-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rj7k/160T8DQXBwXLDZQuGHn9BKLTcjCKaEtl4uorf/v56uouJJ8LBtHoOCmU0af aUpQWF7klztq53dTHJzOyw== 0000950135-00-001774.txt : 20000411 0000950135-00-001774.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950135-00-001774 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMARK CORP CENTRAL INDEX KEY: 0000356064 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 382383282 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-08260 FILM NUMBER: 583781 BUSINESS ADDRESS: STREET 1: 1000 WINTER ST STE 4300N CITY: WALTHAM STATE: MA ZIP: 02451 BUSINESS PHONE: 6174666611 MAIL ADDRESS: STREET 1: 1000 WINTER ST STREET 2: STE 4300 NORTH CITY: WALTHAM STATE: MA ZIP: 02451 10-K405 1 PRIMARK CORPORATION 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-8260 PRIMARK CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MICHIGAN 38-2383282 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1000 WINTER STREET, SUITE 4300N, WALTHAM, MA 02451-1241 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
781-466-6611 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common stock, without par value New York Stock Exchange Pacific Exchange Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes X No __. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __. The aggregate market of the registrant's common stock held by non-affiliates as of February 29, 2000 was $226,056,677, based on the closing price on that day (New York Stock Exchange -- Composite Transactions). The number of shares outstanding of the registrant's common stock without par value on February 29, 2000 was 20,268,221. DOCUMENTS INCORPORATED BY REFERENCE Portions of Primark's 1999 Annual Report are incorporated by reference in Part II, Items 5, 6, 7 and 8. Portions of Primark's 2000 Proxy Statement for its 2000 Annual Meeting of Shareholders, which will be filed within 120 days of December 31, 1999, are incorporated by reference in Part III, Items 10, 11, 12 and 13. 2 TABLE OF CONTENTS
PAGE ---- Cover Page.................................................. i Index....................................................... ii PART I Item 1. Business.................................................... 1 Item 2. Properties.................................................. 15 Item 3. Legal Proceedings........................................... 16 Item 4. Submission of Matters to a Vote of Security Holders......... 16 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................................... 16 Item 6. Selected Financial Data..................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 16 Item 8. Financial Statements and Supplementary Data................. 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 17 PART III Item 10. Directors and Executive Officers of the Registrant.......... 17 Item 11. Executive Compensation...................................... 18 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 18 Item 13. Certain Relationships and Related Transactions.............. 18 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.................................................... 18 Signatures.................................................. 22
ii 3 PART I ITEM 1. BUSINESS GENERAL Primark is a leading global information service provider of comprehensive financial, economic and market research information to investment, legal, accounting, banking, corporate and government customers. We develop and market "value-added" database and information products that cover established and emerging markets worldwide. Our proprietary analytical software applications provide for the analysis and presentation of financial, economic and market research information. We serve customers in the US, Europe and the Pacific Rim and compile, analyze, integrate, package and distribute current and historical data, news and commentary on financial securities, companies and markets worldwide. We own and maintain large-scale databases, which are accessed through our on-line distribution systems, the Internet and third party distributors. Our databases are authoritative sources of data and analytics used by more than 5,000 organizations worldwide, including 75 of the top 100 banks, 82 of the top 100 investment managers, 28 of the top 50 insurance companies and 450 of the top 1,000 US companies. We believe our customers value our products because of their high quality data as well as our understanding of niche markets, our ability to develop products to serve these markets and our superior customer service and support. Our business operations are integrated into three customer-focused divisions. Each division concentrates on specialized product sets, which address the needs of specific customer market groups. Our three operating divisions are: - Primark Financial Information Division. Primark Financial Information Division develops "enterprise-wide" products and services for major financial institutions on a global basis. It also has responsibility for all transactional products, both historical and real-time, as well as products supporting large-scale investment accounting functions, the individual investor and the referential needs of very large financial market customers. This division also manages the corporate network, PrimarkNet, which serves as the major external delivery channel to our customers on a global basis, as well as serving as an internal channel connecting all three Primark divisions. This division's product offerings serve most of our customer types and the division is a major service provider to the "sell-side" portion of the financial markets. - Primark Financial Analytics Division. Primark Financial Analytics Division concentrates on developing and marketing a wide variety of analytical products for money managers, fund sponsors and other investors. These products combine our databases, advanced software, analytical techniques and forecasts for all phases of the investment process. This division's product offerings concentrate on customers in the "buy-side" portion of the financial markets. - Primark Decision Information Division. Primark Decision Information Division develops, markets, and delivers information content products that are primarily focused in areas other than the financial marketplace, and also provides products and services for decision support to financial customers. We have established the Primark Data Company ("PDC") to support the data needs of our operating divisions. PDC is an essential element in the overall Primark strategy because of the necessity for high quality information provided on an efficient basis. PDC is responsible for collecting, verifying and organizing our equity securities pricing, indices, company account, ownership and economic data sets throughout the three divisions of Primark. With major operations in the United States, the United Kingdom, Ireland, India and the Philippines, PDC provides global data knowledge and support to our three divisions. 4 Key factors in Primark's success are recognizable quality and international market acceptance of our branded products sold by the various business units within the divisions. Primark's business units and related brands by division include: PRIMARK FINANCIAL INFORMATION DIVISION - Datastream. Datastream, acquired in 1992, is one of the world's leading providers of global historical and fundamental real-time securities data and news covering more than 50,000 stocks from 64 developed and emerging countries, over 200,000 corporate and government bonds from 32 countries and more than 1,500 major indices. - ICV. ICV, acquired in 1996, is a leading provider in the UK of on-line equity trading products. In 1999, ICV had a market share of approximately 70% of on-line UK equities trading. - Primark Investment Management Services. Primark Investment Management Services ("PIMS"), acquired as part of Datastream in 1992, is a leading supplier of computer-based investment valuations and fund management services in the UK and continental Europe. PIMS provides investment accounting, portfolio valuation and performance measurement to financial managers, unit trusts, mutual funds and portfolio managers. - Disclosure/Worldscope. Disclosure, acquired in 1995, and Worldscope, acquired 20% in June 1999, 30% in 1996 and 50% 1995, are two of the leading providers of "as reported" and abstracted financial information. These businesses have databases that include more than five million SEC filings by more than 12,000 US companies dating back to 1986, as well as foreign company filings from more than 20,000 companies in 50 countries. - Primark Research Centers. Acquired as part of Disclosure in 1995, the Primark Research Centers ("PRC") provide a full range of research solutions from personalized research support to fast and convenient document retrieval. Researchers utilize a repository of documents, online tools and a network of affiliates to guarantee the accurate and immediate delivery of virtually any type of information. The Primark Research Centers are primarily located in the United States and the United Kingdom. - A-T Financial Information. A-T Financial Information, Inc ("A-T"), acquired in February 1999, is a real-time financial information content provider servicing institutional and retail markets with global securities information and attendant display and distribution technology. A-T provides value through creating proprietary content, consolidating disparate third party data sets and disseminating high performance, mission-critical data feeds supported by a series of display and programmatic interfaces to institutional trading and analytical front-end products, various on-line retail brokerage service providers and Internet web sites. - Extel. Primark acquired the company fundamental data business and the Extel brand name ("Extel") in February 1999. Extel, a widely recognized brand name in the European and Asian markets, provides "as reported" company fundamental data covering 15,000 quoted companies in over 55 countries as well as 800 private UK and European companies. Delivery platforms are Windows-based and provide Internet or direct dial access to datasets for real-time updates to reports, charts, images and news through Global Access, a direct datafeed, or leading redistributors. - ScoreLab. ScoreLab is an Internet business developed by Primark in mid-1999. Applying patented data mining and ranking methodologies, ScoreLab's products analyze a wide range of historical financial data including insider information, earnings estimates, analyst reports and institutional ownership to create returns, scores or ratings and other empirical signals about stock performance. ScoreLab generates subscription-based revenues from institutions and active traders, as well as e-commerce and advertising revenues. 2 5 PRIMARK FINANCIAL ANALYTICS DIVISION - I/B/E/S. I/B/E/S, acquired in 1995, is a leading source for analyst estimates, brokerage research, tools and applied intelligence to the institutional investor marketplace. I/B/E/S databases are among the most comprehensive in the industry, covering 18,000 companies in 59 countries, with forecasts from 831 firms worldwide. I/B/E/S technology solutions include Active Express and custom web development. - Baseline. Baseline, acquired in 1997, offers a leading Windows-based, fully integrated stock and portfolio analysis and selection system designed specifically for institutional portfolio managers. - Vestek. Vestek, acquired in 1994, is an international provider of portfolio information, analytics and consulting support to investment professionals. PRIMARK DECISION INFORMATION DIVISION - WEFA. WEFA, acquired in 1997, is an international provider of research, analysis and forecasts on economic information for financial institutions, corporations, governments and universities. - Primark Decision Economics. Primark Decision Economics, an unconsolidated company started in 1996 in which Primark has an equity interest of 20%, is a global economic and financial market information and advisory service that specializes in identifying, monitoring, interpreting and forecasting the impact of interest rates and currency rates on equity and bond markets worldwide. - The Yankee Group. Yankee Group, acquired in 1996, is an internationally recognized leader in strategic planning, technology forecasting and market analysis focusing on e-commerce, communications and computing systems for business, industrial and consumer uses. Leveraging its core research, the Yankee Group develops Internet-enabled market analysis and provides industry-specific services for energy, media and entertainment companies. Primark had net operating revenues of $494.6 million, $434.5 million and $397.9 million for the twelve months ended December 31, 1999, 1998 and 1997, respectively. Our principal sources of revenue are from customer subscriptions, royalty revenues from third party distributors and fees for consulting services. More than 80% of the Company's revenues are derived from subscription and royalty contracts. A majority of these contracts are paid in advance either quarterly or annually. For the twelve months ended December 31, 1999, approximately 82% of Primark's revenues were from subscriptions, 4% from royalties and 14% from other sources. BUSINESS AND OPERATING STRATEGY Primark's business and operating strategy is designed to generate strong revenue growth and increased profitability by selling existing products, by integrating key products and operations, by launching and acquiring new products and by capitalizing on our international brands and comprehensive high quality data. The key elements of this strategy include: Expanding customer relationships and cross-selling. We believe that our customers have an increasing need for financial and economic information from a select group of integrated providers of such information. By cross selling our variety of well-known brands, we believe that we are well positioned to serve this need. In addition to cross-selling, we believe that we will be able to expand relationships with existing customers by using our core products and services as platforms for launching new integrated database and analytic products drawn from multiple sources within Primark. Management also intends to further integrate our databases with our software products to encourage service expansion. Due to the low incremental cost of providing additional products and services to existing customers, we expect these measures to result in increased revenues and improved profit margins. Introducing new products, databases and service enhancements. We believe we can leverage our existing customer base, databases and technology to introduce new products and services. For example, Primark has been working to introduce a comprehensive global equities service by integrating real-time prices, comprehen- 3 6 sive news and our historical content and analytic capabilities with electronic trading systems -- all within one seamless product to be delivered to the market. With GlobalTOPIC and SpeedFeed, we have now achieved this -- the Primark Global Equities Service. We believe our ability to add new products will continue to provide us with a competitive advantage. Leveraging introduction of the euro. In 1999, more than 50% of Primark's revenues were derived from European customers and we believe we are well positioned to continue to take advantage of the euro introduced on January 1, 1999. The euro is expected to lead to new European securities, increased cross- border investing and the liberalization of the European pension and retirement savings industry. We anticipate that all of these trends may also dramatically increase the demand for our products and services from our existing customers and attract new customers. Primark currently possesses a leading position in UK equities trading and provides one of the most comprehensive databases of European company filings available electronically. Management has capitalized on these trends first with the introduction of EuroTOPIC, and then with GlobalTOPIC, both powerful and flexible international equities information products that combine real-time prices, news and Primark proprietary databases with investment analytics and trading capabilities. Capitalizing on, and improving distribution through, new channels and new partnerships. We currently rely on a variety of distribution channels including proprietary software, on-line and satellite feed delivery, as well as third party distributors, paper-based services, CD-ROM and the Internet to distribute our products. We believe we can further capitalize on the Internet based distribution channels and introduce new products and services to both existing and new customers by concentrating in the following areas. RETAIL INTERNET. A major retail initiative targeted to the individual investor is ScoreLab, which currently has operational its insiderSCORES.com site and is planning to add several additional sites during 2000, such as scores for Asian insiders, UK insiders, fund managers, analysts and venture capitalists. These sites will combine Primark data with applications that give the individual investor unique perspectives on changes to various real-time data sets. The Company also has its MarketEye product, which provides real-time prices and news as an Internet service that will be expanded in the UK and introduced in Continental Europe and the US throughout 2000. In addition, a retail version of I/B/E/S' Trapeze.net is being developed to bring global investment research to the individual investor. BUSINESS-TO-BUSINESS INTERNET. Most of Primark's core products are business to business applications that will be transitioned into Internet based products. Global Access is an example of Primark's transition to a business-to-business Internet investment information service. Global Access was a dedicated on-line reference service that has been expanded for content and functionality over the last several years and is now an Internet information investment product available to all of our subscription based customers. Other Primark businesses, such as Baseline, will also introduce an Internet delivered product set during 2000. REAL-TIME INTERNET. Several of the Company's products within the Primark Global Equities Service are Internet-based. GlobalTOPIC, as a browser-based real-time product, was initially rolled out in the UK and will be introduced to Continental Europe in 2000. On a worldwide basis, Primark SpeedFeed is now available for customer Internet sites, from major financial institutions serving day trading activities. INTERNET TRADING. Primark will actively participate, either as an investor or acquirer, in Internet-based direct access trading. The Company has a business relationship with TradePortal, an Internet company providing direct access trading. TradePortal uses Primark SpeedFeed and A-T Financial's software and provides Primark with a share of its transaction revenues. Separately, an order routing network will be built in Europe that connects money managers to sell-side institutions, institutions to each other, and institutions to exchanges and ECNs to permit seamless electronic trading. INTERNET DATA SYNDICATION. Internet retail and e-commerce business will be aggressively pursued by licensing certain portions of Primark's data for redistribution through other financial Internet sites, as has been done with AOL, Microsoft Investor and Yahoo!. 4 7 WEB SITE DEVELOPMENT. The web site development business will be expanded through Primark's leading software technology, along with providing appropriate data to these new sites. WIRELESS. The Primark Financial Channel is currently being developed and will be sold to both the retail and institutional marketplace in cooperation with a third party developer. Leveraging technology. We will continue to use advanced information technology to increase the efficiency, speed and flexibility of our data gathering, database construction, customer delivery efforts and Internet capabilities. For example, our new technology facilitates the integration of multiple databases maintained in diverse computer systems for use by our analytics packages. This will allow us to continue to leverage existing brands and databases to provide new products to new and existing customers. Through the use of advanced information technology, Primark has transformed Disclosure from a primarily paper-based business to one that now derives approximately 57% of its revenues from electronic delivery to the desktop and further anticipates moving even more business to new web based technology platforms conducive for Internet delivery. Providing superior customer service. Providing superior customer support and service is a key aspect of Primark's business philosophy and has contributed to a high customer retention rate. In 1999, this rate was approximately 85% for subscription products. Primark's sales and marketing staff, as well as our technical experts and consultants, work closely with clients, often on-site, to maximize the value of Primark products and services and to develop custom applications tailored to clients' information and software needs. We believe our superior customer service and support will continue to provide us with increased opportunities for additional product and service revenues. Capitalizing on integration of operating units. Primark has grown primarily through acquisitions over the last seven years. In order to capitalize on the advantages expected to result from the integration of these acquired businesses, in mid-1998 we reorganized our twelve operating units into an integrated company totally and solely committed to financial, economic and market research content and applications. We believe that the restructuring has enabled us to reap benefits from combined marketing, sales and administrative operations, eliminate redundant production and delivery platforms, provide broader access to our customer base and deliver current and new product offerings faster and more efficiently. BUSINESS AND PRODUCTS OVERVIEW Primark supplies information to investment and commercial banks, investment firms, corporations, government organizations, professional service firms and individual consumers. The organizations in the financial community generally can be divided into two groups, although there are hybrids and exceptions. One group consists of "buy-side" firms, which invest individual consumer assets or institutional pension funds. The second group consists of "sell-side" firms, which perform investment research, brokerage and trading functions, often combined with corporate finance services. Within the "buy-side," investment managers can be classified according to their particular style of investing -- large cap, small cap, emerging markets, value, growth, indices, etc. While the actual method by which they make investment decisions may vary according to their investment style, the overall investment process is essentially similar across all firms. It can be broken down into five major categories.
Asset Security Portfolio Security Fund Deployment & Criteria Research & Selection Construction & Tracking Trading Accounting
Primark is involved in all aspects of the investment decision-making process. Primark Financial Analytics Division focuses extensively on the "buy-side" sector; however, depending on the functional activity, Primark may also have either of its other operating divisions supply information and analytical services to that function. 5 8 For example: ASSET DEPLOYMENT CRITERIA. The allocation of resources across different asset categories -- equity versus fixed income and international versus domestic, as well as industry selection. Our products that serve these activities are from Vestek and I/B/E/S (Primark Financial Analytics Division) and WEFA and Primark Decision Economics (Primark Decision Information Division). SECURITY RESEARCH AND SELECTION. The evaluation of individual investment securities. Depending on the investment approach used -- technical, fundamental or quantitative -- the information needs will be different, as will the analytical tools. Our products that serve these activities are from Datastream, Disclosure, Worldscope, Extel and ICV (Primark Financial Information Division) and Baseline, I/B/E/S and Vestek (Primark Financial Analytics Division). PORTFOLIO CONSTRUCTION AND TRACKING. The process of creating a portfolio of individually selected securities that collectively possesses the appropriate risk and return characteristics. Primark Financial Analytics Division serves these activities through the Vestek and Baseline products. SECURITY TRADING. The actual buying and selling of individual securities. Timing, costs and other technical factors play important roles in the efficient execution of a tracking strategy. Primark Financial Information Division's TOPIC, GlobalTOPIC and A-T products serve these activities. FUND ACCOUNTING. The accounting for the investment management process on an intra-day, daily, weekly, monthly and annual basis. This includes accounting for portfolio valuation, transactions, tax, regulatory and client reports and performance measurement. Our products that serve these activities are from Datastream and Primark Investment Management Services within the Financial Information Division and Vestek within the Primark Financial Analytics Division. The "sell-side" firms are involved in many aspects of the investment cycle. Each of these aspects is generating stronger demand for more and better financial and economic information. All of Primark's divisions offer products essential to these firms, with Primark Financial Information Division representing the largest share of those offerings. Some of the functions performed by the "sell-side" include: BROKERAGE. This involves the generation and fulfillment of buy and sell orders for specific securities from money managers, trust departments, insurance companies and individuals. Information from Primark Financial Information Division, through TOPIC, GlobalTOPIC, A-T, Datastream and Disclosure, as well as I/B/E/S and WEFA information, through Primark Financial Analytics Division and Primark Decision Information Division, respectively, are useful in this process. RESEARCH. Analysts study corporate securities and other investment instruments to estimate the likely returns from these investments and arrive at buy and sell recommendations. Primark Financial Information Division's Datastream, Disclosure, Extel and Worldscope, together with I/B/E/S and WEFA (Primark Financial Analytics Division and Primark Decision Information Division, respectively) provide useful data and tools to the investment research analyst, as well as distribution systems for the results of their work. TRADING. The actual process of identifying buyers and sellers of securities and executing orders, whether for customers or the firm's own account, make up the bulk of activities in trading. Such orders are usually accomplished through exchanges for most equities, options and futures, while bonds and foreign currencies are more often traded directly or through other brokers. Primark Financial Information Division's TOPIC and GlobalTOPIC products directly support the trading process in London with quotes and news. However, traders have become interested in value-added data as trading strategies have become more sophisticated. To meet this need, we have various products that combine quotes and news with fundamental information, analyses and forecasts from our other business units. Similarly A-T's products fulfill the same role in North America. Primark SpeedFeed provides real-time securities prices sourced directly from the world's major markets. CORPORATE FINANCE. The traditional investment banking functions involving the underwriting of securities, determining capital structure and merger and acquisition activity are very information 6 9 intensive. All three divisions, through the products of Datastream, Disclosure, Extel, Worldscope, I/B/E/S and WEFA, provide extensive support to investment bankers. In addition to the financial community, our customers include corporations, governmental organizations and retail customers. CORPORATIONS. To aid in the increasing competition in the global marketplace, corporations require greater financial and economic information on countries, markets and competitors. Our operations that serve those needs are Primark Financial Information Division's Disclosure and Worldscope, Primark Financial Analytics Division's I/B/E/S and Primark Decision Information Division's WEFA, Primark Decision Economics and the Yankee Group. GOVERNMENTAL ORGANIZATIONS. As issues related to commerce, trade and international finance gain prominence in governmental decision-making, along with fiscal and monetary policy, governmental organizations require greater amounts of financial and economic data. Our operations that serve these needs are Primark Financial Information Division's Disclosure, Primark Financial Analytics Division's I/B/E/S, Primark Decision Information Division's WEFA, Primark Decision Economics and the Yankee Group. RETAIL CUSTOMERS. The following Internet and wireless initiatives demonstrate our strategy to introduce many new Internet-based products for self-directed investors. Our new retail web site, insiderSCORES.com, is the first of a series of "person-centric" scoring sites from our new subsidiary, ScoreLab. MarketEye.com delivers real-time and delayed securities prices, company news, market reports, historical information, charting and portfolio management capabilities primarily to the individual investor. Through a new strategic alliance, Primark is the exclusive provider of financial information to The Money Channel, the UK's first dedicated TV channel for finance and investment. In addition to these Internet initiatives, Primark is also investing in products for wireless distribution. Our alliance with MicroStrategy, the Primark Financial Channel will be syndicated and will combine the wireless delivery technology of MicroStrategy with the global financial and economic information of Primark to deliver up-to-the-minute investment, economic and corporate information to all types of wireless devices as well as faxes and email. The decision to organize Primark under the current divisional structure was made in June of 1998, and is an important step in fully integrating operational functions within Primark to meet customer needs efficiently and to allow for further market penetration with existing and new product offerings. PRIMARK FINANCIAL INFORMATION DIVISION The Primark Financial Information Division recorded $347.5 million of revenues for the 1999 fiscal year. This represented 70.3% of Primark's total revenues. Primark Financial Information Division generated $239.0 million of revenues outside of North America with $135.3 million of those revenues coming from Datastream products, $54.0 million from ICV, $28.8 million from Primark Investment Management Services, $12.7 million for Extel and the remaining $8.2 from Disclosure. The $108.5 million generated in North America represented $67.1 million from Disclosure, $11.3 million from Worldscope, $17.1 million from Datastream sales and $13.0 million for A-T Financial. The Primark Research Centers accounted for $17.6 