-----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, Mql2ZgKGyQL5yGD4X/bT9U+OhLqaezlb4zTpF6QqxgEEv72ZlLjgZQ9oxbsk1BYf hOZUrHPaqM4wyWIudJGu4A== 0000950135-96-001579.txt : 19960401 0000950135-96-001579.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950135-96-001579 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMARK CORP CENTRAL INDEX KEY: 0000356064 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 382383282 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08260 FILM NUMBER: 96541997 BUSINESS ADDRESS: STREET 1: 1000 WINTER STREET STE 4300N CITY: WALTHAM STATE: MA ZIP: 02154 BUSINESS PHONE: 6174666611 MAIL ADDRESS: STREET 1: 1000 WINTER ST STREET 2: STE 4300 NORTH CITY: WALTHAM STATE: MA ZIP: 02154 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 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 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 02154 WALTHAM, MA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 466-6611 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 Stock Exchange
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, 1996 was $928,641,287, based on the closing price on that day (New York Stock Exchange -- Composite Transactions). Number of Shares outstanding of the registrant's common stock without par value on February 29, 1996 was 23,509,906. DOCUMENTS INCORPORATED BY REFERENCE Portions of Primark's 1995 Annual Report are incorporated by reference in Part I, Item 1, and Part II, Items 5, 6, 7 and 8. Portions of Primark's 1996 Proxy Statement for its 1996 Annual Meeting of Shareholders, which will be filed within 120 days of December 31, 1995, 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................................................................. 11 Item 3. Legal Proceedings.......................................................... 12 Item 4. Submission of Matters to a Vote of Security Holders........................ 13 Executive Officers of the Registrant....................................... 13 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...... 14 Item 6. Selected Financial Data.................................................... 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of 14 Operations............................................................... Item 8. Financial Statements and Supplementary Data................................ 14 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial 14 Disclosure............................................................... PART III Item 10. Directors and Executive Officers of the Registrant......................... 14 Item 11. Executive Compensation..................................................... 14 Item 12. Security Ownership of Certain Beneficial Owners and Management............. 14 Item 13. Certain Relationships and Related Transactions............................. 14 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.......... 15 Signatures................................................................. 16
ii 3 PART I ITEM 1. BUSINESS GENERAL Primark Corporation (the "Company" or "Primark") is a Michigan corporation organized in 1981. The Company is engaged principally in the information services industry serving two primary markets, Financial Information and Applied Information Technology. The Company's Financial Information businesses consist of the operations of Datastream International Limited and affiliates ("Datastream"), Disclosure Incorporated ("Disclosure"), I/B/E/S International, Inc. ("I/B/E/S"), Vestek Systems, Inc. ("Vestek") and Worldscope/Disclosure Partners ("Worldscope"). Primark develops and markets "value-added" database products that cover established and emerging markets worldwide, as well as proprietary analytical software for the analysis and presentation of financial and economic information. Customers include investment managers, investment bankers, accounting and legal professionals and information and reference service providers. The Applied Information Technology activities, conducted through TASC, provide a broad spectrum of technology-based information services and products primarily to U.S. government agencies principally involved in national security and intelligence related activities, and increasingly to commercial customers such as users of real-time weather information. The Company is also engaged in transportation services and financial services through its wholly owned subsidiaries, Triad International Maintenance Corporation ("TIMCO") and Primark Storage Leasing Corporation ("PSLC"). At December 31, 1995, the Company and its subsidiaries employed 5,131 persons. Commencing with Primark's acquisition of TASC in 1991, the Company embarked on a strategy of combining information technology expertise with proprietary data content to serve the increasing information requirements of its customers with value-added products. The Company focused its strategy on the Financial Information market through its acquisitions of Datastream in 1992 and Vestek in 1994, while divesting certain of its non-core operations. Primark significantly expanded its domestic presence in Financial Information content services through the June 1995 acquisition of Disclosure and its subsidiary I/B/E/S. Information regarding the revenues, operating results and identifiable assets of the Company and its subsidiaries, both by industry and geographical region, is incorporated by reference herein from Note 12 to the Consolidated Financial Statements entitled "Segment and Geographic Information" in the Company's 1995 Annual Report. Acquisitions On June 29, 1995, the Company acquired the entire equity interest of Disclosure and certain of its affiliates, including I/B/E/S and a 50% ownership of Worldscope. Disclosure is a provider of "as reported" and abstracted financial information, primarily derived from Securities and Exchange Commission filings and supplemented with information from companies, stock exchanges and other sources, both in the United States and worldwide. I/B/E/S is a source of earnings estimates for investors, financial institutions and portfolio managers on a global basis. Total revenues reported by Disclosure and I/B/E/S were approximately $85,972,000 for the year ended December 31, 1994. Information regarding the Company's acquisition of Disclosure is incorporated by reference herein from Note 2 to the Consolidated Financial Statements entitled "Acquisitions" in the 1995 Annual Report. INFORMATION SERVICES SEGMENT Primark's information services industry serves two primary markets, Financial Information and Applied Information Technology. The operations of Datastream, Disclosure, I/B/E/S and Vestek provide the financial information markets with economic and financial information and analysis of the information through proprietary software. The applied information technology activities provide a myriad of technology-based information services and products, primarily to U.S. Government national security and intelligence agencies, and increasingly to commercial customers. 1 4 FINANCIAL INFORMATION MARKET Datastream Founded in 1964 and acquired by Primark in 1992, Datastream provides on-line historical economic and financial information, along with proprietary analytical software for accessing and manipulating such information. Datastream is also a leading provider of computer-based investment valuation and fund services in the United Kingdom. Datastream's customers include approximately 1,600 financial organizations in 45 countries, including investment bankers, brokers, pension and money fund managers and insurance companies that use financial and economic information for investment research and analysis. Other users include publishers of financial journals and daily newspapers, business schools and universities. The core of Datastream's operations is its centralized data system which maintains a series of linked databases of extensive international economic and financial data collected from wire services, official publications of national and international agencies, stock, options and futures exchanges, other information vendors, brokers, dealers, banks and issuers. Customers have on-line 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 all major markets, and to produce graphics, statistics, time series analysis and perform other analytical functions. Datastream's customers typically subscribe through annual contracts. These contracts are automatically renewed, unless notice of cancellation is given three months before the annual renewal date. None of Datastream's customers contributes more than 3% of Datastream's total revenues. Accordingly, the Company does not believe that the loss of any one Datastream customer would have a material adverse effect on Datastream's business. Datastream's products and services fall into two principal categories - -- investment research and fund management services. Investment research services accounted for approximately 85%, 82% and 80% of Datastream's total revenues for the fiscal years ended November 30, 1995, 1994 and 1993, respectively. 