revenue growth.
Operating expenses decreased 4% to $515.9 million in 2000 compared with
$538.3 million in 1999, as a result of cost reductions attributable to the
restructuring actions initiated in the fourth quarters of 1999 and 2000 and the
positive effect of foreign exchange on expenses. Selling and administrative
expenses increased by 1% to $546.7 million in 2000 compared with $539.4 million
in 1999, as a result of costs incurred in order to offer new products and
services, which offset cost reductions and the positive effect of foreign
exchange. Depreciation and amortization decreased 13% to $111.2 million in 2000
as compared to 1999 as a result of lower capitalization over the past two years,
the write-off of certain assets as a result of the restructuring actions and the
positive effect of foreign exchange on expenses. Operating costs in 2000 also
included a $41.5 million charge for restructuring actions, while 1999 operating
costs included a $41.2 million restructuring charge. In 2000, operating costs
included $29.5 million in reorganization costs incurred in connection with the
2000 Distribution.
Operating income increased 7% in 2000 to $172.8 million from $160.9 million
in 1999. Excluding the restructuring charges in 2000 and 1999 and the
reorganization costs incurred in 2000, operating income would have grown 21% in
2000, as a result of revenue growth and lower operating costs.
Non-operating expense -- net was $21.1 million in 2000 compared with $15.5
million in 1999. Included in non-operating expense -- net is interest income and
expense, minority interest expense (which remained level at $22.4 million in
both 2000 and 1999) and other income (expense) -- net. Interest income of $3.9
million in 2000 was higher than 1999 due to higher cash levels, while interest
expense of $8.6 million in 2000 was also higher than in 1999 as a result of the
higher debt levels in 2000 compared with 1999. Other income (expense) -- net was
$6.0 million in 2000 compared with $9.0 million in 1999. 2000 other income
(expense) -- net included a gain of $10.1 million on the settlement of
litigation, while 1999 other income (expense) -- net included a gain of $11.9
million on the settlement of litigation. These gains were offset by other
miscellaneous non-operating income and expense items, which were generally
unchanged in 2000 and 1999.
D&B's effective tax rate was 51.4% in 2000 compared with 44.1% in 1999,
while the underlying tax rate was 42.0% in 2000 and 41.3% in 1999. The
difference between the effective and underlying rates resulted from several
factors in both 2000 and 1999, including taxes imposed on the proceeds from the
settlement of litigation and the non-deductibility of certain restructuring
expenses. Additionally, in 2000 the non-deductibility of certain reorganization
expenses and interest incurred impacted the effective tax rate.
Income from discontinued operations, net of income taxes, was $133.0
million for the year ended December 31, 2000 and $174.7 million for the year
ended December 31, 1999. 2000 results include nine months of income from
discontinued operations, while 1999 included the income from discontinued
operations for a full year.
SEGMENT RESULTS
North America revenues were $968.3 million in 2000, up 5% from 1999
revenues. In comparing 2000 and 1999 revenues, North America's revenues from
credit information solutions were flat at $580.1 million, revenues from
marketing information solutions increased 13% to $259.8 million, revenues from
purchasing information solutions increased 5% to $28.5 million and revenues from
receivable management services increased 22% to $99.9 million. North America's
results reflect a decline in the use of traditional credit information solutions
products as D&B has migrated its customers from traditional credit information
products to lower price, higher margin value added products. In addition, the
availability of free or lower cost information on the Internet (and from other
sources) has impacted revenues from traditional credit information products.
However, revenues from value added credit information products have offset the
decline in traditional credit products. The growth in revenues from marketing
information solutions and purchasing
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information solutions was largely driven by revenues from value added products,
while both traditional and value added products have contributed to the growth
in revenues from receivable management services.
North America's operating income was $287.6 million in 2000, up 13% from
$255.4 million in the prior year, an improvement driven by the increase in
revenues and the impact of data collection cost reductions achieved as part of
the 1999 fourth quarter restructuring actions.
Europe's revenues were $382.1 million in 2000, down 9% when compared with
1999 revenues of $420.6 million. However, before the effect of foreign exchange,
Europe's revenues would have been up 3%. Before the effect of foreign exchange,
Europe would have reported in 2000 an increase in revenues from credit
information solutions of 1%, an increase in revenues from marketing information
solutions of 5%, an increase in revenues from purchasing information solutions
of 70% and an increase in revenues from receivable management services of 6% in
comparison with 1999. As reported, Europe's revenues from credit information
solutions decreased 10% to $266.4 million, revenues from marketing information
solutions decreased 6% to $67.6 million, revenues from purchasing information
solutions increased 52% to $2.1 million and revenues from receivable management
services decreased 7% to $46.0 million, when comparing 2000 to 1999.
European revenues from credit information solutions products continue to be
impacted by ongoing price erosion in the local markets, as well as continued
competition, including availability of free or lower-cost information on the
Internet. However, the growth in revenues from value added products in Europe
has resulted in the overall improvement in revenues, before the negative effect
of foreign exchange.
Europe reported an operating loss of $.9 million in 2000, compared to an
operating loss of $8.9 million in 1999. Europe achieved substantial improvements
in profitability as a result of significant cost reductions realized from the
restructuring actions announced in the fourth quarters of 1999 and 2000.
APLA reported revenues of $67.2 million in 2000, compared to revenues of
$67.1 million in 1999. Before the effect of foreign exchange, revenues would
have been up 1%. APLA's revenue growth was negatively effected by the
elimination of revenues from Singapore as the business was contributed to a
joint venture in the third quarter of 2000, a transaction that is expected to
contribute to an improvement in D&B's international profitability. D&B's share
of the venture's results is no longer included in the APLA segment but rather
within other income (expense) -- net. Excluding revenue from Singapore from both
years' results, and before the effect of foreign exchange, APLA's revenue would
have increased 3%, comprised of a decrease in revenues from credit information
solutions of 8%, an increase in revenues from marketing information solutions of
32% and an increase in revenues from receivable management services of 22%, in
each case in comparison with 1999. In comparing 2000 reported results with those
of 1999, APLA's revenues from credit information solutions decreased 9% to $39.9
million, revenues from marketing information solutions increased 22% to $12.0
million and revenues from receivable management services increased 12% to $15.3
million.
APLA reported an operating loss of $4.6 million in 2000, compared with a
loss of $7.3 million in 1999. The decrease in operating losses in 2000 compared
with 1999 is due to cost reductions and the change in the Singapore business
model. D&B expects to continue to change the business models in certain
countries in the APLA region to further improve profitability.
Year Ended December 31, 1999 Compared with Year Ended December 31, 1998
For the year ended December 31, 1999, D&B reported income from continuing
operations of $81.3 million, or $1.00 per share basic and $.99 per share
diluted. This compares with 1998 income from continuing operations of $86.2
million and earnings per share from continuing operations of $1.02 basic and
$1.00 diluted. 1999 results included the $41.2 million pre-tax restructuring
charge discussed above ($27.9 million after-tax, $.34 per share basic and
diluted), and an $11.9 million pre-tax gain relating to the settlement of
outstanding litigation ($6.6 million after-tax, $.08 per share basic and
diluted). Results for 1998 included reorganization costs associated with the
1998 Distribution of $28.0 million ($23.2 million after-tax, $.27 per share
basic and diluted). 1999 net income of $256.0 million included income from
discontinued operations of $174.7 million, while 1998 net income of $280.1
million included income from discontinued operations of $193.9 million. For the
year ended December 31, 1999, earnings per share of $3.16 basic and $3.12
diluted included earnings per
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share from discontinued operations of $2.16 basic and $2.13 diluted. For the
year ended December 31, 1998, earnings per share of $3.31 basic and $3.26
diluted included earnings per share from discontinued operations of $2.29 basic
and $2.26 diluted.
Operating revenues were $1,407.7 million in 1999 compared with $1,420.5
million in 1998. Before the effect of foreign currency translation, D&B revenues
were flat. These results reflect decreased demand for traditional credit
information solutions, offset by growth in value added products such as
decision-support tools and services.
Operating expenses were flat at $538.3 million in 1999 compared with $536.2
million in 1998. Selling and administrative expenses decreased by 1% to $539.4
million in 1999 compared with $542.4 million in 1998. Costs saved as a result of
D&B's worldwide expense control initiatives were offset by D&B's investment in
value added products.
Operating costs in 1999 also included the $41.2 million restructuring
charge discussed above. In 1998, operating costs included $28.0 million in
reorganization costs incurred in connection with the 1998 Distribution.
Operating income decreased 14% in 1999 to $160.9 million from $187.7
million in 1998. Excluding the $41.2 million restructuring charge in 1999 and
the $28.0 million of reorganization costs in 1998, operating income in 1999
declined 6% compared with 1998.
Non-operating expense -- net was $15.5 million in 1999 compared with $30.4
million in 1998. Included in non- operating expense -- net is interest income
and expense, minority interest expense (which remained relatively level when
comparing 1999 and 1998) and other income (expense) -- net. Interest income of
$2.9 million in 1999 was lower than 1998 due to lower cash levels, while
interest expense of $5.0 million in 1999 was significantly lower than in 1998 as
a result of the lower debt levels in 1999 compared with 1998. Other income
(expense) -- net was income of $9.0 million in 1999 compared with an expense of
$2.2 million in 1998. 1999 other income (expense) -- net included a gain of
$11.9 million on the settlement of litigation. This gain was offset by other
miscellaneous non-operating income and expense items, which were generally
unchanged in 1999 and 1998.
D&B's effective tax rate was 44.1% in 1999 compared with 45.2% in 1998,
while the underlying tax rate was 41.3% in 1999 and 41.0% in 1998. The
difference between the effective and underlying rates resulted from a number of
factors, including taxes imposed on the proceeds from the settlement of
litigation, the non-deductibility of certain restructuring expenses and
refinements of certain estimates.
Income from discontinued operations, net of income taxes, was $174.7
million for the year ended December 31, 1999 and $193.9 million for the year
ended December 31, 1998, with Moody's representing all of such income in 1999
and $160.2 million of such income in 1998. In 1998, the balance of the income
from discontinued operations, net of income taxes, of $33.7 million reflects the
results of Donnelley. Moody's net income of $174.7 million in 1999 grew 9% from
$160.2 million in 1998, principally as a result of strong revenue growth.
SEGMENT RESULTS
North America revenues were $920.0 million in 1999, down 1% from 1998
revenues. In comparing 1999 and 1998 revenues, North America's revenues from
credit information solutions decreased 6% to $581.0 million, revenues from
marketing information solutions increased 5% to $230.1 million, revenues from
purchasing information solutions increased 18% to $27.1 million and revenues
from receivable management services increased 19% to $81.8 million. The decline
in revenues from credit information solutions resulted from a number of factors,
including sales force reorganization, compensation and training issues, as well
as increased competition, including free or lower-cost information from online
vendors and other Internet sources. In addition, the shift by former annual
contract customers to the monthly discount plan negatively affected revenues.
The growth in revenues from marketing information solutions, purchasing
information solutions and receivable management services was largely driven by
revenues from value added products.
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North America's operating income was $255.4 million in 1999, down 4% from
$266.5 million in the prior year due to the lower revenues and higher selling
and administrative expenses resulting from the investment in value added
products.
Europe's revenues were $420.6 million in 1999, down 2% when compared with
1998 revenues of $427.7 million. Before the effect of foreign exchange, Europe's
revenues were up 1% in 1999. Before the effect of foreign exchange, Europe would
have reported in 1999 a decrease in revenues from credit information solutions
of 2%, an increase in revenues from marketing information solutions of 14% and
an increase in revenues from receivable management services of 3% in comparison
with 1998. The decline in European revenues from credit information solutions
resulted from ongoing price erosion in the local credit markets, as well as
increased competition, including the availability of free or lower-cost
information from online vendors and other Internet sources. Revenue growth from
marketing information solutions was largely attributable to value added
products. In comparing reported results in 1999 with 1998, Europe's revenues
from credit information solutions decreased 5% to $297.4 million, while revenues
from marketing information solutions increased 11% to $72.2 million and revenues
from receivable management services were flat at $49.6 million. Europe also
reported revenues from newly introduced purchasing information solutions of $1.4
million during 1999. Europe reported an operating loss of $8.9 million in 1999,
compared with a loss of $4.2 million in 1998. Europe's loss resulted largely
from investment in sales and marketing support for value added products and
higher costs for new technology and systems in the region.
APLA reported revenues of $67.1 million in 1999, up 9% from 1998. Before
the effect of foreign exchange, revenues would have been up 4%. Before the
effect of foreign exchange, APLA would have reported in 1999 an increase in
revenues from credit information solutions of 9%, a decrease in revenues from
marketing information solutions of 6% and a decrease in revenues from receivable
management services of 2%, in each case in comparison with 1998. In comparing
1999 with 1998 reported results, APLA's revenues from credit information
solutions increased 16% to $43.6 million, revenues from marketing information
solutions decreased 2% to $9.9 million and revenues from receivable management
services decreased 1% to $13.6 million. APLA reported an operating loss of $7.3
million in 1999, compared with a loss of $11.7 million in 1998. The decrease in
operating losses in 1999 compared with 1998 is due to expense-control
initiatives and revenue improvements in 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet, and
measurement of those instruments at fair value. If certain conditions are met, a
derivative may be designated specifically as: (i) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or an unrecognized
firm commitment (a fair value hedge), (ii) a hedge of the exposure to variable
cash flows of a forecasted transaction (a cash flow hedge), or (iii) a hedge of
the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. In June 1999, the Financial
Accounting Standards Board issued SFAS No. 137, delaying the effective date of
SFAS No. 133. The provisions of SFAS No. 133 are effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The adoption of SFAS
No. 133 by D&B, effective January 1, 2001, had no effect on D&B.
MARKET RISK SENSITIVE INSTRUMENTS
D&B operates in 33 countries through wholly or majority-owned entities and
in six countries through minority interests in joint ventures, and principally
uses the capital markets to fund its operations. As such, D&B is exposed to
market risk from changes in foreign exchange rates and interest rates, which
could affect its results of operations and financial condition. In order to
reduce the risk from fluctuations in foreign currencies and interest rates, D&B
currently uses short-term forward foreign exchange contracts and in the past has
used interest rate swap agreements. These derivative financial instruments are
viewed by D&B as risk
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management tools that are entered into for hedging purposes only. D&B does not
use derivative financial instruments for trading or speculative purposes.
D&B also has investments in fixed-income marketable securities.
Consequently, D&B is exposed to fluctuations in rates on these marketable
securities. Market risk associated with investments in marketable securities is
immaterial and has been excluded from the sensitivity discussions.
A discussion of D&B's accounting policies for financial instruments is
included in the summary of significant accounting policies in Note 1 to D&B's
consolidated financial statements, and further disclosure relating to financial
instruments is included in Note 7 to the consolidated financial statements. The
following analysis presents the sensitivity of the fair value of D&B market risk
sensitive instruments to changes in market rates and prices.
Interest Rate Risk
D&B is exposed to market risk through its commercial paper program, in
which it borrows at prevailing short-term commercial paper rates. At December
31, 2000, D&B had $49.5 million of short-term commercial paper outstanding
maturing on January 2, 2001, and short-term investments of $37.5 million. As
such, the market risk is immaterial when calculated utilizing estimates of the
termination value based upon a 10% increase or decrease in interest rates from
their levels as of December 31, 2000.
D&B has in the past entered into interest rate swap agreements to manage
exposure to changes in interest rates. Interest rate swaps have allowed D&B to
raise funds at floating rates and effectively swap them into fixed rates that
are lower than those available to it if fixed-rate borrowings were to be made
directly. During 1998, in connection with the 1998 Distribution and repayment of
outstanding notes payable, Donnelley canceled all of its interest rate swap
agreements. D&B has not entered into any interest rate swap agreements since the
1998 Distribution and therefore is not subject to market risk on interest rate
swaps.
Foreign Exchange Risk
D&B's non-U.S. operations generated approximately 34% of total revenues in
2000. As of December 31, 2000, approximately 37% of D&B assets were located
outside the U.S., and no single country outside the U.S. had a significant
concentration of D&B's aggregate cash balance.
D&B follows a policy of hedging substantially all cross-border intercompany
transactions denominated in a currency other than the functional currency
applicable to each of its various subsidiaries. D&B only uses short-term forward
foreign exchange contracts to implement its hedging strategy. Typically, these
contracts have maturities of six months or less. These forward contracts are
executed with creditworthy institutions and are denominated primarily in the
British pound sterling, the euro and the Swedish krona.
The fair value of foreign currency risk is calculated by using estimates of
the cost of closing out all outstanding forward foreign exchange contracts,
given a 10% increase or decrease in forward rates from their December 31, 2000
levels. At December 31, 2000, D&B had approximately $181 million in forward
foreign exchange contracts outstanding, with various expiration dates through
March 2001 (see Note 7 to the consolidated financial statements). At December
31, 2000, net unrealized losses related to D&B's forward contracts were $.7
million. If forward rates were to increase by 10% from December 31, 2000 levels,
the unrealized gain on these contracts would be $11.4 million. If forward rates
were to decrease by 10% from December 31, 2000 levels, the unrealized loss on
these contracts would be $15.4 million. However, the estimated potential gain or
loss on forward contracts is expected to be offset by changes in the dollar
value of underlying transactions. Therefore, the net effect of a 10% movement in
foreign exchange rates would be immaterial.