million of the Division's revenues during 1999. Datastream. Datastream provides global historical economic and financial information to customers worldwide and, together with Primark Investment Management Services' products, is a leading provider of computer-based accounting and other investment fund services in the United Kingdom. The core of Datastream's products is its centralized data system. This system maintains a series of linked databases of extensive international economic and financial data collected from wire services, official publications of national agencies, stock options and futures exchanges, other information vendors, and brokers, dealers, banks and issuers. Customers have online access to Datastream's databases through personal computers, networks or workstations. Datastream's products and services enable customers to perform extensive investment research and analysis, investment administration and portfolio valuations on securities in 7 10 all major markets, and to produce graphics, statistics, time series analysis and other research. Datastream's products and services fall into two principal categories, investment research and fund management services. Investment research services accounted for approximately 81% of Datastream's total revenues for the year ended December 31, 1999, 82% for the year ended December 31, 1998 and 85% for the year ended December 31, 1997. These services consist of a set of software programs to manipulate, analyze and present financial and economic information obtained from Datastream's databases. The software is designed to facilitate our customers' access to data from any of Datastream's databases and to manipulate this data through a variety of pre-programmed and user-defined ways to produce graphs, tables and reports and to perform analyses. Fund management services accounted for approximately 19% of Datastream's total revenues for the year ended December 31, 1999, 18% of Datastream's total revenues for the year ended December 31, 1998 and 15% for the year ended December 31, 1997. Fund management services, available through Primark Information Management Services, provide investment accounting, portfolio valuation and performance measurement activities. A critical component of Datastream's business is the data itself. Datastream's principal supply requirements are for raw financial data, which through the Primark Data Company are acquired from numerous data suppliers worldwide or developed internally. Once acquired and edited, the data sets are stored in Datastream's databases for access and manipulation through Datastream's applications and value-added software programs. Data suppliers generally retain ownership of the raw data, but allow Datastream and its customers the use of such data. Datastream places great importance on the quality of its data and has developed a program to continuously review its data sources to ensure quality, control and continuity. Wherever possible, Datastream develops multiple sources of data to provide backup and cross checking. Data relating to equities include pricing information for earnings and dividends on approximately 50,000 stocks from 64 developed and emerging markets. This data includes historical earnings and dividend data, as well as forecast data supplied by market specialists. Data relating to bonds include maturity and yield on approximately 200,000 corporate and government bonds from 32 countries, all Eurobonds and related indices. Data relating to futures and options includes current prices, previously traded prices, trading volume and intra-day high and low values from the international options and futures exchanges, including LIFFE (London), MONEP and MATIF (Paris), SOFFEX (Switzerland), EOE (Amsterdam), DTB (Germany), Chicago and Philadelphia. Datastream has included databases from Extel, I/B/E/S, Disclosure, Worldscope and WEFA as an integral part of its investment research services. Consequently, it helps these Primark companies gain additional customers, as well as customers new to Datastream. Datastream has also installed the full Disclosure index on its online system and offers index searches and electronic ordering of hard copy documents to Datastream users. Vestek is also developing investment management software products that have been marketed and supported by Datastream's European sales and service personnel. This responsibility for the European sales and service of Vestek products has now been shifted to I/B/E/S' European operations as part of the initiatives to integrate operations within Primark Financial Analytics Division. ICV. ICV provides real-time, on-line prices, news and research on the UK equities market as well as systems for order entry and trade reporting. ICV's software combines real-time prices with news and other data in a unique format, which we believe, has become the standard presentation for UK equity data. ICV has incorporated Datastream's historical information as an add-on to its major products, TOPIC and GlobalTOPIC, and is continuing to integrate both Primark company fundamental data and third party data into its major products. The core of ICV products is its central systems that take real-time data from several exchanges and combine the prices with news. The information is then broadcast to a customer base of nearly 9,000 terminals using the datacast bandwidth on terrestrial television, leased telecommunication circuits or via satellite. The data is broadcast to customers' systems, the signal is decoded, stored on a local database and presented on user screens utilizing software designed and maintained by ICV. Timeliness and reliability are important aspects of 8 11 ICV's service. ICV's central systems are designed to provide state-of-the-art timeliness by handling incoming data within a few milliseconds through a program code that resides in memory. Reliability is provided through several back-up sites. Our investment in trading systems has allowed for the set up of an UK-wide interactive network that can be used to link customers' offices and provide a future conduit to any new data sources ICV may acquire or develop in the future. ICV's two principal products are TOPIC and Market-Eye. TOPIC services accounted for 64%, 60% and 53% of ICV's total revenue for the years ended December 31, 1999, 1998 and 1997, respectively. Primark EuroTOPIC provides real-time UK equities prices and news and can also deliver North American real-time data through SpeedFeed. The GlobalTOPIC product suite delivers quotes, news, indices, historical data, company accounts and broker research to buy and sell side equity professionals via Internet, networks and workstations. GlobalTOPIC represents the culmination of Primark's goal to produce the Primark Global Equities Service. Market-Eye services accounted for 10% of ICV's revenue for each of the years ended December 31, 1999 and 1998 and 12% for the year ended December 31, 1997. Market-Eye delivers real-time prices, news and investment research information on the UK market, both through satellite broadcast and the Internet and is well positioned to take advantage of demographic trends and the increasing popularity of personal investment activity. Disclosure. Disclosure is a leading provider of "as reported" and abstracted financial information throughout the world, distributing information on more than 12,000 US companies and 20,000 foreign companies, derived from a variety of government and third party sources. Disclosure's proprietary content is provided on a subscription and per use basis through electronic media such as online services and compact laser discs, as well as through printed products. Disclosure's customers include investment and commercial banks, money managers, corporations, law, accounting and consulting firms, libraries and universities. Disclosure's financial information products and services are based upon a wide spectrum of SEC documents such as Forms 10-K and 10-Q, proxy statements, registration statements and material event reports, and increasingly non-SEC documents such as foreign company financial filings, news, economic data, pricing information and US and foreign annual reports. The information included in Disclosure's products is obtained through contractual relationships with the SEC and major stock exchanges, from other Primark companies and through commercial acquisition of the information. Once acquired, Disclosure indexes, tags, abstracts and formats the information to allow for ease in navigation, searches and analysis. Primark considers Disclosure's electronic media business, comprised of Global Access, Worldscope, compact discs and revenues from third party distributors of its value-added database products, as representing Disclosure's next generation of product offerings. These products now represent approximately 57% of Disclosure's overall revenues, up from less than 20% in the beginning of 1996. Disclosure's image-based services are delivered through the Global Access and Global Access Pro products as well as through Research Centers located in major cities. Global Access is a web-based front end that offers on-line and real-time access to Disclosure's proprietary electronic index of public company documents; on-line delivery of Disclosure's value-added EDGAR database; access to over ten years of data on 29,000 companies in the Worldscope and SEC databases; institutional and corporate ownership data; and links to third-party content such as I/B/E/S, WEFA and industry news. Global Access provides real-time broadcast alert functionality as well as desktop full text and field searching and screening of company and industry information with direct downloading to spreadsheets and word processors. Laser D is a multi-disc CD-ROM document database that provides a desktop library of information to high volume document users who require immediate access to documents filed with the SEC, banking agencies and US and foreign stock exchanges. Laser D was phased out at the end of 1999 and replaced with Global Access Pro, an Internet-delivered service designed to meet the needs of major clients that require high volume document support. Successful migrations were completed for over 200 clients. The Research Centers are staffed by research specialists who assist customers in locating requested information and produce alert services for customers who want early identification of specified documents. Approximately 86%, 84% and 82% of Disclosure's total revenues were derived from document services for the twelve months ended December 31, 1999, 1998 and 1997, respectively. 9 12 Disclosure also provides products that access value added databases that can be machine read and manipulated by end users. Disclosure's Global Researcher and Compact D products provide the capability to perform sophisticated searching of financial and text information on more than 29,000 companies. These products also provide reporting and graphing functionality. Proprietary Disclosure databases include: EdgarPlus (SEC filings with value-added navigational and style tags); the Securities Exchange Act database, with more than 11,000 US company profiles and financial statement abstracts dating back more than 10 years; and other databases on institutional corporate insider transactions. These proprietary databases are offered directly by Disclosure and also by third-party vendors, which target both the commercial and consumer markets, enhancing Disclosure's product through their hardware, software and market focus. Such vendors include America Online Inc., Bridge Information Systems, Inc., FactSet Research Corp., Lexis-Nexis, UMI Inc. and West Publishing Co. Approximately 14%, 16%, and 18% of Disclosure's total revenues were derived from database services for the years ended December 31, 1999, 1998 and 1997, respectively. Worldscope. Worldscope contains a collection of descriptive profiles and standardized financial statements on more than 20,000 companies in 50 countries and has been fully integrated into Disclosure's product line. The Worldscope database is standardized to a common definition of generally accepted accounting principles across all major countries indexed and organized for cross-border screening and searching. In addition to its global database, Worldscope offers an emerging market database. Worldscope products are delivered via third-party distributors, CD-ROM and online platforms. In June 1999, Primark acquired the remaining 20% minority interest in Worldscope, giving Primark 100% ownership. Extel. Acquired February 1999, Extel is a widely recognized brand name in the European and Asian markets that provides "as reported" company fundamental data covering 15,000 quoted companies in over 55 countries as well as 800 private UK and European companies. Delivery platforms are Windows-based and provide Internet or direct dial access to datasets for real-time updates to reports, charts, images and news through Global Access, a direct datafeed or leading redistributors. Extel added $12.7 million of revenue to the Primark Financial Information Division for the year ended December 31, 1999. A-T Financial Information. Acquired in February 1999, A-T is a real-time financial information content provider servicing institutional and retail markets with global securities information and attendant display and distribution technology. A-T Financial provides value through creating proprietary content, consolidating disparate third party data sets and disseminating high performance, mission-critical data feeds supported by a series of superior display and programmatic interfaces to institutional trading and analytical front-end products, various on-line retail brokerage service providers and Internet web sites. In 1999, A-T completed Primark SpeedFeed, covering all exchange data from all North American exchanges. This market datafeed combines information from more than 35 sources, including North American equities, futures and options exchanges, major newswires and exchange traded data, along with data from I/B/E/S, Disclosure and Worldscope. A-T added $13 million of revenue to the Primark Financial Information Division for the year ended December 31, 1999. PRIMARK FINANCIAL ANALYTICS DIVISION The Primark Financial Analytics Division generated $92.6 million of revenues for the 1999 fiscal year. This represented 19% of Primark's total revenues. Within Primark Financial Analytics Division, I/B/E/S accounted for $47.3 million, Baseline $32.5 million and Vestek $12.8 million of revenues. I/B/E/S. I/B/E/S is a leading source of global analyst estimates for institutional investors, financial institutions and portfolio managers worldwide. I/B/E/S collects, processes and disseminates analyst forecasts from over 9,200 individual securities analysts covering 18,000 companies in 59 countries globally. The estimates, derived content and research are delivered via Internet, I/B/E/S products such as Active Express, a proprietary software delivery system and through third party distributors. Many I/B/E/S products permit the customer to perform analytical functions and are enhanced by reports and graphics. I/B/E/S enjoys complementary strengths in data, applications and consulting, leveraging its own propriety financial database architecture in the development of the state of the art Active Express platform and custom development activities for clients. 10 13 Baseline. Baseline provides portfolio managers at investment companies, banks, investment consulting firms and other institutional investors with online evaluation graphics that portray critical financial information on more than 8,000 US companies. The Baseline product consists of data and software that manipulates, analyzes and graphically presents company financial information to end users through personal computers, typically linked by computer networks. Baseline's principal supply requirements are for raw financial data, which is acquired from numerous data suppliers including other Primark companies. Once acquired, the data is verified, manipulated and stored in Baseline's database for daily transmission to customers for use within Baseline's applications. Baseline places great importance on the quality of its data and has developed a program to review its data sources continuously to guarantee quality control and continuity. Wherever possible, Baseline develops multiple sources of data to provide backup and cross checking. Vestek. Vestek develops, markets and supports investment information services and application software used to manage, analyze and optimize institutional portfolios of equity, fixed income and other financial instruments. Vestek also provides consulting services for investment managers and plan sponsors. Vestek Select, a comprehensive mutual fund research program, provides mutual fund organizations and third-party fund distributors with detailed, forward-looking analysis based on actual monthly fund holdings using more than 100 characteristics, such as forecast earnings growth, forward P/E, price/book, expected return and forward-looking risk measures. Through its international sales force, Vestek currently serves more than 350 clients in nine countries. PRIMARK DECISION INFORMATION DIVISION The Primark Decision Information Division generated $54.5 million of revenues for the 1999 fiscal year, representing 11% of Primark's total revenues. Within Primark Decision Information Division, WEFA accounted for $25.3 million and the Yankee Group $29.2 million. Revenues from Primark Decision Economics are not included in the Primark Division Information Division totals as Primark Decision Economics is not a majority owned operation and is accounted for on the equity method. WEFA. Founded by Nobel Laureate Economist Lawrence R. Klein, who remains active in the business, WEFA is a leading provider of international value-added economic information, software and consulting services to companies, governments, universities and financial institutions. WEFA provides analysis and forecasts for over 100 industries across 100 countries through its Global Industrial Outlook Service, its electronic database and a semi-annual publication. WEFA data, analysis, forecasts and reports are primarily delivered via the Internet. The new myWEFA and myData allow users to pick and choose WEFA services that meet their individual needs. More than 800 businesses, financial institutions and government agencies around the world us myWEFA. Primark Decision Economics. In August 1996, Primark Decision Economics ("PDE") was formed as a joint venture between Primark and Dr. Allen Sinai, Chief Executive Officer and Chief Global Economist. Dr. Sinai was recognized in 1997 by BusinessWeek as the leading economic forecaster in the US. PDE brings value to financial market professionals by providing timely value-added economic forecasts, analysis and commentaries covering the world's major economies and markets. The Yankee Group. The Yankee Group consists of a global team of highly skilled technology and market experts who focuses on identifying current trends and future directions in e-commerce communications and computing for business and consumer markets. The Yankee Group markets these insights by providing strategic planning, technology forecasting, consulting and market research to clients worldwide, including vendors and users of major computer and communications systems and services. The Yankee Group's products and services fall into three principal categories -- planning services, custom consulting engagements and seminars and conferences. Planning services accounted for 68% of total revenue for the year ended December 31, 1999 and 66% for each of the years ended December 31, 1998 and 1997. An annually renewable planning service subscription provides a customer with consultation time with a research analyst, quarterly audio conferences, access to the 11 14 Yankee Group's published research reports and white papers through both the Internet and paper formats as well as discounts on seminars. The Yankee Group currently offers 22 planning service packages covering a broad variety of topics in communications and computing. Custom consulting engagements, seminars and conferences and reports accounted for 32% of total revenue for the year ended December 31, 1999 and 34% for each of the years ended December 31, 1998 and 1997. Custom consulting engagements often result as an extension of planning services when an inquiry or a study is more extensive than that offered through a planning service subscription. Custom consulting contracts are also entered into with external parties when the company considers the study to be of strategic importance. The Yankee Group holds an average of 10 to 15 seminars or conferences a year, often in collaboration with industry publication houses. CUSTOMERS No single customer of the information business accounts for more than 2% of the Company's consolidated revenues. Primark Financial Information Division Datastream/ICV's customers include approximately 5,000 financial organizations in 52 countries, including investment bankers, brokers, investors, fund managers, insurance companies and market makers that use financial and economic information. Other users include publishers of financial journals and daily newspapers, business schools and universities. Datastream/ICV's customers typically subscribe through annual contracts. Of Datastream/ICV's revenues, 61% were derived from the UK, 23% were from Europe, 9% from Asia and 7% from North America. These contracts are automatically renewed unless notice of cancellation is given two to three months before the annual renewal date. In 1999, the renewal rate was approximately 93%. Disclosure's, Worldscope's and Extel's customer base includes the majority of US and UK investment banks, money managers, corporations, law and accounting firms, together with other institutions and individuals performing financial research. Disclosure also distributes its information through over 50 third party vendors. Subscription services accounted for 69%, 69%, and 62% of Disclosure/Worldscope's revenues for the fiscal years ended December 31, 1999, 1998 and 1997, respectively. In 1999, Disclosure/Worldscope experienced a renewal rate for its subscription services of approximately 85%. A-T's customers include large financial institutions, such as international investment banks, clearing firms, on-line and regional brokerage firms, private banks and mutual fund managers, as well as individual investors. For the year ended December 31, 1999 approximately 76% of A-T's revenue was derived from licensing and delivery of various types of software and market data to institutional customers, 17% from its Internet business and 7% from royalties. Primark Financial Analytics Division I/B/E/S directly serves more than 2,250 customers worldwide and thousands more through its distribution networks. I/B/E/S' customers are represented by financial institutions and portfolio managers worldwide, with particular interest by the quantitative analysts who access and download information directly into analytic models. I/B/E/S products are also sold to end users, such as management consultants and traditional investment analysts who utilize I/B/E/S for general research. Approximately 84% of I/B/E/S' 1999 revenues were derived through annual subscription contracts of which 7% were through soft dollar arrangements. In 1999, I/B/E/S experienced a renewal rate for its subscription services of approximately 87%. Baseline serves over 8,000 portfolio managers in more than 700 organizations, including investment companies, banks, investment consulting firms and other institutional investors located throughout the US and Canada who typically subscribe through bi-annual and annual contracts. These contracts are automatically 12 15 renewed unless notice of cancellation is given before the renewal date. In 1999, Baseline experienced a renewal rate for its subscription services in excess of approximately 94%. Vestek's clients include major banks, plan sponsors, consultants, insurers and investment managers. The majority of Vestek's revenues are derived from online subscription services. In 1999, Vestek experienced a renewal rate for its subscription services of approximately 92%. Primark Decision Information Division WEFA has approximately over 1,000 customers operating in corporations, financial services, governments, utilities and other businesses. WEFA performs consulting and planning services to analyze the potential impact of various economic alternatives faced by its customers. In 1999, WEFA experienced a renewal rate for its subscription services of approximately 85%. The Yankee Group's customers consist primarily of suppliers and users of computer and communication technology. Yankee's customer base includes major consulting firms, telecommunications companies, computer hardware manufacturers, software companies, research analysts and the information technology departments of major corporations. MARKETING The products and services of Primark's information companies are marketed worldwide. Increasingly, the individual Primark companies are offering each other's data through their own delivery platforms. Primark Financial Information Division Datastream is located in London, England and has sales personnel which support the full spectrum of Primark Financial Information Division product offerings through offices located in Australia, Belgium, Canada, England, France, Germany, Hong Kong, Italy, Japan, Luxembourg, the Netherlands, Singapore, South Korea, Spain, Sweden, Switzerland, Thailand and the United States. ICV is located in London, England and has sales and support offices throughout the UK. The products of Primark Financial Information Division include data from I/B/E/S and WEFA. Disclosure and Worldscope market and distribute their products predominately in the US, Disclosure extends its sales and marketing reach with Research Centers and through the combined Primark Financial Information Division sales force. Disclosure has incorporated I/B/E/S and WEFA data in its Global Access platform. Since the creation of Primark Financial Information Division, the sales and customer support operations of all Primark Financial Information Division units have been integrated with separate managers for the overall range of activities for North America and for the rest of the world. Primark Financial Analytics Division I/B/E/S, headquartered in New York City, with offices in London, Hong Kong, Tokyo and Brazil, delivers its products directly to customers via state-of-the-art electronic delivery media. I/B/E/S Active Express is a new powerful equity workstation that is capable of seamlessly integrating any type of data from practically anywhere in the world. At the core of Active Express is a virtual, real-time financial data integration engine developed by I/B/E/S. This same technology is also licensed to third parties and leveraged by I/B/E/S for custom development and consulting activities. I/B/E/S also offers its quality data and content through a network of more than 50 electronic third-party distributors including Bloomberg L.P., FactSet, FAME, Data Downlink, Reuters Group PLC, S & P Compustat and Datastream/ICV. These third-party distributors offer I/B/E/S a mechanism to reach new markets and link I/B/E/S data to other databases and applications software. Baseline's product is targeted primarily toward portfolio managers of domestic equities and carries portions of I/B/E/S', Disclosure's and Primark Decision Economics' data as part of its product offering. 