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 the customers' access to data from any of Datastream's databases, and to manipulate this data in a variety of pre-programmed and pre-formatted ways such as graphs, regressions, and tables. Fund management services accounted for approximately 15%, 18% and 20% of Datastream's total revenues for the fiscal years ended November 30, 1995, 1994 and 1993, respectively. Fund management services provide investment accounting, portfolio valuation and performance measurement activities predominantly to fund managers, unit trusts, mutual funds and portfolio managers located primarily in the U.K. Other customers include U.K. clearing banks, insurance companies and international financial institutions. A critical component of Datastream's business is the data itself. Datastream's principal supply requirements are for raw financial data which are acquired from numerous data suppliers worldwide and developed internally. Once acquired, the data are edited and 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 42,000 stocks from 58 countries, including all major markets and a number of 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 88,000 corporate and government bonds from 42 countries, all Eurobonds and related indices. Data relating to futures and options includes current prices, previously 2 5 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 both I/B/E/S and Worldscope as an integral part of its investment research services. Consequently, it has helped these two companies gain additional customers, as well as customers new to Datastream. Datastream has also installed the full Disclosure index on its on-line system, and offers index searches and electronic ordering of hard copy documents to Datastream users. Vestek is also developing investment management software products that will be marketed and supported by Datastream's European sales and service personnel. Disclosure Founded in 1968, Disclosure was acquired by the Company on June 29, 1995. Disclosure is a leading provider of "as reported" and abstracted financial information in the U.S. market, covering over 16,000 U.S. companies and 13,000 foreign companies, derived from a variety of government and third-party sources. Disclosure's document and database services are provided on a subscription and demand basis through electronic media such as on-line services and compact laser disks, as well as through printed products. Disclosure's customer base includes the majority of U.S. investment banks, law and accounting firms, together with other institutions and individuals performing financial research. The United States market accounted for 94% of Disclosure's 1995 revenues. Disclosure's offering of financial information includes a wide spectrum of Securities and Exchange Commission ("SEC") documents, such as Forms 10-K and 10-Q, proxy statements, registration statements and material event reports, as well as non-SEC documents such as U.S. and foreign annual reports. The information included in Disclosure's products is obtained through contractual relationships with the SEC and major stock exchanges, as well as through commercial acquisition of the information. Once acquired, Disclosure indexes, tags and formats the information to allow for ease in navigation, searches and analysis. This information is then delivered to clients through a variety of products including Laser D (an image-based CD-ROM product), Compact D (a searchable electronic database on CD-ROM), on-line distribution channels and printed products. Subscription services accounted for 51% and 50% of Disclosure's revenues for the fiscal years ended December 31, 1995 and 1994, respectively. Disclosure has experienced renewal rates for its subscription services in excess of 90%. The remainder of Disclosure's revenues are predominantly derived from sales at Disclosure's Demand Centers. No single customer accounts for more than 5% of Disclosure's revenues. Disclosure's products fall into two major categories: imaged based services and database services. Disclosure's image-based services provide financial documents via paper, microfiche, on-line and CD-ROM. The delivery of image-based information is handled through Disclosure's Demand Centers, as well as through the Laser D and Global Access applications. The Demand Centers are staffed by research specialists who assist customers in locating requested information and provide alert services for customers who want early identification of specified documents. In 1995, Disclosure delivered over one million documents through its Demand Centers' network. Laser D is a multi-disc CD-ROM document database that provides a desktop library of information to high volume document users who require instant access to documents filed with the SEC, banking agencies and U.S. and foreign stock exchanges. Global Access offers on-line delivery of Disclosure's unique proprietary electronic index of public company documents and access to the SEC's EDGAR filings. Global Access provides desktop searching, display and ordering from Disclosure's information repository of over 29,000 companies. Approximately 81% and 83% of Disclosure's total revenues were derived from document services for the twelve months ended December 31, 1995 and 1994, respectively. Disclosure's database segment provides products which can be machine read and manipulated by the end users. The products are delivered on CD-ROM disks and through a growing list of third-party on-line vendors. The Company's EdgarPlus product contains all EDGAR filings from 1993 to present and full text filings back to 1987 through Disclosure's SEC On-line product, all of which have been enhanced with value-added navigational and formatting tags. The SEC On-line product had been creating EDGAR type databases prior to 3 6 the EDGAR project's implementation by the SEC. The Disclosure/SEC Database is an abstracted database containing a collection of company profiles and financial statements on over 11,000 U.S. public companies, indexed and organized for searching and screening. The Company also delivers other products such as the New Issues Database, which is a collection of abstracted information on security registrations and initial public offerings and Compact D/Canada, which provides information on 10,000 Canadian companies. Approximately 19% and 17% of Disclosure's total revenues were derived from database services for the years ended December 31, 1995 and 1994, respectively. I/B/E/S I/B/E/S is a leading source of global earnings estimates for investors, financial institutions and portfolio managers worldwide. I/B/E/S collects and processes earnings per share estimates provided by over 6,700 individual securities analysts representing approximately 770 firms on over 16,000 companies globally. The estimates and related data are delivered through third-party distributors, I/B/E/S Express (a proprietary software delivery system) and in printed publications. Approximately 78% of I/B/E/S's 1995 revenues were derived through annual subscription contracts and 22% through soft dollar arrangements. Many I/B/E/S products permit the customer to perform analytical functions and are enhanced by reports and graphics. I/B/E/S, founded in 1971, serves over 1,000 customers worldwide. I/B/E/S customers are represented by financial institutions and portfolio managers globally, 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. No I/B/E/S customer contributes more than 2% of I/B/E/S's total revenues. Vestek Acquired by Primark in June of 1994, 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 currently serves over 200 clients in five countries. Vestek clients include major banks, plan sponsors, consultants, insurers, and investment managers. The majority of Vestek's revenues are derived from on-line services. None of Vestek's customers contribute more than 6% of Vestek's total revenues. Worldscope Worldscope contains a collection of descriptive profiles and detailed financial statements on over 11,900 companies in 45 countries. The Worldscope database is standardized, 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 on-line platforms. Worldscope is a partnership owned 50% by the Company and 50% by Wright Investors' Service. Trademarks Primark's Financial Information companies hold numerous trademarks worldwide that are subject to continuous renewal ranging up to 20 years. These trademarks are significant to the Company's business, and are registered in all of the Company's major markets to ensure recognition among its many global trading customers. Marketing The products and services of Primark's Financial Information companies are marketed worldwide. Datastream is located in London, England and has sales and support offices located in Germany, France, Italy, Switzerland, the Netherlands, Belgium, Luxembourg, Sweden, Japan, Hong Kong, Singapore, Australia, Korea, Thailand, Canada and the United States. 4 7 Disclosure, headquartered in Bethesda, Maryland, markets and distributes its products, predominantly in the United States. In addition to employing a domestic and international sales force, Disclosure extends its sales and marketing reach with Demand Centers strategically located in the major financial centers including ten offices in major U.S. cities and several international locations including London, Frankfurt, Madrid, Paris, Milan, Hong Kong, Mexico City and Tokyo. I/B/E/S, headquartered in New York City with offices in London and Tokyo, delivers its products directly to customers via state-of-the-art electronic delivery media. I/B/E/S Express, the fastest growing delivery mechanism, is a PC-based proprietary software, database management and communications package. I/B/E/S also offers its products through a network of more than 30 electronic third-party distributors, including FactSet, OneSource, Datastream, FAME, Bloomberg, Reuters, Telerate and CompuServe. 