LIQUIDITY AND FINANCIAL POSITION
Management believes that cash flows generated from its operations are
sufficient to fund its operating needs and service debt. D&B accesses the
commercial paper market from time to time to fund working capital needs and
share repurchases. Such borrowings have been supported by D&B's bank credit
facilities. It is
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expected that operating cash flows, supplemented as needed with financing
arrangements, will be sufficient to meet the needs of D&B.
D&B is considering the monetization of certain non-strategic assets and
businesses, and intends to complete this review in the first half of 2001.
Certain asset monetization transactions may be announced and/or completed prior
to that date. Funds generated from these transactions may be utilized to invest
in the current business, invest in the B2B strategy, or to repurchase stock.
Year Ended December 31, 2000 Compared With Year Ended December 31, 1999
At December 31, 2000, cash and cash equivalents totaled $70.1 million,
compared to $109.4 million at December 31, 1999. D&B's payment of $349.3 million
to the IRS, as discussed below under "Other," and the impact of the 2000
Distribution with respect to the allocation of net indebtedness, impacted the
cash balance.
Operating activities provided net cash of $23.8 million during 2000. The
$349.3 million payment to the IRS is reflected as a reduction in continuing
operations' accrued income taxes of $174.7 million and as a $174.6 million
offset to net cash used in operating activities of discontinued operations.
Excluding the impact of the payment, cash generated by operating activities in
2000 would have been $373.1 million, with continuing operations providing $202.6
million and discontinued operations providing $170.5 million (representing nine
months of activity). Cash generated by operating activities in 1999 was $350.0
million, with continuing operations providing $135.2 million and discontinued
operations providing $214.8 million. The improvement in cash generated by
operating activities of continuing operations results from increased operating
income and an improvement in working capital.
During 2000, D&B made payments of $21.0 million related to the
restructuring actions implemented during the fourth quarter of 1999 and $.8
million related to the restructuring actions implemented during the fourth
quarter of 2000.
Net cash used in investing activities totaled $84.5 million in 2000,
compared with $116.7 million in 1999. Net cash used in investing activities of
discontinued operations in 2000 was $26.2 million and in 1999 was $12.1 million.
Net cash used by discontinued operations in 2000 included an acquisition by
Moody's of a financial software products company for $17.4 million. In 2000,
spending for capital expenditures, computer software and other intangibles by
continuing operations totaled $67.1 million, compared with $109.6 million in
1999. During 2000, D&B reduced its spending for capital expenditures, computer
software and other intangibles, while formulating the Blueprint for Growth
strategy. Currently, D&B has no material commitments for capital expenditures.
Net cash provided by financing activities was $25.0 million in 2000,
compared with net cash used in financing activities of $210.3 million during
1999. Payments of dividends by Old D&B accounted for $89.8 million in 2000,
compared with $120.1 million in 1999. D&B does not intend to pay dividends in
the future. As discussed below, D&B's financing arrangements and stock
repurchases also affected the net cash provided by or used in financing
activities.
Financing Arrangements
In connection with the 2000 Distribution, Old D&B borrowed funds in order
to repay in full Old D&B's commercial paper obligations. Also pursuant to the
2000 Distribution Agreement, immediately prior to the 2000 Distribution, a
portion of Old D&B's indebtedness (plus certain minority interest obligations)
and a portion of Old D&B's cash was allocated to D&B in amounts such that, at
the time of the 2000 Distribution and before giving effect to certain
adjustments and other factors described in Note 2 to the consolidated financial
statements, the net indebtedness of D&B (plus the minority interest obligations)
approximated the net indebtedness of Moody's. The indebtedness that was assumed
by D&B upon the 2000 Distribution amounted to $24.1 million. D&B also assumed
$300 million in minority interest obligations and was allocated $39.4 million in
cash. The debt that was assumed by Moody's at the 2000 Distribution amounted to
$195.5 million.
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In September 2000, D&B established two committed bank facilities, which
remained in effect after the 2000 Distribution. One of the facilities permits
borrowings of up to $175 million and matures in September 2001. The second
facility permits borrowings of up to $175 million and matures in September 2005.
Under these facilities D&B has the ability to borrow at prevailing short-term
interest rates. D&B has not drawn on those facilities since their inception and
has no borrowings outstanding under these facilities at December 31, 2000. These
facilities are available for general corporate purposes, including to support
D&B's commercial paper program.
At December 31, 2000, D&B had $49.5 million in commercial paper
outstanding, while at December 31, 1999 Old D&B had $124.7 million of commercial
paper outstanding.
In connection with the 1998 Distribution, R.H. Donnelley, Inc. borrowed
$500 million, which was used to repay existing indebtedness (commercial paper
and other short-term borrowings) of Donnelley in the amount of $287.1 million at
the time of the 1998 Distribution. Old D&B used the excess proceeds for general
corporate purposes, including the payment of reorganization costs. The $500
million of debt became an obligation of Donnelley upon the 1998 Distribution.
Also in connection with the 1998 Distribution and repayment of
indebtedness, Donnelley canceled all of its interest rate swap agreements and
recorded into income the previously unrecognized fair value loss at the time of
termination. At the time of the cancellation, the fair value of the interest
rate swaps was a loss of $12.7 million, of which $3.8 million ($.6 million in
the first quarter of 1998 and $3.2 million in 1997) had been recognized in
income relating to swaps that did not qualify for settlement accounting. The
previously unrecognized loss of $8.9 million was recorded during the second
quarter of 1998 and included in reorganization costs.
In 1997, $300 million in minority interest financing was raised by
Donnelley when an unrelated investor contributed cash to a Donnelley partnership
in exchange for a limited partner interest. This transaction was assumed by Old
D&B in connection with the 1998 Distribution and thereafter by D&B in the 2000
Distribution. Under the terms of the limited partnership agreement that governs
the minority interest financing, the unrelated partner is entitled to receive an
amount per annum equal to 7.47% of its initial investment payable quarterly in
arrears, provided that there are sufficient partnership profits.
Pursuant to the terms of the partnership agreement, on December 15, 2000,
the unrelated partner initiated a process that could have resulted in
dissolution and liquidation of the partnership as early as February 25, 2001.
Such dissolution has been prevented, however, through the D&B partner having
elected on December 27, 2000, to exercise its right to purchase the unrelated
partner's interest in the partnership. This purchase is to be made in the first
quarter of 2001. D&B expects that it will fund the purchase price through the
issuance of debt, the issuance of commercial paper, or a combination of the
foregoing. In the opinion of management, this funding will not have a material
adverse effect on D&B's financial position or results of operations.
Stock Repurchase Program
Between January 1, 2000 and September 30, 2000, Old D&B repurchased 125,000
shares for $3.5 million in connection with its Employee Stock Purchase Plan and
to offset a portion of the shares issued under stock incentive plans. During the
fourth quarter of 2000, D&B repurchased 1.8 million shares for $43.3 million to
offset awards under stock incentive plans and in connection with the D&B
Employee Stock Purchase Plan. Proceeds received in connection with Old D&B's
stock plans were $30.7 million for the nine months ended September 30, 2000. D&B
received proceeds in connection with D&B's stock plans of $7.0 million in the
fourth quarter of 2000.
During 1999, Old D&B completed its special stock repurchase program,
authorized by its Board of Directors in June 1998, by purchasing 4.2 million
shares for $150.0 million. During 1999, Old D&B also repurchased 2.6 million
shares for $87.9 million to offset awards made under stock incentive plans and
in connection with the Old D&B Employee Stock Purchase Plan. Proceeds received
in connection with stock incentive plans were $48.4 million in 1999.
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Other
Old D&B and its predecessors have entered into global tax planning
initiatives in the normal course of business, principally through tax-free
restructurings of both their foreign and domestic operations. These initiatives
are subject to normal review by tax authorities. It is possible that additional
liabilities may be proposed by tax authorities as a result of these reviews and
that some of the reviews could be resolved unfavorably. At this time, management
is unable to predict the extent of such reviews, the outcome thereof or whether
the resolution of these matters could materially affect D&B's results of
operations, cash flows or financial position.
Pursuant to the 2000 Distribution Agreement, D&B and Moody's agreed to each
be financially responsible for 50% of any potential liabilities that may arise
with respect to the reviews described above, to the extent such potential
liabilities are not directly attributable to their respective business
operations.
The IRS has completed its review of the utilization of certain capital
losses generated during 1989 and 1990. On June 26, 2000, the IRS, as part of its
audit process, issued a formal assessment with respect to the utilization of
these capital losses and Old D&B responded by filing a petition for a refund in
the U.S. District Court for the District of Columbia on September 21, 2000.
Pursuant to a series of agreements, IMS Health and Nielsen Media Research
are jointly and severally liable to pay one-half, and Donnelley the other half,
of any payments for taxes and accrued interest arising from this matter and
certain other potential tax liabilities after Donnelley pays the first $137
million.
In connection with the 1998 Distribution, Old D&B and Donnelley entered
into an agreement whereby Old D&B assumed all potential liabilities of Donnelley
arising from these tax matters and agreed to indemnify Donnelley in connection
with such potential liabilities.
On May 12, 2000, an amended tax return was filed for the 1989 and 1990 tax
periods, which reflects $561.6 million of tax and interest due. Old D&B paid the
IRS approximately $349.3 million of this amount on May 12, 2000, which Old D&B
funded with short-term borrowings. IMS Health has informed D&B that it paid to
the IRS approximately $212.3 million on May 17, 2000. The payments were made to
the IRS to stop further interest from accruing. Notwithstanding the filing and
payment, D&B is contesting the IRS's formal assessment and will also contest the
assessment of amounts, if any, in excess of the amounts paid. D&B has accrued
its anticipated share of the probable liability arising from the utilization of
these capital losses.
D&B and its subsidiaries are involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Although the outcome of
such matters cannot be predicted with certainty, in the opinion of management,
the ultimate liability of D&B in connection with such matters will not have a
material effect on D&B's operating results, cash flows or financial position
NEW EUROPEAN CURRENCY
On January 1, 1999, 11 of the countries in the European Union began a
three-year transition to the euro to replace the national currency of each
participating country. D&B intends to phase in its transition to the euro over
the next two years. D&B has established a task force to address issues related
to the euro. D&B believes that the euro conversion may have a material impact on
its operations and financial condition if it fails to successfully address such
issues. The task force has prepared a project plan and is proceeding with the
implementation of that plan.
D&B's project plan includes the following: ensuring that D&B's information
technology systems that process data for inclusion in D&B's products and
services can appropriately handle amounts denominated in euro that are contained
in data provided to D&B by third-party data suppliers; modification of D&B
products and services to deal with euro-related issues; and modification of D&B
internal systems (such as payroll, accounting and financial reporting) to deal
with euro-related issues. D&B does not believe that the cost of such
modifications will have a material effect on D&B results of operations or
financial condition. There is no guarantee that all problems will be foreseen
and corrected, or that no material disruption of D&B's business
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will occur. The conversion to the euro may have competitive implications for D&B
pricing and marketing strategies that could be material in nature; however, any
such impact is not known at this time.
DIVIDENDS
Old D&B paid a quarterly dividend of $.185 per share during the first three
quarters of 2000, each quarter of 1999 and the third and fourth quarters of
1998. Donnelley paid quarterly dividends of $.22 per share during the first half
of 1998, resulting in a full-year dividend per share paid of $.555, $.74 and
$.81 for 2000, 1999 and 1998, respectively.
D&B did not pay a dividend during the fourth quarter of 2000 and does not
intend to pay dividends in the future.
COMMON STOCK INFORMATION
D&B's common stock (symbol DNB) is listed on the New York Stock Exchange.
The number of shareholders of record was 8,115 at December 31, 2000.
Old D&B
The following table summarizes price and cash dividend information for Old
D&B's common stock as reported in the periods shown.
DIVIDENDS
PRICE PER SHARE($) PER SHARE($)
------------------------------------ ------------
2000 1999
------------------ --------------
HIGH LOW HIGH LOW 2000 1999
------- ------- ----- ----- ---- ----
First Quarter........................ 30.50 24.6875 37 29 5/16 .185 .185
Second Quarter....................... 33.75 26.50 40 33 1/8 .185 .185
Third Quarter........................ 34.875 28.125 37 13/16 23 3/8 .185 .185
Fourth Quarter....................... N/A N/A 31 25 11/16 N/A .185
------- ------- ----- ----- --- ----
Year................................. 34.875 24.6875 40 23 3/8 .555 .740
------- ------- ----- ----- --- ----
D&B
In the fourth quarter of 2000, D&B's high price per share of common stock
was $26.9375 and the low price per share of common stock was $17.5625. D&B pays
no dividends.
FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K are forward-looking.
These may be identified by the use of forward-looking words or phrases, such as
"expect," "will," "can," "anticipate," and "plan," among others. All such
forward-looking statements are based on D&B's reasonable expectations at the
time they are made, but are not guarantees of future performance. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for such
forward-looking statements. In order to comply with the terms of the safe
harbor, D&B notes that a variety of factors could cause its actual results and
experience to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. The risks and
uncertainties that may affect the operations, performance, development and
results of D&B's businesses include: (1) complexity and uncertainty regarding
the development of new high-technology products, (2) possible loss of market
share through competition, (3) pricing pressures from competitors and/or
customers, (4) changes in the business information and risk management
industries and markets, including those driven by the Internet, (5) D&B's
ability to protect proprietary information and technology or to obtain necessary
licenses on commercially reasonable terms, (6) D&B's ability to complete the
implementation of its euro plans on a timely basis and the competitive
implications that the conversion to the euro may have on D&B's pricing and
marketing strategies, (7) D&B's ability to attract and retain key employees, (8)
risks
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associated with investments and operations in foreign countries, including
regulatory environment, exchange rate fluctuations and cultural factors, (9) the
outcome of any reviews by applicable tax authorities of D&B's global tax
planning initiatives, (10) D&B's ability to successfully implement its Blueprint
for Growth, including the ability to consummate asset monetization transactions,
changes in the international business model and financial flexibility
initiatives on terms and conditions contemplated by D&B, (11) the loss of key
customers due to consolidations and mergers, (12) the impact of product
rationalization activities on revenues, (13) D&B's ability to expand its
database on commercially reasonable terms and the possibility that data
suppliers might withdraw data from D&B, (14) the possibility that economic
conditions might lead to a reduction in the use of D&B products, and (15) the
timing with which significant customer contracts are executed. The company
undertakes no obligations to publicly release any revision to any
forward-looking statement to reflect any future events or circumstances.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information in response to this Item is set forth under the caption "Market
Risk Sensitive Instruments" in Part II, Item 7 on pages 26 and 27 of this Form
10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PAGE(S)
-------
Report of Independent Accountants........................... 33
Statement of Management Responsibility for Financial
Statements................................................ 34
CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2000 and 1999:
Consolidated Balance Sheets............................... 36
For the years ended December 31, 2000, 1999 and 1998:
Consolidated Statements of Operations..................... 35
Consolidated Statements of Cash Flows..................... 37
Consolidated Statements of Shareholders' Equity........... 38
Notes to Consolidated Financial Statements................ 39-64
SCHEDULES
Schedules are omitted as not required or inapplicable or because the
required information is provided in the consolidated financial statements,
including the notes thereto.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of The Dun & Bradstreet Corporation:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, shareholders' equity and cash
flows present fairly, in all material respects, the financial position of The
Dun & Bradstreet Corporation and Subsidiaries at December 31, 2000 and 1999, and
the results of their operations and their cash flows for the years ended
December 31, 2000, 1999 and 1998, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
February 2, 2001
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STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
To the Shareholders of The Dun & Bradstreet Corporation:
Management has prepared and is responsible for the consolidated financial
statements and related information that appear in Items 6 and 7 and on pages
35-64 of this Form 10-K. The consolidated financial statements, which include
amounts based on the estimates of management, have been prepared in conformity
with accounting principles generally accepted in the United States. Other
financial information in this Annual Report on Form 10-K is consistent with that
in the consolidated financial statements.
Management believes that the Company's internal control systems provide
reasonable assurance at reasonable cost that assets are safeguarded against loss
from unauthorized use or disposition, and that the financial records are
reliable for preparing financial statements and maintaining accountability for
assets. These systems are augmented by written policies, an organizational
structure providing division of responsibilities, careful selection and training
of qualified financial personnel and a program of internal audits.
The independent accountants are engaged to conduct an audit of and render
an opinion on the financial statements in accordance with generally accepted
auditing standards. These standards include an assessment of the systems of
internal controls and tests of transactions to the extent considered necessary
by them to support their opinion.
The Board of Directors, through its Audit Committee, consisting solely of
outside directors of the Company, is responsible for reviewing and monitoring
the Company's financial reporting and accounting practices.