13 16 Baseline delivers its product directly to customers via an advanced electronic delivery platform. Baseline markets its product through its own domestic sales force. Headquartered in San Francisco, Vestek's products are marketed through its sales force located in New York, Los Angeles and Japan. Vestek's European sales operations are integrated within I/B/E/S, covering all of Europe from I/B/E/S' London office. Vestek includes data from I/B/E/S, Worldscope and Datastream in portions of its product line. Primark Decision Information Division WEFA markets its products through its international sales force. With headquarters in Philadelphia, WEFA has offices in several US cities and in the UK, Germany, France, South Africa and Mexico. WEFA also employs analysts in other countries. WEFA delivers its data online through I/B/E/S, Disclosure and Datastream/ICV, as well as through its own electronic distribution platform. WEFA believes its historical association with the Wharton School of Business and with Nobel Laureate Lawrence R. Klein gives it a distinct advantage in the marketplace. The Yankee Group markets its services internationally primarily through its own sales force. We consider its historic record of accurately forecasting the general direction of communication and computing technology, together with its focus on customer support, as its greatest competitive advantages. The Yankee Group's industry analysts are the company's critical resource. These individuals have significant expertise in their areas of concentration, gained through industry experience, constant study of the technology market and ongoing dialogue with vendors and consumers in the industry. The Yankee Group headquarters are in Boston, with offices in other US cities, London and Tokyo. COMPETITION The global information industry is highly competitive. There are many large and successful companies in the information services industry that supply financial, economic and market research data that compete with products and services provided by Primark's information businesses. Principal competitive factors include the quality, reliability and comprehensiveness of the analytical services and data provided, flexibility in tailoring services to client needs, experience, innovation, the capability of technical and client service personnel, data processing and decision support software, reputation, price and geographic coverage. We distinguish our products through our broad international coverage, wide range of databases, accuracy of data, proprietary software applications, reputation, experience and quality of customer support provided. Our ability to remain competitive in the information market will depend largely upon our ability to maintain and develop new products and access new markets in a cost efficient manner, as well as the integration of all our information products and services. TECHNOLOGY DEVELOPMENT An essential element in our strategy has been to offer proprietary value-added content through state-of-the-art delivery systems that incorporate the latest improvements in information technology. Over the past several years, through selected acquisitions and internal development, the information technology organizations of our financial, economic and market research businesses have been strengthened, operations and reliability have been improved, software development and maintenance procedures have been upgraded and euro and Y2K compliance achieved. We believe that our information technology resources provide us with enhanced capabilities. In addition, we intend to take additional steps to further integrate these information technology functions. One of the most promising areas for immediate integration is in building PrimarkNet, a worldwide network for Primark that integrates all telecommunications capabilities in a common architecture, providing greater capacity and a higher level of service at lower costs. We anticipate that the PrimarkNet will also facilitate the delivery of new products to our entire customer base. PrimarkNet will provide facilities such as 14 17 high-speed image transmission, bulk data downloading and voice/data transmission on the same lines. Elements of PrimarkNet will also allow for the internal data exchange needed to share data effectively for the creation of new products. We have developed a database and software capability called the Primark Information Optimizer. The Primark Information Optimizer essentially creates a unified and integrated database for all of Primark, while each of its components remain as independent databases compatible with existing legacy products. The Primark Information Optimizer will enable the rapid development of new products and allow each Primark company to readily deliver all relevant Primark data to our customers. We plan to use the capabilities of the Primark Information Optimizer in a data and software product that can be offered to financial clients for their internal use in retrieving and standardizing information in multiple formats and stored in multiple databases. TRADEMARKS Primark's information companies hold numerous trademarks worldwide that are subject to continuous renewal. These trademarks are significant to our business, and are registered in all of our major markets to ensure recognition among our many global trading customers. EMPLOYEES At December 31, 1999, Primark and its subsidiaries employed approximately 3,458 people. We believe our relationship with our employees is excellent. ITEM 2. PROPERTIES We currently occupy our principal executive offices, comprised of approximately 17,848 square feet, in Waltham, Massachusetts under lease agreements that expire in July 2001 with provision for two five-year renewal options. In addition, Primark accounting services occupies 13,094 square feet of office space in Bedford, Massachusetts under a lease that expires in 2004. A-T Financial occupies 6,356 square feet of space at its Naperville Illinois headquarters under a lease agreement that expires January 2001. A-T's regional offices occupy approximately 24,288 square feet of office space under various leases. These offices are located in Naperville and Lisle, Illinois, Chicago, New York, San Francisco and Boston. Baseline occupies 58,566 square feet of space at its New York headquarters at New York's World Trade Center under a lease agreement, which expires in 2015. Baseline also has an office in Philadelphia. Datastream's two principal office facilities are located in London, England. Comprised of an aggregate of 100,779 square feet, these facilities are occupied under lease agreements that expire in 2005 and 2017. Through its affiliates, Datastream also occupies, under short-term leases through 2020, an aggregate total of approximately 90,406 square feet of office space, principally located in Australia, Belgium, Canada, Denmark, England, France, Germany, Hong Kong, Italy, Japan, Luxembourg, the Netherlands, Singapore, South Korea, Scotland, Philippines, Poland, Spain, Sweden, Switzerland, Thailand and the United States. Disclosure/Worldscope's headquarters, comprised of approximately 99,640 square feet, is located in Bethesda, Maryland. The property is occupied under lease agreements that expire in 2006. Disclosure's regional offices occupy approximately 57,909 square feet of office space under various lease terms. These offices are located in Arizona, California, Colorado, the District of Columbia, Georgia, Illinois, Massachusetts, New York and Texas. Worldscope's regional offices occupy approximately 45,178 square feet of office space under various lease terms and are located in Ireland, India and the United States. I/B/E/S occupies 43,859 square feet of space at its New York City headquarters under a lease agreement that expires in 2007. Additional office space totaling 13,700 square feet is located in England, Hong Kong, Brazil and Japan. ICV's facilities occupy approximately 18,916 square feet of space that expires in 2018, and are located primarily in England. 15 18 Vestek occupies approximately 17,000 square feet of space at its San Francisco headquarters under a lease agreement that expires in 2002 with provision for one five-year renewal option. WEFA occupies 39,885 square feet of space at its Pennsylvania headquarters under a lease agreement that expires in 2005. Additional office space of approximately 16,351 square feet is leased in Canada, Europe, South Africa, Hong Kong and the United States. The Yankee Group occupies approximately 25,000 square feet of space at its Boston headquarters under a lease agreement that expires in 2003 and has international offices located in London and Tokyo. ITEM 3. LEGAL PROCEEDINGS The New York Board of Trade, ("NYBT") has submitted to Primark's subsidiary, A-T Financial Information, Inc., a claim for approximately $3.8 million based primarily on an allegation that, over a five-year period, A-T insufficiently delayed the distribution of information received from NYBT and therefore should have paid fees to NYBT applicable to real-time distribution of that information. Management believes that the allegation is without merit and intends to vigorously contest the claim. Our management believes that the outcome of all pending legal proceedings will not, individually, or in the aggregate, have a material adverse effect on our business, results of operations or financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the last quarter of 1999. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is listed and traded on the New York Stock Exchange and the Pacific Exchange Inc. Other information set forth in the section entitled "Supplementary Information -- Quarterly Data" on page 51 of the Company's 1999 Annual Report is incorporated by reference herein. Since 1988, the Company has not paid cash dividends on common stock to its shareholders in order to reinvest available cash in the Company's operations. Information regarding restrictions on the Company's ability to pay cash dividends on its common stock is incorporated by reference herein from Note 6 to the Consolidated Financial Statements entitled "Short-Term and Long Term Debt" on page 32 of the Company's 1999 Annual Report. ITEM 6. SELECTED FINANCIAL DATA The information set forth in the section entitled "Selected Financial Information -- Five Year Data" on page 50 of the Company's 1999 Annual Report is incorporated by reference herein. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information set forth in the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 43 through 49 of the Company's 1999 Annual Report is incorporated by reference herein. ITEM 7A. MARKET RISK DISCLOSURES Information regarding Market Risk is incorporated by reference herein from the section entitled "Market Risk" included in "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 47 through 49 of the Company's 1999 Annual Report incorporated by reference herein. 16 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and the related notes thereto and the Report of Independent Auditors, as contained on pages 24 through 42 of the Company's 1999 Annual Report, and the "Supplementary Financial Information - -- Quarterly Data," as contained on page 51 of the Company's 1999 Annual Report, are incorporated by reference herein. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information set forth in the section entitled "Election of Directors" in the Company's 2000 Proxy Statement for its May 2000 Annual Meeting of Shareholders is incorporated by reference herein. Information with respect to the executive officers of the Company as of February 11, 2000 is set forth below. The Company's Board of Directors elect officers generally for one-year terms expiring at the next organizational meeting to be held in May 26, 2000. The term for Mr. Kasputys is governed by his employment agreement. Under this agreement, Mr. Kasputys is employed as the Chairman, President and Chief Executive Officer of Primark through December 31, 2001. Joseph E. Kasputys, age 63, has served as Chairman, President and Chief Executive Officer of Primark since May 1988. From June 1987 until May 1988, he served as President and Chief Operating Officer of Primark. Prior to joining Primark in June 1987, he was Executive Vice President of The McGraw-Hill Companies, Inc., a publishing and information services company. Prior to joining McGraw-Hill in 1985, he was President and Chief Executive Officer of Data Resources, Inc., an economic forecasting and consulting firm. Mr. Kasputys has been a Primark director since 1987. He is a member of the Nominating Committee of the Board. Mr. Kasputys is also a director of Lifeline Systems, Inc., a company that develops and manufactures personal response products and provides related monitoring and other services and New Era of Networks, Inc., a company that develops, markets and supports application integration software and provides application services. Stephen H. Curran, age 52, has served as Senior Vice President and Chief Financial Officer of Primark since 1988. In 1997 he was elected Executive Vice President and Chief Financial Officer. Michael R. Kargula, age 52, has served as Senior Vice President, General Counsel and Secretary of Primark since 1988. In 1997 he was elected Executive Vice President, General Counsel and Secretary. Steven L. Schneider, age 42, has served as President and Chief Executive Officer of the Primark Financial Information Division since July, 1998. From July 1995 through June 1998, Mr. Schneider served as President and Chief Executive Officer of Disclosure Incorporated and from February 1992 to July 1995, he served as Vice President of Investor Relations for the Company. William J. Swift III, age 48, has served as Vice President and Tax Counsel of Primark since 1988. In 1998 he was elected Senior Vice President. Linda Luke Lee, age 43, has served as Vice President, Associate General Counsel and Assistant Secretary since April 1, 1999. She has been a member of Primark's legal staff in various senior level capacities since 1985. Bruce Fraser, age 50 has served as a member of Primark's tax department in various senior level capacities since 1988. In 1999 he was appointed Vice President of Tax. 17 20 ITEM 11. EXECUTIVE COMPENSATION The information set forth in the sections entitled: "Executive Compensation," "Directors' Compensation," "Compensation Committee Interlocks and Insider Participation," "Compensation Committee Report," "Employment Agreements and Other Arrangements," in the Company's 2000 Proxy Statement for its May 2000 Annual Meeting of Shareholders is incorporated by reference herein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth in the sections entitled "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" in the Company's 2000 Proxy Statement for its May 2000 Annual Meeting of Shareholders is incorporated by reference herein. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth in the sections entitled "Executive Compensation," "Directors' Compensation," "Compensation Committee Interlocks and Insider Participation," "Employment Agreements and Other Arrangements" and "Certain Transactions" of the Company's 2000 Proxy Statement for its May 2000 Annual Meeting of Shareholders is incorporated by reference herein. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) LIST OF DOCUMENTS FILED AS PART OF FORM 10-K 1. The following Financial Statements are contained in Primark's 1999 Annual Report filed as Exhibit 13.1 to this report: - Consolidated Statements of Income for each of the three years in the period ended December 31, 1999. - Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1999. - Consolidated Statements of Financial Position as of December 31, 1999 and 1998. - Consolidated Statements of Common Shareholders' Equity for each of the three years in the period ended December 31, 1999. - Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 1999. - Notes to the Consolidated Financial Statements. - Independent Auditors' Report. - Management's Discussion and Analysis of Results of Operations and Financial Condition. - Selected Financial Information Five Year Data. - Supplementary Financial Information -- Quarterly Data. 2. The following financial statement schedule is filed as part of this report and is located on page: Schedule II Valuation and Qualifying Accounts on page 23. Independent Auditors' Report on Financial Statement Schedule on page 24. 3. The Exhibits filed as part of this Annual Report on Form 10-K are listed in the Index to Exhibits on pages 19 to 21, and are incorporated by reference herein. 18 21 (B) REPORTS ON FORM 8-K During the quarter ended December 31, 1999 the Company filed no Current Reports on Form 8-K. EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1 Stock Purchase Agreement between the Company and Howard Anderson dated as of August 9, 1996 (Exhibit 2.1 to the Company's August 15, 1996 Form 8-K). 2.2 Stock Purchase and Sale Agreement dated as of September 30, 1996, between the Company and American Natural Resources Company (Exhibit 2.3 to the Company's September 30, 1996 Form 10-Q). 2.3 Amended and Restated Partnership Agreement for Worldscope/Disclosure International Partners; Irish Partnership Interest Purchase and Sale Agreement; and Partnership Interest Purchase and Sale Agreement; dated as of October 15, 1996 (Exhibit 2.5 to the Company's 1996 Form 10-K). 2.4 Stock Purchase Agreement by and among Primark Corporation, Primark Information Services UK Limited and Litton Industries, Inc. and Litton UK Limited dated as of December 8, 1997 (Exhibit 2.1 to the Company's Form 8-K filed December 10, 1997). 2.5 Information Technology Services Agreement by and among Primark Corporation, TASC, Inc. and Litton Industries, Inc. (Exhibit 2.2 to the Company's Form 8-K filed December 10, 1997). 2.6 Stock Purchase Agreement between Primark Corporation and Aviation Sales Maintenance, Repair & Overhaul Company, a division of Aviation Sales Company dated as of August 10, 1998. (Exhibit 99.1 to the Company's Form 8-K filed October 6, 1998). 2.7 Stock Option Agreement between the Company and David Taylor dated February 24, 1999 (Exhibit 2.1 to the Company's June 30, 1999 Form 10-Q)). Articles of Incorporation and By-Laws 3.1 Restated Articles of Incorporation of the Company (Exhibit 3.1 to the Company's June 30, 1999 Form 10-Q). 3.2 By-Laws of the Company, as amended (Exhibit 3.1 to the Company's September 30, 1990 Form 10-Q). Instruments defining the rights of security holders, including indentures. 4.1 Rights Agreement dated May 29, 1997 between Primark Corporation and Bank Boston, N.A., as Rights Agent, which includes, Exhibit A, the Rights Certificate and as Exhibit B, the Summary of Rights to Purchase Common Stock (Exhibit 4.1 to the Company's Form 8-A dated June 19, 1997). 4.2 Indenture dated as of December 21, 1998 between the Company and State Street Bank and Trust, as Trustee for the 9 1/4 % Senior Subordinated Notes due 2008. (Exhibit 4.2 to the Company's Form S-4 dated March 12, 1999). 4.3 Registration Rights Agreement dated January 7, 1997 between the Company and Joseph E. Kasputys (Exhibit 4.1 to the Company's 1996 Form 10-K). 4.4 Offer to exchange 9 1/4% Senior Subordinated Notes due 2008 for 9 1/4% Senior Subordinated Exchange Notes due 2008 dated March 19, 1999 (Registration Statement No. 333-71183). Material Contracts 10.1 Primark Corporation 1992 Stock Option Plan dated March 2, 1992 (Exhibit 10.26 to the Company's 1991 From 10-K); Amendment dated September 28, 1995 (Exhibit 10.22 to the Company's 1995 Form 10-K). 10.2 Primark Corporation Stock Option Plan for Non-Employee Directors as amended, dated January 12, 1988 (Exhibit 10.57 to the Company's 1987 Form 10-K); Amendment dated February 21, 1992 (Exhibit 10.24 to the Company's 1991 Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.3 to the Company's September 30, 1992 Form 10-Q); Amendment dated September 22, 1995 (Exhibit 10.2 to the Company's 1996 Form 10-K).
19 22
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.3 Primark Corporation Executive Share Option Scheme (Exhibit 10.26 to the Company's 1992 Form 10-K); Amendment dated September 28, 1995 (Exhibit 10.24 to the Company's 1995 Form 10-K). 10.4 Primark Corporation Savings and Stock Ownership Plan as amended and restated, effective January 1, 1997; (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 dated December 10, 1996). 10.5 Primark Corporation 1992 Employee Stock Purchase Plan dated March 2, 1992 (Exhibit 10.27 to the Company's 1991 Form 10-K); Amended and Restated Stock Purchase Plan and related Prospectus as filed under the Securities Act of 1933 (Exhibit 10.27 to the Company's 1993 Form 10-K); Amendment dated October 4, 1995 (Exhibit 10.26 to the Company's 1995 Form 10-K). 10.6 Form of promissory note to be issued to the Company by executive officers in connection with the Company's 1988 Management Incentive Plan (Exhibit 10.1 to the Company's March 31, 1989 Form 10-Q). 10.7 Promissory notes dated September 30, 1988 issued to the Company by executive officers (Exhibit 10.1 to the Company's September 30, 1988 Form 10-Q). 10.8 Employment and Option agreements between the Company and Joseph E. Kasputys dated January 7, 1997 (Exhibit 10.11 to the Company's 1996 Form 10-K). 10.9 Supplemental Death Benefit and Retirement Income Plan Agreement as amended and restated, dated March 25, 1986 (Exhibit 19.1 to the Company's March 31, 1985 Form 10-Q); Certified Copy of Resolution amending the Supplemental Death Benefit and Retirement Income Plan Agreement (Exhibit 10.17 to the Company's 1991 Form 10-K; Amendment dated September 28, 1992 (Exhibit 29.4 to the Company's September 30, 1992 Form 10-Q). 10.10 Supplemental Medical Reimbursement Insurance Plan (Exhibit 10.15 to the Company's 1996 Form 10-K). 10.11 Form of Change of Control Compensation Agreement entered into between the Company and selected executive officers (Exhibit 10.60 to the Company's 1996 Form 10-K). 10.12 Refinancing Agreements (Revolving Credit Agreement, Term Loan Agreement, Pledge Agreement, Collateral Agency Agreement and Note Backup Agreement) dated as of February 7, 1997, by and among Primark Corporation, Lenders Parties, Mellon Bank, N.A. and other related documents (Exhibit 10.17 to the Company's 1996 Form 10-K); Amendment dated May 1,1997 (Exhibit 10.1 to the Company's June 30, 1997 Form 10-Q); Amendment dated June 30, 1997 (Exhibit 10.2 to the Company's June 30, 1997 Form 10-Q); Amendment dated December 1, 1997 (Exhibit 10.16 to the Company's 1997 Form 10-K); Amendment dated March 6, 1998 (Exhibit 10.16 to the Company's 1997 Form 10-K); Amendment dated May 8, 1998; Amendment dated June 15, 1998 (incorporated by reference to the Company's Schedule 13E-4 dated June 26, 1998); Amendment dated September 10, 1998; Amendment dated December 10, 1998 (Exhibit 10.13 to the Company's Registration Statement No. 333-71183); Amendment dated November 16, 1999*. Amendment dated December 10, 1998*. 10.13 Form of variable rate unsecured loan notes dated October 24, 1996 between the Company and the former shareholders of ICV, Ltd. (Exhibit 10.18 to the Company's 1996 Form 10-K). 10.14 Credit Agreement dated October 23, 1996, by and among the Company, Lenders Parties and Mellon Bank, N.A. (Exhibit 10.1 to the Company's Form 8-K dated November 13, 1996); Amendment dated October 23, 1996 (Exhibit 10.20 to the Company's 1996 Form 10-K); Amendment dated December 18, 1996 (Exhibit 10.21 to the Company's 1996 Form 10-K); Amendment dated January 9, 1997 (Exhibit 10.19 to the Company's 1996 Form 10-K); as amended by the Note Backup Agreement dated February 7, 1997 (Exhibit 10.17 to the Company's 1996 Form 10-K). 10.15 Primark Corporation 1999 Stock Option Plan for Non-Employee Directors dated May 26, 1999 (Exhibit 4.1 to the Company's Registration Statement on Form S-8 dated July 28, 1999). 10.16 Memorandum of Understanding between the Company and David Taylor dated March 15, 1999 (Exhibit 10.2 to the Company's June 30, 1999 Form 10-Q).
20 23
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.17 Employment extension between the Company and John C. Holt dated July 9, 1999 (Exhibit 10.3 to the Company's June 30, 1999 Form 10-Q). 10.18 ScoreLab, Inc 1999 Stock Option Plan.* Annual Report to Security Holders 13.1* Primark Corporation 1999 Annual Report (which is not deemed to be "filed" except to the extent that portions thereof are expressly incorporated by reference in this Annual Report on Form 10-K) filed herewith. Subsidiaries of Registrant 21.1* Subsidiaries of Primark Corporation. Consents of Experts and Counsel 23.1* Independent Auditors' Consent. 24.1* Powers of Attorney (Included herein from Signature Page). 27.1* Financial Data Schedule for the year ended December 31, 1999.
- --------------- * Indicates document filed herewith. For the Company's documents incorporated by reference, references are to File No. 1-8260. 21 24 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 29th day of March, 2000. PRIMARK CORPORATION By: /s/ STEPHEN H. CURRAN ------------------------------------ STEPHEN H. CURRAN EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER The undersigned directors and officers of Primark Corporation, a Michigan corporation, do hereby severally constitute and appoint Joseph E. Kasputys, Stephen H. Curran and Michael R. Kargula, and each of them, his or her true and lawful attorneys-in-fact and agents, each with full power and authority (acting alone and without the others) to execute in the name and on behalf of the undersigned as such Director or Officer, an Annual Report on Form 10-K, for the year ended December 31, 1999, under the Securities and Exchange Act of 1934, of said Corporation, and all amendments to such Annual Report on Form 10-K; hereby granting to such attorneys and agents, and each of them full power of substitution and revocation in the premises; and hereby ratifying and confirming all that such attorneys and agents, or any of them may do or cause to be done by virtue of these presents. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOSEPH E. KASPUTYS Chairman, President and Chief January 8, 2000 - --------------------------------------------------- Executive Officer (Principal JOSEPH E. KASPUTYS Executive Officer) /s/ STEPHEN H. CURRAN Executive Vice President and Chief January 31, 2000 - --------------------------------------------------- Financial Officer STEPHEN H. CURRAN /s/ KEVIN J. BRADLEY Director January 7, 2000 - --------------------------------------------------- KEVIN J. BRADLEY /s/ JOHN C. HOLT Director January 10, 2000 - --------------------------------------------------- JOHN C. HOLT /s/ STEVEN LAZARUS Director January 10, 2000 - --------------------------------------------------- STEVEN LAZARUS /s/ PATRICIA MCGINNIS Director January 7, 2000 - --------------------------------------------------- PATRICIA MCGINNIS /s/ JONATHAN NEWCOMB Director January 10, 2000 - --------------------------------------------------- JONATHAN NEWCOMB /s/ CONSTANCE K. WEAVER Director January 7, 2000 - --------------------------------------------------- CONSTANCE K. WEAVER /s/ STEPHEN H. CURRAN January 31, 2000 - --------------------------------------------------- STEPHEN H. CURRAN ATTORNEY-IN-FACT
22 25 SCHEDULE II PRIMARK CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS OF CONTINUING OPERATIONS
BALANCE AT ADDITIONS DEDUCTIONS BALANCE AT BEGINNING OF CHARGED FROM END OF PERIOD TO INCOME RESERVES(1) PERIOD ------------ --------- ----------- ---------- (IN THOUSANDS OF DOLLARS) Reserves deducted from assets to which they apply: Allowance for Doubtful Accounts: Year ended December 31, 1997.................... 2,234 843 (321) 2,756 Year ended December 31, 1998.................... 2,756 1,979 (973) 3,762 Year ended December 31, 1999.................... 3,762 4,106 (2,711) 5,157
- --------------- (1) Accounts written off. 23 26 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Primark Corporation We have audited the consolidated financial statements of Primark Corporation and subsidiaries as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999, and have issued our report thereon dated February 11, 2000, which is incorporated by reference in this Annual Report on Form 10-K. Our audits also included the financial statement schedule listed in Item 14(a)2 of this Annual Report on Form 10-K. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Boston, Massachusetts February 11, 2000 24 EX-10.12 2 AMENDMENT TO THE TRANSACTION DOCUMENTS & WAIVER 1 EXHIBIT 10.12 AMENDMENT TO TRANSACTION DOCUMENTS THIS AMENDMENT (referred to herein as this "Amendment"), dated as of November 16, 1999, by and among PRIMARK CORPORATION, a Michigan corporation (the "Borrower"), the Lenders party to the Revolving Credit Agreement referred to below, the Lenders party to the Note Backup Agreement referred to below (such agreements being referred to collectively as the "Credit Facilities"), and MELLON BANK, N.A., a national banking association, as Agent under each such Credit Facility. RECITALS: A. The Borrower has entered into (a) a Revolving Credit Agreement (as amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among Primark Corporation (the "Borrower"), the Lenders parties thereto from time to time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent, and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated as of February 7, 1997 among the Borrower, the Lenders parties thereto from time to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent (collectively, the "Credit Facilities"). The Credit Facilities have been amended by a letter agreement dated February 21, 1997, an Amendment to Transactions Documents dated as of May 1, 1997, an Amendment to Transaction Documents dated as of June 30, 1997, an Amendment to Transaction Documents dated as of December 1, 1997, an Agreement dated as of March 6, 1998 (which restated and superseded all such prior amendments), an Amendment to Transaction Documents dated as of May 8, 1998, an Amendment to Transaction Documents dated as of June 15, 1998, an Amendment to Transaction Documents dated as of September 10, 1998 and a Consent and Amendment to Transaction Documents dated as of December 10, 1998. B. The parties hereto desire to amend further the Credit Facilities as set forth herein. Capitalized terms used herein and not otherwise defined shall have the meanings given them in, or by reference in, the Collateral Agency Agreement. NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. LOANS, ADVANCES AND INVESTMENTS. (a) Section 7.05 of each Credit Facility is amended by (i) relettering existing clauses (k) and (l) as clauses (l) and (m) and (ii) by inserting the following new clause (k): (k) Equity investment of up to [pound]3,500,000 in The Money Channel; SECTION 2. EFFECTIVENESS AND EFFECT, ETC. (a) EFFECTIVENESS. This Amendment shall become effective on the date when Mellon Bank, N.A., as Agent under each of the Revolving Credit Agreement and the Note Backup Agreement, shall have received counterparts hereof duly executed by the Borrower and by the "Required Lenders" and the "Agent" under each of the Revolving Credit Agreement and the Note Backup Agreement. (b) EFFECT. The Revolving Credit Agreement and the Note Backup Agreement, in the forms initially executed and as previously amended and as amended hereby, are and shall continue to be 2 in full force and effect, and are hereby in all respects ratified and confirmed. Except to the extent expressly set forth herein, the execution delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy under any of the foregoing agreements and instruments or constitute a waiver of any provision of any of the foregoing agreements and instruments. SECTION 3. MISCELLANEOUS. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same document. Section and other headings herein are for reference purposes only and shall not affect the interpretation of this Amendment in any respect. This agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to choice of law rules. This Amendment is a requested amendment within the meaning of Section 10.06(a) of each Credit Facility. [Remainder of page intentionally left blank] 2 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. PRIMARK CORPORATION By /s/ Stephen H. Curran -------------------------------------------------- Name: Stephen H. Curran Title: EVP & CFO MELLON BANK, N.A., Individually and as Agent under each Credit Facility By /s/ R.Jane Westrich -------------------------------------------------- R. Jane Westrich Vice President CONSENTED AND AGREED: BANKBOSTON, N.A. By /s/ Jorge A. Schwarz -------------------------------- Title: Director NATIONSBANK, N.A. By /s/ Michael R. Heredia -------------------------------- Title: Managing Director THE CHASE MANHATTAN BANK By /s/ Robert Dellatorre -------------------------------- Title: Asst. Vice President 3 4 FIRST AMERICAN NATIONAL BANK By /s/ Hope Stewart -------------------------------- Title: WACHOVIA BANK, N.A. By /s/ John Rafferty -------------------------------- Title: SVP FLEET NATIONAL BANK By /s/ Deanne Horn -------------------------------- Title: Vice President THE HUNTINGTON NATIONAL BANK By /s/ Robert Friend -------------------------------- Title: Vice President 5 AMENDMENT TO TRANSACTION DOCUMENTS AND WAIVER THIS AMENDMENT TO TRANSACTION DOCUMENTS AND WAIVER (referred to herein as this "Amendment"), dated as of December 31, 1999, by and among PRIMARK CORPORATION, a Michigan corporation (the "Borrower"), the Lenders party to the Revolving Credit Agreement referred to below, the Lenders party to the Note Backup Agreement referred to below (such agreements being referred to collectively as the "Credit Facilities"), and MELLON BANK, N.A., a national banking association, as Agent under each such Credit Facility. RECITALS: A. The Borrower has entered into (a) a Revolving Credit Agreement (as amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among Primark Corporation (the "Borrower"), the Lenders parties thereto from time to time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent, and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated as of February 7, 1997 among the Borrower, the Lenders parties thereto from time to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent (collectively, the "Credit Facilities"). The Credit Facilities have been amended by a letter agreement dated February 21, 1997, an Amendment to Transactions Documents dated as of May 1, 1997, an Amendment to Transaction Documents dated as of June 30, 1997, an Amendment to Transaction Documents dated as of December 1, 1997, an Agreement dated as of March 6, 1998 (which restated and superseded all such prior amendments), an Amendment to Transaction Documents dated as of May 8, 1998, an Amendment to Transaction Documents dated as of June 15, 1998, an Amendment to Credit Facilities dated as of September 10, 1998, a Consent and Amendment to Transaction Documents dated as of December 10, 1998 and an Amendment to Transaction Documents dated as of November 16, 1999. B. The parties hereto desire to provide for the consent of the Required Lenders to amend further the Credit Facilities as set forth herein. Capitalized terms used herein and not otherwise defined shall have the meanings given them in, or by reference in, the Credit Facilities. NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: SECTION 1. CERTAIN AMENDMENTS TO THE CREDIT FACILITIES. (a) AMENDMENTS RELATING TO SCORELAB STOCK OPTIONS. (i) Section 7.05 of each of the Revolving Credit Agreement and the Note Backup Agreement is amended by relettering subsections (l) and (m) as subsections (m) and (n), and by adding the following new subsection (l): (l) Ownership of Shares of Capital Stock of, and capital contributions, loans and Advances to, Scorelab, Inc. so long as Primark and its Wholly-Owned Subsidiaries own 85% or more the Shares of Capital Stock of Scorelab, Inc. (ii) Section 7.06 of each of the Revolving Credit Agreement and the Note Backup Agreement is amended by (A) deleting the "and" at the end of subsection (b), (B) deleting the period and substituting a semi-colon at the end of subsection (c) and (C) adding the following new subsection (d): (d) Scorelab, Inc. may (i) issue to employees up to 15% of its Shares of Capital Stock on a fully diluted basis pursuant to options granted pursuant to the Scorelab Stock Option Plan, (ii) repurchase such shares of Capital Stock from such employees to the extent required by the Scorelab Stockholders' Agreements and (iii) so long as no Event of Default or Potential Default shall exist on the date of such repurchase, or immediately thereafter and after giving effect thereto, repurchase such Shares of Capital Stock from such employees to the extent permitted by the Scorelab Stockholders' Agreements. 