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. In addition, Datastream is marketing and selling I/B/E/S products in Asia and Disclosure products in both Asia and Europe. No single customer of the Financial Information businesses accounts for more than 5% of the Company's consolidated revenues. Competition The global information industry is highly competitive. The advancement of electronic delivery via on-line vendors and the Internet has further impacted the competitive environment in the financial information market. There are many large and successful companies in the financial information services industry that supply financial data competitive to products and services provided by Primark's Financial 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. Primark distinguishes its products through its broad international coverage, wide range of databases, high accuracy of the data, proprietary software applications, reputation, experience and quality of customer support provided. I/B/E/S competes on quality, depth and breadth of data, price, accuracy and timeliness of delivery. I/B/E/S's major direct competitor is the First Call unit of the Thomson Corporation. While First Call provides certain services not currently offered by I/B/E/S, I/B/E/S believes its products are more globally comprehensive and provide a unique historical database for analysis and backtesting. Overall, Primark's ability to remain competitive in the financial information markets will depend largely upon its ability to maintain and develop new products and access new markets in a cost efficient manner, including integration of all its financial information products and services. There can be no assurance that Primark will continue to maintain its market share in the future. Foreign Operating Risks Substantially all of Datastream's revenues are derived from various foreign markets. Approximately 47% of Datastream's 1995 revenues were derived from the U.K. Consequently, the Company is exposed to certain risks associated with an international business, particularly with respect to foreign currency exchange rate movements. Datastream's business is also subject to the customary risks associated with international transactions, including political risks, local laws and taxes, the potential imposition of trade or currency exchange restrictions, tariff increases and difficulties or delays in collecting accounts receivable. Weak foreign economies and/or a weakening of foreign currencies in certain countries against the U.S. dollar would adversely affect Datastream's overall future operating results and cash flows. However, operating income, under this condition, has been and will continue to be somewhat insulated due to high levels of British pound-based operating expenses which also fluctuate against the U.S. dollar. The Company has been and will 5 8 continue hedging the currency risk associated with Datastream's foreign operations as may be needed in the future. APPLIED INFORMATION TECHNOLOGY TASC TASC was founded in 1966 to provide solutions to complex analytical and technological problems. Concentrating on the application of leading-edge information technology, TASC now provides a broad spectrum of products, services and systems primarily to U.S. government organizations responsible for intelligence and national defense activities. Growing demand for information technology support has increased TASC's government and commercial customer base, both in the United States and internationally. Primark acquired TASC in August 1991 as the information technology cornerstone of its planned information services business. Primark recognized that not only would the U.S. government have greater needs for information technology, but also that TASC was capable of expanding its customer base to many other organizations. Technology developed by TASC under U.S. government contracts could be readily applied to create new products and services and used to assist commercial organizations in improving internal performance as well as service their own customers. For example, using internally developed imaging, database, communications and workstation technology, TASC has leveraged its weather information subsidiary, WSI, into a leading market position. As Primark has acquired data content companies such as Datastream, Disclosure, I/B/E/S and Vestek, it has used TASC to assist these acquisitions in a variety of ways. TASC has participated in the development of technology platforms used to deliver data and software to Financial Information customers and, in one case, undertook turn-key development of a new product platform, Easystream. TASC has also played a vital role in the planning and development of the internal computer systems architecture and worldwide communications networks used by the Financial Information businesses. Finally, TASC has assisted the customers of the Financial Information companies with their own internal information technology requirements, often involving the integration of data from Primark with internal databases and other third-party data. To accomplish these various objectives, personnel from TASC consult on a reimbursable basis for periods of up to one year or TASC enters into internal contracts with other companies within Primark. TASC maintains its leadership in information technology in two principal ways. First, TASC's core business involves the design and development of advanced systems that encompass various information technologies, including database development and access, software engineering, information system architecture design, simulation and modeling, signal processing and visual computing. While this work keeps TASC at the leading edge, TASC also receives research contracts sponsored by U.S. government agencies to develop these technologies further. In addition, TASC conducts its own internal research and development programs. Total TASC research spending has historically exceeded $30 million annually. TASC has built the information technology research area as an independent revenue source and uses the results of such research to continue to support other business areas of TASC and the Company. Second, TASC recruits top talent with advanced degrees from leading universities, research laboratories and businesses, retaining these individuals by providing challenging work in a stimulating atmosphere. Of TASC's 2,459 employees as of December 31, 1995, approximately 85% were professional or technical personnel, the majority of which hold advanced degrees in engineering, computer science, mathematics, earth and environmental sciences, business or economics. TASC maintains 27 offices in the United States and abroad to provide its customers with ready access to its personnel. The recognized quality and professionalism of TASC's staff in providing unique information technology solutions to both governmental and commercial customers have contributed to TASC's record of 29 years of uninterrupted growth in revenues. For the years ended December 31, 1995, 1994 and 1993, respectively, approximately 49%, 57% and 60% of Primark's consolidated revenues were derived from contracts that TASC holds with U.S. government agencies and from subcontracts with U.S. government prime contractors. 6 9 Government Business TASC's strategy with its U.S. government customers is to provide high value through the design, development and implementation of major systems that will enable these customers to perform their missions in a superior manner and at lower cost. Through the experience and qualifications of its personnel and its history of performing top quality work, TASC is able to command higher prices and margins than many competitors. However, TASC believes its solutions provide the lowest overall cost to customers since systems provided through TASC are typically completed within schedule and budget, and most importantly, combine state-of-the-art capabilities with reliable performance. In many cases, TASC assists its Federal government customers with the determination of future requirements, assessments of technical feasibility, cost estimates and systems design. Work of this nature is often termed systems engineering, and involves mathematical modeling of complex systems development, risk assessment, cost-performance tradeoffs, engineering, management information systems development and decision support services. Once a system has been designed and approved for procurement, TASC frequently supports its customers in the development, testing and deployment of such systems. Work of this nature is called program management support. TASC will participate in structuring requests for proposals and in evaluating responses. Once contractors have been selected, TASC supports its government customers in overseeing the performance of these contractors. In addition to continuing much of the systems