PricewaterhouseCoopers LLP and the internal auditors each have full and free
access to the Audit Committee and meet with it regularly, with and without
management.
/s/ ALLAN Z. LOREN
--------------------------------------
Allan Z. Loren
Chairman, Chief Executive Officer and
President
/s/ CHESTER J. GEVEDA, JR.
--------------------------------------
Chester J. Geveda, Jr.
Vice President and Controller and
Acting Chief
Financial Officer
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THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
2000 1999 1998
--------------- --------------- ---------------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
OPERATING REVENUES.................................. $ 1,417.6 $ 1,407.7 $ 1,420.5
----------- ----------- -----------
Operating Expenses.................................. 515.9 538.3 536.2
Selling and Administrative Expenses................. 546.7 539.4 542.4
Depreciation and Amortization....................... 111.2 127.9 126.2
Restructuring Expense............................... 41.5 41.2 --
Reorganization Costs................................ 29.5 -- 28.0
----------- ----------- -----------
OPERATING INCOME.................................... 172.8 160.9 187.7
----------- ----------- -----------
Interest Income..................................... 3.9 2.9 6.3
Interest Expense.................................... (8.6) (5.0) (12.0)
Minority Interest Expense........................... (22.4) (22.4) (22.5)
Other Income (Expense) -- Net....................... 6.0 9.0 (2.2)
----------- ----------- -----------
Non-Operating Expense -- Net........................ (21.1) (15.5) (30.4)
----------- ----------- -----------
Income from Continuing Operations before Provision
for Income Taxes.................................. 151.7 145.4 157.3
Provision for Income Taxes.......................... 78.1 64.1 71.1
----------- ----------- -----------
Income from Continuing Operations................... 73.6 81.3 86.2
Income from Discontinued Operations, Net of Income
Taxes of $86.2, $114.8 and $104.7 for 2000, 1999
and 1998, respectively............................ 133.0 174.7 193.9
----------- ----------- -----------
NET INCOME.......................................... $ 206.6 $ 256.0 $ 280.1
=========== =========== ===========
BASIC EARNINGS PER SHARE OF COMMON STOCK:
Continuing Operations............................. $ .91 $ 1.00 $ 1.02
Discontinued Operations........................... 1.64 2.16 2.29
----------- ----------- -----------
BASIC EARNINGS PER SHARE OF COMMON STOCK............ $ 2.55 $ 3.16 $ 3.31
=========== =========== ===========
DILUTED EARNINGS PER SHARE OF COMMON STOCK:
Continuing Operations............................. $ .90 $ .99 $ 1.00
Discontinued Operations........................... 1.62 2.13 2.26
----------- ----------- -----------
DILUTED EARNINGS PER SHARE OF COMMON STOCK.......... $ 2.52 $ 3.12 $ 3.26
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic............................................. 81,001,000 81,127,000 84,746,000
=========== =========== ===========
Diluted........................................... 81,994,000 82,142,000 85,852,000
=========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
35
36
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
----------------------
2000 1999
--------- ---------
(DOLLAR AMOUNTS IN
MILLIONS,
EXCEPT PER SHARE DATA)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents................................... $ 70.1 $ 109.4
Accounts Receivable -- Net of Allowance of $19.5 in 2000 and
$17.4 in 1999............................................. 376.3 363.7
Other Current Assets........................................ 92.2 133.6
-------- --------
TOTAL CURRENT ASSETS.............................. 538.6 606.7
-------- --------
NON-CURRENT ASSETS
Property, Plant and Equipment, Net.......................... 202.8 240.3
Prepaid Pension Costs....................................... 268.9 217.2
Computer Software, Net...................................... 131.3 149.8
Goodwill, Net............................................... 135.5 166.6
Other Non-Current Assets.................................... 146.5 194.2
-------- --------
TOTAL NON-CURRENT ASSETS.......................... 885.0 968.1
-------- --------
TOTAL ASSETS................................................ $1,423.6 $1,574.8
======== ========
CURRENT LIABILITIES
Notes Payable............................................... $ 49.6 $ 126.2
Accrued Income Taxes........................................ -- 175.4
Other Accrued and Current Liabilities....................... 353.5 382.2
Unearned Subscription Income................................ 340.0 353.2
-------- --------
TOTAL CURRENT LIABILITIES......................... 743.1 1,037.0
-------- --------
PENSION AND POSTRETIREMENT BENEFITS......................... 373.2 365.0
NET LIABILITIES OF DISCONTINUED OPERATIONS.................. -- 222.8
OTHER NON-CURRENT LIABILITIES............................... 56.7 64.7
CONTINGENCIES (NOTE 15)
MINORITY INTEREST........................................... 301.6 301.9
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value per share,
authorized -- 10,000,000 shares; -- outstanding -- none
Series Common Stock, $.01 par value per share,
authorized -- 10,000,000 shares; -- outstanding -- none
Common Stock, $.01 par value per share,
authorized -- 200,000,000 shares and 400,000,000 shares
for 2000 and 1999 respectively -- issued -- 81,945,520
shares and 171,451,136 shares for 2000 and 1999
respectively.............................................. .8 1.7
Unearned Compensation Restricted Stock...................... (1.9) --
Capital Surplus............................................. 241.1 237.3
Retained Earnings........................................... 13.2 (105.9)
Treasury Stock, at cost, 1,790,620 shares and 10,627,327
shares for 2000 and 1999 respectively..................... (45.3) (330.2)
Cumulative Translation Adjustment........................... (205.3) (181.1)
Minimum Pension Liability................................... (53.6) (38.4)
-------- --------
TOTAL SHAREHOLDERS' EQUITY.................................. (51.0) (416.6)
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $1,423.6 $1,574.8
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
36
37
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.................................................. $ 206.6 $ 256.0 $ 280.1
Less:
Net Income from Discontinued Operations................... 133.0 174.7 193.9
------- ------- -------
Net Income from Continuing Operations....................... 73.6 81.3 86.2
Reconciliation of Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization............................. 111.2 127.9 126.2
Restructuring Expense..................................... 41.5 41.2 --
Restructuring Payments.................................... (21.8) (2.6) --
Postemployment Benefit Payments........................... (2.6) (13.4) (15.3)
Net (Increase) Decrease in Accounts Receivable............ (26.3) (22.8) 9.0
Deferred Income Taxes..................................... 18.4 16.3 (28.2)
Accrued Income Taxes, Net................................. (136.7) 7.4 127.7
Decrease in Long Term Liabilities......................... (7.8) (7.3) (105.7)
Increase in Other Long-Term Assets........................ (46.4) (36.8) (17.8)
Net Decrease (Increase) in Other Working Capital Items.... 29.5 (56.0) (33.4)
Other..................................................... (4.7) -- 4.1
------- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Continuing Operations..................................... 27.9 135.2 152.8
Discontinued Operations................................... (4.1) 214.8 222.4
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 23.8 350.0 375.2
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Marketable Securities................ 1.2 22.5 50.9
Payments for Marketable Securities.......................... (1.1) (21.8) (50.4)
Capital Expenditures........................................ (24.1) (34.3) (47.2)
Additions to Computer Software and Other Intangibles........ (43.0) (75.3) (87.2)
(Purchase of) Proceeds from Sales of Other Investments...... (5.5) (6.3) 3.6
Net Cash (Used in) Provided by Investing Activities of
Discontinued Operations................................... (26.2) (12.1) 9.7
Other....................................................... 14.2 10.6 (16.0)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES....................... (84.5) (116.7) (136.6)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Dividends........................................ (89.8) (120.1) (137.4)
Payments for Purchase of Treasury Shares.................... (46.8) (237.9) (220.2)
Net Proceeds from Stock Plans............................... 37.7 48.4 41.0
(Decrease) Increase in Commercial Paper Borrowings.......... (75.2) 88.8 (385.7)
Increase (Decrease) in Other Short-Term Borrowings.......... -- .6 (28.9)
Net Cash Provided by Financing Activities of Discontinued
Operations................................................ 195.5 1.3 1.1
Proceeds from Debt Assumed by R.H. Donnelley................ -- -- 500.0
Other....................................................... 3.6 8.6 2.8
------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... 25.0 (210.3) (227.3)
------- ------- -------
Effect of Exchange Rate Changes on Cash and Cash
Equivalents............................................... (3.6) (.3) (1.4)
------- ------- -------
(Decrease) Increase in Cash and Cash Equivalents............ (39.3) 22.7 9.9
Cash and Cash Equivalents, Beginning of Year................ 109.4 86.7 76.8
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 70.1 $ 109.4 $ 86.7
======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
37
38
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 2000
-----------------------------------------------------------
COMMON UNEARNED
STOCK COMPENSATION
($1 AND $.01 RESTRICTED CAPITAL RETAINED TREASURY
PAR VALUE) STOCK SURPLUS EARNINGS STOCK
------------ ------------ ------- -------- --------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
BALANCE, JANUARY 1, 1998................... $ 188.4 $ -- $ 80.2 $ 367.7 $(964.0)
------- ----- ------ ------- -------
Dollar Par Common Stock:
Treasury Shares Reissued Under Stock
Options, Deferred and Other
Compensation Plans (1,514,773)......... (52.6) 85.3
Treasury Shares Acquired (790,800)....... (27.2)
Stock Dividend to Shareholders of
Donnelley................................ 183.5
Adjustment to Penny Par Value.............. (169.6) 169.6
Recapitalization........................... (17.1) .5 (889.3) 905.9
Net Income................................. 280.1
Dividends Declared ($.775 per share)....... (130.4)
Penny Par Common Stock:
Treasury Shares Reissued Under Stock
Options, Deferred and Other
Compensation Plans (837,232)........... (1.3) 24.3
Treasury Shares Earned Under Restricted
Stock Plan (5,595)..................... .6
Treasury Shares Acquired (7,239,751)..... (193.0)
Common Shares Issued Under Stock Options
and Restricted Stock Plan (159,819).... 2.1
Change in Cumulative Translation
Adjustment...............................
Change in Minimum Pension Liability........
Unrealized Gains on Investments............ .1
------- ----- ------ ------- -------
TOTAL COMPREHENSIVE INCOME.................
BALANCE, DECEMBER 31, 1998................. 1.7 -- 251.1 (240.9) (168.1)
------- ----- ------ ------- -------
Net Income................................. 256.0
Dividends Declared ($.74 per share)........ (119.3)
Treasury Shares Reissued Under Stock
Options, Deferred, and Other Compensation
Plans and Restricted Stock Plan
(2,420,300).............................. (13.8) .3 71.0
Treasury Shares Reissued Under Employee
Stock Purchase Plan (153,097)............ (.6) 4.8
Treasury Shares Acquired (6,803,800)....... (237.9)
Change in Cumulative Translation
Adjustment...............................
Change in Minimum Pension Liability........
Unrealized Losses on Investments........... (1.4)
------- ----- ------ ------- -------
TOTAL COMPREHENSIVE INCOME.................
BALANCE, DECEMBER 31, 1999................. 1.7 -- 237.3 (105.9) (330.2)
------- ----- ------ ------- -------
Net Income................................. 206.6
Dividends Declared ($.555 per share)....... (60.0)
Common Shares Issued Under Stock Options
and Restricted Stock Plan (732,000)...... 8.8 (2.7)
Treasury Shares Reissued Under Stock
Options, Deferred, and Other Compensation
Plans and Restricted Stock Plan
(1,500,111).............................. (7.4) 48.1
Treasury Shares Reissued Under Employee
Stock Purchase Plan (183,541)............ .1 5.5
Treasury Shares Acquired (1,908,543)....... (46.8)
Unearned Portion of Restricted Stock
Awards................................... (1.9) 2.4
Stock Dividend to Shareholders of
Moody's.................................. 252.5
Recapitalization........................... (.9) (279.9) 280.8
Change in Cumulative Translation
Adjustment...............................
Change in Minimum Pension Liability........
Unrealized Losses on Investments........... (.2)
------- ----- ------ ------- -------
TOTAL COMPREHENSIVE INCOME.................
BALANCE, DECEMBER 31, 2000................. $ .8 $(1.9) $241.1 $ 13.2 $ (45.3)
======= ===== ====== ======= =======
THREE YEARS ENDED DECEMBER 31, 2000
-------------------------------------------------------
CUMULATIVE MINIMUM TOTAL
TRANSLATION PENSION SHAREHOLDERS' COMPREHENSIVE
ADJUSTMENT LIABILITY EQUITY INCOME
----------- --------- ------------- -------------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
BALANCE, JANUARY 1, 1998................... $(162.6) $(37.4) $(527.7)
------- ------ -------
Dollar Par Common Stock:
Treasury Shares Reissued Under Stock
Options, Deferred and Other
Compensation Plans (1,514,773)......... 32.7
Treasury Shares Acquired (790,800)....... (27.2)
Stock Dividend to Shareholders of
Donnelley................................ 183.5
Adjustment to Penny Par Value.............. --
Recapitalization........................... --
Net Income................................. 280.1 $280.1
Dividends Declared ($.775 per share)....... (130.4)
Penny Par Common Stock:
Treasury Shares Reissued Under Stock
Options, Deferred and Other
Compensation Plans (837,232)........... 23.0
Treasury Shares Earned Under Restricted
Stock Plan (5,595)..................... .6
Treasury Shares Acquired (7,239,751)..... (193.0)
Common Shares Issued Under Stock Options
and Restricted Stock Plan (159,819).... 2.1
Change in Cumulative Translation
Adjustment............................... (7.6) (7.6) (7.6)
Change in Minimum Pension Liability........ (7.2) (7.2) (7.2)
Unrealized Gains on Investments............ .1 .1
------- ------ ------- ------
TOTAL COMPREHENSIVE INCOME................. $265.4
BALANCE, DECEMBER 31, 1998................. (170.2) (44.6) (371.0)
------- ------ ------- ======
Net Income................................. 256.0 $256.0
Dividends Declared ($.74 per share)........ (119.3)
Treasury Shares Reissued Under Stock
Options, Deferred, and Other Compensation
Plans and Restricted Stock Plan
(2,420,300).............................. 57.5
Treasury Shares Reissued Under Employee
Stock Purchase Plan (153,097)............ 4.2
Treasury Shares Acquired (6,803,800)....... (237.9)
Change in Cumulative Translation
Adjustment............................... (10.9) (10.9) (10.9)
Change in Minimum Pension Liability........ 6.2 6.2 6.2
Unrealized Losses on Investments........... (1.4) (1.4)
------- ------ ------- ------
TOTAL COMPREHENSIVE INCOME................. $249.9
BALANCE, DECEMBER 31, 1999................. (181.1) (38.4) (416.6)
------- ------ ------- ======
Net Income................................. 206.6 $206.6
Dividends Declared ($.555 per share)....... (60.0)
Common Shares Issued Under Stock Options
and Restricted Stock Plan (732,000)...... 6.1
Treasury Shares Reissued Under Stock
Options, Deferred, and Other Compensation
Plans and Restricted Stock Plan
(1,500,111).............................. 40.7
Treasury Shares Reissued Under Employee
Stock Purchase Plan (183,541)............ 5.6
Treasury Shares Acquired (1,908,543)....... (46.8)
Unearned Portion of Restricted Stock
Awards................................... .5
Stock Dividend to Shareholders of
Moody's.................................. 252.5
Recapitalization........................... --
Change in Cumulative Translation
Adjustment............................... (24.2) (24.2) (24.2)
Change in Minimum Pension Liability........ (15.2) (15.2) (15.2)
Unrealized Losses on Investments........... (.2) (.2)
------- ------ ------- ------
TOTAL COMPREHENSIVE INCOME................. $167.0
BALANCE, DECEMBER 31, 2000................. $(205.3) $(53.6) $ (51.0)
======= ====== ======= ======
The accompanying notes are an integral part of the consolidated financial
statements.
38
39
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
those of The Dun & Bradstreet Corporation (the "Company" or "D&B") and its
subsidiaries and investments in which the Company has a controlling interest.
Investments in companies over which the Company has significant influence but
not a controlling interest are carried on an equity basis. The effects of all
significant intercompany transactions have been eliminated.
The financial statements of subsidiaries outside the United States and
Canada reflect a fiscal year ended November 30 to facilitate timely reporting of
the Company's consolidated financial results.
As discussed more thoroughly in Note 2, Moody's Corporation and R.H.
Donnelley Corporation are presented as discontinued operations.
CASH EQUIVALENTS. Marketable securities that mature within 90 days of
purchase date are considered cash equivalents and are stated at cost, which
approximates fair value.
MARKETABLE SECURITIES. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," marketable securities at December 31, 2000 and
1999, are classified as "available for sale" and are reported at fair value,
with net unrealized gains and losses reported in shareholders' equity.
The fair value of current and non-current marketable securities was
estimated based on quoted market prices. Realized gains and losses on marketable
securities are determined on the specific identification method.
The Company's marketable securities of $37.5 million and $45.4 million at
December 31, 2000 and 1999, respectively, consisted primarily of debt securities
of the U.S. Government and its agencies.
PROPERTY, PLANT AND EQUIPMENT. Buildings, machinery and equipment are
depreciated principally using the straight-line method over a period of three to
40 years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the term of the lease or the estimated useful life of the
improvement.