6 (iii) Section 7.09 of each of the Revolving Credit Agreement and the Note Backup Agreement is amended by relettering subsection (g) as subsection (h) and by adding the following new subsection (g) (g) Issuance of stock options by Scorelab, Inc. for up to 15% of its Shares of Capital Stock on a fully diluted basis pursuant to the Scorelab Stock Option Plan, issuance of Shares of Capital Stock by Scorelab, Inc. pursuant to such options and repurchase of Shares of Capital Stock of Scorelab, Inc. to the extent permitted by Section 7.06. (iv) The following new definitions are added to Annex A to each of the Revolving Credit Agreement and the Note Backup Agreement "Scorelab Stock Option Plan" shall mean the 1999 Scorelab Stock Option Plan as in effect on the date hereof. "Scorelab Stockholders' Agreement" shall mean stockholders agreements between Scorelab and a Person acquiring Shares of Capital Stock of Scorelab pursuant to the Scorelab Stock Option Plan in the form attached to the Scorelab Stock Option Plan. (b) EVERGREEN LETTERS OF CREDIT. Section 3.01(b) of the Revolving Credit Agreement is deleted and the following is substituted: (b) TERMS OF LETTERS OF CREDIT. The Borrower shall not request any Letter of Credit to be issued, nor shall the Issuing Banks be obligated to issue any Letter of Credit, except within the following limitations: each Letter of Credit (i) shall have an expiration date no later than the earlier of (A) 12 months after the date of issuance thereof, or (B) ten days before the Revolving Credit Maturity Date, (ii) shall be denominated in Dollars, (iii) shall be payable only against sight drafts (and not time drafts), and (iv) shall be in a minimum stated amount of $50,000. Letter of Credit Exposure with respect to evergreen Letters of Credit shall not exceed $1,500,000 in the aggregate at any time. SECTION 2. WAIVER OF CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Lenders hereby waive compliance with the requirements of Section 7.01(b) of each Credit Facility at December 31, 1999, PROVIDED, the foregoing waiver will be effective only if the Consolidated Fixed Charge Coverage Ratio for the period of four consecutive fiscal quarters ending on December 31, 1999 shall not be less than 1.0 to 1. SECTION 3. EFFECTIVENESS AND EFFECT, ETC. (a) EFFECTIVENESS. This Amendment shall become effective as of December 31, 1999, on the date (the "Effective Date") when each of the following conditions has been satisfied: (i) Mellon Bank, N.A., as Agent under each of the Revolving Credit Agreement and the Note Backup Agreement and as Collateral Agent, shall have received counterparts hereof duly executed by the Borrower, by each of the "Required Lenders" and the "Agent" under each of the Revolving Credit Agreement and the Note Backup Agreement. (ii) The Borrower shall have paid to the Agent, for the account of each Lender that executes and delivers a copy of this Amendment, an amendment and waiver fee equal to .05% of such Lender's Revolving Credit Committed Amount under the Revolving Credit Agreement as in effect on January 1, 2000. In the event that the Effective Date occurs, the Agent shall promptly notify each of the Lenders of such fact. (b) EFFECT. The Revolving Credit Agreement, the Note Backup Agreement, the Collateral Agency Agreement and the Borrower Pledge Agreement, in the forms initially executed and as previously amended and as amended hereby, are and shall continue to be in full force and effect, and are hereby in all respects ratified and confirmed. Except to 2 7 the extent expressly set forth herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy under any of the foregoing agreements and instruments or constitute a waiver of any provision of any of the foregoing agreements and instruments. SECTION 4. MISCELLANEOUS. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same document. Section and other headings herein are for reference purposes only and shall not affect the interpretation of this Amendment in any respect. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to choice of law rules. This Amendment is a requested amendment within the meaning of Section 10.06(a) of each Credit Facility. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 3 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. PRIMARK CORPORATION By -------------------------------------------------- Name: Stephen H. Curran Title: EVP & CFO MELLON BANK, N.A., individually and as Agent under each Credit Facility By -------------------------------------------------- R. Jane Westrich Vice President CONSENTED AND AGREED: BANKBOSTON, N.A. By -------------------------------- Title: BANK OF AMERICA, N.A. By -------------------------------- Title: THE CHASE MANHATTAN BANK By -------------------------------- Title: FIRST AMERICAN NATIONAL BANK By -------------------------------- Title: 4 9 WACHOVIA BANK, N.A. By -------------------------------- Title: FLEET NATIONAL BANK By -------------------------------- Title: THE HUNTINGTON NATIONAL BANK By -------------------------------- Title: 5 EX-10.18 3 SCORELAB, INC. 1999 STOCK OPTION PLAN 1 EXHIBIT 10.18 SCORELAB, INC. 1999 STOCK OPTION PLAN (Effective November 17, 1999) 1. PURPOSE OF PLAN The purpose of the Plan is to assist ScoreLab, Inc. (the "Sponsor"), Primark Corporation and their Affiliates to retain valued employees, officers, directors and other consultants and advisors by offering them a greater stake in the success of the Sponsor and a closer identity with it, and to aid in attracting individuals whose services would be helpful to the Sponsor and would contribute to its success. 2. DEFINITIONS "AFFILIATE" means, with respect to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of the Plan (other than the definition of the term "Change of Control"), the term "control," including its correlative terms "controlled by" and "under common control with," mean, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "BOARD" means the board of directors of the Sponsor. "CHANGE OF CONTROL." (a) A "SPONSOR CHANGE OF CONTROL" means any transaction or series of transactions as a result of which any Person who was a Third Party immediately before such transaction or series of transactions owns then-outstanding securities of the Sponsor having more than fifty percent (50%) of the voting power for the election of directors of the Sponsor. (b) A "PRIMARK CHANGE OF CONTROL" means any transaction or series of transactions as a result of which any Person who was a Third Party immediately before such transaction or series of transactions owns then-outstanding securities of Primark Corporation having more than fifty percent (50%) of the voting power for the election of directors of Primark Corporation. "CODE" means the U.S. Internal Revenue Code of 1986, as amended. "COMMITTEE" means the committee described in Paragraph 5. "COMMON STOCK" means the common stock of the Sponsor. "DATE OF GRANT" means the date as of which an Option is granted, as determined by the Committee. 2 "FAIR MARKET VALUE" means: (i) If Shares are listed on a stock exchange or trades of Shares are reported on the NASDAQ National Market, Fair Market Value shall be determined based on the last reported sale price of a Share on the principal exchange on which Shares are listed or, if not so listed, the last quoted sale price of a Share on the NASDAQ National Market, in either case on the Date of Grant, or, if no trading occurred on that date, then the last trading day prior to the Date of Grant. (ii) Except as otherwise provided in subparagraph (i) above, the amount most recently determined by an independent valuation advisor appointed by the Company's Board of Directors to determine Fair Market Value for purposes of this Agreement and approved by the Committee, provided, however, that if, since the date of that valuation, an unrelated third party has purchased equity in the Sponsor equal to ten percent (10%) or more of all the issued and outstanding equity, then the price paid by that third party shall be the measure of the Fair Market Value. "NON-QUALIFIED OPTION" means an Option granted under the Plan. "OPTION" means any stock option granted under the Plan and described in Paragraph 3. "OPTION AGREEMENT" means the written agreement described in Paragraph 7. "OPTION PRICE" means the price per Share for an Optionee to exercise an Option, as determined pursuant to Paragraph 7(b). "OPTIONEE" means a person to whom an Option has been granted under the Plan, which Option has not been exercised in full and has not expired or terminated. "PERSON" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization. "PLAN" means this ScoreLab, Inc. 1999 Stock Option Plan. "PRIMARK COMPANIES" means Primark Corporation, a Michigan corporation, or its successors, by merger, consolidation, sale of substantially all of its business and assets or otherwise, to all or substantially all of its business and assets, and the Sponsor, and any Affiliate of either. "Primark Company" means any one of the foregoing. "PUBLIC OFFERING" means any public offering of a common equity security of Sponsor pursuant to an effective registration statement under the Securities Act of 1933, as amended, as a result of which the Sponsor first becomes subject to the reporting obligations of the Securities Exchange Act of 1934, as amended. "SHARE" or "SHARES" means a share or shares of Common Stock, including a fractional share, or such other securities issued by the Sponsor as may be the subject of an adjustment under Paragraph 9. 2 3 "SPONSOR" means ScoreLab, Inc., a Delaware corporation, or its successors, by merger, consolidation, sale of substantially all of its business and assets or otherwise, to all or substantially all of its business and assets. "STOCKHOLDER'S AGREEMENT" means the agreement between the Sponsor and a stockholder who acquired the Shares subject to that agreement upon the exercise of an Option, in the form attached as an exhibit hereto and incorporated herein by reference. "SUBSIDIARY COMPANIES" means all Affiliates that are controlled by the Sponsor. "TERMINATING EVENT" means any of the following events: (a) the Sponsor's cessation of substantially all business activities; (b) Board action to dissolve or liquidate the Sponsor; (c) a Sponsor Change of Control; (d) a Primark Change of Control; or (e) Board action to terminate Plan. "THIRD PARTY" means any Person other than a Primark Company. 3. OPTIONS TO BE GRANTED Rights that may be granted under the Plan are Non-Qualified Options which give the Optionee the right for a specified time period to purchase a specified number of Shares for a price determined by the Committee. 4. SHARES SUBJECT TO PLAN Subject to adjustment as provided in Paragraph 9 and the last sentence of this Paragraph 4, not more than 150,000 Shares in the aggregate may be issued pursuant to the Plan upon exercise of Options. Shares delivered pursuant to the exercise of an Option may, at the Sponsor's option, be either treasury Shares or Shares originally issued for such purpose. If an Option covering Shares terminates or expires without having been exercised in full, other Options may be granted covering the Shares as to which the Option was not exercised. 5. ADMINISTRATION OF PLAN (a) COMMITTEE. The Plan shall be administered by a committee of the Board, which shall be composed of three or more individuals appointed by the Board. 3 4 (b) MEETINGS. The Committee shall hold meetings at such times and places as it may determine. Actions approved at a meeting by a majority of the members of the Committee or actions approved in writing by the unanimous consent of the members of the Committee shall be the valid actions of the Committee. (c) EXCULPATION. No member of the Committee shall be personally liable for monetary damages for any action taken or any failure to take any action in connection with the administration of the Plan or the granting of Options hereunder. (d) INDEMNIFICATION. Service on the Committee shall constitute service as a member of the Board. Each member of the Committee shall be entitled without further act to indemnity from the Sponsor to the fullest extent provided by applicable law and the Sponsor's by-laws in connection with or arising out of any actions, suit or proceeding with respect to the administration of the Plan or the granting of Options hereunder in which he or she may be involved by reason of being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding. 6. ELIGIBILITY Eligible persons to whom Options may be granted shall be employees, officers or directors of a Primark Company who are selected by the Committee for the grant of Options. In addition, Options may be granted to such consultants and advisors to a Primark Company as may be selected by the Committee for such a grant. 7. OPTION AGREEMENTS AND TERMS All Options shall be evidenced by Option Agreements, which are agreements that shall be executed on behalf of the Sponsor and by the respective Optionees, containing terms determined from time to time by the Committee, consistent, however, with the following: (a) TIME OF GRANT. All Options shall be granted within ten (10) years from the date of adoption of the Plan by the Board. (b) OPTION PRICE. The Option Price per Share with respect to any Option shall be the Fair Market Value of a Share on the Date of Grant. (c) RESTRICTIONS ON TRANSFERABILITY. No Option shall be transferable otherwise than by will or the laws of descent and distribution and, during the lifetime of the Optionee, shall be exercisable only by him or her, or for his or her benefit by his or her attorney-in-fact or guardian. Upon the death of an Optionee, the person to whom the Option has been transferred may exercise any Options only in accordance with the provisions of Paragraph 7(f). 4 5 (d) PAYMENT UPON EXERCISE OF OPTIONS. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee and as the Committee may, in its sole discretion, approve, by surrendering Shares held for six months or more on the date of exercise with an aggregate Fair Market Value equal to the aggregate option price, or by delivering such combination of Shares and cash as the Committee may, in its sole discretion, approve. (e) ISSUANCE OF CERTIFICATE UPON EXERCISE OF OPTIONS. Whole Shares shall be issuable upon exercise of Options. Upon satisfaction of the conditions of Paragraph 7(g), a certificate for the number of Shares to which the Optionee is entitled shall be delivered to such Optionee by the Sponsor. Cash shall be paid in lieu of fractional Shares. (f) PERIODS OF EXERCISE OF OPTIONS. An Option shall be exercisable in whole or in part at such time or times as may be determined by the Committee and stated in the Option Agreement; PROVIDED, HOWEVER, that except as otherwise provided by the Committee in its discretion, no Option or part thereof shall first become exercisable following an Optionee's termination of employment for any reason; (i) Provided further, that: (w) Except as otherwise provided in Paragraph 7(f)(i)(z), in the event of termination of an Optionee's employment with the Primark Companies for any reason other than death, disability retirement, or for "cause," any Option held by such Optionee and which is then exercisable shall be exercisable for a period of three months following the date the Optionee terminates employment with the Primark Companies (unless a longer period is established by the Committee); PROVIDED, HOWEVER, that in no event shall an Option be exercisable after ten years from the Date of Grant. (x) Except as otherwise provided in Paragraph 7(f)(i)(z), in the event that an Optionee terminates employment with the Primark Companies by reason of death, disability or retirement, any Option held at death or retirement by such Optionee which is then exercisable shall be exercisable for a period of one year from the date of death disability or retirement (unless a longer period is established by the Committee) by the Optionee (or in the case of death, by the person to whom the rights of the Optionee shall have passed by will or by the laws of descent and distribution); PROVIDED, HOWEVER, except as otherwise provided in Paragraph 7(f)(i)(z), in no event shall an Option be exercisable after ten years from the Date of Grant. (y) In the event that an Optionee's employment with the Primark Companies terminates for "cause" (as defined by the Committee, or, if the Optionee is a party to an employment agreement with the employing Primark Company that provides for a definition of the term "cause," "cause" as so defined), any unexercised Option shall terminate on the date of termination of employment. 5 6 (z) No Option shall be exercisable if the issuance of Shares pursuant to the exercise of such Option would violate the provisions of any loan agreement to which the Sponsor or any Subsidiary Company is a party, provided that if no violation of such loan agreement would occur if the Optionee were to pledge the Shares issuable pursuant to the exercise of such Option in accordance with a pledge and security agreement in a form acceptable under such loan agreement and reasonably satisfactory to the Sponsor and the Optionee, the Optionee may elect to exercise such Option and pledge the Shares issuable pursuant to the exercise of such Option accordingly. If, as of the date an Option would otherwise cease to be exercisable under Paragraphs 7(f)(i)(w), 7(f)(i)(x) and 7(f)(i)(y) because of the passage of time, an Option is not exercisable solely because the exercise of such Option would violate the provisions of any loan agreement to which the Sponsor or any Subsidiary Company is a party (whether or not the Optionee were to pledge the Shares issuable pursuant to the exercise of such Option), the periods during which such Option may be exercised under Paragraphs 7(f)(i)(x) and 7(f)(i)(y) shall be extended to the close of the 30-day period beginning on the date on which the exercise of such Option would not violate the provisions of any loan agreement to which the Sponsor or any Subsidiary Company is a party, provided however that in no event shall any Option be exercisable after ten years from the Date of Grant. (ii) For purposes of this Paragraph 7(f), an Optionee's termination of employment shall be deemed to occur on the date of termination of employment as determined in accordance with the Optionee's employer's standard personnel policies or, if the Optionee is a party to an employment agreement with a Primark Company, the date of termination of employment for purposes of the Plan shall be as determined under such agreement, or on the date the Optionee's service as a director terminates for any reason, or on the date the Optionee's service pursuant to his or her engagement as a consultant or advisor terminates for any reason, as applicable. (g) MANNER AND DATE OF EXERCISE. The Optionee shall exercise the Option by delivering to the Company at the address specified below the following: (a) written notice that specifies the Option being exercised, the number of Shares being acquired, and the manner of payment; (b) payment in full of the Option Price for such Shares and all applicable withholding taxes as stated in Paragraph 14; and (c) a fully executed Stockholder's Agreement. In case these separate conditions are fulfilled on different dates, the Date of Exercise shall be the date on which all the conditions to exercise are fulfilled. Exercise shall be irrevocable once all the conditions are fulfilled. (h) TERMINATION OF EMPLOYMENT. For purposes of the Plan, a transfer of service between two employers, each of which is a Primark Company, or a change of relationship to a Primark Company from "employee" to "consultant," shall not be deemed a termination of employment. 6 7 8. RIGHTS AS STOCKHOLDERS An Optionee shall not have any right as a stockholder with respect to any Shares subject to his or her Option until all the conditions in Paragraph 7(g) hereof and the Option Agreement shall have been fulfilled. 9. CHANGES IN CAPITALIZATION; ANTI-DILUTION PROVISIONS The Board of Directors of the Company shall make appropriate adjustments to the number and class of shares of Common Stock available for issuance under the Plan, and/or to the number, class and Option Price of outstanding Options in the event that: (a) Shares are changed into or exchanged for a different number or kind of shares of stock or other securities of the Sponsor, whether through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split-up, issuance of warrants, rights, or options (other than pursuant to the Plan) or change in corporate structure or otherwise; or (b) A Public Offering has not previously been consummated when Common Stock (or any security convertible into Common Stock) shall be issued (other than upon the exercise of Options issued under the Plan) at a price or for consideration less than the Fair Market Value at the time the Shares are issued. Any reference to the Option Price in the Plan and Option Agreements shall be a reference to the Option Price as so adjusted. Any reference to the term "Shares" in the Plan and Option Agreements shall be a reference to the appropriate number and class of shares of Common Stock available for issuance under the Plan, as adjusted pursuant to this Paragraph 9. The Committee's adjustment shall be effective and binding for all purposes of this Plan. The adjustment provided for in this Paragraph 9 may require the Sponsor to issue fractional shares, and the total adjustment with respect to the Plan shall be determined accordingly. 10. TERMINATING EVENTS (a) IN GENERAL. The Sponsor shall give Optionees at least fifteen (15) days' notice (or, if not practicable, such shorter notice as may be reasonably practicable) prior to the anticipated date of the consummation of a Terminating Event other than a Primark Change of Control. Upon receipt of such notice, and continuing to the date of consummation of the Terminating Event (or such earlier date as the Board shall reasonably determine in its discretion and set forth in such notice), each Optionee shall be permitted to exercise all Options then held by such Optionee, whether or not then otherwise vested, PROVIDED THAT, in the event of a Terminating Event in which the Optionee would be required to participate pursuant to Section 2.7 of the Stockholder's Agreement were the Optionee then a party to such agreement, the Sponsor may, by similar notice, require the Optionee to exercise the Option, to the extent the Option is then exercisable, or to forfeit the Option (or portion thereof, as applicable). Upon the close of the period described in this Paragraph 10(a) during which an Option may be exercised in connection with a Terminating Event, such Option (including such portion thereof that is not exercisable) shall terminate. 7 8 (b) PRIMARK CHANGE OF CONTROL. The Sponsor shall give Optionees at least fifteen (15) days' notice (or, if not practicable, such shorter notice as may be reasonably practicable) prior to the anticipated date of the consummation of a Primark Change of Control. Upon receipt of such notice, and continuing to the date of consummation of the Primark Change of Control (or such earlier date as the Board shall reasonably determine in its discretion and so notify the Optionees), each Optionee shall be permitted to exercise the Option for all Options then held by such Optionee, whether or not then otherwise exercisable. Upon the close of the period described in this Paragraph 10(b) during which an Option may be exercised in connection with a Terminating Event, such Option (including such portion thereof that is not exercisable) shall terminate. (c) IF THE TERMINATING EVENT IS NOT CONSUMMATED. Notwithstanding Paragraphs 10(a) and 10(b), in the event the Terminating Event is not consummated, the Option shall be deemed not to have been exercised, any notice of exercise shall be void, any consideration delivered to the Sponsor shall be returned to the Optionee, and any certificate for Shares that may have been issued shall be returned to the Sponsor, and the Option shall be exercisable thereafter to the extent it would have been exercisable if no such notice had been given. Notwithstanding the above, to the extent any Option exercised pursuant to Paragraph (a) or (b) would have been exercisable without the notice of a Terminating Event, the Optionee may elect to treat the exercise as valid, with respect to any vested portion of the Option. 11. INTERPRETATION The Committee shall have the power to interpret the Plan and to make and amend rules for putting it into effect and administering it. It is intended that Options shall be Non-Qualified Options, and that Shares transferred pursuant to their exercise shall constitute property subject to federal income tax pursuant to the provisions of section 83 of the Code, and that Options not be treated as "incentive stock options" described in section 422 of the Code. The provisions of the Plan shall be interpreted and applied insofar as possible to carry out such intent. 12. AMENDMENTS: The Plan may be amended by the Board, provided that no outstanding Option shall be adversely affected by any such amendment without the written consent of the Optionee or other person then entitled to exercise such Option. 13. SECURITIES LAW The Committee shall have the power to make each grant under the Plan subject to such conditions as it deems necessary or appropriate to comply with the then-existing requirements of law, including the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, including Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. 8 9 14. WITHHOLDING OF TAXES ON EXERCISE OF OPTION Except as otherwise provided below, any tax liabilities incurred in connection with the exercise of an Option under the Plan shall be satisfied by the withholding of a portion of the Shares underlying the Option exercised having a Fair Market Value approximately equal to the minimum amount of taxes required to be withheld under applicable law. Notwithstanding the foregoing, the Committee may permit an Optionee to pay to the Sponsor in cash all or a portion of the taxes to be withheld upon the exercise of an Option. In all cases, the Shares so withheld shall have a Fair Market Value that does not exceed the amount of taxes to be withheld minus the cash withholding payment, if any, made by the Optionee. Any election pursuant to this Paragraph 14 must be delivered at the time of delivery of the notice of exercise. Shares withheld pursuant to this Paragraph 14 shall be available for subsequent grants under the Plan. The Committee may add such other reasonable requirements and limitations regarding elections pursuant to this Paragraph 14 as it deems appropriate. The Sponsor's obligation to make any delivery or transfer of Shares shall be conditioned on the recipient's compliance, to the Sponsor's satisfaction, with any withholding requirement. 15. EFFECTIVE DATE AND TERM OF PLAN The effective date of Plan is the date on which it was adopted by the Board, as set forth below. The Plan shall expire no later than the tenth anniversary of the date the Plan was initially adopted by the Board, unless sooner terminated by the Board. 16. GENERAL The issuance of Shares on the exercise of an Option shall be subject to all of the applicable requirements of the corporation law of the Sponsor's state of incorporation and other applicable laws, including federal or state securities laws, and all Shares issued under the Plan shall be subject to the terms and restrictions contained in the Certificate of Incorporation of the Sponsor, as amended from time to time. Adopted by the Board on the 17th day of November, 1999. SCORELAB, INC. BY: /s/ JOSEPH E. KASPUTYS -------------------------------------------- Joseph E. Kasputys, Chairman ATTEST: /s/ MICHAEL R. KARGULA ---------------------------------------- Michael R. Kargula, Secretary 9 EX-13.1 4 PRIMARK CORPORATION 1999 ANNUAL REPORT 1 Exhibit 13 - ------------------------------------------------------- FINANCIAL CONTENTS - ------------------------------------------------------- 24 Consolidated Financial Statements - ------------------------------------------------------- 28 Notes to Consolidated Financial Statements - ------------------------------------------------------- 42 Report of Management - ------------------------------------------------------- 42 Independent Auditors' Report - ------------------------------------------------------- 43 Management's Discussion and Analysis - ------------------------------------------------------- 50 Selected Financial Information - Five Year Data - ------------------------------------------------------- 51 Supplementary Financial Information - Quarterly Data - ------------------------------------------------------- [PRIMARK LOGO] PRIMARK GLOBAL INFORMATION SERVICES 2 CONSOLIDATED STATEMENTS OF INCOME