engineering work described in the preceding paragraph, TASC will perform configuration control, testing and independent validation and verification, along with maintaining the management systems used to monitor cost, schedule and performance. TASC has developed its own tools, models, software and methods to perform both systems engineering and program management support. In performing systems engineering and program management support work, in many ways TASC acts as an "extension" of the government organization management team, supporting them in their responsibilities to manage multiple contractors to create complex operational systems. TASC has tended to align itself with a wide variety of long-term classified government programs of significant national importance. TASC helps government managers in their oversight of these programs and maintains technological superiority by moving systems from one generation to the next. Systems engineering and program management support comprise the majority of TASC's work for the Federal government, but TASC also builds and implements turn-key systems itself. This work, called specialized information system integration, is usually done by integrating commercial hardware and software programs with TASC-developed custom software. Due to its technology and management expertise, TASC is also called upon to provide analytic studies and evaluations of various technical, organizational and policy issues for U.S. government customers in areas of defense, intelligence, arms control, economic assessment, procurement and manufacturing. For use in manufacturing applications, TASC has developed unique analytical tools and databases to measure the cost and effectiveness of government incentive strategies and defense system warranties. For example, TASC authored the recent "Perry" study (named after Secretary of Defense Perry) on the cost of U.S. government regulations in the procurement process. TASC has successfully grown its U.S. government business revenues in the face of national security spending cutbacks through the company's emphasis on leading edge technology and its application to critical missions. As the U.S. government has shifted to using information technology to maintain an adequate defense posture with fewer resources, TASC has increased its emphasis on surveillance, command/ control/communications, simulation, "smart weapons" and the integration of tactical and strategic intelligence. The following are certain important characteristics of TASC's business with the Federal government. Concentration. Approximately 87%, 88% and 89% of TASC's revenues for the years ended December 31, 1995, 1994 and 1993, respectively, were derived from contracts held by TASC with U.S. government 7 10 agencies and from subcontractors with U.S. government prime contractors. TASC's revenues from its three largest contracts with the U.S. government comprised approximately 23%, 26%, and 32% of TASC's total revenue for the years ended December 31, 1995, 1994 and 1993, respectively. No other single customer accounted for 10% or more of TASC's or Primark's consolidated revenues for these years. Government Security Clearances. TASC is involved in a number of classified programs and its ability to maintain its current base of business and to grow in the future is based in part upon its ability to provide employees and facilities which meet rigorous U.S. government security requirements. There can be no assurance that the Company will be able to meet these requirements in the future. Pricing. TASC's U.S. government business is performed under cost reimbursement, fixed price and fixed-rate time and materials ("T&M") contracts. Cost reimbursement contracts awarded to TASC include cost plus fixed fee and cost plus award fee contracts. Fees may either be fixed by the contract (cost plus fixed fee), or variable based on actual performance within specified limits for such factors as cost, quality and delivery schedule, and the customer's subjective evaluation of TASC's work (cost plus award fee). TASC is subject to regular audit with respect to costs incurred and charged to the government. Such audits may result in the disallowance of amounts charged to or paid by the government. There can be no assurance that such disallowances will not be claimed or imposed against the Company, and if imposed, will not have a material impact. For the year ended December 31, 1995, approximately 82% of TASC's revenue from U.S. government contracts was generated by cost reimbursement contracts; approximately $321 million and $215 million of TASC's backlog at December 31, 1995 and 1994, respectively, were associated with cost reimbursement contracts. See "Backlog." Under fixed price contracts, TASC agrees to perform certain work for a fixed price and, accordingly, realizes the benefit or detriment resulting from decreased or increased costs of performing the contract. Under a fixed-rate T&M contract, TASC has the responsibility to deliver professional services at a predetermined hourly rate; thus, the profitability of such contracts depends upon TASC's ability to deliver the specified services at costs below the rates received from the government. For the year ended December 31, 1995, approximately 18% of TASC's revenue from U.S. government contracts was fixed price or fixed rate T&M contracts. Approximately $131 million and $73 million of TASC's backlog at December 31, 1995 and 1994, respectively, were associated with fixed price or fixed rate T&M contracts. See "Backlog." Annual Funding. The U.S. government programs in which TASC participates may extend for several years, but are normally contracted and funded on an annual basis. Government contracts generally are conditioned upon the continuing availability of Congressional appropriations. Congress usually appropriates funds on a fiscal year basis, even though contract performance may take several years. Consequently, at the outset of a major program, the contract is usually partially funded and additional monies are normally committed to the contract by the procuring agency only if and as appropriations are made by Congress for future fiscal years. Limitations imposed on spending by U.S. government agencies, which might result from efforts to reduce the Federal deficit or for other reasons, may limit the continued funding of TASC's existing contracts with the U.S. government and may limit the ability of TASC to obtain additional contracts. All contracts made with the U.S. government may be terminated by the U.S. government at any time, with or without cause. In addition, TASC's operations are subject to the usual risks inherent in contracting with the U.S. government on national security related programs such as national and global political, social and economic events that may affect U.S. national security programs. No assurance can be given that the current level of government spending for national security programs will continue, that the U.S. government will continue its commitment to programs in which TASC's products and services are applicable or that TASC will not be adversely affected by any decline in that spending or commitment by the U.S. government. TASC has rarely had a contract canceled and has been working on most of its programs for many years; in the case of some programs, TASC's involvement has encompassed the entire 29-year history of the company. However, one notable exception was TASC's contract with the Ballistic Missile Defense Organization (the "BMDO"), which was formerly called the Strategic Defense Initiative. TASC was the second largest systems engineering and technical assistance contractor for this program, and held a contract to support 8 11 the program for six and one-half years, from April 1988 to December 1994. Revenues from this contract peaked in 1992, reaching $55.6 million. Due to changing government priorities, funding was reduced to $40.6 million in 1993, $16.5 million in 1994 and $1.5 million in 1995. The contract was recompeted for 1995 and the number of prime contractors reduced from three to one. Although TASC was not selected for the contract, it continues to perform a modest amount of work for BMDO. Despite these funding cuts, TASC was able to grow its overall revenues in 1993, 1994 and 1995 by 6.0%, 5.6% and 10.9%, respectively. During these same periods, TASC's non-BMDO revenues grew 14.3%, 16.0% and 16.6%, respectively. Backlog. TASC's backlog (anticipated revenues from the uncompleted portions of existing contracts, including options to continue specific contracts beyond the current funding period) at December 31, 1995 and 1994 was approximately $453 million and $288 million, respectively. TASC's total backlog includes $9.8 million and $8.3 million of backlog related to commercial business activity for the years ended 1995 and 1994, respectively. The increase in 1995 is principally due to a very high "win" rate of competitively bid contracts, together with a sustained level of sole-source negotiated awards. Approximately $181 million of TASC's 1994 backlog and $247 of the 1995 backlog represents revenues expected to be realized beyond a 12 month period. TASC's backlog is subject to seasonal fluctuations as a result of multi-year contracts and annual renewals of other contracts throughout