COMPUTER SOFTWARE, GOODWILL AND INTANGIBLE ASSETS. Effective January 1,
1999, the Company adopted Statement of Position ("SOP") 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." Among
other provisions, SOP 98-1 requires that entities capitalize certain
internal-use software costs once certain criteria are met. Under SOP 98-1,
overhead, general and administrative and training costs are not capitalized. In
addition, certain computer software costs are capitalized in accordance with
SFAS No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased
or Otherwise Marketed," and are reported at the lower of unamortized cost or net
realizable value. Costs incurred in connection with business process
reengineering are expensed as incurred.
Other intangibles result from acquisitions and database enhancements.
Computer software and other intangibles are being amortized, using the
straight-line method, over three to five years and three to 15 years,
respectively. Goodwill represents the excess purchase price over the fair value
of identifiable net assets of businesses acquired and is amortized on a
straight-line basis over five to 40 years.
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
reviews for impairment of long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In general, the Company will recognize an
impairment loss when the sum of undiscounted expected future cash flows is less
than the carrying amount of such assets. The measurement for such an impairment
loss is then based on the fair value of the asset.
39
40
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At each balance sheet date, the Company reviews the recoverability of
goodwill, not identified with long-lived assets, based on estimated undiscounted
future cash flows from operating activities compared with the carrying value of
goodwill, and recognizes any impairment on the basis of such comparison. The
recognition and measurement of goodwill impairment is assessed at the
business-unit level.
REVENUE RECOGNITION. The Company recognizes revenue as services are
performed, information is delivered and products and services are used by its
customers. Amounts billed for service and subscriptions are credited to unearned
subscription income and reflected in operating revenues as used over the
subscription term, which is generally one year.
FOREIGN CURRENCY TRANSLATION. For all operations outside the United States
where the Company has designated the local currency as the functional currency,
assets and liabilities are translated using the end-of-year exchange rates, and
revenues and expenses are translated using average exchange rates for the year.
For these countries, currency translation adjustments are accumulated in a
separate component of shareholders' equity, whereas realized transaction gains
and losses are recognized in other income (expense) -- net. For operations in
countries that are considered to be highly inflationary, where the U.S. dollar
is designated as the functional currency, monetary assets and liabilities are
translated using end-of-year exchange rates, and nonmonetary accounts are
translated using historical exchange rates. Translation and transaction loss of
$.3 million in 2000 and gains of $.1 million and $1.0 million in 1999 and 1998,
respectively, are recognized in other income (expense) -- net.
EARNINGS PER SHARE OF COMMON STOCK. In accordance with SFAS No. 128,
"Earnings per Share" ("SFAS No. 128"), basic earnings per share are calculated
based on the weighted average number of shares of common stock outstanding
during the reporting period. Diluted earnings per share are calculated giving
effect to all potentially dilutive common shares, assuming such shares were
outstanding during the reporting period.
FINANCIAL INSTRUMENTS. At times, the Company uses forward foreign exchange
contracts and interest rate swaps to hedge existing assets, liabilities and firm
commitments. The Company does not use any derivatives for trading or speculative
purposes.
Gains and losses on forward foreign exchange contracts that qualify as
hedges of existing assets or liabilities are included in the carrying amounts of
those assets or liabilities and are ultimately recognized in income as part of
those carrying amounts. Gains and losses related to qualifying hedges of firm
commitments are also deferred, and are recognized in income or as adjustments of
carrying amounts when the hedged transactions occur. For forward foreign
exchange contracts, the risk reduction is assessed on a transaction basis, and
contract amounts and terms are matched to existing intercompany transactions.
The Company has used, but no longer uses, interest rate swaps to hedge
interest rate risk on commercial paper. Settlement accounting is accorded to the
swaps that have contractual, periodic payment terms considered to be aligned to
the expected future commercial paper issuances. Periodic swap payments and
receipts under interest rate swaps are recorded as part of interest expense.
Neither the swap contracts nor the gains or losses on these contracts, which are
designated and effective as hedges, are recognized in the financial statements.
If a hedging instrument is sold or terminated prior to maturity, gains and
losses will continue to be deferred until the hedged item is recognized in
income. If a hedging instrument ceases to qualify for settlement accounting, any
subsequent gains and losses are recognized currently in income.
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those
40
41
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimates. Estimates are used in the determination of allowances for doubtful
accounts, employee benefits plans, taxes and contingencies, and depreciation
rates for property, plant and equipment, computer software, goodwill and other
capitalized costs, among others.
RECLASSIFICATIONS. As discussed in Note 2, the consolidated financial
statements have been reclassified to identify separately the results of
operations and cash flows of the Company's discontinued operations. In addition,
certain prior-year amounts have been reclassified to conform to the 2000
presentation.
NOTE 2 REORGANIZATION AND DISCONTINUED OPERATIONS
Pursuant to APB No. 30, "Reporting the Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," the consolidated financial
statements of the Company have been reclassified to reflect as discontinued
operations the segment conducted principally by Moody's Investors Service, Inc.
as a result of the 2000 Distribution (as defined below) and the companies that
constituted the directory information services business segment of the
predecessor of D&B, as a result of the 1998 Distribution (as defined below).
2000 DISTRIBUTION
On September 30, 2000 (the "2000 Distribution Date"), the company then
known as The Dun & Bradstreet Corporation ("Old D&B") separated into two
independent, publicly traded companies -- The New D&B Corporation (the
"Company") and Moody's Corporation ("Moody's"). The separation was accomplished
through a tax-free distribution to shareholders of Old D&B (the "2000
Distribution") of all of the shares of common stock of the Company. For every
two shares of common stock of Old D&B held, shareholders received one share of
common stock of the Company. Following the 2000 Distribution, Old D&B was
renamed "Moody's Corporation" and the Company was renamed "The Dun & Bradstreet
Corporation."
Prior to the 2000 Distribution, Old D&B had completed an internal
reorganization to the effect that, at the time of the 2000 Distribution, the
business of the Company consisted solely of the business of supplying credit,
marketing and purchasing information as well as receivables management services
(the "D&B Business"), and the business of Old D&B (other than the Company and
its subsidiaries) consisted solely of the business of providing ratings and
related research and risk management services (the "Moody's Business").
Old D&B received a ruling letter from the Internal Revenue Service (the
"IRS") on June 15, 2000, to the effect that the receipt by Old D&B shareholders
of the common stock of the Company in the 2000 Distribution would be tax-free to
such stockholders and Old D&B for Federal income tax purposes, except to the
extent of cash received in lieu of fractional shares of common stock of the
Company. The 2000 Distribution was effected on September 30, 2000, and resulted
in an increase to shareholders' equity of $256.6 million. During the fourth
quarter of 2000, adjustments to the dividend of $4.1 million were recorded as a
decrease to shareholders' equity, primarily as a result of changes in estimates.
For purposes of, among other things, governing certain of the ongoing
relations between the Company and Moody's as a result of the 2000 Distribution,
as well as to allocate certain tax, employee benefit and other liabilities
arising prior to the 2000 Distribution, the companies entered into various
agreements, including a Distribution Agreement (the "2000 Distribution
Agreement"), Tax Allocation Agreement, Employee Benefits Agreement, Intellectual
Property Assignment, Shared Transaction Services Agreement, Insurance and Risk
Management Services Agreement, Data Services Agreement and Transition Services
Agreement.
In general, pursuant to the terms of the 2000 Distribution Agreement, all
of the assets of the D&B Business have been allocated to the Company and all of
the assets of the Moody's Business have been allocated to Moody's. The 2000
Distribution Agreement also provided for assumptions of liabilities and cross-
indemnities designed to allocate generally, as of September 30, 2000, financial
responsibility for: (i) all
41
42
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities arising out of or in connection with the D&B Business to the
Company, (ii) all liabilities arising out of or in connection with the Moody's
Business to Moody's, and (iii) substantially all other liabilities as of
September 30, 2000, equally between the Company and Moody's. The liabilities so
allocated include contingent and other liabilities relating to former businesses
of Old D&B and its predecessors and certain prior business transactions, which
consist primarily of potential liabilities arising from a legal action initiated
by Information Resources, Inc. ("IRI"), or from reviews by tax authorities of
Old D&B's global tax planning initiatives, each of which is described in Note
15.
Pursuant to the terms of a distribution agreement, dated as of June 30,
1998 (the "1998 Distribution Agreement"), between Old D&B (then known as "The
New Dun & Bradstreet Corporation") and R.H. Donnelley Corporation (then known as
"The Dun & Bradstreet Corporation" and herein referred to as "Donnelley"), as a
condition to the 2000 Distribution, the Company was required to undertake to be
jointly and severally liable with Moody's to Donnelley for any liabilities
arising thereunder. The 2000 Distribution Agreement generally allocates the
financial responsibility for liabilities of Old D&B under the 1998 Distribution
Agreement equally between the Company and Moody's, except that any such
liabilities that relate primarily to the D&B Business are liabilities of the
Company and any such liabilities that relate primarily to the Moody's Business
are liabilities of Moody's. Among other things, the Company and Moody's agreed
that, as between themselves, they are each responsible for 50% of any payments
to be made under the 1998 Distribution Agreement in respect of the action by IRI
(as described in Note 15), including any legal fees and expenses related
thereto.
In connection with the 2000 Distribution, Old D&B borrowed funds to repay
in full its commercial paper obligations. In addition, pursuant to the 2000
Distribution Agreement, immediately prior to the 2000 Distribution, a portion of
Old D&B's indebtedness (plus certain minority interest obligations) and a
portion of Old D&B's cash was allocated to the Company in amounts such that, at
the time of the 2000 Distribution and before giving effect to the agreement
discussed below and certain other factors, the net indebtedness of the Company
(plus the minority interest obligations) approximated the net indebtedness of
Moody's. Under the terms of the Employee Benefits Agreement, substantially all
unexercised Old D&B stock options have been adjusted as of the 2000 Distribution
Date to comprise options to purchase Moody's common stock and separately
exercisable options to purchase common stock of the Company. In light of, among
other things, the numbers of optionees employed by the Company and Moody's,
respectively, this adjustment resulted in a substantially greater number of
outstanding options to purchase common stock of Moody's than would be the case
if options had been adjusted so as to become solely options to purchase common
stock of the optionee's employer. Due to this fact and the fact that, consistent
with past practice, each company was expected to maintain a stock purchase
program designed to offset the increased number of shares otherwise attributable
to option exercises, the Company agreed to adjust the net indebtedness of the
two companies to compensate Moody's for the disproportionate amount of its
estimated future cash costs in this regard. The final amount of the adjustment
discussed in the immediately preceding sentence has been reflected in the
Company's consolidated balance sheet at December 31, 2000, and was determined on
a formula basis dependent upon a variety of factors, including the respective
trading prices of Moody's and the Company's common stock at the time of the 2000
Distribution.
Due to the relative significance of the D&B Business as compared with the
Moody's Business, the 2000 Distribution has been accounted for as a reverse
spin-off. As such, the D&B Business has been classified as continuing
operations, and the Moody's Business as discontinued operations. For financial
reporting purposes,
42
43
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the assets and liabilities of Moody's have been separately classified on the
balance sheet at December 31, 1999 as "Net Liabilities of Discontinued
Operations." A summary of these assets and liabilities follows:
DECEMBER 31,
1999
------------
Current assets.............................................. $178.3
Total assets................................................ 211.0
Current liabilities......................................... 377.8
Total liabilities........................................... 433.8
Net liabilities of discontinued operations.................. 222.8
The net operating results of Moody's have been reported in the caption
"Income from Discontinued Operations," in the consolidated statements of
operations. Summarized operating results for Moody's for the years ended
December 31, 2000, 1999 and 1998 were as follows:
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
2000 1999 1998
------ ------ ------
Operating revenues....................................... $441.1 $564.2 $513.9
Income before provision for income taxes................. 219.2 289.5 242.4
Net income............................................... 133.0 174.7 160.2
1998 DISTRIBUTION
On June 30, 1998, the company then known as The Dun & Bradstreet
Corporation separated into two publicly traded companies. The separation (the
"1998 Distribution") of the two companies was accomplished through a tax-free
dividend by Donnelley of Old D&B, which was a new entity comprising Moody's and
the Dun & Bradstreet operating company. That new entity is now known as "The Dun
& Bradstreet Corporation," and the continuing entity, consisting of R.H.
Donnelley Inc., the operating company, and the DonTech partnership, changed its
name from The Dun & Bradstreet Corporation to R.H. Donnelley Corporation (i.e.,
Donnelley). Due to the relative significance of the new entity as compared with
Donnelley, the transaction was accounted for as a reverse spin-off and, as such,
Moody's and the D&B operating company were classified as continuing operations,
and Donnelley and DonTech were classified as discontinued operations. On June 3,
1998, following receipt of a ruling from the IRS that the transaction would be
tax-free to Donnelley and its U.S. shareholders, the Board of Directors of
Donnelley declared a dividend distribution to shareholders of record on June 17,
1998, consisting of one share of Old D&B for each share of Donnelley common
stock held as of the record date. The 1998 Distribution was effected on June 30,
1998, and resulted in an increase to shareholders' equity of $188.5 million.
During the fourth quarter of 1998, adjustments to the dividend of $5.0 million
were recorded as a decrease to shareholders' equity of Old D&B, primarily as a
result of employee benefits plan revisions.
For purposes of governing certain of the ongoing relationships between Old
D&B and Donnelley following the 1998 Distribution, the companies entered into
various agreements, including the 1998 Distribution Agreement and the related
Tax Allocation Agreement, Employee Benefits Agreement, Intellectual Property
Agreement, Shared Transaction Services Agreement, Data Services Agreement and
Transition Services Agreements.
The net operating results of the Directory Information Services segment,
which is now a part of Donnelley, have been reported in the caption "Income from
Discontinued Operations" in the consolidated
43
44
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
statements of operations of the Company. Summarized operating results for this
Directory Information Services segment for the year ended December 31, 1998 were
as follows:
Operating revenues.......................................... $107.8
Income before provision for income taxes.................... 56.2
Net income.................................................. 33.7
NOTE 3 SUMMARY OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133").
This statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet and measurement
of those instruments at fair value. If certain conditions are met, a derivative
may be designated specifically as: (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm commitment
(a fair value hedge), (b) a hedge of the exposure to variable cash flows of a
forecasted transaction (a cash flow hedge), or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. In June 1999, the Financial
Accounting Standards Board issued SFAS No. 137, delaying the effective date of
SFAS No. 133. The provisions of SFAS No. 133 are effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. The adoption of SFAS
No. 133 by D&B, effective January 1, 2001, had no effect on the Company.
NOTE 4 RESTRUCTURING
During the fourth quarter of 2000, the Company announced a new business
strategy, "The Blueprint for Growth," designed to transform the Company into a
growth company with an important presence on the Web, while also delivering
shareholder value during the transformation.
One component of the strategy is the reallocation of approximately $100
million from the Company's cost base to create the financial flexibility needed
to implement the new strategy. In the fourth quarter of 2000, the Company
announced actions designed to create approximately $100 million in financial
flexibility in 2001, which includes globalizing administrative functions,
streamlining data collection and fulfillment, rationalizing sales and marketing
functions, and consolidating and simplifying technology functions. The Company
will utilize the newly created financial flexibility to enhance its current
business, fund its strategy to become an important player in B2B e-commerce and
support annual earnings per share growth of 10%.
During the fourth quarter of 2000, the Company recorded a restructuring
charge of $41.5 million in connection with the Blueprint for Growth plan. The
charge included $28.2 million related to severance costs in connection with the
termination of approximately 880 associates. The costs were determined based on
amounts that will be paid pursuant to the Company's policies and certain non-US
governmental regulations. Leasehold termination obligations arising from office
closures represent $8.8 million and the write-off of certain assets made
obsolete or redundant and abandoned as a result of the plan represent $4.5
million. As of December 31, 2000, the Company had terminated approximately 100
of the affected employees. The Company anticipates that all actions under this
plan will be completed by the end of 2001 and considers the 2000 restructuring
reserve balances to be adequate to cover committed restructuring actions.
During the fourth quarter of 1999, the Company recorded a restructuring
charge of $41.2 million, comprised of severance costs of $32.7 million in
connection with the termination of approximately 700 associates, including two
former corporate executives, write-off of certain assets made obsolete or
redundant and abandoned of $3.9 million and leasehold termination obligations of
$4.6 million. The actions implemented under the plan included: (1) office
consolidations and organization changes in both Europe and other
44
45
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
international locations and improvements in sales and data collection operations
in Europe, (2) realigning and streamlining the Company's global technology
organization and outsourcing certain software and product development to
resources outside the United States and Europe, and (3) migrating data
collection in the U.S. to telephonic data collection and closing 15 U.S. field
data collection offices. As of December 31, 2000, the Company has terminated
approximately 530 employees out of the approximately 700 originally
contemplated. The remaining terminations will be completed by the end of January
2001 and payment of substantially all the related costs will be made by the end
of 2001. The remaining 1999 restructuring reserve balances are considered
adequate to cover committed restructuring actions. During the fourth quarter of
2000, the Company changed certain estimates with respect to costs associated
with the remaining actions to be taken under the plan.