In Thousands Except Per Share Amounts for Years Ended December 31 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING REVENUES $494,619 $434,540 $397,875 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Cost of services 200,158 174,825 157,327 Selling, general and administrative 188,191 165,884 151,309 Depreciation 20,843 17,221 17,371 Amortization of goodwill 18,850 15,625 15,805 Amortization of other intangible assets 17,199 15,969 17,029 Restructuring and other charges (4) 67,970 6,800 - ----------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 445,237 457,494 365,641 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME (LOSS) 49,382 (22,954) 32,234 - ----------------------------------------------------------------------------------------------------------------------------------- OTHER EXPENSE Interest expense - net (19,091) (6,275) (14,901) Other expense - net (513) (1,562) (38) - ----------------------------------------------------------------------------------------------------------------------------------- Total other expense (19,604) (7,837) (14,939) - ----------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 29,778 (30,791) 17,295 INCOME TAX EXPENSE 12,887 2,579 12,441 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 16,891 (33,370) 4,854 - ----------------------------------------------------------------------------------------------------------------------------------- DISCONTINUED OPERATIONS Discontinued operations, net of income tax expense of $5,614 in 1998 and $12,510 in 1997 -- 7,927 16,816 Gain on disposal of discontinued operations, net of income tax expense of $108,376 in 1998 -- 187,286 -- - ----------------------------------------------------------------------------------------------------------------------------------- Total Discontinued Operations -- 195,213 16,816 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE EXTRAORDINARY LOSS AND CHANGE IN ACCOUNTING PRINCIPLE 16,891 161,843 21,670 EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, net of income tax benefit of $3,614 in 1998 and $1,379 in 1997 -- (5,121) (1,955) - ----------------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE CHANGE IN ACCOUNTING PRINCIPLE 16,891 156,722 19,715 CHANGE IN ACCOUNTING PRINCIPLE, -- net of income tax benefit of $109 in 1999 (219) -- -- - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 16,672 $156,722 $ 19,715 - ----------------------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS (LOSS) PER COMMON SHARE Income (loss) from continuing operations $ 0.82 $ (1.37) $ 0.18 Discontinued operations -- 8.03 0.64 Extraordinary loss -- (0.21) (0.07) Change in accounting principle (0.01) -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 0.81 $ 6.45 $ 0.75 - ----------------------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS (LOSS) PER COMMON SHARE Income (loss) from continuing operations $ 0.80 $ (1.37) $ 0.17 Discontinued operations -- 8.03 0.61 Extraordinary loss -- (0.21) (0.07) Change in accounting principle (0.01) -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net income $ 0.79 $ 6.45 $ 0.71 - ----------------------------------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 20,472 24,302 26,348 Dilutive effect of stock options 519 -- 1,596 - ----------------------------------------------------------------------------------------------------------------------------------- Diluted shares outstanding (1998 excludes effect of options to purchase 929 shares) 20,991 24,302 27,944 - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. 3 CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands For Years Ended December 31 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 16,672 $ 156,722 $ 19,715 Adjustments to reconcile net income to cash flows provided by operating activities: Discontinued operations -- (7,927) (16,816) Gain on sale of subsidiary -- (187,286) -- Restructuring charge - intangible assets -- 60,673 -- Extraordinary loss on early extinguishment of debt -- 8,735 3,334 Change in accounting principle 219 Cash provided by (contributed to) discontinued operations -- (6,306) 23,380 Depreciation and amortization 56,892 48,815 50,205 Other charges and credits - net (2,673) (28,166) (12,471) Changes in operating working capital, excluding the effect of acquisitions: (Increase) in accounts receivable, unbilled and other receivables - net (11,848) (17,462) (5,366) (Increase) decrease in other current assets and liabilities (999) 26,478 3,717 (Decrease) in accounts payable (1,535) (817) (2,896) Increase in accrued payroll and benefits 11,140 6,719 2,515 Decrease (increase) in income and other taxes payable - net (14,633) 3,397 (5,506) Decrease (increase) in deferred revenue (10,108) 9,127 (1,787) - ----------------------------------------------------------------------------------------------------------------------------------- Net change in operating working capital (27,983) 27,442 (9,323) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 43,127 72,702 58,024 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of short-term notes payable 1,075,526 919,171 225,304 Repayment of short-term notes payable (942,526) (946,773) (197,702) Issuance of long-term debt -- 150,000 100,000 Repayment of long-term debt (5,500) (332,504) (5,000) Common stock repurchased and retired (39,306) (197,263) (56,238) Common stock issuance and related tax benefit 4,514 12,131 12,235 Debt issue costs and other (1,060) (2,112) (3,853) Call premium -- (4,900) -- - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing activities 91,648 (402,250) 74,746 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (35,136) (22,812) (23,965) Software capitalized (31,714) (17,587) (19,971) Purchase of subsidiaries - net of acquired cash (79,118) (19,225) (88,089) Proceeds from disposal of discontinued operations 8,900 502,000 -- Tax paid on disposal of discontinued operations (30,738) (62,000) -- Other - net 226 171 (4,514) Cash contributed to discontinued operations -- (12,395) (7,965) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) investing activities (167,580) 368,152 (144,504) - ----------------------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (390) 246 (762) - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,195) 38,850 (12,496) CASH AND CASH EQUIVALENTS, JANUARY 1 51,630 12,780 25,276 - ----------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 18,435 $ 51,630 $ 12,780 - ----------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID FOR: Income taxes, including amounts paid on discontinued operations $ 53,450 $ 95,431 $ 12,834 Interest $ 18,157 $ 12,638 $ 25,512 - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. 4 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
In Thousands At December 31 1999 1998 - --------------------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 18,435 $ 51,630 Accounts receivable, less allowance for doubtful accounts of $5,157 and $3,762, respectively 108,116 88,770 Unbilled and other receivables 11,992 13,203 Federal and other income tax receivable 20,448 7,914 Other current assets 16,940 15,806 Net assets of discontinued operations -- 8,900 - --------------------------------------------------------------------------------------------------------------------------------- Total current assets 175,931 186,223 - --------------------------------------------------------------------------------------------------------------------------------- INTANGIBLE AND OTHER ASSETS Goodwill, less accumulated amortization of $99,327 and $81,048, respectively 583,371 526,624 Capitalized data and other intangible assets, less accumulated amortization of $36,984 and $29,670, respectively 36,418 38,703 Capitalized software, less accumulated amortization of $23,899 and $18,578, respectively 66,640 37,765 Other 10,665 9,797 - --------------------------------------------------------------------------------------------------------------------------------- Total intangible and other assets 697,094 612,889 - --------------------------------------------------------------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Computer equipment 75,432 79,837 Leasehold improvements 20,568 19,267 Other 21,937 10,901 - --------------------------------------------------------------------------------------------------------------------------------- 117,937 110,005 Accumulated depreciation (51,862) (58,649) - --------------------------------------------------------------------------------------------------------------------------------- Net property and equipment 66,075 51,356 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $939,100 $850,468 - --------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES Revolving bank debt $133,000 $ -- Notes payable and current portion of capital lease obligations 8,774 7,390 Accounts payable 10,120 12,059 Accrued employee payroll and benefits 42,417 31,924 Income taxes payable 14,672 49,232 Deferred revenue 82,109 80,004 Other accrued expenses 54,457 53,441 - --------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 345,549 234,050 - --------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT AND OTHER LIABILITIES Senior subordinated notes 150,000 150,000 Deferred income taxes 14,484 9,599 Other liabilities 11,142 16,641 - --------------------------------------------------------------------------------------------------------------------------------- Total long-term debt and other liabilities 175,626 176,240 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 521,175 410,290 - --------------------------------------------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (NOTE 13) - --------------------------------------------------------------------------------------------------------------------------------- COMMON SHAREHOLDERS' EQUITY Common stock and additional paid-in-capital 55,447 90,239 Retained earnings 372,052 355,380 Accumulated other comprehensive income (9,574) (5,441) - --------------------------------------------------------------------------------------------------------------------------------- Total common shareholders' equity 417,925 440,178 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities and common shareholders' equity $939,100 $850,468 - ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. 5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
In Thousands For Years Ended December 31 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK, without par value - authorized 100,000,000 shares, issued 19,990,124; 21,251,455 and 26,800,399 shares, respectively, at $0.02 stated value Balance - beginning of year $ 425 $ 536 $ 541 Issued for employee stock purchase and option plans 7 11 36 Retirement of common stock (32) (122) (41) - ----------------------------------------------------------------------------------------------------------------------------------- Balance - end of year 400 425 536 - ----------------------------------------------------------------------------------------------------------------------------------- ADDITIONAL PAID-IN CAPITAL Balance - beginning of year 89,814 274,834 296,005 Tax benefit relating to stock option plans 75 2,837 22,827 Issued for employee stock purchase and option plans 4,432 9,284 12,198 Retirement of common stock (39,274) (197,141) (56,196) - ----------------------------------------------------------------------------------------------------------------------------------- Balance - end of year 55,047 89,814 274,834 - ----------------------------------------------------------------------------------------------------------------------------------- RETAINED EARNINGS Balance - beginning of year 355,380 198,658 178,943 Net income 16,672 156,722 19,715 - ----------------------------------------------------------------------------------------------------------------------------------- Balance - end of year 372,052 355,380 198,658 - ----------------------------------------------------------------------------------------------------------------------------------- ACCUMULATED OTHER COMPREHENSIVE INCOME: CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT Balance - beginning of year (1,975) (3,057) 341 Translation adjustment (11,235) 1,658 (5,221) Related income tax benefit (expense) 3,932 (576) 1,823 - ----------------------------------------------------------------------------------------------------------------------------------- Balance - end of year (9,278) (1,975) (3,057) - ----------------------------------------------------------------------------------------------------------------------------------- ADDITIONAL MINIMUM PENSION LIABILITY Balance - beginning of year (3,466) -- -- Additional minimum pension liability 3,966 (4,951) -- Related income tax benefit (expense) (1,190) 1,485 - ----------------------------------------------------------------------------------------------------------------------------------- Balance - end of year (690) (3,466) -- - ----------------------------------------------------------------------------------------------------------------------------------- NET GAIN ON DERIVATIVE INSTRUMENTS DESIGNATED AS CASH FLOW HEDGES Balance - beginning of year -- -- -- Net gain on derivative instruments designated as cash flow hedges 668 -- -- Related income tax benefit (expense) (274) - ----------------------------------------------------------------------------------------------------------------------------------- Balance - end of year 394 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated other comprehensive income (9,574) (5,441) (3,057) - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL COMMON SHAREHOLDERS' EQUITY $417,925 $ 440,178 $470,971 - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In Thousands For Years Ended December 31 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 16,672 $ 156,722 $ 19,715 - ----------------------------------------------------------------------------------------------------------------------------------- Other comprehensive income, net of tax: Cumulative translation adjustment (7,303) 1,082 (3,398) Net gain on derivative instruments designated as cash flow hedges 394 -- -- Additional minimum pension liability 2,776 (3,466) -- - ----------------------------------------------------------------------------------------------------------------------------------- OTHER COMPREHENSIVE LOSS (4,133) (2,384) (3,398) - ----------------------------------------------------------------------------------------------------------------------------------- COMPREHENSIVE INCOME $ 12,539 $ 154,338 $ 16,317 - -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to the consolidated financial statements are an integral part of these statements. 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. BUSINESS Primark Corporation and its majority-owned subsidiaries ("the Company") is a global information services company with businesses strategically focused in supplying financial, economic and market research information to financial and corporate markets. b. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated. Investments in companies of less than 50 percent are accounted for using the equity method. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior year statements to conform to the 1999 presentation. c. FOREIGN CURRENCY TRANSLATION The functional currency for most of the Company's foreign operations is the applicable local currency. Foreign currency accounts are translated into US dollars using current exchange rates in effect at the balance sheet date for assets and liabilities, and weighted average monthly exchange rates during the period for revenues and expenses. Adjustments resulting from translating foreign functional currency financial statements into US dollars are reported as a component of accumulated other comprehensive income (loss). Gains and losses resulting from transactions and certain balance sheet accounts denominated in currencies other than the applicable functional currency are included in income. d. CHANGE IN ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS Effective January 1, 1999, the Company adopted Statement of Financial Accounting Standards 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging Activities." FAS 133 requires the Company to recognize all derivatives on the balance sheet at fair value. Depending on the nature of the underlying exposure being hedged, the effective portion of changes in the fair value of derivatives are either recognized in the consolidated statement of income or as a component of accumulated other comprehensive income. The ineffective portion of a derivative's change in fair value is recognized in the consolidated statement of income. In accordance with its risk management policy, the Company uses foreign currency options and foreign currency forward contracts. Gains and losses from financial instruments that do not qualify for hedge accounting are marked to market and recognized as a gain or loss in the current period. The Company does not hold or issue derivative instruments for trading purposes. The cumulative effect of a change in accounting principle due to adoption of FAS 133 as of January 1, 1999 was a charge to income of $219,000. Prior to January 1, 1999, the Company applied the principles of Statements of Financial Accounting Standards 52 ("FAS 52"), "Foreign Currency Translation," and 119 ("FAS 119"), "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments," when accounting for derivative financial instruments. e. REVENUE RECOGNITION Revenue derived from subscription contracts is generally billed in advance of services provided. Amounts billed in advance are recorded as deferred income and recognized ratably over the periods in which services are performed. Revenue derived from consulting services is recognized based upon time and out-of-pocket expense or by percentage of completion, depending on the contract terms. f. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less. g. GOODWILL Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired and is amortized on a straight-line basis over estimated useful lives ranging from 5 to 40 years. The Company regularly evaluates the net carrying value of all long-lived assets, including intangibles and goodwill, for recoverability based upon the undiscounted future cash flows associated with these assets. h. CAPITALIZED SOFTWARE During 1999, the Company adopted AICPA SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," which requires certain expenditures made for internal use software to be capitalized. Capitalized software is amortized on a straight-line basis over periods ranging from 3 to 5 years. The adoption of these provisions did not materially impact the Company's consolidated results. 7 NOTES CONTINUED i. CAPITALIZED DATA AND OTHER INTANGIBLES Costs incurred to maintain the Company's database assets are expensed as incurred. Costs associated with the purchase of historical data not currently part of the Company's database assets, as well as the cost of developing the history for new database content, are capitalized. Other intangible assets and liabilities consist primarily of non-compete covenants, trademarks and unfavorable lease commitments. Data and other intangibles are amortized on a straight-line basis over periods ranging from 3 to 20 years. j. PROPERTY AND EQUIPMENT Computer equipment and other property are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, ranging from 3 to 10 years. Leasehold improvements are amortized over the shorter of the remaining life of the lease or the estimated useful life of the improvement. k. INCOME TAXES Deferred income taxes reflect the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. l. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations. The impact of recording stock-based compensation under the method prescribed by Statement of Financial Accounting Standards 123 ("FAS 123"), "Accounting for Stock-Based Compensation," is disclosed in Note 9. m. EARNINGS PER SHARE Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock. 2. ACQUISITIONS During the three year period ended December 31, 1999, the Company made the acquisitions set forth below, each of which has been accounted for as a purchase. Accordingly, the purchase price has been allocated to the identifiable net assets acquired. The excess of the purchase price over the net identifiable assets acquired has been allocated to goodwill and is amortized on a straight-line basis. The consolidated financial statements include the operating results of each business from the date of acquisition. a. 1999
Remaining 20% Interest in Summary of Acquisition Costs (000s) Worldscope Extel A-T ----------------------------------------------------------------------------------------------------------- Cash $ 9,000 $30,669 $35,306 Convertible Notes Issued 7,000 -- -- Acquisition Fees -- 1,249 825 Other -- -- 34 ----------------------------------------------------------------------------------------------------------- Total Consideration $16,000 $31,918 $36,165 Acquired Cash -- -- (1,253) ----------------------------------------------------------------------------------------------------------- Consideration Paid $16,000 $31,918 $34,912 ----------------------------------------------------------------------------------------------------------- Excess of Purchase Price over Fair Value $16,566 $31,532 $29,028 -----------------------------------------------------------------------------------------------------------
Worldscope On June 1, 1999, the Company acquired the remaining 20% minority interest in Worldscope for $16.0 million, giving Primark 100% ownership of this business. The purchase price consisted of a $9.0 million cash payment and two $3.5 million convertible subordinated notes. The excess of the purchase price over the fair market value of net assets acquired of approximately $16.6 million is being amortized on a straight line basis over 25 years. Future adjustments to the total purchase price allocation, if any, are not expected to materially affect the Company's financial statements. Worldscope produces a leading database covering global company financial information on over 24,000 companies from 53 countries. Extel On February 19, 1999, the Company acquired the Company Fundamental Data business and the Extel brand name ("Extel") from The Financial Times Group, part of Pearson plc, for $31.9 million, subject to certain post closing adjustments. The excess of purchase price over fair value of net assets acquired of approximately $31.5 million is being amortized on a straight-line basis over 25 years. Extel is a widely recognized brand name in the European and Asian markets and provides summarized company "tear sheets" for rapid corporate analysis, historical company fundamental information, image-based data, textual corporate profiles and company news to the investment industry worldwide. A-T Financial On February 5, 1999, Primark acquired all of the outstanding shares of A-T Financial Information ("A-T") for $34.9 million, which is net of acquired cash. During the fourth quarter of 1999, the Company reallocated the purchase price based on an appraisal increasing certain identifiable intangibles, reducing the preliminary allocation of the excess purchase price over the fair value of net assets acquired of approximately $31.1 million to $29.0 million and decreasing the estimated life of goodwill from 40 years to 20 years. These 8 NOTES CONTINUED changes in purchase price allocation and estimated life of goodwill have the effect of decreasing net income by $304,000 in the fourth quarter of 1999. Founded in 1987, A-T is a real-time financial information content provider servicing institutional and retail markets with timely, high quality, global securities information and attendant display and distribution technology. OnPoint Also during 1999, the Company acquired OnPoint Technologies, Inc. for an aggregate purchase price of approximately $3.3 million. Goodwill associated with this acquisition of approximately $3.3 million is being amortized over five years. OnPoint specializes in developing Internet-based financial applications and software products for the financial services sector. The following unaudited pro forma financial information reflects the consolidated results of operations of the Company for the years ended December 31, 1999 and 1998 as though the acquisitions had occurred on January 1 of the respective year. This information has been prepared for comparative purposes only and does not necessarily represent actual operating results that may be achieved in the future or that would have occurred had the acquisitions been consummated on January 1, 1998. (000s) except Earnings Per Share 1999 1998 - ------------------------------------------------------------------------------ Operating revenues $497,462 $ 463,696 - ------------------------------------------------------------------------------ Income (loss) from continuing operations 16,006 (40,713) - ------------------------------------------------------------------------------ Net income 15,787 149,379 - ------------------------------------------------------------------------------ Diluted earnings (loss) per share from continuing operations $ 0.76 $ (1.68) - ------------------------------------------------------------------------------ b. 1998 During 1998, the Company acquired four companies for an aggregate purchase price of approximately $8.8 million. Goodwill associated with these acquisitions of approximately $3.5 million is being amortized over five years. The companies acquired supplement and enhance existing product offerings and capabilities. Due to the relative size of the acquisitions made in 1998, no pro forma information is required. c. 1997 Summary of Acquisition Costs (000s) WEFA Baseline - ----------------------------------------------------------------------------- Cash $45,000 $40,963 Acquisition Fees 204 233 - ----------------------------------------------------------------------------- Total Consideration $45,204 $41,196 Acquired Cash (308) (2) - ----------------------------------------------------------------------------- Consideration Paid $44,896 $41,194 - ----------------------------------------------------------------------------- Excess of Purchase Price over Fair Value $44,979 $39,431 - ----------------------------------------------------------------------------- WEFA On February 7, 1997, the Company acquired all of the outstanding stock of WEFA Holdings, Inc. ("WEFA") for $45.0 million in cash. Headquartered in Pennsylvania, WEFA is an international provider of value added economic information and consulting services to Fortune 500 companies, governments, universities and financial institutions. The excess of purchase price over fair value of net assets acquired of approximately $45.0 million is being amortized on a straight-line basis over 35 years. Baseline On January 6, 1997, the Company purchased all of the outstanding stock of Baseline Financial Services, Inc. ("Baseline") for $41.0 million in cash. Baseline provides institutional investors with visual valuation graphics of financial market information. The excess of purchase price over fair value of net assets acquired of approximately $39.4 million is being amortized on a straight-line basis over 30 years. 3. DISCONTINUED OPERATIONS AND DISPOSITIONS The accompanying consolidated financial statements reflect the operating results of two discontinued operations separately from the Company's continuing operations for 1998 and 1997. Consolidated interest expense has been allocated to discontinued operations based upon their ratio of net assets to total consolidated net assets. Discontinued Operations (000s) 1998 1997 - ------------------------------------------------------------------------- Income (loss): TASC $ 3,735 $17,086 TIMCO 4,192 (270) - ------------------------------------------------------------------------- Total $ 7,927 $16,816 - ------------------------------------------------------------------------- Gain on disposal: TASC $171,115 $ -- TIMCO 16,171 -- - ------------------------------------------------------------------------- Total $187,286 $ -- - ------------------------------------------------------------------------- TASC On April 1, 1998, the Company completed the sale of TASC and its affiliated weather information companies to Litton Industries for $432.0 million in cash plus an equity adjustment of $8.9 million. The Company recorded a gain on the sale of $171.1 million which includes the $8.9 million closing adjustment, transaction costs of $6.1 million, taxes of $99.9 million and the net book value of TASC's assets. The cash, net of all transaction costs and taxes, received by the Company from the foregoing sale was approximately $334.9 million; $8.9 million of which was received in January of 1999. 9 NOTES CONTINUED TIMCO On September 22, 1998, the Company completed the sale of all of the outstanding common stock of its heavy aircraft maintenance unit, the Triad International Maintenance Corporation ("TIMCO"), to Aviation Sales Maintenance, Repair & Overhaul Company ("AVS"), a division of Aviation Sales Company. The transaction was executed in accordance with a Stock Purchase Agreement dated August 10, 1998 for a cash purchase price of $70.0 million and resulted in a gain of $16.2 million. Pursuant to the Stock Purchase Agreement, a working capital adjustment of $1.3 million was based upon TIMCO's closing balance sheet as of September 22, 1998, and was received in November 1998. 4. RESTRUCTURING AND OTHER CHARGES a. REORGANIZATION Effective June 1, 1998, the Company was reorganized in order to focus solely on its information services businesses. In connection with this reorganization, the Company recorded $68.7 million in operating expenses for direct and other reorganization related costs in June 1998. In addition, an extraordinary loss of $8.7 million ($5.1 million after tax) was also recorded in June 1998 in connection with the early extinguishment of debt. The restructuring charge included the write-off of intangible assets for: (i) $25.0 million of previously capitalized software related to the planned integration of several product offerings on common software platforms; (ii) $1.5 million of data that was determined to be duplicative and not used as a result of the software platform integration; (iii) write-off of $23.9 million of goodwill associated with software and data, established as part of purchase accounting; (iv) write-off of $7.2 million of goodwill related to DAFSA; and (v) write-off of $3.1 million of a trademark no longer used in the restructured organization. The level of impairment as well as the fair value of liabilities accrued was determined based upon the discounted value of estimated future cash flows. The $68.7 million charge included $8.0 million related primarily to termination benefits in the phased reduction of employees and the abandonment of leased facilities, including leasehold improvements. Salaries and termination benefits, either in the form of one-time or periodic payments, were made when the employee ceased employment. These employees were in management, sales and administrative support. In December of 1998, $707,000 of restructuring accruals was reversed into income for a lease that was bought out by a third party at terms more favorable than originally estimated. During 1999, the Company decided not to abandon certain leased space, primarily as a result of acquisitions made since the restructuring charge was recorded in June of 1998. Also, the Company was able to sub-lease or otherwise abandon certain leases for less than was originally estimated. This resulted in a reduction of restructuring expense and the related accrual of approximately $3.0 million. The Company also wrote off leasehold improvements and amortized leases associated with abandoned space in an amount equal to approximately $877,000. The severance accrual was reduced by $780,000 during 1999, $711,000 for severance amounts paid to 49 employees and $69,000 for amounts settled favorably. An additional amount of approximately $3.1 million of severance was also incurred and paid to 45 employees notified and terminated in 1999. As of December 31, 1999, the remaining accrual totaled $611,000 and is recorded in other liabilities. Approximately $410,000 of this amount represents the liability associated with abandoned lease space to be paid out over the next 3 years and $201,000 represents severance related to two staff reductions to be paid in the first quarter of 2000. Details of activity related to the restructuring and other costs in 1998 and 1999 are as follows:
ABANDONMENT OF LEASED FACILITIES, SALARIES AND INCLUDING LEASEHOLD TERMINATION 1998 PLAN (000s) IMPROVEMENTS BENEFITS TOTAL - ------------------------------------------------------------------------------------------------- Balance January 1, 1998 $ -- $ -- $ -- Expensed 5,156 2,871 8,027 Paid (176) (1,890) (2,066) Reversed (707) -- (707) - ------------------------------------------------------------------------------------------------- December 31, 1998 Accrual $ 4,273 $ 981 $ 5,254 Expensed -- -- -- Paid / write-off of related assets (877) (711) (1,588) Reversed (2,986) (69) (3,055) - ------------------------------------------------------------------------------------------------- DECEMBER 31, 1999 ACCRUAL $ 410 $ 201 $ 611 - -------------------------------------------------------------------------------------------------
SALARIES AND 1999 PLAN (000s) TERMINATION BENEFITS - ------------------------------------------------------------------------ Balance January 1, 1999 $ -- Expensed 3,051 Paid (3,051) - ------------------------------------------------------------------------ December 31, 1999 Accrual $ -- - ------------------------------------------------------------------------ The following table summarizes the effect to the income statement for restructuring items for the year ended December 31, 1999. (000s) - ------------------------------------------------------------------------ Salaries and termination benefits $ 3,051 Leasehold and related items not abandoned or items settled for amounts less than originally anticipated (2,986) Salaries and termination benefits settled for amounts less than anticipated (69) - ------------------------------------------------------------------------ Total $ (4) - ------------------------------------------------------------------------ 10 NOTES CONTINUED b. DISCLOSURE During the first quarter of 1997, the Company recorded a $1.8 million charge at Disclosure to take advantage of new information technology, reorganization of Disclosure's document business and other actions aimed at reducing costs and enhancing efficiency. The restructuring provision included estimated costs for employee severance and other benefits of $981,200, asset write-downs of $713,600 and idle facility related costs of $105,200. As part of the restructuring, 114 employees were terminated. The spending for these accrued restructuring costs was completed in June 1997. b. DAFSA During the second quarter of 1997, the Company recorded a restructuring charge of $5.0 million related to the integration and downsizing of operations at DAFSA. Due to DAFSA's unprofitable condition, tax benefits associated with losses incurred during 1997, including the restructuring charge, were not recognized. In addition to the $5 million restructuring charge noted above, when the Company acquired DAFSA in June of 1996, approximately $1.5 million of integration costs were recorded in determining the purchase accounting. The subsequent restructuring charge is the result of a plan to further integrate DAFSA's personnel, space and products with those of the Company's other subsidiaries. The $6.5 million total restructuring provision was completed in early 1997 and included: (i) approximately $1.7 million of costs for exiting a line of business; (ii) the future rent cost of abandoned space of $1.0 million; (iii) employee severance and other benefits of $1.4 million; (iv) asset write-downs of $1.2 million; and (v) legal, professional and other related costs of $1.2 million. 5. LEASES The Company leases a variety of assets principally under non-cancelable operating lease agreements, including office facilities, real property, and computer and office equipment. These leases expire at various dates through 2015. Total rent expense for all operating leases was $17.9 million, $16.7 million and $15.1 million for the years ended December 31, 1999, 1998 and 1997, respectively. Future Minimum Lease Commitments (000s) Capital Operating - ------------------------------------------------------------------------------ 2000 $ 559 $17,568 2001 278 16,616 2002 54 14,582 2003 6 12,646 2004 6 8,892 Thereafter -- 28,129 - ------------------------------------------------------------------------------ Total minimum lease payments $ 903 $98,433 -------- Amounts representing interest and other (59) - --------------------------------------------------------------- Present value of net minimum payments $ 844 Less: current portion (524) - --------------------------------------------------------------- Long-term obligations $ 320 - ------------------------------------------------------------------------------ 6. SHORT-TERM AND LONG-TERM DEBT On December 16, 1998, the Company issued $150.0 million of 91/4% Senior Subordinated Notes (the "Subordinated Notes") due 2008. The Subordinated Notes are carried at their principal amount due at maturity. Interest only is due on the Subordinated Notes and is payable semi-annually on June 15 and December 15. The Subordinated Notes are unsecured obligations of the Company, contain no mandatory sinking fund or redemption requirements, and are redeemable in whole or in part at the option of the Company in 2003 and thereafter at redemption prices ranging from 104.625% to 100.000% plus accrued interest. In addition, prior to December 15, 2001, the Company may redeem up to 35% of the principal amount of the Subordinated Notes with the net cash proceeds of one or more sales by the Company of its capital stock at a redemption price of 109.250% plus accrued interest. This redemption may occur provided that at least 65% of the aggregate principal amount of the Subordinated Notes originally issued remains outstanding after each such redemption. The Subordinated Notes are subject to various restrictive covenants. The Company is restricted from paying cash dividends on its common stock, repurchasing its common stock or making certain other payments which in the aggregate exceed the sum of: (i) $25.0 million; (ii) 50% of the Company's consolidated net income (cumulative from October 1, 1998); (iii) 100% of the net proceeds received from sales of the Company's common stock for cash; and (iv) 100% of the net reduction in investments resulting from payments of interest, dividends or repayments of debt to the Company, or from the net cash proceeds from the sale of any such investments. The Company used a portion of the net proceeds: (i) to repay outstanding borrowings; (ii) to repurchase stock; and (iii) for other general corporate purposes. The Company incurred costs of $4.4 million in conjunction with the arrangement, which are being amortized over the term of the debt. In conjunction with the above, the Company replaced its outstanding $75.0 million credit facility with a $225.0 million revolving credit facility (the "Credit Facility") which expires in 2002. The aggregate credit committed amount reduces semi-annually on June 30 and December 31 of each year. As of December 31, 1999 the total revolving credit committed was $205.0 million which will be reduced by $20.0 million during 2000. Interest on the borrowings under the new revolving credit facility is payable at rates ranging from 0.375% to 1.50% above the current prevailing LIBOR rate of interest. On February 7, 1997, the Company entered into a refinancing agreement to replace funds expended for acquisitions, resulting in an extraordinary after tax loss of $2.0 million. 11 NOTES CONTINUED In connection with the purchase of the remaining 20% minority interest in Worldscope on June 1, 1999, the Company issued two $3.5 million Convertible Subordinated Notes. The notes bear interest at 5%, have a maturity date of June 1, 2014, are due upon demand at any time after January 1, 2000 and are convertible into the Company's common shares at a price of $30 per share. The Notes are callable by the Company in the event of a change in control. The ICV Purchase Notes are currently callable by the owners and must be paid by the Company no later than October 24, 2002. Interest on the ICV Purchase Notes is payable quarterly at the current prevailing LIBOR rate. Through 1999, the Company has paid $7.0 million of the ICV Purchase Notes and $1.3 million remains outstanding. a. SHORT-TERM DEBT December 31 (000s) 1999 1998 - ----------------------------------------------------------------------------- Outstanding bank borrowings $133,000 $ -- Available bank borrowings $ 72,000 $220,000 Effective interest rate at December 31 7.78% -- - ----------------------------------------------------------------------------- Worldscope 5% Convertible Subordinated Notes $ 7,000 $ -- ICV Variable Purchase Notes $ 1,250 $ 6,750 - ----------------------------------------------------------------------------- b. LONG-TERM DEBT The Company's outstanding long-term debt, including capital lease obligations, is shown below. December 31 (000s) 1999 1998 - ----------------------------------------------------------------------------- Primark 9 1/4% Senior Subordinated Notes Due 2008 $150,000 $150,000 Capital lease obligations 844 2,129 - ----------------------------------------------------------------------------- Total debt and capital lease obligations $150,844 $152,129 Less current maturities (524) (640) - ----------------------------------------------------------------------------- Long-term debt and capital lease obligations $150,320 $151,489 - ----------------------------------------------------------------------------- 7. FINANCIAL INSTRUMENTS The Company enters into a variety of financial instruments, including foreign currency forward and call option contracts and interest rate swaps, to manage currency and interest rate risk. The Company does not hold or issue derivative contracts for trading purposes. The Company is exposed to credit losses in the event of non-performance by counterparties to these financial instruments, but it does not expect any of the counterparties to fail to meet their obligations. To manage credit risks, the Company selects counterparties based on credit ratings and monitors the exposure with each counterparty. a. FOREIGN EXCHANGE MARKET RISK Forward and option contracts related to foreign exchange market risk are utilized to reduce the exposure of the Company's anticipated foreign revenues, net of cash operating expenses, to excessive foreign currency fluctuations. A significant portion of the Company's revenues are denominated in currencies other than the US dollar. For the twelve months ended December 31, 1999, approximately 57.8% of total revenues, including intercompany sales, were denominated in non-US dollar currencies of which approximately 33.8%, 17.6% and 6.4% are denominated in UK sterling, currencies of Continental Europe and Asian currencies, respectively. The majority of the Company's revenues are subscription-based arrangements of up to two years in duration. Additionally, a significant percentage of the Company's operating costs are denominated in foreign currencies. The Company maintains significant production, product development, sales and administrative functions in the United Kingdom. Also, the Company maintains local sales and customer service functions in most financial centers of Europe and Asia. For the twelve months ended December 31, 1999, approximately 52.5% of operating income, excluding goodwill amortization, was denominated in non-US dollar currencies of which approximately 3.3%, 42.0% and 7.2% are denominated in UK sterling, currencies of Continental Europe and Asian currencies, respectively. The primary market risk that the Company faces is the US dollar strengthening against the euro, Swiss franc, Swedish krona and Japanese yen. The use of domestic investment and borrowing facilities eliminates foreign currency exposures related to financial instruments. Derivatives related to the foreign exchange market risk category are utilized to reduce the exposure of the Company's operating income to excessive foreign currency fluctuations. Certain principles underlying the Company's foreign exchange risk management strategy include: (i) derivative contracts are assigned to an identified cash flow exposure and the notional amount of such derivatives will not exceed the amount of the underlying exposure; (ii) levels of cover for foreign exchange hedging will not exceed 90% for exposures with a horizon within the next 12 months, and 75% for the following 12 months; (iii) derivatives linked to a cash flow exposure will not exceed 24 months in duration; and (iv) options can only be written as part of a matched combination strategy or collar with no net premium received. The Company principally enters into contracts to deliver foreign currencies for UK sterling at agreed-upon exchange rates with maturities not exceeding two years. The underlying transactions typically represent estimated future service fees from the Company's network of global sales organizations. The Company accounts for these instruments as cash flow hedges. In accordance with FAS 12 NOTES CONTINUED 133, the fair value of changes of derivative instruments related to the effective portion of cash flow hedges are initially recorded as a component of other comprehensive income. Hedging transactions are typically set up with a notional principal less than the principal of the underlying transaction. At December 31, 1999 the notional value of foreign exchange contracts to deliver UK sterling is shown below. (000s) Notional Amounts - ---------------------------------------------------------------------------- FAIR VALUE FORWARD EXCHANGE CONTRACTS: Euro $ 8,058 Japanese Yen 3,901 Swiss Franc 1,748 - ---------------------------------------------------------------------------- $13,707 - ---------------------------------------------------------------------------- Effectiveness of these contracts is measured as the first units of currency of the underlying exposure being hedged and is reviewed quarterly to ensure that the estimated amount of the exposure being hedged does not decline below the notional principal of the respective hedging transactions. Unrealized gains and losses on cash flow hedges accumulate in other comprehensive income and are reclassified into earnings when the forecasted transaction affects earnings. For the year ended December 31, 1999, there was no ineffective portion of derivative gains or losses reported in earnings, and net gains from hedge transactions reclassified from other comprehensive income to revenues totaled $710,000. At December 31, 1999, the fair value of derivative instruments designated as cash flow hedges is $394,000 and is recorded in other current assets with the offset to other comprehensive income. This gain will be recognized in revenues over the next 24 months as the forecasted revenues are recognized. Forward and option contracts are also entered into to protect anticipated repatriations of excess cash flow, primarily from the UK, under intercompany loan agreements or other financial transactions. The Company accounts for these instruments at fair market value, recording each period's gains or losses in non-operating income or loss. For the year ended December 31, 1999, the net gain on these instruments recorded in non-operating income was $486,000. Foreign exchange contracts with a value of $160,000 are recorded on the balance sheet in other current assets at December 31, 1999. The notional value of these foreign exchange contracts at December 31, 1999 is shown below. (000s) Notional Amounts - ---------------------------------------------------------------------------- CASH FLOW FORWARD EXCHANGE CONTRACTS: Euro $2,681 UK Sterling 7,051 - ---------------------------------------------------------------------------- $9,732 - ---------------------------------------------------------------------------- b. INTEREST RATE MARKET RISK Derivatives contracts entered into relate to specific financial liabilities or assets with either fixed or floating interest rates attached. The objective of the Company's interest rate risk management program is to optimize and regulate the mix of fixed and floating rate assets and liabilities recorded on the Company's balance sheet with consideration given to management's plans for future investments, divestitures and financing. To manage its interest rate exposures, the Company may utilize forward rate agreements, swaps and options. During 1999 and 1998, the Company was not a party to any outstanding interest rate derivative agreements. c. DEBT The fair value of the Company's $150.0 million 91/4% Subordinated Notes was approximately $141.0 million and $150.0 million at December 31, 1999 and 1998, respectively, and the book value was $150.0 million as of each of these respective dates. Estimated fair value of these financial instruments was based upon quotations obtained from investment and commercial bankers using comparable securities. d. 1998 Prior to January 1, 1999, the Company applied the principles of FAS 52 when accounting for derivative financial instruments. The table below illustrates the US dollar equivalent of foreign exchange contracts at December 31, 1998 along with unrecorded gross unrealized gains and losses. Gross Notional Unrealized Gross Unrealized (000s) Amounts Gains Deferred Losses Deferred - ------------------------------------------------------------------------------ FORWARD EXCHANGE CONTRACTS: Japanese Yen $3,363 $-- $(291) US Dollars/Irish Punt (112) -- -- Swedish Krona 724 6 -- Other 88 21 (11) - ------------------------------------------------------------------------------ $4,063 27 (302) - ------------------------------------------------------------------------------ OPTION CONTRACTS PURCHASED: Swedish Krona $1,591 $-- $ (3) - ------------------------------------------------------------------------------ $1,591 $-- $ (3) - ------------------------------------------------------------------------------ The carrying and estimated fair values of certain of the Company's financial instruments at December 31, 1998 are shown below. (000s) Carrying Value Estimated Fair Value - ------------------------------------------------------------------------------ Forwards $192 $(83) Options $ 14 $ 11 - ------------------------------------------------------------------------------ 13 NOTES CONTINUED 8. SHAREHOLDERS' EQUITY a. COMMON STOCK In June 1998, the Company purchased 4,540,000 shares at $34 per share in a "Dutch Auction" self-tender offer for $155.0 million, including legal and accounting fees. In addition, in July 1998, the Company implemented an open market purchase program to buy up to 4,000,000 shares of its common stock from time to time, depending on market conditions. As a result, during 1999 and 1998, the Company purchased a total of 1,582,046 and 6,108,500 shares at a total cost of $39.3 million and $197.3 million, representing approximately 5.9% and 22.8% of its total outstanding common stock, respectively. As of December 31, 1999, the Company had authority remaining to buy back up to 849,454 additional shares of its common stock, however, the Company is limited to approximately $13.4 million of additional repurchases under its existing bank covenants. In 1997, the Company repurchased 1,349,000 shares of its outstanding common stock in the open market at a total cost of $26.6 million under a prior authorization. The Company issued approximately 320,715 and 560,000 shares of common stock during 1999 and 1998, respectively, in connection with its stock option and employee stock purchase plan. In December of 1997, the Company received 722,000 shares of its common stock to satisfy the exercise price of stock options and payment of withholding taxes due on option exercises totaling $29.6 million. The Company drew on its revolving credit facility to satisfy the withholding tax payment. In connection with these option exercises, the Company received a tax deduction related to the option exercises which resulted in a $25.0 million refund and reduction in taxes paid. b. RIGHTS AGREEMENT The Company's Rights Agreement (the "Rights Agreement") is designed to deter coercive or unfair takeover tactics, and to prevent a buyer from gaining control of the Company without offering a fair price to all of its shareholders. The Rights Agreement generally becomes effective when a potential acquirer beneficially owns 15% or more of the outstanding shares of the Company's common stock. Each Right represents the right to purchase one share of Common Stock of the Company at a price per share of $138.00, subject to adjustment. The Rights, which do not have voting privileges, are redeemable under certain circumstances at $0.01 per Right and will expire on January 25, 2008, unless previously redeemed. At December 31, 1999, common stock reserved for issuance under the Rights Agreement was 19,990,124 shares. 9. RETIREMENT AND BENEFIT PLANS a. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN Under the 401(K) provisions of the Primark Corporation Employee Savings and Stock Ownership Plan ("ESSOP"), the Company matches 50% of an employee's contribution up to a maximum of 3% of each participant's compensation. Participating employees' future benefits are based on their vested portion of contributions, plus their pro rata share of subsequent fund investment gains or losses. The Company contributed $1.7 million in 1999 and $1.4 million during 1998. b. FOREIGN PLANS Substantially all employees in foreign countries who are not US citizens are covered by various retirement benefit arrangements, some of which are considered to be defined benefit pension plans for accounting purposes. Benefits are based primarily on years of service and employees' salaries near retirement. In general, plans are funded based upon legal requirements, tax considerations, local practices and investment opportunities. Plan assets are generally held in restricted trusts or foundations that are segregated from the assets of the plan sponsor and consist primarily of common stock and fixed income securities. The changes in benefit obligations and plan assets are shown below.
December 31 (000s) 1999 1998 - ----------------------------------------------------------------------------------------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation, beginning of year $28,956 $20,508 Service cost 2,070 1,589 Interest cost 1,698 1,589 Net actuarial loss (gain) (2,458) 5,839 Benefits paid (420) (569) - ----------------------------------------------------------------------------------------------- Benefits obligation, end of year $29,846 $28,956 - ----------------------------------------------------------------------------------------------- CHANGE IN PLAN ASSETS Fair value of fund assets, beginning of year $23,877 $19,661 Actual return on fund assets 1,375 3,463 Employer contribution 1,472 1,322 Benefits paid (420) (569) - ----------------------------------------------------------------------------------------------- Fair value of fund assets, end of year $26,304 $23,877 - ----------------------------------------------------------------------------------------------- Funded status $(3,542) $(5,079) Unrecognized net actuarial loss 4,625 7,555 Unrecognized prior service cost 81 100 Unrecognized transition (asset) (1,197) (1,489) - ----------------------------------------------------------------------------------------------- Net amount recognized $ (33) $ 1,087 - ----------------------------------------------------------------------------------------------- Amounts recognized in the statement of financial position consist of: Accrued benefit liability $ (804) $(2,479) Intangible assets 81 100 Additional minimum pension liability 690 3,466 - ----------------------------------------------------------------------------------------------- Net amount recognized $ (33) $ 1,087 - -----------------------------------------------------------------------------------------------
14 NOTES CONTINUED The following assumptions were used in accounting for foreign defined benefit plans. December 31 1999 1998 1997 - ------------------------------------------------------------------------------- Discount rate 6.8% 6.1% 7.8% Rate of increase in future compensation 4.5% 4.0% 5.0% Rate of return on plan assets 8.3% 7.8% 9.3% - ------------------------------------------------------------------------------- The components of net periodic benefit cost for foreign defined benefit plans are shown below. December 31 (000s) 1999 1998 1997 - ------------------------------------------------------------------------------- Service cost $ 2,070 $ 1,589 $ 1,345 Interest cost 1,698 1,589 1,362 Expected return on plan assets (1,633) (1,706) (1,627) Amortization of the transition amount (243) (251) (249) Amortization of prior service cost 16 33 33 Amortization of loss 663 318 133 - ------------------------------------------------------------------------------- Net periodic benefit cost $ 2,571 $ 1,572 $ 997 - ------------------------------------------------------------------------------- c. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS Established in 1992, the Primark Corporation Employee Stock Purchase Plan is available to all employees of the Company and certain subsidiaries. Under this plan, employees may purchase through periodic payroll deductions up to a maximum of 3,000,000 shares of the Company's common stock at 85% of the lower of the average market price of such shares, either at the beginning or end of each six month offering period. The Primark Corporation 1992 Stock Option Plan (the "1992 Plan") provides for the granting of options to purchase common stock to officers and certain key employees of the Company and its subsidiaries. This plan limits the number of shares subject to option that may be granted to any participant in any year to 100,000 shares. Stock options available for grant in any one year under the 1992 Plan may not exceed 1.5% of the Company's outstanding common stock as of January 1 of each year, plus any excess of available stock options not granted from previous years. Generally, options outstanding under the Company's stock option plans are: (i) granted at prices equal to the fair market value of the stock on the date of grant; (ii) vest within a three year period; and (iii) expire ten years from the date of grant. In May 1999, the Company terminated its Stock Option Plan for Non-Employee Directors and established the 1999 Stock Option Plan for Non-Employee Directors, which provides for the granting of 200,000 options to purchase shares of Primark common stock. Options under this new plan: (i) are granted at prices equal to the fair market value of the stock on the date of grant; (ii) vest immediately; and (iii) expire ten years from the date of grant. Changes in the number of options granted under the Company's various stock option plans are shown below.
1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price - ---------------------------------------------------------------------------------------------------------------------- Outstanding at January 1 4,082,815 $22.96 4,116,406 $20.71 4,375,865 $12.51 Granted at market value 936,250 24.20 598,375 34.39 1,056,875 24.89 Granted above market value -- -- -- -- 500,000 33.34 Granted below market value 14,200 9.02 -- -- -- -- Exercised (284,731) 12.91 (476,671) 15.52 (1,692,663) 5.68 Canceled (144,579) 28.53 (155,295) 30.00 (123,671) 23.36 - ---------------------------------------------------------------------------------------------------------------------- Outstanding at December 31 4,603,955 $23.62 4,082,815 $22.96 4,116,406 $20.71 - ---------------------------------------------------------------------------------------------------------------------- Available for future grant at December 31 425,585 538,297 657,361 Exercisable at December 31 3,073,565 2,358,483 1,213,263 - ----------------------------------------------------------------------------------------------------------------------
The following table sets forth information regarding options outstanding at December 31, 1999. Options Outstanding Options Exercisable - ------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price - ------------------------------------------------------------------------------- $ 7.63 - $12.88 563,909 2.42 $11.37 563,909 $11.37 $13.50 - $14.00 795,500 4.48 $13.69 795,500 $13.69 $14.05 - $24.25 1,117,930 7.69 $22.67 784,506 $23.03 $25.00 - $33.25 1,566,291 8.08 $28.31 633,060 $27.41 $36.38 - $42.50 560,325 7.00 $38.85 296,590 $40.77 - ------------------------------------------------------------------------------- $ 7.63 - $42.50 4,603,955 6.54 $23.62 3,073,565 $21.09 - ------------------------------------------------------------------------------- 15 NOTES CONTINUED Effective November 17, 1999, ScoreLab, Inc., a subsidiary of the Company established its 1999 Stock Option Plan. This Plan is available to employees, officers and directors of the Company and its subsidiaries and consultants and advisors of the Company and provides such individuals options to purchase shares of ScoreLab, Inc. Pursuant to the 1999 ScoreLab Plan, up to 150,000 shares in the aggregate may be issued under this Plan, which represents 15% of ScoreLab's issued and outstanding common stock. The options granted under the 1999 ScoreLab Plan: (i) are granted at fair value; (ii) vest within a two-year period; and (iii) expire ten years subsequent to grant date. On December 6, 1999, 113,250 options were granted at a fair value of $8. These were the only options granted during 1999. There were no options exercised or canceled in 1999. At December 31, 1999, there are 38,208 options exercisable and 36,750 shares available for future grants. To date, this plan has not been dilutive to the Company's interest in the earnings of this subsidiary. Effective December 23, 1999, the Yankee Group, a subsidiary of the Company, established its 1999 Stock Option Plan. This Plan is available to employees, officers and directors of the Company and its subsidiaries and consultants and advisors of the Company and provides such individuals with the option to purchase shares of the Yankee Group Research, Inc. Pursuant to the 1999 Yankee Plan, up to 600,000 shares in the aggregate may be issued under this Plan, which represents 15% of Yankee's issued and outstanding common stock. The options granted under the 1999 Yankee Plan: (i) are granted at a fair value; (ii) vest within a three-year period; and (iii) expire ten years subsequent to grant date. On December 23, 1999, 447,750 options were granted at a fair value of $15. These were the only options granted during 1999. There were no options exercised or canceled in 1999. At December 31, 1999, there are no options exercisable and 152,250 shares available for future grants. To date, this plan has not been dilutive to the Company's interest in the earnings of this subsidiary. The value of options on their grant date, including the valuation of the option feature implicit in the Company's stock purchase plan, was measured using the Black-Scholes option-pricing model. The weighted average value of options on their grant date and key assumptions used to apply this model are shown below.