the year. Substantially all of TASC's contracts reflected in the backlog are subject to termination at the convenience of the customer. Commercial Business While the U.S. government's need for information technology remains a stable source of growth, the principal growth strategy for TASC is to leverage information technology developed under government contracts into new higher margin commercial markets. Most importantly, TASC has used its satellite imaging, communications, database and workstation technology as the foundation for the weather information business of its subsidiary, WSI. WSI provides its clients with timely and accurate weather information services on a 24 hour basis. WSI, through the application of information technology supplied by TASC, has developed automated satellite ground stations to receive information from meteorological satellites that are used to create a variety of information products, including weather satellite images commonly seen on commercial television. An information system has been built to use this information from meteorological satellites, together with inputs from the U.S. national network of weather radar and worldwide observations of weather conditions supplied through the World Meteorological Organization. This data, along with forecasts and warnings provided by the U.S. National Weather Service, is used as the basis for specialized information services that are provided to users of real-time weather information including news media organizations, the aviation industry, agri-businesses and energy utilities. TASC also provides weather information services throughout Europe through The Weather Department, Ltd., and The Computer Department, Ltd. TASC is entering a number of new commercial markets on a worldwide basis, using information technology developed under U.S. government contracts. Document management is a fast-growing market as more businesses move to the "paperless office" to organize their data, speed information retrieval and reduce storage costs. Using proprietary data compression and COLD (computer output to laser disk) software, TASC has designed and built document management systems for financial services and healthcare firms, as well as for state government agencies. TASC's geographic information systems software, sensor technology and hyperspectral analysis capabilities have positioned it to perform environmental analysis, surveillance and monitoring for business and government, both within the United States and in foreign countries. Aviation systems engineering and development has been an active growth area for TASC, with contracts completed or in process for several airlines, air cargo carriers, the Eurocontrol air traffic system, the Federal Aviation Administration and the governments of the United Kingdom and Poland. TASC's extensive capabilities in the collection, storage, retrieval and dissemination of imagery data have positioned it well to serve the technology needs of the entertainment, cable and telephone companies entering the interactive multimedia field. 9 12 Additionally, TASC's communications engineers have assisted major oil companies and financial institutions with network design and are providing support to Motorola in the development of the Iridium personal communications system. Marketing TASC's marketing activities are conducted principally by its senior management and by its professional staff of engineers, scientists and analysts. TASC's marketing approach for both U.S. government and commercial organizations begins with the development and organization of information concerning both present and future requirements of potential customers. TASC believes that its marketing approach enables it to anticipate the technical and other needs of its customers, and allows it to develop proposals that satisfy customers' requirements. TASC places significant emphasis on the importance of client satisfaction and development of repeat business. TASC prepares a number of proposals in response to U.S. government Requests for Proposals ("RFPs"). The bidding on RFPs is often highly competitive and preparing bids is an expensive and time consuming process requiring significant allocation of highly qualified TASC personnel. If TASC's proposal for a contract is accepted, TASC and its customer will negotiate and enter into a contract with agreed upon price, terms and conditions. In addition, TASC often submits unsolicited proposals to various U.S. government agencies which often lead to contract awards on a negotiated basis. Approximately 32% of TASC's 1995 contracts resulted from the competitive RFP process. For the commercial markets, TASC utilizes direct sales personnel, mailings, trade journal advertising and trade shows to distribute information on the products and services offered. The marketing of larger, customized systems often uses techniques similar to those employed for the U.S. government, involving professional personnel, the submission of unsolicited proposals and the response to commercially prepared RFPs. Competition Most of the business areas in which TASC is involved are competitive and require highly skilled and experienced technical personnel. TASC believes that the skills and experience of its technical personnel are critical to maintaining its competitive position. Many of these business areas also require high levels of U.S. government security clearances, as previously discussed. TASC competes with many companies in the business areas in which it is engaged, some of which have greater resources than TASC, and there can be no assurance that TASC will compete successfully in the future. Many of TASC's contracts are acquired as a result of competitive bidding, only a portion of which may result in the award of contracts. TASC believes that its success in the competitive bidding process depends on a variety of factors, including the technical content of the contract proposal, performance on previous contracts, reputation, experience and price. Patents and Technical Data TASC owns three patents and has four pending patent applications. In selected business areas, patent protection is increasingly important to TASC's operations. In addition, TASC utilizes trade secret protection to safeguard key technologies and software critical to its business. Commercial software products benefit from copyright protection and are marketed under limited license agreements. Certain technical data and software that was developed wholly under government contracts and delivered to the government is subject to unlimited rights of the U.S. Government and may be disclosed by the government to third parties, including competitors of TASC. The Company does not believe that the subsequent use of this data or software by the U.S. Government or its contractors has had or will have a material adverse effect on its business. 10 13 OTHER SEGMENTS TRANSPORTATION SERVICES Triad International Maintenance Corporation ("TIMCO") was formed by the Company in 1989 to operate a newly constructed heavy aircraft maintenance facility located at the Piedmont Triad International Airport in Greensboro, North Carolina. TIMCO opened for business in October 1990. The company provides major aircraft maintenance services such as scheduled maintenance checks, modifications, overhauls and repair work on transport category aircraft. TIMCO holds a Class IV Repair Station Certificate issued by the Federal Aviation Administration (FAA) which enables TIMCO to work on all aircraft types. TIMCO has also been classified as a Designated Alteration Station by the FAA, allowing the company to approve major modifications to aircraft normally reserved for the FAA. TIMCO's services are offered to the industry at large and in particular, to operators and owners of aircraft who do not have maintenance facilities of their own, or whose facilities are unable to accommodate an increasing workload. Emphasis has been and will continue to be placed on air cargo carrier customers who have limited facilities to accomplish their required work. In addition, TIMCO targets both aircraft involved in sale or lease transactions and passenger airlines without adequate maintenance facilities as potential sources of business. TIMCO currently has six major customers, ABX Air, Inc. (also known as "Airborne Express"), Emery Worldwide Airlines, Continental Airlines, Northwest Airlines, General Electric Capital Aviation Services and United Parcel Service. The first three of these customers generated over 1,096,000 man-hours of TIMCO's 1,519,000 total man-hours in 1995. Loss of any of the above customers contracts, or any future contracts with major customers, could have a material adverse effect on TIMCO. As of December 31, 1995, TIMCO had approximately 1,082,000 man-hours worth of business contracted for 1996. The industry in which TIMCO operates is highly competitive. Space availability, price, quality, trained personnel, on-time delivery and accountability are the key competitive factors in the heavy aircraft maintenance industry. These factors, with respect to TIMCO's performance, will determine its future success in the industry. FINANCIAL SERVICES Primark Storage Leasing Corporation ("PSLC") owns and leases eight underground natural gas storage fields and related facilities