The restructuring reserves and utilization to date were as follows:
AS OF DECEMBER 31, 2000
---------------------------------
AMOUNT AMOUNT AMOUNTS REMAINING
CHARGED UTILIZED ADJUSTED RESERVE
------- -------- -------- ---------
2000 RESTRUCTURING CHARGE:
Severance and termination benefits................... $28.2 $ (.8) $27.4
Asset write-offs and impairments..................... 4.5 (4.5) --
Lease termination obligations........................ 8.8 -- 8.8
----- ------ -----
Total 2000 Restructuring Charge............ $41.5 $ (5.3) $36.2
===== ====== =====
1999 RESTRUCTURING CHARGE:
Severance and termination benefits................... $32.7 $(22.7) $ 2.1 $12.1
Asset write-offs..................................... 3.9 (3.9) --
Lease termination obligations........................ 4.6 (.9) (2.1) 1.6
----- ------ ----- -----
Total 1999 Restructuring Charge............ $41.2 $(27.5) $ -- $13.7
===== ====== ===== =====
NOTE 5 NON-RECURRING ITEMS
In 2000, the Company incurred pre-tax expenses (primarily professional
fees) of $29.5 million in connection with the 2000 Distribution. In the third
quarter of 2000, the Company received a $10.1 million settlement of a lawsuit
related to a 1991 business transaction. The settlement payment was recorded in
other income (expense) -- net.
During the fourth quarter of 1999, the Company received $11.9 million to
settle litigation that arose from a transaction related to the 1996 sale of the
Dun & Bradstreet software company. The Company recorded the $11.9 million gain
in other income (expense) -- net.
In 1998, the Company incurred pre-tax expenses of $28.0 million in
connection with the separation of Donnelley (primarily professional fees of
$19.1 million and costs resulting from the termination of interest rate swaps of
$8.9 million).
45
46
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 RECONCILIATION OF WEIGHTED AVERAGE SHARES
2000 1999 1998
------ ------ ------
(SHARE DATA IN THOUSANDS)
Weighted average number of shares -- basic............... 81,001 81,127 84,746
Dilutive effect of shares issuable under stock options,
restricted stock and performance share plans........... 849 942 1,009
Adjustment of shares applicable to stock options
exercised during the period and performance share
plans.................................................. 144 73 97
------ ------ ------
Weighted average number of shares -- diluted............. 81,994 82,142 85,852
====== ====== ======
As required by SFAS No. 128, the Company has provided a reconciliation of
basic weighted average shares to diluted weighted average shares within the
tables outlined above. Options to purchase 4.4 million, 1.5 million and 1.7
million shares of common stock of the Company were outstanding at December 31,
2000, 1999 and 1998, respectively, but were not included in the computation of
diluted earnings per share because the options' exercise prices were greater
than the average market price of the Company's common stock. The Company's
options generally expire 10 years after the initial grant date.
Upon the 2000 Distribution, substantially all unexercised Old D&B stock
options were adjusted to comprise options to purchase Moody's common stock and
separately exercisable options to purchase the Company's common stock. The value
of the replacement awards preserved as closely as possible the value of the
awards that existed immediately prior to the Distribution. The number of shares
of Moody's common stock covered by the adjusted Moody's stock options is the
same number of shares covered by the Old D&B stock options. The number of shares
of the Company's common stock covered by the new D&B stock options equals 50% of
the number of shares covered by the unexercised Old D&B stock options.
Upon the 1998 Distribution, employees of the Company were granted
substitute options, preserving the economic value, as closely as possible, of
the options that existed immediately prior to the 1998 Distribution, and any
awards or options held by them in respect of Donnelley were canceled.
NOTE 7 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The Company uses short-term forward foreign exchange contracts and in the
past has used interest rate swap agreements to reduce exposure to fluctuations
in foreign exchange rates and in interest rates. The Company does not use
derivative financial instruments for trading or speculative purposes. If a
hedging instrument ceases to qualify as a hedge, any subsequent gains and losses
are recognized currently in income. Collateral is generally not required for
these types of instruments.
By their nature, all such instruments involve risk, including the credit
risk of non-performance by counterparties. However, at December 31, 2000 and
1999, in management's opinion there was no significant risk of loss in the event
of non-performance of the counterparties to these financial instruments. The
Company controls its exposure to credit risk through monitoring procedures.
FOREIGN EXCHANGE
In order to reduce the risk of foreign currency exchange rate fluctuations,
the Company follows a policy of hedging substantially all cross-border
intercompany transactions denominated in a currency other than the functional
currency applicable to each of its various subsidiaries. The financial
instruments used to hedge these cross-border intercompany transactions are
forward foreign exchange contracts with maturities of six months or less. These
forward contracts are executed with creditworthy institutions and are
denominated primarily in the British pound sterling, the euro and the Swedish
krona. The gains and losses on these forward
46
47
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contracts are recorded to income or expense and are essentially offset by the
gains and losses on the underlying foreign currency transactions.
At December 31, 2000 and 1999, the Company had approximately $181 million
and $138 million of forward foreign exchange contracts outstanding with various
expiration dates through March 2001 and March 2000, respectively. At December
31, 2000, unrealized gains on these contracts were $1.0 million, and the
unrealized losses were $1.7 million. At December 31, 1999, unrealized gains on
these contracts were $.9 million, and the unrealized losses were $.4 million.
INTEREST RATE SWAP AGREEMENTS
In the past, the Company has entered into interest rate swap agreements to
manage exposure to changes in interest rates. Interest rate swaps allowed the
Company to raise funds at floating rates and effectively swap them into fixed
rates that were lower than those available to it if fixed-rate borrowings were
to be made directly.
In connection with the 1998 Distribution and repayment of outstanding notes
payable, Donnelley canceled all of its interest rate swap agreements (which
fixed interest rates on $300 million of variable rate debt through January 2005)
and recorded into income the previously unrecognized fair value loss at the time
of termination. At the time of the cancellation, the fair value of the interest
rate swaps was a loss of $12.7 million, of which $3.8 million ($.6 million in
the first quarter of 1998 and $3.2 million in 1997) had been recognized in
income relating to swaps that did not qualify for settlement accounting. The
previously unrecognized loss of $8.9 million was recorded during the second
quarter of 1998 and included in reorganization costs.
NOTE 8 - PENSION & POSTRETIREMENT BENEFITS
PENSION PLANS POSTRETIREMENT BENEFITS
---------------------- ------------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
CHANGE IN BENEFIT OBLIGATIONS
Benefit obligation at January 1.................. $(1,152.9) $(1,236.2) $(193.5) $(214.0)
Service cost..................................... (19.0) (18.4) (2.1) (2.9)
Interest cost.................................... (86.5) (81.6) (14.4) (13.8)
Benefits paid.................................... 92.1 88.5 18.5 17.8
Impact of 2000 Distribution...................... 30.9 -- 3.2 --
Actuarial (loss) gain............................ (33.8) 94.8 (3.5) 22.1
Plan participant contributions................... (17.9) -- (2.8) (2.7)
--------- --------- ------- -------
Benefit obligation at December 31................ $(1,187.1) $(1,152.9) $(194.6) $(193.5)
========= ========= ======= =======
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1........... $ 1,680.6 $ 1,465.1 $ -- $ --
Actual return on plan assets..................... (63.6) 279.6 -- --
Employer contribution............................ 28.8 24.4 15.7 15.1
Impact of 2000 Distribution...................... (88.0) -- -- --
Plan participant contributions................... -- -- 2.8 2.7
Benefits paid.................................... (92.1) (88.5) (18.5) (17.8)
--------- --------- ------- -------
Fair value of plan assets at December 31......... $ 1,465.7 $ 1,680.6 $ -- $ --
========= ========= ======= =======
47
48
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PENSION PLANS POSTRETIREMENT BENEFITS
---------------------- ------------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
RECONCILIATION OF FUNDED STATUS TO TOTAL AMOUNT
RECOGNIZED
Funded status of plan............................ $ 278.6 $ 527.7 $(194.6) $(193.5)
Unrecognized actuarial (gain) loss............... (133.5) (380.8) .2 (3.3)
Unrecognized prior service cost.................. 24.2 28.7 -- --
Unrecognized net transition asset................ (.9) (12.5) -- --
--------- --------- ------- -------
Net amount recognized............................ $ 168.4 $ 163.1 $(194.4) $(196.8)
========= ========= ======= =======
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE
SHEETS
Prepaid pension costs............................ $ 268.9 $ 266.9 $ -- $ --
Pension and postretirement benefits.............. (170.7) (162.5) (194.4) (196.8)
Intangible assets................................ 16.6 20.3 -- --
Minimum pension liability........................ 53.6 38.4 -- --
--------- --------- ------- -------
Net amount recognized............................ $ 168.4 $ 163.1 $(194.4) $(196.8)
========= ========= ======= =======
1999 benefit obligations and plan assets include amounts attributable to
Moody's. The net amount recognized attributable to Moody's has been included in
the net liabilities of discontinued operations. The Company has retained the
obligation for all pension and postretirement benefits for personnel who retired
from Moody's prior to the 2000 Distribution and for the obligation for all
vested benefits accrued by Moody's active employees under the Old D&B
nonqualified supplemental pension plans through the date of the 2000
Distribution.
The benefit obligation and accumulated benefit obligation for pension plans
with accumulated benefit obligations in excess of plan assets were $182.5
million and $170.7 million in 2000 and $176.9 million and $162.5 million in
1999. Grantor trusts are used to fund these obligations. At December 31, 2000
and 1999, the balance of those trusts were $37.3 million and $45.2 million,
respectively.
PENSION PLANS POSTRETIREMENT BENEFITS
--------------------------- ------------------------
2000 1999 1998 2000 1999 1998
------- ------- ------- ------ ------ ------
COMPONENTS OF NET PERIODIC (INCOME) COST
Service cost................................... $ 19.0 $ 18.4 $ 18.2 $ 2.1 $ 2.9 $ 2.8
Interest cost.................................. 86.5 81.6 82.6 14.4 13.8 14.3
Expected return on plan assets................. (130.6) (114.0) (109.4) -- -- --
Amortization of transition obligation
(asset)...................................... 1.8 (11.7) 3.1 -- -- --
Amortization of prior service cost............. 3.5 3.8 4.4 -- (2.7) (4.4)
Recognized actuarial (gain) loss............... (10.4) 6.6 (10.4) -- -- --
------- ------- ------- ----- ----- -----
Net periodic pension (income) cost............. $ (30.2) $ (15.3) $ (11.5) $16.5 $14.0 $12.7
======= ======= ======= ===== ===== =====
PENSION PLANS POSTRETIREMENT BENEFITS
------------------ ------------------------
2000 1999 1998 2000 1999 1998
---- ---- ---- ------ ------ ------
ASSUMPTIONS AS OF DECEMBER 31:
Discount rate......................................... 7.50% 7.75% 6.75% 7.50% 7.75% 6.75%
Expected return on plan assets........................ 9.75 9.75 9.75 -- -- --
Rate of compensation increase......................... 4.66 4.91 3.91 4.66 4.91 3.91
Cash balance accumulation conversion rate............. 5.75 6.50 5.50 -- -- --
48
49
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For measurements purposes, a 6.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2001. The rate was assumed
to decrease gradually to 5.0% for 2021 and remain at that level thereafter.
Assumed health-care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in the
assumed health care cost trend rates would have the following effects.
1% POINT
--------------------
INCREASE DECREASE
-------- --------
Benefit obligation at end of year........................... $16.4 $(15.0)
Service cost plus interest cost............................. 1.4 (1.2)
PROFIT PARTICIPATION PLAN
The Company also has a profit participation plan covering substantially all
U.S. employees that provides for an employee salary deferral contribution and
Company contributions. Employees may contribute up to 16% of their pay. The
Company contributes an amount equal to 50% of employee contributions, up to 6%
of the employee's pay. The Company also makes contributions to the plan if
certain objectives are met. The Company recognized expense associated with the
plan of $11.7 million, $12.1 million and $16.4 million in 2000, 1999 and 1998,
respectively.
NOTE 9 EMPLOYEE STOCK PLANS
Under The Dun & Bradstreet Corporation 2000 Stock Incentive Plan, the
Company has granted options to certain associates to purchase shares of its
common stock at the market price on the date of the grant. Options granted in
December 2000 generally vest in three equal installments, beginning on the third
anniversary of the grant. These options expire 10 years from the date of the
grant. The Dun & Bradstreet Corporation 2000 Stock Incentive Plan provides for
the granting of up to 9.7 million shares of common stock of the Company.
Upon the 2000 Distribution (under the 2000 Dun & Bradstreet Corporation
Replacement Plan for Certain Employees Holding Dun & Bradstreet Corporation
Equity-Based Awards), substantially all unexercised Old D&B stock options were
adjusted to comprise options to purchase Moody's common stock and separately
exercisable options to purchase the Company's common stock. The value of the
replacement awards preserved as closely as possible the value of the awards that
existed immediately prior to the 2000 Distribution. The number of shares of
Moody's common stock covered by the adjusted Moody's stock options is the same
number of shares covered by the Old D&B stock options. The number of shares of
the Company's common stock covered by the new D&B stock options equals 50% of
the number of shares covered by the unexercised Old D&B stock options.
The Company applies APB No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for the stock option plans. The Company
has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"). Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant date for awards in 2000, 1999 and 1998 (excluding awards granted to
employees of discontinued operations) consistent with the provisions of SFAS No.
123, the
49
50
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's income from continuing operations and earnings per share would have
been reduced to the pro-forma amounts indicated below:
2000 1999 1998
----- ----- -----
Income from continuing operations:
As reported............................................... $73.6 $81.3 $86.2
Pro forma................................................. 66.1 75.5 81.2
Basic earnings per share of common stock from continuing
operations:
As reported............................................... .91 1.00 1.02
Pro forma................................................. .82 .94 .96
Diluted earnings per share of common stock from continuing
operations:
As reported............................................... .90 .99 1.00
Pro forma................................................. .81 .92 .94
The pro forma disclosures shown are not representative of the effects on
income and earnings per share in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
CONVERSION
AFTER 2000 PRIOR TO 2000 AFTER 1998 AT 1998 PRIOR TO 1998
DISTRIBUTION DISTRIBUTION 1999 DISTRIBUTION DISTRIBUTION DISTRIBUTION
------------ ------------- --------- ------------ ------------ -------------
Expected dividend yield...... 0% 2.40% 2.40% 2.75% 2.75% 3.3%
Expected stock volatility.... 35% 30% 30% 20% 20% 20%
Risk-free interest rate...... 5.47% 5.49% 6.41% 5.38% 5.42% 5.53%
Expected holding period...... 5.0 years 5.0 years 5.0 years 6.0 years 2.3 years 4.5 years
Options outstanding at December 31, 2000 were originally granted during the
years 1991 through 2000 and are exercisable over periods ending not later than
2010. At December 31, 2000, 1999 and 1998 options for 3,215,849 shares,
7,899,386 shares and 8,527,343 shares of common stock of the Company,
respectively, were exercisable and 6,778,907 shares, 9,087,997 shares and
12,427,373 shares of the Company, respectively, were available for future grants
under the plans.
Changes in stock options for the three years ended December 31, 2000, are
summarized as follows:
WEIGHTED AVERAGE
SHARES EXERCISE PRICE($)
---------- -----------------
Options outstanding at January 1, 1998.................. 15,719,328 23.36
Granted............................................... 87,390 32.84
Exercised............................................. (1,305,111) 20.77
Surrendered or expired................................ (336,444) 24.53
----------
Options outstanding at June 30, 1998.................... 14,165,163 23.63
Attributable to 1998 Distribution....................... (1,206,985) 24.78
----------
Options outstanding at June 30, 1998.................... 12,958,178 23.52
==========
Options converted at July 1, 1998....................... 13,734,489 22.19
Granted............................................... 4,171,907 32.47
Exercised............................................. (1,095,003) 18.84
Surrendered or expired................................ (432,396) 26.35
----------
50
51
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WEIGHTED AVERAGE
SHARES EXERCISE PRICE($)
---------- -----------------
Options outstanding at December 31, 1998................ 16,378,997 24.92
Granted............................................... 3,656,224 29.31
Exercised............................................. (2,286,242) 19.99
Surrendered or expired................................ (825,818) 29.26
----------
Options outstanding at December 31, 1999................ 16,923,161 26.32
Granted............................................... 1,290,770 29.33
Exercised............................................. (1,258,366) 21.34
Surrendered or expired................................ (1,628,583) 29.82
----------
Options outstanding at September 30, 2000............... 15,326,982 26.62
==========
Options converted at October 1, 2000.................... 8,425,788 13.31
Granted............................................... 3,223,593 23.72
Exercised............................................. (587,948) 10.71
Surrendered or expired................................ (140,385) 14.98
----------
Options outstanding at December 31, 2000................ 10,921,048 16.50
==========
The weighted average fair value of options granted during 2000, 1999 and
1998 was $9.40, $8.78 and $7.13 respectively.