December 31 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------- Weighted average grant date fair value $9.99 $15.59 $12.21 Range of risk-free interest rates 4.40% to 6.54% 4.63% to 5.85% 5.51% to 6.82% Range of expected life of option grants 4 to 9 years 3 to 9 years 3 to 9 years Expected volatility of underlying stock 37.3% 37.8% 37.5% - -----------------------------------------------------------------------------------------------------------
The value of options on their grant date for the ScoreLab, Inc. 1999 Stock Option Plan was also measured using the Black-Scholes option-pricing model. The value of options on their grant date and key assumptions used to apply this model were: (i) a grant date fair value of $8; (ii) range of risk-free interest rates of 4.40% to 6.54%; (iii) expected life of option grants of 10 years; and (iv) an expected volatility of underlying stock of 37.3%. The value of options on their grant date for the Yankee Group 1999 Stock Option Plan was also measured using the Black-Scholes option-pricing model. The value of options on their grant date and key assumptions used to apply this model were: (i) a grant date fair value of $15; (ii) range of risk-free interest rates of 4.40% to 6.54%; (iii) expected life of options grants of 10 years; and (iv) an expected volatility of underlying stock of 37.3%. It should be noted that the option-pricing model used was designed to value readily tradable stock options with relatively short lives. The options granted to employees are not tradable and have contractual lives of up to ten years. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The Company uses the intrinsic value method to measure compensation expense associated with grants of stock options to employees. Had compensation cost been determined, based upon the option-pricing model at the grant date for awards under these plans, reported net income and earnings per share would have been as follows. December 31 (000's except per share) 1999 1998 1997 - ------------------------------------------------------------------------------- Net income $10,105 $149,269 $12,351 Basic EPS $ 0.49 $ 6.14 $ 0.47 Diluted EPS $ 0.48 $ 6.14 $ 0.44 - ------------------------------------------------------------------------------- 16 NOTES CONTINUED 10. INCOME TAXES
December 31 (000s) 1999 1998 1997 - ------------------------------------------------------------------------------------------- FEDERAL AND OTHER INCOME TAXES CONSISTED OF: Current provision $10,560 $ 6,756 $ 6,728 Deferred provision (benefit) - net 2,327 (4,177) 5,713 - ------------------------------------------------------------------------------------------- Total federal and other income tax expense $12,887 $ 2,579 $12,441 - ------------------------------------------------------------------------------------------- RECONCILIATION BETWEEN STATUTORY AND ACTUAL INCOME TAXES: Income (loss) from continuing operations $16,891 $(33,370) $ 4,854 Income tax expense 12,887 2,579 12,441 - ------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes $29,778 $(30,791) $17,295 - ------------------------------------------------------------------------------------------- Statutory federal income taxes at a rate of 35% $10,422 $(10,777) $ 6,053 ADJUSTMENTS TO FEDERAL INCOME TAXES: Amortization of goodwill 5,657 4,635 4,737 Goodwill adjustment -- 8,341 -- Adjustment of federal income taxes from prior years (787) (2,087) (1,375) Change in valuation allowance (1,222) 2,041 2,493 State income taxes - net 1,495 (308) 545 Effect of foreign taxes (2,354) 537 (198) Other - net (324) 197 186 - ------------------------------------------------------------------------------------------- Total federal and other income tax expense $12,887 $ 2,579 $12,441 - -------------------------------------------------------------------------------------------
The 1999 adjustment of income taxes from prior years is a result of a refund of UK taxes from the final settlement of the 1995-1997 tax years, and a true up of the 1998 tax expense. The 1998 and 1997 adjustments to income taxes from prior years was primarily due to a true up of prior year tax expense. The tax effects of significant temporary differences that gave rise to deferred income tax assets and liabilities are shown below. December 31 (000s) 1999 1998 - ------------------------------------------------------------------------------ DEFERRED TAX ASSETS: State taxes $ 10,246 $ 8,053 Post-retirement benefits 1,588 1,547 Fixed assets 913 564 Unfavorable lease reserve 1,501 1,808 Net operating loss carry forward 3,262 4,560 Bad debts 1,143 769 Other 6,874 5,575 - ------------------------------------------------------------------------------ Total deferred tax assets 25,527 22,876 Valuation allowance (3,262) (4,560) - ------------------------------------------------------------------------------ Net deferred tax assets 22,265 18,316 - ------------------------------------------------------------------------------ DEFERRED TAX LIABILITIES: Intangibles (27,906) (20,289) Fixed assets (1,995) (2,376) Other (10,064) (5,551) - ------------------------------------------------------------------------------ Total deferred tax (liability) (39,965) $(28,216) - ------------------------------------------------------------------------------ Net deferred tax (liability) $(17,700) $ (9,900) - ------------------------------------------------------------------------------ Net current asset (liability) $ 5,394 $ (301) Net long-term (liability) (23,094) (9,599) - ------------------------------------------------------------------------------ Net deferred tax (liability) $(17,700) $ (9,900) - ------------------------------------------------------------------------------ The Company has net operating loss carry forwards in various jurisdictions that expire in the years 2000 through 2004. The Company has provided a valuation allowance against losses of $3.3 million and $4.6 million at December 31, 1999 and 1998, respectively. The decrease in the valuation allowance in 1999 results from the use of net operating losses in 1999 that were included in the allowance at December 31, 1998. 17 NOTES CONTINUED - -------------------------------------------------------------------------------- Primark and Corporation And Subsidiaries 11. SEGMENT AND GEOGRAPHIC INFORMATION - -------------------------------------------------------------------------------- Based upon the different requirements of the Company's customer base, the Company has organized itself into four operating divisions as follows: PRIMARK FINANCIAL INFORMATION DIVISION. Primark Financial Information Division ("PFID") develops "enterprise-wide" products and services for major financial institutions on a global basis. It also has responsibility for all transactional products, both historical and real-time, as well as products supporting large-scale investment accounting functions, the individual investor and the referential needs of a very large financial market. This division also manages the corporate network, PrimarkNet, which serves as the major delivery channel to the Company's customers on a global basis and across all three divisions. PFID's product offerings serve most of the Company's customer types and is a major service provider to the "sell-side" portion of the financial market. PRIMARK FINANCIAL ANALYTICS DIVISION. Primark Financial Analytics Division ("PFAD") concentrates on developing and marketing a wide variety of analytical products for money managers, fund sponsors and other investors. These products combine the Company's databases, advanced software, analytical techniques and forecasts for all phases of the investment process. PFAD's product offerings concentrate on customers in the "buy-side" portion of the financial market. PRIMARK DECISION INFORMATION DIVISION. Primark Decision Information Division ("PDID") acquires, develops and operates information content businesses that are primarily focused in areas other than the financial marketplace. PDID also provides products and services for decision support to financial customers. PRIMARK RESEARCH CENTERS. The Primark Research Centers ("PRC") provide a full range of research solutions, from personalized research support to fast and convenient document retrieval. Researchers utilize a repository of documents, online tools and a network of affiliates to guarantee the accurate and immediate delivery of virtually any type of information. The Primark Research Centers are primarily located in the United States and the United Kingdom and although a separate line of business, the PRC is part of PFID. The Primark Corporate Division ("CORP") supports the all operating divisions with tax, accounting and legal services. The accounting policies of each division conform to those described in the summary of significant accounting policies. The Company evaluates the performance of each operating division on the basis of total revenues, earnings before interest, taxes, depreciation and amortization ("EBITDA"), and funds used for the purchase of fixed assets, including capitalized data and software. The previous periods have been restated to reflect a change in segments. No single customer accounted for more than 2% of the Company's consolidated revenues in 1999, 1998 and 1997. COMPARATIVE SEGMENT ANALYSIS
December 31, (000s) 1999 1998 1997 - -------------------------------------------------------------------------------- Revenue: PFID $329,880 $282,183 $ 261,651 PFAD 92,625 75,715 60,165 PDID 54,525 52,456 44,493 PRC 17,589 24,186 31,566 CORP -- -- -- - -------------------------------------------------------------------------------- Total $494,619 $434,540 $ 397,875 - -------------------------------------------------------------------------------- EBITDA (excl. restructuring): PFID $ 75,370 $ 59,666 $ 64,937 PFAD 25,065 21,771 16,287 PDID 5,139 11,894 4,786 PRC 5,113 7,420 9,820 CORP (4,417) (6,921) (6,591) - -------------------------------------------------------------------------------- Total $106,270 $ 93,830 $ 89,239 - -------------------------------------------------------------------------------- Restructuring: PFID $ (4) $ 44,866 $ 2,535 PFAD -- 225 -- PDID -- 17,778 3,450 PRC -- 2,540 815 CORP -- 2,561 -- - -------------------------------------------------------------------------------- Total $ (4) $ 67,970 $ 6,800 - -------------------------------------------------------------------------------- Depreciation and Amortization PFID $ 40,352 $ 33,532 $ 34,833 PFAD 7,286 6,549 6,365 PDID 4,322 4,710 5,117 PRC 3,285 2,768 2,023 CORP 1,647 1,256 1,867 - -------------------------------------------------------------------------------- Total $ 56,892 $ 48,815 $ 50,205 - -------------------------------------------------------------------------------- Operating Income (Loss) PFID $ 35,022 $(18,731) $ 27,569 PFAD 17,779 14,997 9,922 PDID 817 (10,594) (3,781) PRC 1,828 2,112 6,982 CORP (6,064) (10,738) (8,458) - -------------------------------------------------------------------------------- Total $ 49,382 $(22,954) $ 32,234 - -------------------------------------------------------------------------------- Capital Expenditures and Software: PFID $ 48,709 $ 32,116 $ 34,200 PFAD 9,696 4,508 6,684 PDID 2,603 1,641 684 PRC 1,264 981 1,388 CORP 4,578 1,153 980 - -------------------------------------------------------------------------------- Total $ 66,850 $ 40,399 $ 43,936 - -------------------------------------------------------------------------------- Total Assets*: PFID $696,214 $ 610,738 $ 607,107 PFAD 92,291 80,402 94,236 PDID 100,242 104,582 113,903 CORP 50,353 54,746 228,563 - -------------------------------------------------------------------------------- Total $939,100 $ 850,468 $1,043,809 - --------------------------------------------------------------------------------
* Total assets for PRC are not allocated by the Company. 18 NOTES CONTINUED - -------------------------------------------------------------------------------- Primark and Corporation And Subsidiaries EBITDA represents operating income plus depreciation and amortization expense and should not be considered in isolation from, or as a substitute for, operating income, net income or cash flows from operating activities computed in accordance with generally accepted accounting principles. While not computed in accordance with generally accepted accounting principles, EBITDA is a widely-used measure of a company's performance in its industry because it assists in comparing performance on a consistent basis without regard to depreciation and amortization, which may vary significantly depending on accounting methods particularly where acquisitions are involved. Management of the Company believes that EBITDA is a meaningful measure, given its widespread industry acceptance as a basis for financial analysis. Further, certain of the Company's debt agreements include financial covenants that are based upon EBITDA, as defined above. Due to the variety of methods that may be used by companies and analysts to calculate EBITDA, the EBITDA measures presented herein may not be comparable to that presented by other companies. The Company's operations by geographic region are presented in the following table. Most of the Company's international sales originate through its affiliates, which are located throughout Europe, Asia and the United States. GEOGRAPHIC REGIONS
(000s) 1999 1998 1997 - -------------------------------------------------------------------------------- NORTH AMERICA Operating Revenues $223,807 $189,680 $ 173,150 Operating Income (Loss) Non-affiliate 17,154 (24,705) 20,107 Affiliate (2) (6,337) (6,082) (7,005) Identifiable Assets $514,190 $411,317 $ 393,572 - -------------------------------------------------------------------------------- UNITED KINGDOM Operating Revenues Non-affiliate $130,838 $146,062 $ 131,889 Affiliate (2) 41,984 42,740 39,894 Operating Income (Loss) Non-affiliate (16,300) (26,155) (18,933) Affiliate (2) 42,001 42,740 39,894 Identifiable Assets $357,098 $346,711 $ 363,611 - -------------------------------------------------------------------------------- OTHER INTERNATIONAL Operating Revenues $132,565 $ 98,798 $ 92,836 Operating Income (Loss) Non-affiliate 51,869 36,961 36,812 Affiliate (2) (35,664) (36,658) (32,889) Identifiable Assets $ 38,078 $ 45,609 $ 58,063 - -------------------------------------------------------------------------------- CORPORATE & OTHER Operating Revenues Affiliate (2) $(34,575) $(42,740) $ (39,894) Operating Income (Loss) (3,341) (9,055) (5,752) Identifiable Assets $ 29,734 $ 46,831 $ 228,563 - -------------------------------------------------------------------------------- CONSOLIDATED Operating Revenues $494,619 $434,540 $ 397,875 Operating Income(Loss) (3) 49,382 (22,954) 32,234 Identifiable Assets $939,100 $850,468 $1,043,809 - --------------------------------------------------------------------------------
(1) Corporate and other includes corporate accounts, eliminations and reclassifications, as well as the net assets of discontinued operations. (2) Affiliate transfers represent service fees received by Datastream's United Kingdom operation from its international affiliates. (3) Includes restructuring charges of $(4,000) in 1999, $68.0 million in 1998 and $6.8 million in 1997 (Note 4). 19 NOTES CONCLUDED - -------------------------------------------------------------------------------- Primark and Corporation And Subsidiaries 12. SUBSEQUENT EVENTS - -------------------------------------------------------------------------------- In January 2000, the Company entered into an agreement with MicroStrategy for the development and licensing of certain software for a total consideration of $11.0 million payable in cash, the Company's common stock, or a combination of both as determined by the Company. On January 25, 2000, 230,770 shares of Primark common stock were issued in connection with this agreement. Through this alliance, the Primark Financial Channel will be syndicated and will combine the wireless delivery technology of MicroStrategy with the global financial and economic information of the Company to deliver up-to-the-minute investment, economic and corporate information to all types of wireless devices as well as faxes and email. In February 2000, the Company invested $5.1 million in The Money Channel for a 5% equity interest. The Money Channel is the UK's first dedicated TV channel for finance and investment information and is listed on the London Stock Exchange. 13. COMMITMENTS AND CONTINGENCIES - -------------------------------------------------------------------------------- The Board of Trade of the City of New York ("NYBT") has submitted to Primark's subsidiary, A-T Financial Information, Inc., a claim for approximately $3.8 million based primarily on an allegation that, over a five-year period, A-T insufficiently delayed the distribution of information received from NYBT and therefore should have paid fees to NYBT applicable to real-time distribution of that information. Management believes that the allegation is without merit and intends to vigorously contest the claim. The Company and its subsidiaries are involved in other administrative proceedings and matters concerning issues arising in the ordinary course of business. Management cannot predict the final disposition of such issues, but believes that adequate provision has been made for the probable losses and that the ultimate resolution of these proceedings will not have a material adverse effect on the Company's financial condition, results of operations or financial liquidity. 20 REPORT OF MANAGEMENT - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries Management of Primark Corporation and its subsidiaries (the "Company") is responsible for the preparation and integrity of the accompanying consolidated financial statements and other financial information contained in this Annual Report. Management believes that all such information has been prepared in conformity with generally accepted accounting principles, and necessarily includes certain amounts that are based on management's judgements and estimates. The consolidated financial statements have been audited by Deloitte & Touche LLP, the Company's Independent Auditors. Their audit was conducted in accordance with generally accepted auditing standards, as indicated in their report In management's opinion, the Company's system of internal accounting controls, coupled with an ongoing program of internal audits to review such controls, provide reasonable assurance that the Company's assets are safeguarded from material loss and the transactions are executed and recorded in accordance with established procedures. The system is supported by formal policies and procedures, including an active Code of Conduct program intended to ensure key employees adhere to the highest standards of personal professional integrity. The concept of reasonable assurance is based on the recognition that the cost of maintaining a system of internal accounting controls should not exceed the related benefits to be derived. The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with management, internal auditors and Deloitte & Touche LLP to review planned audit scope and results and to discuss other matters affecting the adequacy of internal accounting controls and the quality of financial reporting. Deloitte & Touche LLP has full and free access to the Audit Committee and meets with the committee without management representatives present. /s/ Stephen H. Curran - ---------------------------------------------------- Stephen H. Curran Executive Vice President and Chief Financial Officer February 11, 2000 INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries TO THE BOARD OF DIRECTORS OF PRIMARK CORPORATION: We have audited the accompanying consolidated statements of financial position of Primark Corporation and its subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, cash flows, common shareholders' equity and comprehensive income for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Primark Corporation and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. As discussed in Note 1, in 1999 the Company changed its method of accounting for derivative financial instruments to conform with Statement of Financial Accounting Standards No. 133. /s/ Deloitte & Touche LLP - ----------------------------------------- Deloitte & Touche LLP Boston, Massachusetts February 11, 2000 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries RESULTS OF OPERATIONS Primark reported 1999 income from continuing operations of $16.9 million or $0.80 per share compared to a loss of $33.4 million or $1.37 per share in 1998 and income of $4.9 million or $0.17 per share in 1997. During the three years reported, the Company purchased four significant operations, sold two operations no longer part of its strategic focus and materially restructured its remaining operations to align more closely with the needs of its customers. Additionally, Primark refinanced several of its debt issues and repurchased 26% of its outstanding common stock during this three-year period. During 1997 Primark purchased Baseline and WEFA for a combined $86.0 million in cash and entered into a refinancing agreement with its commercial banks to address the funding of those acquisitions. The 1997 refinancing resulted in an extraordinary loss on early extinguishment of debt of $2.0 million after tax or $0.07 per share. The Company also restructured its Disclosure and DAFSA business units in 1997 and recorded a charge of $6.8 million. In 1998 the Company sold TASC, a government contracting business, and TIMCO, a heavy aircraft maintenance operation, for a total of $502.0 million in cash. As a consequence of the decision to dispose of these assets, the results of the operations for these companies were reported in discontinued operations. The Company reported net income from discontinued operations of $7.9 million or $0.33 per share and $16.8 million or $0.61 per share for the years 1998 and 1997, respectively. In 1998, the Company also recorded gains of $187.3 million or $7.71 per share on the sales of the two discontinued operations. With the sale of TASC and TIMCO reducing the Company's size by approximately 60% in 1998 the Company restructured its remaining businesses to integrate their operations, eliminate duplicate costs and serve customers more effectively. The restructuring resulted in a charge of $68.0 million to operating income. The charge included a write-off of $25.0 million of software and $31.1 million of goodwill, with the remainder of the charge related to severance and lease reductions necessary to integrate facilities and employee work forces. With monies received from the sales in 1998, Primark repaid its senior notes, resulting in a 1998 extraordinary loss on early extinguishment of debt of $5.1 million after tax or $0.21 per share. During 1999, the restructuring program was substantially completed within the cost levels estimated in 1998. In February of 1999, the Company acquired A-T Financial for $34.9 million and Extel for $31.9 million. When the extraordinary losses, net income from discontinued operations and the impact of restructuring charges are eliminated from all years, income from continuing operations for 1998 was $20.9 million or $0.83 per share compared to 1997 income from continuing operations which was $11.0 million or $0.39 per share. When compared on a similar basis, 1999 income from continuing operations was $16.9 million or $0.80 per share, $4.0 million or $0.03 per share lower than 1998. Revenues and operating income show consistent improvement throughout the three-year period, but the transactions noted above caused net interest expense to vary significantly. The timing of cash received on asset sales in 1998 and cash paid out for acquisitions in 1999, together with share repurchases made over both periods, resulted in reduced borrowing levels in 1998 and increased debt requirements in 1999. Consequently, net interest expense was $6.3 million in 1998 compared to $19.1 million in 1999 and $14.9 million in 1997. Revenues for 1999 were $494.6 million compared to $434.5 million in 1998 and $397.9 million in 1997, a 13.8% and 9.2% increase, respectively. During 1999, 50.8% of the Company's revenues were generated outside the United States and for the most part were denominated in foreign currency. Movements of currency rates relative to the US dollar caused revenues to be lower by $6.2 million in 1999 compared to 1998. When the effects of currency movements are eliminated, 1999 revenues grew 15.3%. Similarly, with the exclusion of currency movements, 1998 revenues grew 10.3% over 1997. The 1999 acquisitions added $25.9 million to revenue which, when eliminated together with the effects of currency, resulted in a 9.2% growth rate. Because of significant amortization from the acquisition related intangible assets, the Company uses earnings before interest, taxes, depreciation and amortization ("EBITDA") as a measure of profitability. EBITDA for 1999, excluding restructuring charges, was reported at $106.3 million compared to $93.8 million in 1998 and $89.2 million in 1997, growing 13.3% in 1999 and 5.1% in 1998. Fluctuations in currency rates had an unfavorable impact on EBITDA of $1.4 million in 1999 and $1.1 million in 1998. The improvement in profitability is evidence of the success of the restructuring initiated in June of 1998. When restructuring charges are eliminated for all years, operating income for 1999 was $49.4 million compared to $45.0 million in 1998 and $39.0 million in 1997. While operating income grew over the three-year period, it did not grow as fast as EBITDA due to increases in the amortization of goodwill and intangible assets created by the acquisitions of A-T Financial and Extel in 1999. 22 MANAGEMENT'S DISCUSSION CONTINUED - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries The change in effective tax rates between the years ended 1999 and 1998 was principally the result of the goodwill adjustments associated with the 1998 restructuring charge. In addition, the goodwill added through the acquisitions of AT Financial and Extel affected the 1999 effective tax rate. Goodwill is a significant deduction from pretax income but for the most part does not qualify as a deduction on the tax return. Consequently additions and adjustments to goodwill materially impact effective tax rates. To a lesser extent, the 1999 effective rate was also reduced by the use of tax benefits associated with NOL's in France and Japan for which a valuation allowance had been provided in prior years. The Company also received refunds for its United Kingdom tax return, which was not previously provided for. The Company is organized into three divisions, aligned with the major markets served by the business units within each division. The Financial Information Division delivers enterprise wide real-time and research data and applications, with a concentration on the sell-side of the financial markets. The Primark Research Centers, which are included as a separate line of business within the Financial Information Division, provide a full range of research solutions from personalized research support to fast and convenient document retrieval. The Financial Analytics Division delivers data and applications principally to the buy-side of the financial markets. The Decision Information Division provides market research, economic and consulting products to corporate and government customers, with some additional sales to financial institutions. All three divisions have developed Internet applications that allow for expansion into new markets. During 1999, Internet related businesses accounted for approximately $40.0 million of revenues. Aggressive development is planned for both Internet and wireless services by all divisions during 2000, which is expected to lower reported earnings and increase capital expenditures when compared to historic performance levels. The Company anticipates spending $60.0 million in additional capital investment and expense, reducing 2000 operating income by approximately $25.0 million from the level otherwise expected. The Company is in the preliminary stages of investigating organizational changes to address the best way to manage its current divisional segments to most efficiently manage these new initiatives. FINANCIAL INFORMATION DIVISION The Financial Information Division revenues were $347.5 million in 1999 compared to $306.4 million in 1998 and $293.1 million in 1997, representing growth rates of 13.4% and 4.5%, respectively. The International operations grew revenues in 1999 by 11.1% and the North American operations grew 18.8%. Much of the growth came from revenues generated by the newly acquired A-T Financial and Extel operations. Excluding the revenue from the acquired operations and any impact of currency movements, the Division's growth rate was 6.7%. Revenues by region reflected 1999 growth rates of 10.7% in Continental Europe, 8.0% in the United Kingdom, 4.6% in North America and a drop of 2.4% in Asia. The Datastream research product accounted for $124.4 million of revenues and grew 7.8% over 1998. The PIMS product line totaled $31.6 million and the Topic line totaled $34.5 million, growing 15.5% and 4.4%, respectively, in 1999. The Global Access product line accounted for $21.7 million of revenues and posted 74% improvement over 1998. The Division's Research Centers recorded revenues of $17.6 million in 1999 compared to $24.2 million in 1998 and $31.6 million in 1997, representing declines of 26.7% and 23%, respectively. The Research Centers declines were primarily related to the traditional document retrieval services while non-Edgar documents and services remained flat during this three year period. The North American operation was able to partially offset this decline with $5.0 million of additional data and history sales in 1999. The Financial Information Division 1999 EBITDA was $80.5 million, a 20.0% increase over the $67.1 million recorded in 1998 and compares favorably to the $70.2 million reported in 1997, when restructuring charges are excluded. EBITDA, excluding restructuring charges, for the Division's Research Centers was $5.1 million, $7.4 million and $9.8 million in 1999, 1998 and 1997, respectively. Newly acquired operations contributed $3.7 million to EBITDA. As a percentage of revenue, the Division's EBITDA was 23.2% in 1999 compared to 21.7% in 1998. Profitability improvement was due to the integration program initiated in June of 1998. The Financial Information Division was the beneficiary of all of the Company's 1999 acquisitions. On February 5, 1999, the company purchased A-T Financial for $34.9 million in cash. A-T is a real time financial information provider servicing institutional and retail markets with timely, high quality, global securities information, with $13 million 23 MANAGEMENT'S DISCUSSION CONTINUED - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries in revenues. The A-T acquisition was critical to expanding the real-time content for the Division's new global equity products. At the same time, this acquisition gives Primark the capability to include real-time information in products across all divisions. On February 19, 1999 the Company purchased the Extel Company Fundamental Data business for $31.9 million in cash. Extel is a widely recognized brand name in Europe and Asia, supplying company fundamental data in a variety of applications, with revenues of $12.7 million. The Extel acquisition adds dramatically to our European capabilities. On June 1, 1999 the Company also purchased the remaining 20% interest in Worldscope for $16.0 million to permit the full integration of both Worldscope and Extel into the Division's operations. The integration is expected to be completed by the first quarter of 2000. Significant savings are expected in product platform applications and data aggregation functions due to synergies between these companies and other Primark operations. FINANCIAL ANALYTICS DIVISION The Financial Analytics Division 1999 revenues were $92.6 million compared to $75.7 million in 1998 and $60.2 million in 1997. This performance represents growth rates of 22.3% and 25.7% for 1999 and 1998, respectively. Within the division, the Baseline US equity product posted revenues of $32.5 million, growing 30.9% in 1999, following a 36.6% growth rate in 1998. I/B/E/S revenues were $47.3 million, led by the Active Express product line, growing 17.1% in 1999 and 23.2% in 1998. Vestek's portfolio measurement and analytic product line grew 22.4%, with revenues of $12.8 million in 1999, compared to 13.3% growth in 1998. The markets and products within this division have remained strong over the three years reported and the Company expects this performance to continue. The Financial Analytic Division EBITDA was $25.1 million in 1999, with I/B/E/S accounting for $16.3 million of the total. EBITDA grew 15.1% in 1999 and 33.7% in 1998. As a percentage of revenue, the division's EBITDA represented 27.1% in 1999 and 28.8% in 1998. During 1999, the Division has been developing a mutual fund warehouse product through its Vestek operations. The spending on this development has been expensed and consequently lowered the growth in EBITDA during 1999. The Division expects that margins will return to historical levels as the new product is fully introduced into the market place during 2000. DECISION INFORMATION DIVISION The Decision Information Division revenues were $54.5 million in 1999 compared to $52.5 million in 1998 and $44.5 million in 1997. Growth in 1999 revenues was 3.9%, while 1998 demonstrated growth of 17.9%. Within the Division, the Yankee Group recorded revenues of $29.2 million, growing 24.6% over 1998. Yankee also grew 23.1% in 1998. The WEFA economic business experienced lower revenues in 1999, of $25.3 million compared to $29.0 million in 1998. The fall-off represents a combination of flat growth in its base subscription products coupled with high consulting revenues recorded in 1998 that were not matched in 1999. WEFA has been investing in new product offerings that are mostly Internet-based, to take advantage of emerging customer requirements. Secondly, WEFA has been reconstructing its consulting practice to address attractive market opportunities in 2000. With the new Internet-based product applications and expansion of consulting capabilities, WEFA should grow again in 2000 and, as new products are added in 2000, higher growth is expected in 2001. The Decision Information Division EBITDA was $5.1 million compared to $11.9 million in 1998 and $8.6 million in 1997. The reduction in profitability is mostly due to investments at WEFA to develop new product offerings that are Internet-based and the addition of consulting staff to build that capability. Also during the year, the Yankee Group increased expenses to build new planning services to address attractive market opportunities in 2000. Most of the additional spending on planning services centered around expanding the Yankee Group's coverage of Internet applications in the industry segments it covers. CAPITAL RESOURCES & LIQUIDITY As of December 31, 1999, the Company had $18.4 million of cash and cash equivalents. This compares to $51.6 million and $12.8 million at year-end 1998 and 1997, respectively. The large cash balance as of December 1998 was the result of the issuance of the 9 1/4% Senior Subordinated Notes in December of 1998. A portion of this cash balance was applied towards the acquisitions of A-T Financial and Extel in February of 1999. The Company's share repurchase program also required significant cash during both 1998 and 1999. 