located in Michigan to ANR Pipeline Company ("ANR"). PSLC is also involved in the exploration and development of mineral resources underneath the storage fields through various farm-out agreements with exploration companies. Lease revenue accounted for 95%, 93% and 94% of PSLC's total revenues for the years ended December 31, 1995, 1994, and 1993, respectively. PSLC's storage fields and facilities are leased under noncancelable agreements that expire in 2003, and provide for two renewal options of five years each, which could extend the lease term to 2013. Lease payments are calculated on a net plant base that was approximately $27.4 million at December 31, 1995. The depreciation of a portion of this plant base results in a corresponding reduction in the lease payments. ITEM 2. PROPERTIES The Company currently occupies its 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. Datastream's two principal office facilities are located in London, England. Comprised of an aggregate total of 100,995 square feet, these facilities are occupied under lease agreements that expire in 2005 and 2018. Through its affiliates, Datastream also occupies under short-term leases, an aggregate total of approximately 55,000 square feet of office space, principally located in Australia, Canada, France, Germany, Hong Kong, Italy, Japan, the Netherlands, Singapore, Sweden, Switzerland, and the United States. 11 14 Disclosure's headquarters, comprised of approximately 99,640 square feet, is located in Bethesda, Maryland. The property is occupied under lease agreements that expire in 2003. Disclosure's regional offices occupy approximately 80,500 square feet of office space under lease terms that expire through 2004. These offices are located in California, Georgia, Illinois, Massachusetts, New York, Texas and Washington, D.C. I/B/E/S occupies 19,600 square feet of space at its New York City headquarters under a lease agreement that expires in 1997. Additional office space totaling 3,000 square feet is located in England and Japan with lease terms through 2004. TASC's principal facilities, aggregating approximately 787,000 square feet, are occupied under leases expiring at various dates through 2006. TASC's headquarters is located in Reading, Massachusetts, and it has regional offices in Alabama, Arizona, Colorado, Florida, Georgia, Maryland, Massachusetts, Michigan, Missouri, New Mexico, New York, Ohio, Oklahoma, Texas, Virginia, Washington, D.C. and England. TIMCO leases a heavy aircraft maintenance facility from the Triad International Airport Authority (the "Triad Authority") for an initial 30-year lease term, with renewal options which could extend the lease term to the year 2029. Located in Greensboro, North Carolina, the facility encompasses over 422,000 square feet, which includes 284,000 square feet of hanger space, 109,000 square feet of support shops and stores and 30,000 square feet of administrative office space. The facility is located on 45 acres. PSLC owns eight underground natural gas storage fields and related facilities in the state of Michigan that are leased on a long-term basis to ANR. The storage fields encompass an area totaling 92,620 acres, contain approximately 71 billion cubic feet ("Bcf") of PSLC-owned base gas and have a working storage capacity of 125 Bcf. The storage field formation is primarily owned by PSLC through storage and mineral deeds covering approximately 80,487 acres. Most of these deeds, however, are limited in depth to the storage field formations. Within the total storage field area, PSLC owns 11,006 acres of land in fee, leases 9,970 acres of storage and surface rights and has 2,713 acres of oil and gas leases. The leased facilities consist principally of 791 active storage injection/withdrawal wells, 129 observation wells, 7 brine disposal wells, 202 plugged wells, 276 miles of field lines, dehydration plants and compressor facilities with a rated capacity of 79,905 horsepower. In addition, PSLC has interests in 12 producing gas wells and 21 producing oil wells for the development of minerals underneath the storage fields. The Company believes that its facilities are adequate for its present needs, but will continue to evaluate the need for additional space as the growth of the business requires. ITEM 3. LEGAL PROCEEDINGS HUTSON V. TASC ET AL. On August 16, 1994, a jury in a civil case in the Federal District Court in Boston, Massachusetts returned an unfavorable verdict against the Company's wholly owned subsidiary, TASC, for approximately $3.1 million plus accrued interest. The lawsuit was brought by a former TASC employee and involved a claim for compensation for intellectual property transferred to TASC and claims relating to such employee's termination of employment. The events underlying this lawsuit occurred prior to the Company's acquisition of TASC in August of 1991. In July 1995, TASC paid $3.3 million in full settlement of this lawsuit. The Company had previously reserved for the settlement. BRADLEY V. GELB ET AL. On June 24, 1994, a jury in a civil case in the Massachusetts Superior Court (the "Court") returned an unfavorable verdict against the two founders of TASC, and against TASC itself. The suit was brought by a former employee regarding a TASC stock transaction which took place in 1976, prior to the Company's acquisition of TASC in 1991. On June 28, 1994, the Court ordered that judgment be entered on the verdict requiring the two founders (but not TASC itself) to disgorge $19,800,000. Such amount accrues post-judgment interest at a statutory rate. As an alternative course of action, the plaintiff may pursue the two founders and TASC, jointly and severally, for $48,600. Based on the adjudication, the Company has denied requests of the two founders for indemnification. Certain post-verdict motions (including a motion for judgment notwithstanding the verdict, and in the alternative, a motion for a new trial) are pending. While the 12 15 outcome of these motions cannot be predicted with certainty, the Company believes it will not be required to pay any portion of this judgment. ENVIRONMENTAL CLAIMS The Company has received notifications from the Michigan Department of Natural Resources of three matters involving environmental contamination in the vicinity of natural gas storage fields in Michigan which the Company leases to an interstate pipeline company. The Company conducts no operations of its own on these properties. While the ultimate resolution of these matters cannot be predicted at this time, the Company believes that its existing reserves of approximately $250,000 are adequate for the resolution of such matters. OTHER MATTERS On April 8, 1994, the Department of Defense Office of the Assistant Inspector General for Auditing (the "IG") issued a final report relative to its audit of contracting practices of the Ballistic Missile Defense Organization (the "BMDO"), which included a comprehensive review of one of TASC's contracts with the BMDO. The report included a recommendation for monetary recovery from TASC. All of the issues raised in the report were settled with the cognizant government contracting officer during 1995. The Company's reserves were adequate for the resolution of this matter. The Company and its subsidiaries are involved in certain 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 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. 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 1995. EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to the executive officers of the Company, as of February 29, 1996, is set forth below. Such officers are elected by the Company's Board of Directors generally for one-year terms expiring at the next organizational meeting to be held in May 1996.
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS ---- --- ------------------------------------------ Joseph E. Kasputys....... 59 Chairman, President and Chief Executive Officer of the Company since 1988. Mr. Kasputys has been a director of the Company since 1987. John C. Holt............. 55 Executive Vice-President of the Company, President and Chief Executive Officer of TASC, Inc. since February 1994. From 1982 until January 1994, Mr. Holt held the position of Executive Vice President of The Dun & Bradstreet Corporation ("D&B"), an information services company, and served as a director of that company from 1985 until 1994. In addition, Mr. Holt is the former Chairman, President and Chief Executive Officer of the A.C. Nielsen Company, a marketing information business and an affiliate of D&B. Mr. Holt has been a director of the Company since 1985. Stephen H. Curran........ 48 Senior Vice President and Chief Financial Officer of the Company since 1988. Michael R. Kargula....... 48 Senior Vice President, General Counsel and Secretary of the Company since 1988. Patrick G. Richmond...... 45 Vice President of Corporate Development of the Company since May 1989. William J. Swift III..... 43 Vice President and Tax Counsel of the Company since 1988.