The following table summarizes information about stock options outstanding
at December 31, 2000:
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
------------------------------------------------ ----------------------------
WEIGHTED AVERAGE
RANGE OF SHARES REMAINING WEIGHTED AVERAGE SHARES WEIGHTED AVERAGE
EXERCISE PRICES (000'S) CONTRACTUAL LIFE EXERCISE PRICE (000'S) EXERCISE PRICE
--------------- ---------- ---------------- ---------------- --------- ----------------
$ 8.93 - $14.86 5,443,217 6.4 Years $12.41 3,210,883 $11.30
$15.06 - $23.72 5,477,831 8.1 Years $20.57 4,966 $15.91
---------- ---------
Total 10,921,048 3,215,849
========== =========
The plans also provide for the granting of stock appreciation rights
("SARs") and limited stock appreciation rights ("LSARs") in tandem with stock
options to certain key employees. Upon the 2000 Distribution, substantially all
the Old D&B SARs and LSARs were adjusted or converted into awards of the Company
and Moody's. The value of the replacement awards preserved as closely as
possible the value of the awards that existed immediately prior to the 2000
Distribution. At December 31, 2000 there were 111,494 SARs and 1,974,352 LSARs
attached to stock options, which are exercisable only if, and to the extent
that, the related option is exercisable and, in the case of LSARs, only upon the
occurrence of specified contingent events.
Upon the 2000 Distribution, restricted stock of Old D&B that had been
granted to key associates was forfeited and replaced with D&B common stock, and
restricted stock held by members of the Board of Directors of the Company was
forfeited and replaced with D&B and Moody's common stock preserving the economic
value that existed immediately prior to the 2000 Distribution. During the fourth
quarter of 2000, 151,390 shares of restricted stock were replaced or granted and
were outstanding at December 31, 2000. During 1999 and 1998, no new awards of
restricted stock were granted, and during 1998, 36,620 shares of Old D&B common
stock were replaced. There were no forfeitures during 2000, 1999 or 1998. The
restrictions on the majority of such shares lapse over a period of three years
from the date of the grant, and the cost is charged to compensation expense
ratably.
51
52
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the 1998 Key Employees' Stock Incentive Plan of Old D&B, key
employees were granted shares of common stock based on the achievement of
two-year revenue growth goals or other key operating objectives, where
appropriate. At the end of the performance period, company performance at target
yielded the targeted amount of shares, whereas company performance above or
below target resulted in larger or smaller share awards, respectively. Awards
that were outstanding at the 2000 Distribution were canceled and replaced with
new awards, preserving the economic value that existed prior to the 2000
Distribution, however no new shares were issued in 2000. Recorded in selling and
administrative expenses was compensation expense of $14.9 million and $16.0
million in 1999 and 1998 respectively for the 1998 Key Employees' Stock
Incentive Plan. In 2000, targets were not met, and as such no expense was
recorded for the plan.
NOTE 10 INCOME TAXES
Income before provision for income taxes consisted of:
2000 1999 1998
------ ------ ------
U.S......................................................... $171.2 $173.1 $166.2
Non-U.S..................................................... (19.5) (27.7) (8.9)
------ ------ ------
Income before provision for income taxes.................... $151.7 $145.4 $157.3
====== ====== ======
The provision (benefit) for income taxes consisted of:
2000 1999 1998
------ ----- ------
Current tax provision:
U.S. Federal................................................ $ 43.0 $40.9 $ 90.1
State and local............................................. 1.5 2.8 (2.5)
Non-U.S..................................................... 13.7 4.1 11.7
------ ----- ------
Total current tax provision....................... 58.2 47.8 99.3
------ ----- ------
Deferred tax provision (benefit):
U.S. Federal................................................ 28.9 12.9 (36.5)
State and local............................................. 2.6 .6 7.0
Non-U.S..................................................... (11.6) 2.8 1.3
------ ----- ------
Total deferred tax provision (benefit)............ 19.9 16.3 (28.2)
------ ----- ------
Provision for income taxes................................ $ 78.1 $64.1 $ 71.1
====== ===== ======
The following table summarizes the significant differences between the U.S.
Federal statutory tax rate and the Company's effective tax rate for financial
statement purposes.
2000 1999 1998
---- ---- ----
Statutory tax rate.......................................... 35.0% 35.0% 35.0%
State and local taxes, net of U.S. Federal tax benefit...... 1.8 1.5 1.9
Non-U.S. taxes.............................................. 1.3 4.7 8.2
Recognition of ordinary losses.............................. -- -- (6.7)
Reorganization costs........................................ 8.0 3.4 4.0
Interest.................................................... 5.3 -- --
Other....................................................... -- (.5) 2.8
---- ---- ----
Effective tax rate.......................................... 51.4% 44.1% 45.2%
==== ==== ====
52
53
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes paid were $219.5 million, $165.1 million and $136.5 million in
2000, 1999, and 1998, respectively. Income taxes refunded were $21.5 million,
$26.7 million and $32.1 million in 2000, 1999 and 1998, respectively.
Deferred tax assets (liabilities) are comprised of the following at
December 31:
2000 1999 1998
------ ------ ------
Deferred tax assets:
Operating losses............................................ $ 82.0 $ 59.5 $ 48.3
Postretirement benefits..................................... 31.1 63.0 77.7
Intangibles................................................. 43.7 48.5 56.1
Postemployment benefits..................................... 2.4 2.9 2.7
Restructuring and reorganization costs...................... 15.4 10.2 16.1
Bad debts................................................... 5.4 3.8 3.3
Other....................................................... .4 .4 1.9
------ ------ ------
Total deferred tax assets......................... 180.4 188.3 206.1
Valuation allowance......................................... (77.6) (59.5) (48.3)
------ ------ ------
Net deferred tax assets..................................... 102.8 128.8 157.8
------ ------ ------
Deferred tax liabilities:
Tax leasing transactions.................................... (15.7) (18.3) (20.4)
Depreciation................................................ (.3) (3.8) (14.4)
------ ------ ------
Total deferred tax liability...................... (16.0) (22.1) (34.8)
------ ------ ------
Net deferred tax asset...................................... $ 86.8 $106.7 $123.0
====== ====== ======
The Company has not provided for U.S. deferred income taxes or foreign
withholding taxes on $138.5 million of undistributed earnings of its non-U.S.
subsidiaries as of December 31, 2000, since these earnings are intended to be
reinvested indefinitely. During 2000, the Company changed its method for
determining the tax liability that would arise if such earnings were remitted to
the United States. As of December 31, 2000, however, the Company has not
determined the tax liability that would arise if these earnings were remitted,
as the determination of such liability is not practicable.
During the three year period ended December 31, 1983, the Company invested
$304.4 million in tax-leasing transactions, varying in length from 4.5 to 25
years. These leases provided the Company with significant benefits from tax
deductions in excess of taxable income for Federal income tax purposes. These
amounts are included in deferred income taxes.
NOTE 11 NOTES PAYABLE AND OTHER INDEBTEDNESS
Notes payable consisted of the following at December 31:
2000 1999
----- ------
Commercial paper............................................ $49.5 $124.7
Bank notes.................................................. .1 1.5
----- ------
$49.6 $126.2
===== ======
The weighted average interest rates on outstanding commercial paper and
notes payable at December 31, 2000 and 1999, were 6.85% and 5.90%, respectively.
53
54
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 2000, the Company entered into a $175 million 364-day
revolving credit facility and a $175 million five year revolving credit
facility. Under these facilities, the Company has the ability to borrow at
prevailing short-term interest rates. The Company has had no borrowings
outstanding under these facilities since they were established in September
2000.
At December 31, 2000, the Company also had non-committed lines of credit of
$13 million and had no borrowings outstanding under these lines of credit as of
that date. These arrangements have no material commitment fees or compensating
balance requirements.
Interest paid totaled $8.3 million, $4.5 million and $12.1 million for the
years ended December 31, 2000, 1999 and 1998, respectively.
In connection with the 1998 Distribution, during June 1998 R.H. Donnelley
Inc. borrowed $350 million under the R.H. Donnelley Inc. credit facility and
issued $150 million of senior subordinated notes under the R.H. Donnelley Inc.
indenture. This $500 million of debt remained an obligation of R.H. Donnelley
Inc. after the 1998 Distribution. A portion of the proceeds of this borrowing
was used by Donnelley to repay outstanding indebtedness at the time of the 1998
Distribution of $287.1 million. The remainder of the proceeds was used for
general corporate purposes, including the payment of costs and expenses
associated with the reorganization.
NOTE 12 INVESTMENT PARTNERSHIP
During 1993, the Company participated in the formation of a limited
partnership to invest in various securities, including those of the Company.
Third-party investors held limited-partner and special investors' interests
totaling $500 million. During the fourth quarter of 1996, the Company redeemed
these partnership interests. This redemption was financed with short-term
borrowings.
The partnership is presently engaged in the business of licensing database
assets and computer software. One of the Company's subsidiaries serves as
managing general partner, and two subsidiaries hold limited-partner interests.
In April 1997, the partnership raised $300 million of minority interest
financing from an unrelated investor. This transaction was assumed by Old D&B in
connection with the 1998 Distribution and thereafter by the Company in the 2000
Distribution. Under the terms of the limited partnership agreement that governs
the minority interest financing, the unrelated partner is entitled to receive an
amount per annum equal to 7.47% of its initial investment payable quarterly in
arrears, provided that there are sufficient partnership profits. The partnership
agreement allocates other items of profit, gain, loss, and deductions among the
partners. At December 31, 2000 and 1999, the third-party investment in this
partnership was included in minority interest.
Pursuant to the terms of the partnership agreement, on December 15, 2000,
the unrelated partner initiated a process that could have resulted in
dissolution and liquidation of the partnership as early as February 25, 2001.
Such dissolution has been prevented, however, through the D&B partner having
elected on December 27, 2000, to exercise its right to purchase the unrelated
partner's interest in the partnership. This purchase will be made in the first
quarter of 2001. The Company expects that it will fund the purchase price
through the issuance of debt, the issuance of commercial paper, or a combination
of the foregoing. In the opinion of management, this funding will not have a
material effect on the Company's financial position or results of operation.
For financial reporting purposes, the results of operations, assets,
liabilities and cash flows of the partnership described above are included in
the Company's consolidated financial statements.
54
55
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 CAPITAL STOCK
The total number of shares of all classes of stock that the Company has
authority to issue under its Restated Certificate of Incorporation is
220,000,000 shares of which 200,000,000 shares, par value $.01 per share,
represent Common Stock (the "Common Stock"), 10,000,000 shares, par value $.01
per share, represent shares of Preferred Stock (the "Preferred Stock") and
10,000,000 shares, par value $.01 per share, represent shares of Series Common
Stock (the "Series Common Stock"). The board of directors of the Company has
designated 500,000 shares of the Preferred Stock as Series A Junior
Participating Preferred Stock, par value $.01 per share. The Preferred Stock and
the Series Common Stock can be issued with varying terms, as determined by the
board of directors.
On September 30, 2000, 81,213,520 shares of Common Stock were distributed
to the shareholders of Old D&B. Since the Company has been treated as the
successor entity for accounting purposes, the Company's historical financial
statements reflect the recapitalization in connection with the 2000
Distribution, including the elimination of treasury shares (which shares became
treasury shares of Moody's) and the authorization of the Common Stock, Preferred
Stock and Series Common Stock.
In connection with the 2000 Distribution, the Company entered into a Rights
Agreement with EquiServe Trust Company, N.A., designed to (i) minimize the
prospects of changes in control that could jeopardize the tax-free nature of the
2000 Distribution by assuring meaningful board of directors involvement in any
such proposed transaction and (ii) protect shareholders of the Company in the
event of unsolicited offers to acquire the Company and other coercive takeover
tactics that, in the opinion of the board of directors of the Company, could
impair its ability to represent shareholder interests. Under the Rights
Agreement, each share of the Common Stock has a right that trades with the stock
until the right becomes exercisable. Each right entitles the registered holder
to purchase one one-thousandth of a share of Series A Junior Participating
Preferred stock, par value $.01 per share, at a price of $125 per one
one-thousandth of a share, subject to adjustment. The rights will generally not
be exercisable until a person or group (an "Acquiring Person") acquires
beneficial ownership of, or commences a tender offer or exchange offer that
would result in such person or group having beneficial ownership of 15% or more
of the outstanding Common Stock.
In the event that any person or group becomes an Acquiring Person, each
right will thereafter entitle its holder (other than the Acquiring Person) to
receive, upon exercise, that number of shares of Common Stock having a market
value of two times the exercise price.
In the event that, after a person or group has become an Acquiring Person,
the Company is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power are sold, proper
provision will be made so that each right will entitle its holder (other than
the Acquiring Person) to receive, upon exercise, that number of shares of common
stock of the person with whom the Company has engaged in the foregoing
transaction (or its parent), which number of shares at the time of such
transaction will have a market value of two times the exercise price.
The Company may redeem the rights, which expire on August 15, 2010, for
$.01 per right, under certain circumstances.
NOTE 14 LEASE COMMITMENTS
Certain of the Company's operations are conducted from leased facilities,
which are under operating leases that expire over the next 10 years. The Company
also leases certain computer and other equipment under operating leases that
expire over the next three years. These leases are frequently renegotiated or
otherwise changed as advancements in computer technology produce opportunities
to lower costs and improve performance. Additionally, the Company has agreements
with various third parties to purchase certain data processing and
telecommunication services extending beyond one year. Rental expenses under
operating leases were $52.4 million, $71.8 million and $59.6 million for the
years ended December 31, 2000, 1999 and 1998,
55
56
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively. Future minimum lease payments under noncancelable leases at
December 31, 2000 are as follows:
2001 2002 2003 2004 2005 THEREAFTER TOTAL
----- ----- ----- ---- ---- ---------- ------
$37.5 $25.6 $18.2 $9.2 $7.2 $14.3 $112.0
NOTE 15 CONTINGENCIES
The Company is involved in legal proceedings, claims and litigation arising
in the ordinary course of business. Although the outcome of such matters cannot
be predicted with certainty, in the opinion of management, the ultimate
liability of the Company, in connection with such matters will not have a
material effect on the Company's results of operations, cash flows or financial
position.
In addition, the Company also has certain other contingencies discussed
below.
Information Resources
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 Donnelley, A.C. Nielsen Company (a subsidiary of ACNielsen
Corporation) and IMS International, Inc. (a subsidiary of the company then known
as Cognizant Corporation). At the time of the filing of the complaint, each of
the other defendants was a wholly owned subsidiary of Donnelley.
The complaint alleges various violations of United States antitrust laws,
including alleged violations of Section 1 and 2 of the Sherman Act. The
complaint also alleges a claim of tortious interference with a contract and a
claim of tortious interference with a prospective business relationship. These
claims relate to the acquisition by defendants of Survey Research Group Limited
("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed
to be acquired by the defendants and that the defendants induced SRG to breach
that agreement.
IRI's complaint alleges damages in excess of $350 million, which amount IRI
asked to be trebled under antitrust laws. IRI also seeks punitive damages in an
unspecified amount. No amount in respect of these alleged damages has been
accrued in the consolidated financial statements of the Company.
In November 1996, Donnelley completed a distribution to its shareholders
(the "1996 Distribution") of the capital stock of ACNielsen Corporation
("ACNielsen") and Cognizant Corporation ("Cognizant"). On October 28, 1996, in
connection with the 1996 Distribution, Cognizant, ACNielsen and Donnelley
entered into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint
Defense Agreement") pursuant to which they have agreed: (i) to certain
arrangements allocating potential liabilities ("IRI Liabilities") that may arise
out of or in connection with the IRI action and (ii) to conduct a joint defense
of such action. In particular, the Indemnity and Joint Defense Agreement
provides that ACNielsen will assume exclusive liability for IRI Liabilities up
to a maximum amount to be calculated at such time such liabilities, if any,
become payable (the "ACN Maximum Amount"), and that Donnelley and Cognizant will
share liability equally for any amounts in excess of the ACN Maximum Amount. The
ACN Maximum Amount will be determined by an investment banking firm as the
maximum amount which ACNielsen is able to pay after giving effect to (i) any
plan submitted by such investment bank which is designed to maximize the claims
paying ability of ACNielsen without impairing the investment banking firm's
ability to deliver a viability opinion (but which will not require any action
requiring stockholder approval), and (ii) payment of related fees and expenses.
For these purposes, financial viability means the ability of ACNielsen, after
giving effect to such plan, the payment of related fees and expenses, and the
payment of the ACN Maximum Amount, to pay its debts as they become due and to
finance the current and anticipated operating and capital requirements of its
business, as reconstituted by such plan, for two years from the date any such
plan is expected to be
56
57
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
implemented. On February 19, 2001, ACNielsen announced that it merged with VNU
N.V. Pursuant to the Indemnity and Joint Defense Agreement, VNU is to be
included with ACNielsen for purposes of determining the ACN Maximum Amount, and
VNU must assume ACNielsen's liabilities under that agreement.