24 MANAGEMENT'S DISCUSSION CONTINUED - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries Operating activities provided $43.1 million of cash in 1999 compared to $72.7 million in 1998 and $58 million in 1997. During 1999, working capital used $28.0 million compared to the $27.4 million generated in 1998 and the $9.3 million used in 1997. During 1998, the Company received net tax benefits of $21.3 million, principally from the exercise of significant levels of stock options. Because of delay in the receipt of tax refunds related to the sale of TASC's foreign operations, the Company was paid approximately $10.0 million of foreign refunds in the first quarter of 2000. Excluding the impact of tax payments, the Company continued to generate over $50.0 million of operating cash flows and has not experienced significant collection issues with its receivables. Because most of the Company's subscription contracts are billed quarterly or annually in advance, Primark tends to exhibit negative working capital principally as a result of currently deferred income for services that have been billed and collected but are amortized over the period of the contract. Financing activities provided $91.7 million of cash in 1999 compared to $402.3 million used in 1998 and the $74.8 million provided in 1997. During 1999, Primark drew $133.0 million on its revolving credit facility to fund $39.3 million of common share repurchases and support the capital expenditure program. The 1998 use of cash in financing activities reflects $197.3 million expended to repurchase common stock and the repayment of debt with proceeds received from the sale of TASC and TIMCO. Those expenditures were net of cash provided with the December 1998 issuance of the Company's 9 1/4% Senior Subordinated Notes, maturing in December of 2008. At year-end, the Company's debt to total capitalization was 41.1%, with $292.0 million of funded debt outstanding. In addition to $150.0 million of Senior Subordinated Notes, the Company had $133.0 million drawn on its revolving credit facility with a variable interest charge of LIBOR plus 150 basis points. Also outstanding was the $7.0 million 5% Convertible Note issued for the purchase of the remaining 20% of Worldscope. The revolving credit facility had the capacity for $205.0 million, leaving additional availability at year-end of $72.0 million. When considering the capital spending anticipated during 2000 to support the introduction of real-time and wireless Internet products, the Company anticipates requesting covenant amendments from its commercial bank group in the first quarter of 2000. The Company is also pursuing the option of using private equity funds to support these growth opportunities. During 1999, the Company used $167.6 million of cash for investing activities compared to $368.2 million provided in 1998 and $144.5 million absorbed by investing activities in 1997. During 1999, the Company paid a total of $79.1 million of cash, net of cash acquired, for the acquisitions of A-T Financial, Extel and Worldscope's remaining 20% outstanding minority interest. During 1999, $30.7 million of taxes came due for the 1998 sale of TASC and TIMCO. During 1999, the Company spent $66.9 million on capital equipment and capitalized software of this amount the Decision Information Division accounted for $2.6 million, principally for new product offerings at WEFA. The Financial Analytics Division spent $9.7 million, including $6.5 million at Baseline, which included leasehold improvements and equipment necessary to relocate operations to a new office facility. The Financial Information Division accounted for $50.0 million of expenditures, including $20.8 million in equipment and $27.3 million in capitalized software. The equipment spending was evenly divided to support North America and International operations. In North America, equipment was needed to support new products such as Piranha, and to create back office support for certain new electronic products, such as real-time applications. The International expenditure was needed to build the communications and support for the real-time EuroTopic product, as well as equipment necessary for the integration of Extel into the Worldscope and Disclosure platforms. Software capitalized internationally totaled $16.6 million, to support the new real-time products and the integration of Extel into the Company's existing business. In North America, $9.1 million was spent to support the back office operation needed for new electronic product offerings. The large influx of cash received from investing operations in 1998 was due to proceeds from the sale of TASC and TIMCO in April and September of 1998. The Company continues to generate strong cash flows from operations and has good access to capital markets. As a consequence, the Company is confident in its ability to provide the cash necessary to support its growth plans for 2000. 25 MANAGEMENT'S DISCUSSION CONTINUED - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries NEWLY ADOPTED ACCOUNTING STANDARD Effective January 1, 1999, the Company adopted Statement of Financial Accounting Standards 133 ("FAS 133"), "Accounting for Derivative Instruments and Hedging Activities." FAS 133 requires the Company to recognize all derivatives on the balance sheet at fair value. Depending on the nature of the underlying exposure being hedged, the effective portion of changes in the fair value of derivatives are either recognized in the consolidated statement of income or as a component of accumulated other comprehensive income. The ineffective portion of a derivative's change in fair value is recognized in the consolidated statement of income. In accordance with its risk management policy, the Company uses foreign currency options and foreign currency forward contracts. Gains and losses from financial instruments that do not qualify for hedge accounting are marked to market and recognized as a gain or loss in the current period. The Company does not hold or issue derivative instruments for trading purposes. The cumulative effect of a change in accounting principle due to adoption of FAS 133 as of January 1, 1999 was a charge to income of $219,000. YEAR 2000 READINESS DISCLOSURE Y2K issues relate to a complex set of potential problems arising from the ways in which computer software and hardware handle dates. Many older systems use a two-digit date format that may create ambiguities, at and shortly after the turn of the century. However, the Company's testing, operations and backup/recovery procedures will ensure that the Company can deal effectively with any problems that may arise with our products and services, operations and interfaces with customers and suppliers. The Company has been actively addressing all known Y2K issues since 1995, with the goal of providing continuous and reliable service to the Company's customers and a seamless transition to the new Millennium. To date these goals have been met successfully. Any remaining issues can be addressed within ongoing company operations. The Company's Y2K program focused on each of the Company's internal systems, products and third parties with which the Company has a significant business relationship. In addition to the databases and software that the Company provides to its customers, the Company reviewed, fixed and tested all aspects of its internal operations. These included hardware systems (e.g., servers, LANs), software (e.g., production database systems, human resources and finance information systems) and desktop PC programs, as well as physical security systems, fire suppression and other building control systems. These reviews have included key data suppliers, hardware manufacturers, telecommunications companies, electric utilities and many others. The issues dealt with in the Y2K Program have now been transferred from close corporate oversight to the respective business units within the Primark operating companies. The Company incurred costs related to its Y2K initiative of approximately $5.0 million for the year ended December 31, 1999. The Company has resolved all known significant Y2K problems and is continuing to have its solutions thoroughly tested both with customers and in internal operations, as business circumstances require. MARKET RISK The Company enters into a variety of financial instruments, including foreign currency forward and call option contracts and interest rate swaps, to manage currency and interest rate risk. Counterparties to these financial instruments expose the Company to credit losses in the event of non-performance, but the Company does not expect any of the counterparties to fail to meet their obligations. To manage credit risks, the Company selects counterparties based on credit ratings and monitors the exposure with each counterparty. The Company does not hold or issue derivative contracts for trading purposes. There were no material changes in market risk exposures between 1999 and 1998. Foreign Currency Exchange Rate Risk Forward and option contracts related to foreign exchange market risk are utilized to reduce the exposure of the Company's anticipated foreign revenues, net of cash operating expenses, to excessive foreign currency fluctuations. Significant portions of the Company's revenues are denominated in currencies other than the US dollar. For the twelve months ended December 31, 1999, approximately 57.8% of total revenues were denominated in non-US dollar currencies of which approximately 33.8%, 17.6% and 6.4% are denominated in UK sterling, currencies of Continental Europe and Asian currencies, respectively. The majority of the Company's revenues are subscription-based arrangements of up to two years in duration. 26 MANAGEMENT'S DISCUSSION CONTINUED - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries Additionally, a significant percentage of the Company's operating costs are denominated in foreign currencies. The Company maintains significant production, product development, sales and administrative functions in the United Kingdom. Also, the Company maintains local sales and customer service functions in most financial centers of Europe and Asia. For the twelve months ended December 31, 1999, approximately 52.5% of operating income, excluding goodwill amortization, was denominated in non-US dollar currencies of which approximately 3.3%, 42.0% and 7.2% are denominated in UK sterling, currencies of Continental Europe and Asian currencies, respectively. The primary market risk that the Company faces is the US dollar strengthening against the euro, Swiss franc, Swedish krona and Japanese yen. The use of domestic investment and borrowing facilities eliminates foreign currency exposures related to financial instruments. Derivatives related to the foreign exchange market risk category are utilized to reduce the exposure of the Company's operating income to excessive foreign currency fluctuations. Certain principles underlying the Company's foreign exchange risk management strategy include: (i) derivative contracts are assigned to an identified cash flow exposure and the notional amount of such derivatives will not exceed the amount of the underlying exposure; (ii) levels of cover for foreign exchange hedging will not exceed 90% for exposures with a horizon within the next 12 months, and 75% for the following 12 months; (iii) derivatives linked to a cash flow exposure will not exceed 24 months in duration; and (iv) options can only be written as part of a matched combination strategy or collar with no net premium received. Primark Corporation has adopted value at risk ("VAR") analysis as a management tool to quantify the potential impact of exchange rate volatility on future operating income. VAR is a measure of the potential loss on a portfolio within a specified time horizon, at a specified confidence interval. The Company defines loss as the reduction in the value of the rolling four-quarter forecast of operating income denominated in US dollars. The VAR calculation parameters and assumptions are as follows: (i) daily volatility and correlation data from RiskMetrics; (ii) portfolio data = rolling four quarter estimated operating income (excluding goodwill amortization) based on the transactional and translation exposures of each Primark subsidiary; (iii) horizon = one fiscal quarter (65 business days); (iv) home currency = US dollar; (v) confidence interval = 95%; (vi) VAR method = Monte Carlo using RiskMetrics' correlation and volatility data sets; and (vii) periodicity of VAR calculation = quarterly. Based on the VAR model, Primark estimates there is a 5% chance that the forecast for operating income for the coming four quarters will deteriorate over the next calendar quarter by more than $2.45 million before hedging and $1.77 million after taking into account the Company's hedging portfolio, representing cover of 27.6%, as of December 31, 1999. All foreign currency forward and option contracts held at December 31, 1999 are included in the VAR calculation. Over the each of the four quarters in 1999, the average value at risk before hedging on operating income for the next four quarters varied between $2.32 million and $2.74 million, averaging $2.52 million and after hedging varied between $1.68 million and $1.96 million, averaging $1.79 million. At December 31, 1998, the Company estimated there was a 5% chance that the forecast for operating income for the coming four quarters would deteriorate over the next calendar quarter by more than $2.43 million before hedging and $2.32 million after taking into account the Company's hedging portfolio. All foreign currency forward and option contracts held at December 31, 1998 are included in the VAR calculation. The Company principally enters into contracts to deliver foreign currencies for UK sterling at agreed-upon exchange rates with maturities not exceeding two years. The underlying transactions typically represent estimated future service fees from the Company's network of global sales organizations. The Company accounts for these instruments as cash flow hedges. In accordance with FAS 133, the fair value of changes of derivative instruments related to the effective portion of cash flow hedges are initially recorded as a component of other comprehensive income. Hedging transactions are typically set up with a notional principal less than the principal of the underlying transaction and effectiveness of these contracts is measured as the first units of currency of the underlying exposure being hedged. Effectiveness is reviewed quarterly to ensure that the estimated amount of the exposure being hedged does not decline below the notional principal of the respective hedging transactions. Unrealized gains and losses on cash flow hedges accumulate in other comprehensive income and are reclassified into earnings when the forecasted transaction affects earnings. For the year ended December 31, 1999, there was no ineffective portion of derivative gains or losses reported in earnings, and net gains from hedge transactions reclassified from other comprehensive income to revenues totaled $710,000. At December 31, 1999, the fair value of derivative instruments designated as cash flow hedges is $394,000 and 27 MANAGEMENT'S DISCUSSION CONCLUDED - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries is recorded in other current assets with the offset to other comprehensive income. This gain will be recognized in revenues over the next 24 months as the forecasted revenues are recognized. Forward and option contracts are also entered into to protect anticipated repatriations of excess cash flow, primarily from the UK, under intercompany loan agreements or other financial transactions. The Company accounts for these instruments at fair market value, recording each period's gains or losses in non-operating income or loss. For the year ended December 31, 1999, the net gain on these instruments recorded in non-operating income was $486,000. Foreign exchange contracts with a value of $160,000 are recorded on the balance sheet in other current assets at December 31, 1999. Interest Rate Risk Derivatives contracts entered into relate to specific financial liabilities or assets with either fixed or floating interest rates attached. The objective of the Company's interest rate risk management program is to optimize and regulate the mix of fixed and floating rate assets and liabilities recorded on the Company's balance sheet with consideration given to management's plans for future investments, divestitures and financing. To manage its interest rate exposures, the Company may utilize forward rate agreements, swaps and options. During 1999 and 1998, the Company was not a party to any outstanding interest rate derivative agreements. The Company's revolving credit facility carries a variable interest rate of LIBOR plus 150 basis points. An increase in interest rates would increase the cost to borrow funds under the revolver. In addition, an increase in interest rates would cause the market value of an investment in the Company's $150 million, 9 1/4% Senior Subordinated Notes due December of 2008 to decrease, which would benefit the shareholders of the Company. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS In addition to the historical information presented here, this report includes statements that may constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although Primark believes the expectations contained in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove correct. This information may involve risks and uncertainties that could cause the actual results of Primark to differ materially from the forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to: (i) the risks associated with operating on a global basis, including fluctuations in the value of foreign currencies relative to the US dollar, and the ability to successfully hedge such risks; (ii) the extent to which Primark seeks growth through acquisitions, and the ability to identify and consummate acquisitions on satisfactory terms; (iii) uncertainty regarding the development and market acceptance of new products; (iv) loss of market share through competition; and (v) deterioration in economic conditions, particularly in the financial services industry. 28 SELECTED FINANCIAL INFORMATION - FIVE YEAR DATA - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries
Dollars In Thousands Except Per Share Amounts 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL AND OPERATING DATA (1) Operating revenues $ 494,619 $434,540 $ 397,875 $277,063 $184,779 EBITDA (3) 106,274 25,861 82,439 61,121 46,795 Operating income (loss) 49,382 (22,954) 32,234 27,839 20,886 Income (loss) from continuing operations 16,891 (33,370) 4,854 12,516 5,381 Net income (2) 16,672 156,722 19,715 36,749 16,882 Basic earnings per share: From continuing operations 0.82 (1.37) 0.18 0.49 0.21 Total earnings per share (2) 0.81 6.45 0.75 1.48 0.88 Diluted earnings per share: From continuing operations 0.80 (1.37) 0.17 0.46 0.19 Total earnings per share (2) 0.79 6.45 0.71 1.38 0.82 Total assets 939,100 850,468 1,043,809 920,801 718,184 Total debt, including capital lease obligations 292,094 158,879 370,163 248,340 239,476 Redeemable preferred stock -- -- -- -- 16,874 Common shareholders' equity (4) 417,925 440,178 470,971 475,830 354,062 Capital expenditures 35,136 22,812 23,965 19,412 9,803 Software capitalized 31,714 17,587 19,971 16,916 5,704 Cash flows from operations $ 43,127 $ 72,702 $ 58,024 $ 65,707 $ 49,305 Debt to total capitalization 41.1% 26.5% 44.0% 34.3% 39.2% Total employees 3,458 2,933 2,328 2,025 1,588 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK DATA (4) Actual shares outstanding 19,990 21,251 26,800 27,068 23,317 Weighted average common shares outstanding - basic 20,472 24,302 26,348 24,813 19,150 Weighted average common shares outstanding - diluted 20,991 24,302 27,944 26,571 20,681 Market price per share on NYSE Composite: High $28 3/4 $43 5/8 $41 5/8 $40 $30 1/4 Low $19 $22 9/16 $18 1/8 $21 3/8 $12 3/4 Close $27 13/16 $27 1/8 $40 11/16 $24 3/4 $30 - ------------------------------------------------------------------------------------------------------------------------------
(1) The financial data for the Company has been restated to exclude discontinued operations and to include all acquired companies from their respective dates of acquisition. (2) Includes the following: a) an after tax charge of $219,000 due to a change in accounting principle in 1999. b) restructuring charges of 54.3 million and 6.2 million in 1998 and 1997, respectively. c) results of discontinued operations, along with a $187.3 million and $8.4 million after tax gain on the sale of discontinued operations in 1998 and 1996, respectively; d) an after tax extraordinary loss for the early extinguishment of debt of $1.5 million, $2.0 million and $534 thousand for 1998, 1997 and 1996, respectively; e) dividends on the Company's outstanding preferred stock through its conversion to common in 1996. (3) EBITDA represents operating income plus depreciation and amortization expense and should not be considered in isolation from, or as a substitute for, operating income, net income or cash flows from operating activities computed in accordance with generally accepted accounting principles. While not computed in accordance with generally accepted accounting principles, EBITDA is a widely used measure of a company's performance in its industry because it assists in comparing performance on a consistent basis without regard to depreciation and amortization, which may vary significantly depending on accounting methods particularly where acquisitions are involved. Management of the Company believes that EBITDA is a meaningful measure given the widespread industry acceptance as a basis for financial analysis. Further, certain of the Company's debt agreements include financial covenants that are based upon EBITDA, as defined above. Due to the variety of methods that may be used by companies and analysts to calculate EBITDA, the EBITDA measures presented herein may not be comparable to that presented by other companies. (4) During 1999, 1998 and 1997, the Company retired 1,582,046; 6,108,500 and 2,071,483 shares of its common stock, respectively. In May 1996, 1,164,276 shares of common stock were issued upon conversion of the redeemable preferred stock. In December 1995, the Company issued 4,356,200 shares of common stock. 29 SUPPLEMENTARY FINANCIAL INFORMATION - QUARTERLY DATA - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries
In Thousands Except Per Share Amounts First Second Third Fourth - ---------------------------------------------------------------------------------------------------------- 1999(5) - ---------------------------------------------------------------------------------------------------------- Operating revenues $117,344 $122,170 $ 122,675 $132,430 - ---------------------------------------------------------------------------------------------------------- Operating income 9,460 12,284 13,371 14,267 - ---------------------------------------------------------------------------------------------------------- Income before extraordinary item and change in accounting principle 2,688 4,191 4,772 5,240 - ---------------------------------------------------------------------------------------------------------- Net income(1) 2,469 4,191 4,772 5,240 - ---------------------------------- ---------------------------------------------------------------------- Earnings per share before extraordinary item and change in accounting principle: Basic 0.13 0.20 0.23 0.26 Diluted 0.13 0.20 0.23 0.25 - ---------------------------------------------------------------------------------------------------------- Market price per share: High 26 1/2 28 1/8 28 3/4 28 3/4 Low $19 1/8 $19 $23 $24 1/4 - ---------------------------------------------------------------------------------------------------------- 1998(5) - ---------------------------------------------------------------------------------------------------------- Operating revenues $104,411 $108,874 $ 108,534 $112,721 - ---------------------------------------------------------------------------------------------------------- Operating income(2) 11,317 (57,170) 12,091 10,808 - ---------------------------------------------------------------------------------------------------------- Income before extraordinary item and change in accounting principle(2)(4) 8,520 126,462 21,935 4,927 - ---------------------------------------------------------------------------------------------------------- Net income 8,520 121,341 21,935 4,927 - ---------------------------------------------------------------------------------------------------------- Earnings per share before extraordinary item and change in accounting principle: Basic(2)(4) 0.32 4.68 0.99 0.23 Diluted(2)(4) 0.30 4.68 0.96 0.22 - ---------------------------------------------------------------------------------------------------------- Market price per share: High 43 5/8 43 5/8 31 11/16 30 1/8 Low $38 $31 3/16 $23 5/8 $23 9/16 - ----------------------------------------------------------------------------------------------------------
(1) Includes an after tax charge of $219,000 due to a change in accounting principle. (2) Includes for the second and fourth quarter restructuring charges of $68.7 million and $(707,000), respectively. (3) Includes for the second quarter an after tax extraordinary loss of $5.1 million resulting from the extinguishment of debt. (4) Includes in the second and third quarter a $171.1 million and $16.2 million gain, respectively, on the sale of discontinued operations. (5) The quarterly data includes the operations of acquired businesses from their respective dates of acquisition. 30 SHAREHOLDER INFORMATION - -------------------------------------------------------------------------------- Primark Corporation And subsidiaries 2000 ANNUAL MEETING The Annual Meeting of Shareholders will be held at the Wyndham Garden Hotel, 420 Totten Pond Road, Waltham, Massachusetts on Friday, May 26, 2000 at 11:00 a.m. Information with respect to this meeting, the proxy statement and proxy will be mailed on or about April 9, 2000. STOCK LISTED New York and Pacific Stock Exchanges Trading Symbol: PMK CORPORATE INFORMATION/INVESTOR INQUIRIES The following information is available without charge to shareholders and other interested parties: - - Annual Report - - Annual Report on Form 10-K filed with the Securities and Exchange Commission [exhibit filed as part of this report are available upon payment of a specified fee] - - Quarterly Reports to Shareholders - - Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission To request these publications or if you have any questions about Primark, you are invited to contact: PRIMARK INVESTOR RELATIONS 1000 Winter Street, Suite 4300N Waltham, MA 02451-1241 (781) 466-6611 (800) 755-1032 E-mail: investor-relations@primark.com SHAREHOLDERS SERVICES All inquiries regarding the following items should be directed to the Stock Transfer Agent. - - Change of address - - Lost stock certificate - - Duplicate mailings - - Transfer of stock to another person - - Other administrative concerns STOCK TRANSFER AGENT AND REGISTRAR BankBoston c/o EquiServe P.O. Box 8040 Boston, MA 02266-8040 (781) 575-3120 (800) 730-6001 www.equiserve.com INDEPENDENT ACCOUNTANTS Deloitte & Touche LLP 200 Berkeley Street Boston ,MA 02116-5022 (617) 437-2000 THE ANNUAL REPORT This report is submitted for the general information of the shareholders of Primark corporation and is not intended to be used in connection with any sale or purchase of securities. EX-21.1 5 SUBSIDIARIES OF PRIMARK CORPORATION 1 Exhibit 21.1 SUBSIDIARIES OF PRIMARK CORPORATION PRIMARK CORPORATION OWNS ALL OF THE ISSUED AND OUTSTANDING COMMON STOCK OF PRIMARK HOLDING CORPORATION, AND PRIMARK FINANCIAL TECHNOLOGIES, INC., WHICH ARE DELWARE CORPORATIONS. PRIMARK CORPORATION ALSO HOLDS A 20% INTEREST IN PRIMARK DECISION ECONOMICS, INC., A MASSACHUSETTS CORPORATION. Primark Holding Corporation owns all of the issued and outstanding common stock of: * A-T Financial Information, Inc. * Baseline Financial Services, Inc.; a New York Corporation * Primark Information Service (UK) Limited (UK) owns all the common stock of: - Datastream Group (UK) owns Datastream (UK) - Datastream Pension Trustees Limited (UK) - Primark Investment Management Services Limited (UK) - Datastream International Limited (UK) owns all the common stock of Primark Netherlands B.V. (the Netherlands) Primark Philippines, Inc. and has a branch in Malaysia - I/B/E/S (UK) Limited - Disclosure Limited (UK) - ICV Limited (U.K) - marketeye.com limited - Primark Limited * Primark Switzerland Limited (Switzerland) * Primark GmbH (Germany) * Primark Hong Kong Limited * Datastream International, Inc. (Delaware) * Primark Japan K.K. * Primark Australia Pty. Limited (Australia) * Datastream International (D.C.), Inc. (Delaware) * Primark Canada Limited * Primark Italy S.r.L. (Italy) * Datastream International (Sweden) Aktiebolag (Sweden) * Datastream International (South Africa) Proprietary Limited (South Africa) * Primark Korea Limited (Korea) * Primark (Thailand) Limited (Thailand) * Primark Singapore Pte., Ltd. (Singapore) * Vestek Systems, Inc., a California corporation * Disclosure Incorporated (Delaware) owns all the issued and outstanding stock of: - ScoreLab, Inc. - Disclosure International, Inc. (Delaware) owns: - Worldscope/Disclosure LLC owns all of the issued and outstanding stock of Primark India Private Limited - Worldscope/ Disclosure International Partners (Ireland) - Disclosure Incorporated also directly owns a 20% interest in Worldscope/Disclosure LLC. 2 - Worldscope/Disclosure LLC. * I/B/E/S International, Inc. (Delaware) owns all the issued and outstanding stock of: - I/B/E/S, Inc. (Delaware) * Primark France SA (France) owns all the issued and outstanding stock of Groupe DAFSA S.A. and a 4.4% interest in Globe On-Line. Groupe DAFSA owns DAFSA Edition SNC and a 33% interest in Panorama.2 * WEFA, Inc. (Delaware) owns all of the issued and outstanding common stock of Primark South Africa (Pty.) Ltd. (S. Africa) * Primark Belgium SA (Belgium) * WEFA (Holdings) Limited, (England), owns WEFA Limited (England), in turn * WEFA Inc. also owns a 45% interest in Ciemex, Inc. (Delaware), owns Ciemex WEFA, Inc. (Delaware) * Primark Data Company (Delaware) * Primark Information Service Spain S.A. (Spain) * Primark Luxembourg SA (Luxembourg) 99% interest held by PHC; remaining 1% held by Primark Corporation * Primark Poland SP 20.0 * Primark do Brazil S/C LTDA (Brazil) * Yankee Group Research, Inc. (MA) EX-23.1 6 INDEPENDENT AUDITORS' CONSENT 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 2-77751, 2-92579, 33-6009, 33-23876, 33-49132, 33-49134 (amended by 333-83909), 333-17567, 333-17563, 333-17561, 333-24677, 333-50923, 333-50925 on Form S-8, in Registration Statement No. 333-71183 on Form S-4 and in Amendment No. 3 to Registration Statement No. 333-43299 on Form S-3 of Primark Corporation and subsidiaries of our report dated February 11, 2000, incorporated by reference in this Annual Report on Form 10-K of Primark Corporation and subsidiaries for the year ended December 31, 1999. /s/ Deloitte & Touche LLP Boston, Massachusetts February 11, 2000 EX-27.1 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRIMARK CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 INCLUDED IN THE FORM 10-K AS EXHIBIT 13.1 AND THE 1999 ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1 18,435 0 120,108 5,157 0 175,931 117,937 20,843 939,100 345,549 150,000 0 0 400 417,525 939,100 0 494,619 0 200,158 245,079 0 19,091 29,778 12,887 16,891 0 0 (219) 0 0.81 0.79 Net of interest income.
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