13 16 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 Stock Exchange. Other information set forth in the section entitled "Supplementary Financial Information -- Quarterly Data" on page 43 of the Company's 1995 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 30 of the Company's 1995 Annual Report. ITEM 6. SELECTED FINANCIAL DATA The information set forth in the section entitled "Selected Financial Information -- Five Year Data" on page 42 of the Company's 1995 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 39 through 41 of the Company's 1995 Annual Report is incorporated by reference herein. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and the related notes thereto, and the Report of Independent Certified Public Accountants, as contained on pages 22 through 38 of the Company's 1995 Annual Report, and the "Supplementary Financial Information -- Quarterly Data," as contained on page 43 of the Company's 1995 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 1996 Proxy Statement for its May 1996 Annual Meeting of Shareholders is incorporated by reference herein. Information regarding the executive officers of the Company is set forth in the section entitled "Executive Officers of the Registrant" on page 13 in Part I of this report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information set forth in the sections entitled "Directors Compensation", "Executive Compensation", "Compensation Committee Report", "Employment Agreements And Other Arrangements", and "Compensation Committee Interlocks and Insider Participation" of the Company's 1996 Proxy Statement for its May 1996 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" of the Company's 1996 Proxy Statement for its May 1996 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", "Compensation Committee Interlocks and Insider Participation" and "Employment Agreements and Other Arrangements" of the Company's 1996 Proxy Statement for its May 1996 Annual Meeting of Shareholders is incorporated by reference herein. 14 17 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. Financial Statements: - Consolidated Statements of Financial Position as of December 31, 1995 and 1994* - Consolidated Statements of Income for each of the three years in the period ended December 31, 1995* - Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995* - Consolidated Statements of Common Shareholders' Equity for each of the three years in the period ended December 31, 1995* - Notes to Consolidated Financial Statements* - Management's Discussion and Analysis of Results of Operations and Financial Condition* - Report of Independent Certified Public Accountants* - Selected Financial Information--Quarterly Data* 2. Financial Statement Schedules: - Financial statement schedules have been omitted as they are not applicable or not required, or the required information is not material or is included in the consolidated financial statements thereto. 3. Exhibits - The Exhibits filed as part of this Annual Report on Form 10-K are listed in the Index to Exhibits on pages 18 to 21, and are incorporated by reference herein. (b) REPORTS ON FORM 8-K The Company filed no reports on Form 8-K during the fourth quarter ended December 31, 1995. (c) EXHIBITS The Company hereby files as part of this Annual Report on form 10-K the Exhibits listed in the Index to Exhibits. (d) FINANCIAL STATEMENT SCHEDULES Not Applicable. - --------------- * Referenced information is contained in Primark's 1995 Annual Report filed as Exhibit 13.1 hereto. 15 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 29th day of March, 1996. PRIMARK CORPORATION -------------------------------------- (Registrant) By: /s/ STEPHEN H. CURRAN --------------------------------- Stephen H. Curran Senior Vice President and Chief Financial Officer The undersigned directors and officers of Primark Corporation, a Michigan corporation, 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 of and on behalf of the undersigned as such Director or Officer, an Annual Report on Form 10-K, for the year ended December 31, 1995, 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 attorney 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 Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- /s/ JOSEPH E. KASPUTYS Chairman, President and Chief January 3, 1996 - ---------------------------------------- Executive Officer (Principal Joseph E. Kasputys Executive Officer) /s/ STEPHEN H. CURRAN Senior Vice President and Chief January 21, 1996 - ---------------------------------------- Financial Officer (Principal Stephen H. Curran Financial and Accounting Officer) /s/ JOHN C. HOLT Director and Executive Vice January 16, 1996 - ---------------------------------------- President John C. Holt /s/ KEVIN J. BRADLEY Director January 3, 1996 - ---------------------------------------- Kevin J. Bradley /s/ PATRICIA G. MCGINNIS Director January 4, 1996 - ---------------------------------------- Patricia G. McGinnis
16 19
SIGNATURES TITLE DATE ---------- ----- ---- /s/ STEVEN LAZARUS Director January 9, 1996 - ---------------------------------------- Steven Lazarus /s/ ROBERT W. STEWART Director January 4, 1996 - ---------------------------------------- Robert W. Stewart /s/ CONSTANCE K. WEAVER Director January 3, 1996 - ---------------------------------------- Constance K. Weaver /s/ MICHAEL R. KARGULA Senior Vice President General January 10, 1996 - ---------------------------------------- Counsel and Secretary Michael R. Kargula /s/ PATRICK G. RICHMOND Vice President of Corporate January 9, 1996 - ---------------------------------------- Development Patrick G. Richmond /s/ WILLIAM J. SWIFT III Vice President and Tax Counsel January 2, 1996 - ---------------------------------------- William J. Swift III By: /s/ STEPHEN H. CURRAN - ---------------------------------------- Stephen H. Curran Attorney-in-fact
17 20 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 2.1 Stock and Asset Purchase Agreement dated as of August 13, 1992 between the Company and The Dun & Bradstreet Corporation and its affiliates (Exhibit 2.1 to the Company's June 30, 1992 Form 10-Q); Amendment dated September 25, 1992, exhibits and other related documents (Exhibit 2.1 to the Company's Form 8-K dated October 7, 1992). 2.2 Stock Purchase and Sale Agreement dated as of July 9, 1993, by and among Network Financial Services, Inc., Primark Corporation, JMS Companies, Inc., and Westmark Mortgage Corporation (Exhibit 2.4 to the Company's 1994 Form 10-K). 2.3 Loan Modification Agreement dated July 15, 1994 by and among Network Financial Services, Inc., Westmark Mortgage Corporation, Primark Corporation, and JMS Companies, Inc. (Exhibit 2.5 to the Company's 1994 Form 10-K). 2.4 Stock Purchase and Sale Agreement dated as of May 20, 1994 between Primark Corporation and Card Establishment Services, Inc. (Exhibit 2.6 to the Company's 1994 Form 10-K). 2.5 Acquisition Agreement by and among Datastream International, Inc., VSI Acquisition, Inc. and Vestek Systems, Inc. dated May 20, 1994 (Exhibit 2.7 to the Company's 1994 Form 10-K). 2.6 Stock Purchase Agreement between Primark Corporation and VNU International B.V. dated as of May 26, 1995 (Exhibit 2.1 to the Company's Form 8-K dated June 2, 1995); Amendment to Agreement dated as of June 29, 1995 (Exhibit 2.1 to the Company's Form 8-K dated July 3, 1995). 3.1 Articles of Incorporation of the Company (Exhibit 3.1 to the Company's Registration Statement No. 2-74688); Amendment to the Articles of Incorporation (Exhibit 3.1 to the Company's 1985 Form 10-K); Amendment dated June 16, 1988 (Exhibit 3.1 to the Company's 1988 Form 10-K); Amendment dated August 8, 1991 (Exhibit 3(a) to the Company's Form 8-K dated August 9, 1991); Amendment dated May 27, 1992 (Exhibit 3.1 to the Company's June 30, 1992 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). 4.1 Indenture dated as of October 18, 1993 by and among the Company and The First National Bank of Boston, as Trustee (Exhibit 4.1 to the Company's September 30, 1993 Form 10-Q). STORAGE FIELD LEASE AGREEMENTS 10.1 Lease Agreement dated August 31, 1948 (Exhibit 15-K to American Natural Resources (American Natural) Registration Statement No. 2-7800); Amendatory Agreement dated March 1, 1950 (Exhibit 15-TT to American Natural's Registration Statement No. 2-8567); Amendatory Agreement dated February 28, 1951 (Exhibit 15-N to American Natural's Registration Statement No. 2-9003); Amendatory Agreement dated January 1, 1962 (Exhibit 4-E-5 to Registration Statement No. 2-21082); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-12 to Registration Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline Company's (ANR Pipeline) Registration Statement No. 2-50880). 10.2 Lease Agreement dated April 13, 1962 (Exhibit 4-E-9 to Registration Statement No. 2-21082); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-16 to Registration Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-l to ANR Pipeline's Registration Statement No. 2-50880). 10.3 Lease Agreement dated February 15, 1963 (Exhibit 13-S-1 to ANR Pipeline's Registration Statement No. 2-21500); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-17 to Registration Statement No. 2-29659); Amendment dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No. 2-50880). 10.4 Lease Agreement dated July 1, 1964 (Exhibit 13-F-1 to ANR Pipeline's Registration Statement No. 2-26144); Amendatory Agreement dated September 1, 1971 (Exhibit 13-F-1 to ANR Pipeline's Registration Statement No. 2-42256); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No. 2-50880).