In June 1998, Donnelley completed a distribution to its shareholders (the
"1998 Distribution") of the capital stock of Old D&B and changed its name to
R.H. Donnelley Corporation. In connection with the 1998 Distribution, Old D&B
and Donnelley entered into an agreement (the "1998 Distribution Agreement")
whereby Old D&B assumed all potential liabilities of Donnelley arising from the
IRI action and agreed to indemnify Donnelley in connection with such potential
liabilities.
During 1998, Cognizant separated into two new companies, IMS Health
Incorporated ("IMS") and Nielsen Media Research, Inc. ("NMR"). IMS and NMR are
each jointly and severally liable for all Cognizant liabilities under the
Indemnity and Joint Defense Agreement.
Under the terms of the 2000 Distribution Agreement, as a condition to the
2000 Distribution, the Company undertook to be jointly and severally liable with
Moody's for Old D&B's obligations to Donnelley under the 1998 Distribution
Agreement, including any liabilities arising under the Indemnity and Joint
Defense Agreement. However, as between themselves, each of the Company and
Moody's will be responsible for 50% of any payments to be made with respect to
the IRI action pursuant to the 1998 Distribution Agreement, including legal fees
or expenses related thereto.
Management is unable to predict at this time the final outcome of the IRI
action or whether the resolution of this matter could materially affect the
Company's results of operations, cash flows or financial position.
Tax Matters
Old D&B and its predecessors have entered into global tax planning
initiatives in the normal course of business, principally through tax free
restructurings of both their foreign and domestic operations. These initiatives
are subject to normal review by tax authorities. It is possible that additional
liabilities may be proposed by tax authorities as a result of these reviews and
that some of the reviews could be resolved unfavorably. At this time, management
is unable to predict the extent of such reviews, the outcome thereof or whether
the resolution of these matters could materially affect the Company's results of
operations, cash flows or financial position.
Pursuant to the 2000 Distribution Agreement, the Company and Moody's agreed
to each be financially responsible for 50% of any potential liabilities that may
arise with respect to the reviews described above, to the extent such potential
liabilities are not directly attributable to their respective business
operations.
The IRS has completed its review of the utilization of certain capital
losses generated during 1989 and 1990. On June 26, 2000, the IRS, as part of its
audit process, issued a formal assessment with respect to the utilization of
these capital losses and Old D&B responded by filing a petition for a refund in
the U.S. District Court for the District of Columbia on September 21, 2000.
Pursuant to a series of agreements, IMS Health and NMR are jointly and
severally liable to pay one-half, and Donnelley the other half, of any payments
for taxes and accrued interest arising from this matter and certain other
potential tax liabilities after Donnelley pays the first $137 million.
In connection with the 1998 Distribution, Old D&B and Donnelley entered
into an agreement whereby Old D&B has assumed all potential liabilities of
Donnelley arising from these tax matters and has agreed to indemnify Donnelley
in connection with such potential liabilities.
57
58
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On May 12, 2000, an amended tax return was filed for the 1989 and 1990 tax
periods, which reflects $561.6 million of tax and interest due. Old D&B paid the
IRS $349.3 million of this amount on May 12, 2000, which Old D&B funded with
short-term borrowings. IMS Health has informed Old D&B that it paid to the IRS
$212.3 million on May 17, 2000. The payments were made to the IRS to stop
further interest from accruing. Notwithstanding the filing and payment, the
Company is contesting the IRS's formal assessment and would also contest the
assessment of amounts, if any, in excess of the amounts paid. Old D&B and the
Company have accrued their anticipated share of the probable liability arising
from the utilization of these capital losses.
NOTE 16 SUPPLEMENTAL FINANCIAL DATA
Other Current Assets:
AT DECEMBER 31,
---------------
2000 1999
----- ------
Deferred taxes.............................................. $31.2 $ 17.2
Prepaid expenses............................................ 50.4 116.0
Other....................................................... 10.6 .4
----- ------
$92.2 $133.6
===== ======
Property, Plant and Equipment -- Net, carried at cost:
AT DECEMBER 31,
----------------
2000 1999
------ ------
Buildings.................................................. $157.7 $170.9
Machinery and equipment.................................... 339.9 352.6
------ ------
497.6 523.5
Less: accumulated depreciation............................. 328.0 320.6
------ ------
169.6 202.9
Leasehold improvements, less: accumulated amortization of
$33.9 and $34.1.......................................... 8.5 10.3
Land....................................................... 24.7 27.1
------ ------
$202.8 $240.3
====== ======
Other Income (Expense) -- Net:
2000 1999 1998
----- ----- -----
Other expense....................................... $(4.1) $(2.9) $(2.2)
Litigation settlement............................... 10.1 11.9 --
----- ----- -----
$ 6.0 $ 9.0 $(2.2)
===== ===== =====
58
59
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Computer Software and Goodwill -- Net:
COMPUTER
SOFTWARE GOODWILL
-------- --------
January 1, 1999.......................................... $142.5 $190.5
Additions at cost........................................ 70.5 .7
Amortization............................................. (63.0) (5.9)
Other deductions and reclassifications................... (.2) (18.7)(1)
------ ------
December 31, 1999........................................ 149.8 166.6
Additions at cost........................................ 41.7 --
Amortization............................................. (64.1) (5.2)
Other deductions and reclassifications................... 3.9 (25.9)(1)
------ ------
December 31, 2000........................................ $131.3 $135.5
====== ======
---------------
(1) Impact of foreign currency fluctuations.
Allowance for Doubtful Accounts:
January 1, 1998............................................. $11.6
Additions charged to costs and expenses..................... 7.5
Write-offs.................................................. (5.2)
-----
December 31, 1998........................................... 13.9
Additions charged to costs and expenses..................... 8.3
Write-offs.................................................. (4.8)
-----
December 31, 1999........................................... 17.4
Additions charged to costs and expenses..................... 8.3
Write-offs.................................................. (6.2)
-----
December 31, 2000........................................... $19.5
=====
NOTE 17 SEGMENT INFORMATION
In accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" the segment information is being reported consistent
with the Company's method of internal reporting, which excludes divested
operations from the segments. Effective January 1, 2000, responsibility for the
management of the Canadian business was moved from the Asia Pacific/Latin
America segment to its U.S. segment now referred to as its North America
segment. All prior years' segment information has been restated to reflect the
change. The Company's reportable segments are North America,
Europe/Africa/Middle East ("Europe") and Asia Pacific/Latin America ("APLA").
The three Dun & Bradstreet segments, managed on a geographical basis, provide
business-to-business credit, marketing and purchasing information solutions and
receivable management services. The accounting policies of the segments are the
same as those described in Note 1 -- Summary of Significant Accounting Policies.
The Company evaluates performance and allocates resources based on segment
operating income. Intersegment sales are immaterial and no single customer
accounted for 10% or more of total revenues.
59
60
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
OPERATING REVENUES:
North America............................................. $ 968.3 $ 920.0 $ 929.6
Europe.................................................... 382.1 420.6 427.7
APLA...................................................... 67.2 67.1 61.5
-------- -------- --------
Total Divisions................................... 1,417.6 1,407.7 1,418.8
All Other................................................. -- -- 1.7
-------- -------- --------
Consolidated Total.......................................... $1,417.6 $1,407.7 $1,420.5
======== ======== ========
OPERATING INCOME (LOSS):
North America............................................. $ 287.6 $ 255.4 $ 266.5
Europe.................................................... (.9) (8.9) (4.2)
APLA...................................................... (4.6) (7.3) (11.7)
-------- -------- --------
Total Divisions................................... 282.1 239.2 250.6
All Other(1).............................................. (109.3) (78.3) (62.9)
-------- -------- --------
Consolidated Total.......................................... 172.8 160.9 187.7
Non-Operating Expense -- Net.............................. (21.1) (15.5) (30.4)
-------- -------- --------
Income from Continuing Operations before Provision for
Income Taxes.............................................. $ 151.7 $ 145.4 $ 157.3
======== ======== ========
DEPRECIATION AND AMORTIZATION:(2)
North America............................................. $ 63.1 $ 65.8 $ 61.9
Europe.................................................... 39.4 52.8 55.1
APLA...................................................... 4.1 5.3 5.6
-------- -------- --------
Total Divisions................................... 106.6 123.9 122.6
All Other................................................. 4.6 4.0 3.6
-------- -------- --------
Consolidated Total.......................................... $ 111.2 $ 127.9 $ 126.2
======== ======== ========
CAPITAL EXPENDITURES:
North America............................................. $ 13.4 $ 15.5 $ 20.6
Europe.................................................... 7.6 15.7 19.9
APLA...................................................... 2.2 2.3 5.2
-------- -------- --------
Total Divisions................................... 23.2 33.5 45.7
All Other................................................. .9 .8 1.5
-------- -------- --------
Consolidated Total.......................................... $ 24.1 $ 34.3 $ 47.2
======== ======== ========
ADDITIONS TO COMPUTER SOFTWARE AND OTHER INTANGIBLES:
North America............................................. $ 33.2 $ 40.7 $ 44.5
Europe.................................................... 5.0 27.9 35.8
APLA...................................................... 1.6 .4 .8
-------- -------- --------
Total Divisions................................... 39.8 69.0 81.1
All Other................................................. 3.2 6.3 6.1
-------- -------- --------
Consolidated Total.......................................... $ 43.0 $ 75.3 $ 87.2
======== ======== ========
60
61
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
ASSETS:
North America............................................. $ 437.3 $ 432.4 $ 426.7
Europe.................................................... 447.5 536.6 599.9
APLA...................................................... 52.0 50.3 51.5
-------- -------- --------
Total Divisions................................... 936.8 1,019.3 1,078.1
All Other (primarily domestic pensions and taxes)......... 486.8 555.5 496.6
-------- -------- --------
Consolidated Total.......................................... $1,423.6 $1,574.8 $1,574.7
======== ======== ========
SUPPLEMENTAL GEOGRAPHIC AND PRODUCT LINE INFORMATION:
OPERATING REVENUES:
United States.......................................... $ 938.7 $ 891.5 $ 904.2
International.......................................... 478.9 516.2 516.3
-------- -------- --------
Consolidated Total........................................ $1,417.6 $1,407.7 $1,420.5
======== ======== ========
LONG-LIVED ASSETS:
United States.......................................... $ 478.1 $ 433.3 $ 399.2
International.......................................... 313.8 399.8 441.3
-------- -------- --------
Consolidated Total........................................ $ 791.9 $ 833.1 $ 840.5
======== ======== ========
PRODUCT LINE REVENUES:
NORTH AMERICA:
Credit Information Solutions........................... $ 580.1 $ 581.0 $ 618.2
Marketing Information Solutions........................ 259.8 230.1 219.5
Purchasing Information Solutions....................... 28.5 27.1 23.0
Receivable Management Services......................... 99.9 81.8 68.9
-------- -------- --------
Total North America............................... 968.3 920.0 929.6
-------- -------- --------
EUROPE:
Credit Information Solutions........................... 266.4 297.4 312.9
Marketing Information Solutions........................ 67.6 72.2 65.2
Purchasing Information Solutions....................... 2.1 1.4 --
Receivable Management Services......................... 46.0 49.6 49.6
-------- -------- --------
Total Europe...................................... 382.1 420.6 427.7
-------- -------- --------
APLA:
Credit Information Solutions........................... 39.9 43.6 37.6
Marketing Information Solutions........................ 12.0 9.9 10.1
Receivable Management Services......................... 15.3 13.6 13.8
-------- -------- --------
Total APLA........................................ 67.2 67.1 61.5
-------- -------- --------
61
62
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
TOTAL DIVISIONS:
Credit Information Solutions.............................. 886.4 922.0 968.7
Marketing Information Solutions........................... 339.4 312.2 294.8
Purchasing Information Solutions.......................... 30.6 28.5 23.0
Receivable Management Services............................ 161.2 145.0 132.3
-------- -------- --------
Total Divisions................................... $1,417.6 $1,407.7 $1,418.8
======== ======== ========
---------------
(1) The following table itemizes "All Other":
YEAR ENDED DECEMBER 31,
---------------------------
2000 1999 1998
------- ------ ------
OPERATING LOSS
Corporate and other................................... $ (38.3) $(37.1) $(34.9)
Restructuring expense................................. (41.5) (41.2) --
Reorganization costs.................................. (29.5) -- (28.0)
------- ------ ------
Total "All Other"............................. $(109.3) $(78.3) $(62.9)
======= ====== ======
(2) Includes depreciation and amortization of Property, Plant and Equipment,
Computer Software, Goodwill and Other Intangibles.
NOTE 18 QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- ------- ------------ ----------- --------
2000
Operating Revenues:
North America.......................... $253.2 $232.5 $229.6 $253.0 $ 968.3
Europe................................. 88.8 99.1 88.0 106.2 382.1
APLA................................... 14.5 16.2 17.3 19.2 67.2
------ ------ ------ ------ --------
Consolidated Operating Revenues........... $356.5 $347.8 $334.9 $378.4 $1,417.6
------ ------ ------ ------ --------
Operating Income (Loss):
North America.......................... $ 79.2 $ 61.6 $ 64.4 $ 82.4 $ 287.6
Europe................................. (13.3) (2.3) (3.7) 18.4 (.9)
APLA................................... (3.7) (2.2) (.2) 1.5 (4.6)
------ ------ ------ ------ --------
Total Divisions........................ 62.2 57.1 60.5 102.3 282.1
All Other(1)........................... (9.3) (11.1) (36.3) (52.6) (109.3)
------ ------ ------ ------ --------
Consolidated Operating Income............. $ 52.9 $ 46.0 $ 24.2 $ 49.7 $ 172.8
------ ------ ------ ------ --------
Income:
Continuing Operations, Net of Income
Taxes(2)............................. $ 27.0 $ 21.1 $ 7.1 $ 18.4 $ 73.6
Discontinued Operations, Net of Income
Taxes................................ 40.8 46.8 45.4 -- 133.0
------ ------ ------ ------ --------
Net Income................................ $ 67.8 $ 67.9 $ 52.5 $ 18.4 $ 206.6
------ ------ ------ ------ --------
62
63
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- ------- ------------ ----------- --------
Basic Earnings Per Share of Common
Stock(4):
Continuing Operations.................. $ .33 $ .26 $ .09 $ .23 $ .91
Discontinued Operations................ .51 .58 .56 -- 1.64
------ ------ ------ ------ --------
Basic Earnings Per Share of Common
Stock.................................. $ .84 $ .84 $ .65 $ .23 $ 2.55
====== ====== ====== ====== ========
Diluted Earnings Per Share of Common
Stock:
Continuing Operations.................. $ .33 $ .26 $ .09 $ .22 $ .90
Discontinued Operations................ .50 .57 .55 -- 1.62
------ ------ ------ ------ --------
Diluted Earnings Per Share of Common
Stock.................................. $ .83 $ .83 $ .64 $ .22 $ 2.52
====== ====== ====== ====== ========
1999
Operating Revenues:
North America.......................... $241.6 $226.6 $219.3 $232.5 $ 920.0
Europe................................. 98.8 105.7 96.9 119.2 420.6
APLA................................... 13.6 17.5 18.2 17.8 67.1
------ ------ ------ ------ --------
Consolidated Operating Revenues........... $354.0 $349.8 $334.4 $369.5 $1,407.7
------ ------ ------ ------ --------
Operating Income (Loss):
North America.......................... $ 70.5 $ 54.5 $ 56.8 $ 73.6 $ 255.4
Europe................................. (15.1) (2.6) (7.2) 16.0 (8.9)
APLA................................... (3.8) (2.3) (.5) (.7) (7.3)
------ ------ ------ ------ --------
Total Divisions........................ 51.6 49.6 49.1 88.9 239.2
All Other(1)........................... (12.1) (8.3) (5.7) (52.2) (78.3)
------ ------ ------ ------ --------
Consolidated Operating Income............. $ 39.5 $ 41.3 $ 43.4 $ 36.7 $ 160.9
------ ------ ------ ------ --------
Income:
Continuing Operations, Net of Income
Taxes(3)............................. $ 19.4 $ 19.9 $ 21.5 $ 20.5 $ 81.3
Discontinued Operations, Net of Income
Taxes................................ 41.0 46.5 44.6 42.6 174.7
------ ------ ------ ------ --------
Net Income................................ $ 60.4 $ 66.4 $ 66.1 $ 63.1 $ 256.0
====== ====== ====== ====== ========
Basic Earnings Per Share of Common
Stock(4):
Continuing Operations.................. $ .24 $ .24 $ .27 $ .25 $ 1.00
Discontinued Operations................ .49 .58 .55 .53 2.16
------ ------ ------ ------ --------
Basic Earnings Per Share of Common
Stock.................................. $ .73 $ .82 $ .82 $ .78 $ 3.16
====== ====== ====== ====== ========
63
64
THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- ------- ------------ ----------- --------
Diluted Earnings Per Share of Common
Stock(4):
Continuing Operations.................. $ .23 $ .24 $ .26 $ .25 $ .99
Discontinued Operations................ .49 .57 .55 .53 2.13
------ ------ ------ ------ --------
Diluted Earnings Per Share of Common
Stock.................................. $ .72 $ .81 $ .81 $ .78 $ 3.12
====== ====== ====== ====== ========
---------------
(1) The following table itemizes the components of the "All Other" category of
Operating Income (Loss):
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- ------- ------------ ----------- -------
Operating Loss:
2000:
Restructuring expense........... $ -- $ -- $ -- $(41.5) $ (41.5)
Reorganization costs............ -- (2.2) (26.4) (.9) (29.5)
Corporate and other............. (9.3) (8.9) (9.9) (10.2) (38.3)
------ ------ ------ ------ -------
Total.............................. $ (9.3) $(11.1) $(36.3) $(52.6) $(109.3)
------ ------ ------ ------ -------
1999:
Restructuring expense........... $ -- $ -- $ -- $(41.2) $ (41.2)
Corporate and other............. (12.1) (8.3) (5.7) (11.0) (37.1)
------ ------ ------ ------ -------
Total.............................. $(12.1) $ (8.3) $ (5.7) $(52.2) $ (78.3)
------ ------ ------ ------ -------
(2) Income from Continuing Operations, Net of Income Taxes included after-tax
reorganization costs of $2.2 million, $22.8 million and $.6 million incurred
in the quarters ended June 30, September 30 and December 31, 2000
respectively, an after-tax gain on the settlement of outstanding litigation
of $6.2 million in the quarter ended September 30, 2000 and after-tax
restructuring expenses of $30.3 million in the quarter ended December 31,
2000.
(3) Income from Continuing Operations, Net of Income Taxes included an after-tax
gain on the settlement of outstanding litigation of $6.6 million and
after-tax restructuring expenses of $27.9 million in the quarter ended
December 31, 1999.
(4) The number of weighted average shares outstanding changes as common shares
are issued for employee plans and other purposes or as shares are
repurchased. For this reason, the sum of quarterly earnings per share may
not be the same as earnings per share for the year.
64
65
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for the information relating to the executive officers of the
Company set forth in Part I of this Form 10-K, the information called for by
Items 10-13 will be contained in the Company's definitive proxy statement for
use in connection with its annual meeting of shareholders scheduled to be held
on April 27, 2001, and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Financial Statements.
See Index to Financial Statements and Schedules in Part II, Item 8
on page 32 of this Form 10-K.
(2) Financial Statement Schedules.
None.
(3) Exhibits.
See Index to Exhibits on pages 67-70 of this Form 10-K.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on October 4, 2000 pursuant to Item
5 -- Other Events and Item 7 -- Financial Statements: Pro Forma Financial
Statements and Exhibits.
(c) Exhibits.
See Index to Exhibits on pages 67-70 of this Form 10-K.
(d) Financial Statement Schedules.
None.
65
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE DUN & BRADSTREET CORPORATION
(Registrant)
By: /s/ ALLAN Z. LOREN
------------------------------------
Allan Z. Loren
Chairman, Chief Executive Officer
and President
Date: February 21, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ ALLAN Z. LOREN /s/ VICTOR A. PELSON
--------------------------------------------------- ---------------------------------------------------
(Allan Z. Loren, (Victor A. Pelson, Director)
Director and Chairman, Chief
Executive Officer and President)
(principal executive officer)
/s/ CHESTER J. GEVEDA, JR. /s/ MICHAEL R. QUINLAN
--------------------------------------------------- ---------------------------------------------------
(Chester J. Geveda, Jr., Vice President and (Michael R. Quinlan, Director)
Controller and Acting Chief Financial Officer)
(principal financial and accounting officer)
/s/ RONALD L. KUEHN, JR. /s/ NAOMI O. SELIGMAN
--------------------------------------------------- ---------------------------------------------------
(Ronald L. Kuehn, Jr., Director) (Naomi O. Seligman, Director)
Date: February 21, 2001
66
67
INDEX TO EXHIBITS
REGULATION
S-K
EXHIBIT
NUMBER
----------
3 ARTICLES OF INCORPORATION AND BY-LAWS
.1 Restated Certificate of Incorporation of the Registrant, as
amended effective October 1, 2000 (incorporated herein by
reference to Exhibit 3.1 to Registrant's Report on Form 8-K,
file number 1-15967, filed October 4, 2000).
.2 Amended and Restated By-laws of the Registrant (incorporated
herein by reference to Exhibit 3.2 to Registrant's
Registration Statement on Form 10, file number 1-15967,
filed June 27, 2000).
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
.1 Specimen Common Stock Certificate (incorporated herein by
reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form 10, file number 1-15967, filed September
11, 2000).
.2 Rights Agreement, dated as of August 15, 2000, between the
Registrant (f.k.a. The New D&B Corporation) and EquiServe
Trust Company, N.A., as Rights Agent which includes the
Certificate of Designation for the Series A Junior
Participating Preferred Stock as Exhibit A thereto, the Form
of Right Certificate as Exhibit B thereto and the Summary of
Rights to Purchase Preferred Shares as Exhibit C thereto
(incorporated herein by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A, file number
1-15967, filed September 15, 2000).
.3 Five Year Credit Agreement, dated as of September 11, 2000,
among the Registrant (f.k.a. The New D&B Corporation), The
Chase Manhattan Bank, Citibank, N.A. and the Bank of New
York (incorporated herein by reference to Exhibit 4.2 to the
Registrant's Quarterly Report on Form 10-Q, file number
1-15967, filed November 14, 2000).
.4 364-Day Credit Agreement, dated as of September 11, 2000,
among the Registrant (f.k.a. The New D&B Corporation), The
Chase Manhattan Bank, Citibank, N.A. and the Bank of New
York (incorporated by reference to Exhibit 4.3 to
Registrant's Registration Statement on Form 10, file number
1-15967, filed September 14, 2000).
10 MATERIAL CONTRACTS
.1 Distribution Agreement, dated as of September 30, 2000,
between Moody's Corporation (f.k.a. The Dun & Bradstreet
Corporation) and the Registrant (f.k.a. The New D&B
Corporation) (incorporated herein by reference to Exhibit
10.1 to the Registrant's Report on Form 8-K, file number
1-15967, filed October 4, 2000).
.2 Tax Allocation Agreement, dated as of September 30, 2000,
between Moody's Corporation (f.k.a. The Dun & Bradstreet
Corporation) and the Registrant (f.k.a. The New D&B
Corporation) (incorporated herein by reference to Exhibit
10.2 to the Registrant's Report on Form 8-K, file number
1-15967, filed October 4, 2000).
.3 Employee Benefits Agreement, dated as of September 30, 2000,
between Moody's Corporation (f.k.a. The Dun & Bradstreet
Corporation) and the Registrant (f.k.a. The New D&B
Corporation) (incorporated herein by reference to Exhibit
10.3 to the Registrant's Report on Form 8-K, file number
1-15967, filed October 4, 2000).
.4 Intellectual Property Assignments, dated as of September 1,
2000, between Moody's Corporation (f.k.a. The Dun &
Bradstreet Corporation) and the Registrant (f.k.a. The New
D&B Corporation) (incorporated herein by reference to
Exhibit 10.4 to the Registrant's Report on Form 8-K, file
number 1-15967, filed October 4, 2000).
.5 Shared Transaction Services Agreement, dated as of September
30, 2000, between Moody's Corporation (f.k.a. The Dun &
Bradstreet Corporation) and the Registrant (f.k.a. The New
D&B Corporation) (incorporated herein by reference to
Exhibit 10.5 to the Registrant's Report on Form 8-K, file
number 1-15967, filed October 4, 2000).
.6 Data Services Agreement, dated as of September 30, 2000,
between Moody's Corporation (f.k.a. The Dun & Bradstreet
Corporation) and the Registrant (f.k.a. The New D&B
Corporation) (incorporated herein by reference to Exhibit
10.6 to the Registrant's Report on Form 8-K, file number
1-15967, filed October 4, 2000).
67
68
.7 Transition Services Agreement, dated as of September 30,
2000, between Moody's Corporation (f.k.a. The Dun &
Bradstreet Corporation) and the Registrant (f.k.a. The New
D&B Corporation) (incorporated herein by reference to
Exhibit 10.7 to the Registrant's Report on Form 8-K, file
number 1-15967, filed October 4, 2000).
.8 Insurance and Risk Management Services Agreement, dated as
of September 30, 2000, between Moody's Corporation (f.k.a.
The Dun & Bradstreet Corporation) and the Registrant (f.k.a.
The New D&B Corporation) (incorporated herein by reference
to Exhibit 10.8 to the Registrant's Report on Form 8-K, file
number 1-15967, filed October 4, 2000).
.9 Undertaking of the Registrant (f.k.a. The New D&B
Corporation), dated September 30, 2000, to Cognizant
Corporation and ACNielsen Corporation (incorporated herein
by reference to Exhibit 10.9 to the Registrant's Report on
Form 8-K, file number 1-15967, filed October 4, 2000).
.10 Undertaking of the Registrant (f.k.a. The New D&B
Corporation), dated September 30, 2000, to R.H. Donnelley
Corporation (incorporated herein by reference to Exhibit
10.10 to the Registrant's Report on Form 8-K, file number
1-15967, filed October 4, 2000).
.11 Distribution Agreement, dated as of June 30, 1998, between
R.H. Donnelley Corporation (f.k.a. The Dun & Bradstreet
Corporation) and Moody's Corporation (f.k.a. The New Dun &
Bradstreet Corporation) (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q of Moody's
Corporation, file number 1-14037, filed August 14, 1998).
.12 Tax Allocation Agreement, dated as of June 30, 1998, between
R.H. Donnelley Corporation (f.k.a. The Dun & Bradstreet
Corporation) and Moody's Corporation (f.k.a. The New Dun &
Bradstreet Corporation) (incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q of Moody's
Corporation, file number 1-14037, filed August 14, 1998).
.13 Employee Benefits Agreement, dated as of June 30, 1998,
between R.H. Donnelley Corporation (f.k.a. The Dun &
Bradstreet Corporation) and Moody's Corporation (f.k.a. The
New Dun & Bradstreet Corporation) (incorporated by reference
to Exhibit 10.3 to the Quarterly Report on Form 10-Q of
Moody's Corporation, file number 1-14037, filed August 14,
1998).
.14 Distribution Agreement, dated as of October 28, 1996, among
R.H. Donnelley Corporation (f.k.a. The Dun & Bradstreet
Corporation), Cognizant Corporation and ACNielsen
Corporation (incorporated by reference to Exhibit 10(x) to
the Annual Report on Form 10-K of R.H. Donnelley Corporation
(f.k.a. The Dun & Bradstreet Corporation) for the year ended
December 31, 1996, file number 1-7155, filed March 27,
1997).
.15 Tax Allocation Agreement, dated as of October 28, 1996,
among R.H. Donnelley Corporation (f.k.a. The Dun &
Bradstreet Corporation), Cognizant Corporation and ACNielsen
Corporation (incorporated by reference to Exhibit 10(y) to
the Annual Report on Form 10-K of R.H. Donnelley Corporation
(f.k.a. The Dun & Bradstreet Corporation) for the year ended
December 31, 1996, file number 1-7155, filed March 27,
1997).
.16 Employee Benefits Agreement, dated as of October 28, 1996,
among R.H. Donnelley Corporation (f.k.a. The Dun &
Bradstreet Corporation), Cognizant Corporation and ACNielsen
Corporation (incorporated by reference to Exhibit 10(z) to
the Annual Report on Form 10-K of R.H. Donnelley Corporation
(f.k.a. The Dun & Bradstreet Corporation) for the year ended
December 31, 1996, file number 1-7155, filed March 27,
1997).
.17 Indemnity and Joint Defense Agreement, dated as of October
28, 1996, among R.H. Donnelley Corporation (f.k.a. The Dun &
Bradstreet Corporation), Cognizant Corporation and ACNielsen
Corporation (incorporated by reference to Exhibit 10(aa) to
the Annual Report on Form 10-K of R.H. Donnelley Corporation
(f.k.a. The Dun & Bradstreet Corporation) for the year ended
December 31, 1996, file number 1-7155, filed March 27,
1997).
.18 Amended and Restated Agreement of Limited Partnership of D&B
Investors L.P., dated April 1, 1997 (incorporated by
reference to Exhibit 10.14 to the Quarterly Report on Form
10-Q of Moody's Corporation, file number 1-14037, filed
August 14, 1998).
.19 D&B Guaranty, dated as of April 1, 1997, given by The Dun &
Bradstreet Corporation in favor of Utrecht-America Finance
Co. and Leiden Inc. (as assumed by the Registrant)
(incorporated herein by reference to Exhibit 10.19 to the
Registrant's Quarterly Report on Form 10-Q, file number
1-15967, filed November 14, 2000).
68
69
.20+ The Dun & Bradstreet Executive Transition Plan (incorporated
herein by reference to Exhibit 10.20 to the Registrant's
Quarterly Report on Form 10-Q, file number 1-15967, filed
November 14, 2000).
.21+ Forms of Change in Control Severance Agreements
(incorporated herein by reference to Exhibit 10.21 to the
Registrant's Quarterly Report on Form 10-Q, file number
1-15967, filed November 14, 2000).
.22+ Pension Benefit Equalization Plan of The Dun & Bradstreet
Corporation (incorporated herein by reference to Exhibit
10.22 to the Registrant's Quarterly Report on Form 10-Q,
file number 1-15967, filed November 14, 2000).
.23+ Supplemental Executive Benefit Plan of The Dun & Bradstreet
Corporation (incorporated herein by reference to Exhibit
10.23 to the Registrant's Quarterly Report on Form 10-Q,
file number 1-15967, filed November 14, 2000).
.24+ Profit Participation Benefit Equalization Plan of The Dun &
Bradstreet Corporation (incorporated herein by reference to
Exhibit 10.24 to the Registrant's Quarterly Report on Form
10-Q, file number 1-15967, filed November 14, 2000).
.25+ Employment Agreement, dated May 15, 2000, by and between
Moody's Corporation (f.k.a. The Dun & Bradstreet
Corporation) and Allan Z. Loren (incorporated herein by
reference to Exhibit 10.11 to the Registrant's Registration
Statement on Form 10/A-3, file number 1-15967, filed
September 14, 2000) (as assumed by the Registrant).
.26+ The Dun & Bradstreet Career Transition Plan (incorporated
herein by reference to Exhibit 10.25 to the Registrant's
Quarterly Report on Form 10-Q, file number 1-15967, filed
November 14, 2000).
.27+ 2000 Dun & Bradstreet Corporation Replacement Plan for
Certain Directors Holding Dun & Bradstreet Corporation
Equity-Based Awards (incorporated herein by reference to
Exhibit 10.27 to the Registrant's Quarterly Report on Form
10-Q, file number 1-15967, filed November 14, 2000).
.28+ 2000 Dun & Bradstreet Corporation Replacement Plan for
Certain Employees Holding Dun & Bradstreet Corporation
Equity-Based Awards (incorporated herein by reference to
Exhibit 10.28 to the Registrant's Quarterly Report on Form
10-Q, file number 1-15967, filed November 14, 2000).
.29*+ The Dun & Bradstreet Corporation 2000 Stock Incentive Plan.
.30*+ 2000 Dun & Bradstreet Corporation Nonemployee Directors'
Stock Incentive Plan.
.31+ Executive Transition Plan Agreement, dated October 1, 1999,
between Frank Sowinski and Moody's Corporation (f.k.a. The
Dun & Bradstreet Corporation) (incorporated by reference to
Exhibit 10.28 to Moody's Corporation Annual Report on Form
10-K, file number 1-14037, filed February 16, 2000) (as
assumed by the Registrant).
.32+ The Dun & Bradstreet Corporation Nonfunded Deferred
Compensation Plan for Non-Employee Directors (incorporated
by reference to Exhibit 10.18 to Moody's Corporation
Quarterly Report on Form 10-Q, file number 1-14037, filed
October 20, 1999) (as assumed by the Registrant).
.33+ Employment Agreement, dated October 1, 1999, between Andre
Dahan and Moody's Corporation (f.k.a. The Dun & Bradstreet
Corporation) (incorporated herein by reference to Exhibit
10.31 to the Registrant's Quarterly Report on Form 10-Q,
file number 1-15967, filed on November 14, 2000) (as assumed
by the Registrant).
.34+ Form of Limited Stock Appreciation Rights Agreement
(incorporated by reference to Exhibit 10.25 to Moody's
Corporation Quarterly Report on Form 10-Q, file number
1-14037, filed August 14, 1998).
.35*+ The Dun & Bradstreet Corporation Covered Employee Cash
Incentive Plan.
.36*+ The Dun & Bradstreet Corporation Cash Incentive Plan.
21* SUBSIDIARIES OF THE REGISTRANT
List of Active Subsidiaries as of January 31, 2001.
69
70
23* CONSENTS OF EXPERTS AND COUNSEL
.1 Consent of PricewaterhouseCoopers LLP.
---------------
* Filed herewith.
+ Represents a management contract or compensatory plan.
70