18 21
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.5 Lease Agreement dated September 25, 1950 (Exhibit 15-0 to American Natural's Registration Statement No. 2-9003); Amendatory Agreement dated January 1, 1962 (Exhibit 4-E-6 to Registration Statement No. 2-21082); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-13 to Registration Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No. 2-50880). 10.6 Lease Agreement dated April 13, 1962 (Exhibit 4-E-8 to Registration Statement No. 2-21082); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-15 to Registration Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No. 2-50880). 10.7 Lease Agreement dated September 25, 1951 (Exhibit 13-F-4 to Registration Statement No. 2-10282); Amendatory Agreements dated January 1, 1962 (Exhibit 4-E-7 to Registration Statement No. 2-21082); Amendatory Agreement dated December 31, 1962 (Exhibit 10-7 to the Company s 1988 Form 10-K); Amendatory Agreement dated April 26, 1968 (Exhibit 4-D-14 to Registration Statement No. 2-29659); Amendatory Agreement dated August 1, 1973 (Exhibit 13-D-1 to ANR Pipeline's Registration Statement No. 2-50880). 10.8 Seven Amendatory Agreements dated April 8, 1977, to the Storage Lease Agreements between MichCon and ANR Pipeline (Exhibit 20-4 to ANR Pipeline's 1980 Form 10-K, File No. 1-7320). 10.9 Seven Amendatory Agreements dated January 1, 1982, to the Storage Lease Agreements between MichCon and ANR Pipeline (Exhibit 10.18 to the Company's 1982 Form 10-K). 10.10 Agreement as to sale of Leased Facilities (Exhibit 10-21 to Registration Statement No. 2-81102). OTHER LEASES 10.11 Lease Agreement dated as of April 5, 1994 between the Trustees of London & Leeds NDAI Bay Colony II Realty Trust and Primark Corporation; Amendatory Agreement dated January 3, 1995 (Exhibit 10.11 to the Company's 1994 Form 10-K). 10.12 Lease Agreement dated August 8, 1991 between Arthur Gelb and Harry Silverman, trustees of TASC Realty Trust, and The Analytic Sciences Corporation (Exhibit 10.13 to the Company's 1991 Form 10-K). 10.13 Fourth Amendment to Lease dated July 1, 1991 between Arthur Gelb and Harry B. Silverman, as trustees of TASC Realty Trust, and The Analytic Sciences Corporation (Exhibit 10.14 to the Company's 1991 Form 10-K). 10.14 Letter dated July 1, 1991 from Arthur Gelb and Harry B. Silverman, as trustees of TASC Realty Trust, to The Analytic Sciences Corporation (Exhibit 10.15 to the Company's 1991 Form 10-K). 10.15 Letter dated August 8, 1991 from Arthur Gelb and Harry B. Silverman, as trustees of TASC Realty Trust, to The Analytic Sciences Corporation (Exhibit 10.16 to the Company's 1991 Form 10-K). 10.16 Option Agreement dated August 8, 1991 between Arthur Gelb and Harry B. Silverman, as trustees of TASC Realty Trust, and The Analytic Sciences Corporation (Exhibit 10.17 to the Company's 1991 Form 10-K). 10.17 Lease Agreement, dated November 1, 1989, between Triad International Maintenance Corporation and Piedmont Triad Airport Authority (Exhibit 10.12 to the Company's 1989 Form 10-K). OTHER CONTRACTS 10.18 Supplemental Medical Reimbursement and Life Insurance Plan (Exhibit 10.31 to MichCon's 1983 Form 10-K, File No. 1-7310). 10.19 Operating and Servicing Agreement dated December 31, 1987, as amended, by and among the Company, MichCon and Primark Leasing Corporation (Exhibit 10.33 to MichCon's 1987 Form 10-K, File No. 1-7310). 10.20 Tax Agreement dated December 31, 1987, as amended, between the Company and MichCon (Exhibit 10.34 to MichCon's 1987 Form 10-K, File No. 1-7310).
19 22
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.21 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 1990 Form 10-K); as amended and restated as of January 1, 1992 (Exhibit 10.22 to the Company's 1991 Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.4 to the Company's September 30, 1992 Form 10-Q). 10.22 Primark Corporation 1992 Stock Option Plan, dated March 2, 1992 (Exhibit 10.26 to the Company's 1991 Form 10-K); Amendment dated September 28, 1995. 10.23* 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 28, 1995; filed herewith. 10.24* Primark Corporation Executive Share Option Scheme (Exhibit 10.26 to the Company's 1992 Form 10-K); Amendment dated September 28, 1995; filed herewith. 10.25 Primark Corporation Employee Stock Ownership Plan, as amended and restated, effective January 1, 1989; Amendment dated February 28, 1991 (Exhibit 10.20 to the Company's 1990 Form 10-K); Amendments dated April 22, 1991 and February 21, 1992 (Exhibit 10.25 to the Company's 1991 Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.2 to the Company's September 30, 1992 Form 10-Q). 10.26* 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; filed herewith. 10.27 Form of Change of Control Compensation Agreement entered into between the Company and selected executive officers (Exhibit 10.60 to the Company's 1987 Form 10-K). 10.28 Certain agreements entered into between the Company and Joseph E. Kasputys (Exhibit 19.1 to the Company's June 30, 1987 Form 10-Q). 10.29 Agreement between the Company and Robert W. Stewart entered into January 12, 1988 (Exhibit 10.62 to the Company's 1987 Form 10-K). 10.30 Employment agreement between the Company and Joseph E. Kasputys dated February 21, 1992 (Exhibit 10.32 to the Company's 1991 Form 10-K). 10.31 Employment and related agreements between The Analytic Sciences Corporation, the Company and John C. Holt dated February 28, 1994 (Exhibit 10.32 to the Company's 1993 Form 10-K). 10.32 Management Incentive Plan adopted by Board of Directors on January 12, 1988 (Exhibit 10.64 to the Company's 1987 Form 10-K); Amendment dated February 21, 1992 (Exhibit 10.33 to the Company's 1991 Form 10-K). 10.33 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). 10.34 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). 10.35 Restricted Stock Award Agreements and Stock Option Agreements (Exhibit 4(b) to the Company's Registration Statement No. 2-3876). 10.36 Credit Agreement dated as of October 18, 1993 by and among the Company, Lenders Parties, Issuing Banks, Mellon Bank, N.A. and The First National Bank of Boston (Exhibit 28.1 to the Company's September 30, 1993 Form 10-Q). 10.37 Underwriting Agreement dated October 8, 1993 by and among the Company and PaineWebber Incorporated (Exhibit 28.2 to the Company's September 30, 1993 Form 10-Q). 10.38 Purchase Agreement dated as of July 30, 1992 between Primark Storage Leasing Corporation and Teachers Insurance and Annuity Association of America (Exhibit 10.1 to the Company's June 30, 1992 Form 10-Q). 10.39 Mortgage, Assignment and Security Agreement dated as of July 30, 1992 between Primark Storage Leasing Corporation and Teachers Insurance and Annuity Association of America (Exhibit 10.2 to the Company's June 30, 1992 Form 10-Q).
20 23
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT - ------- ----------------------- 10.40 Guaranty Agreement, dated November 1, 1989, between Triad International Maintenance Corporation and Piedmont Triad Airport Authority (Exhibit 10.30 to the Company's 1989 Form 10-K). 10.41 Reimbursement Agreement, dated October 1, 1989, between Triad International Maintenance Corporation and Mellon Bank, N.A. (Exhibit 10.31 to the Company's 1989 Form 10-K); Amendment dated September 25, 1992 and other related documents (Exhibit 28-4 to the Company's Form 8-K dated October 7, 1992); Amendments to Agreement and other related documents dated February 1, 1993 (Exhibit 10-43 to the Company's 1993 Form 10-K). 10.42 Revolving Credit Agreement dated as of June 29, 1995 between Primark Corporation, Lenders Parties, Mellon Bank, N.A. and the First National Bank of Boston and other related documents (Exhibit 10.1 to the Company's Form 8-K dated July 3, 1995). 10.43 Term Loan Agreement dated as of June 29, 1995 between Primark Corporation, Lenders Parties, Mellon Bank, N.A. and The First National Bank of Boston and other related documents (Exhibit 10.2 to the Company's Form 8-K dated July 3, 1995). 10.44 Loan Agreement dated as of June 29, 1995 between TASC, Inc. and Mellon Bank, N.A. (Exhibit 10.1 to the Company's Form 8-K dated July 3, 1995). 10.45 Underwriting Agreement dated November 29, 1995 by and among Primark Corporation and PaineWebber Incorporated (Exhibit 1.1 to the Company's November 7, 1995 Form S-3 Amendment No. 1). 10.46 International Underwriting Agreement dated December 5, 1995 by and among the Primark Corporation and PaineWebber Incorporated (Exhibit 1.2 to the Company's November 7, 1995 Form S-3 Amendment No. 1). 13.1* Primark Corporation 1995 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. 21.1* Subsidiaries of Primark Corporation; filed herewith. 23.1* Consent of Independent Certified Public Accountants; filed herewith. 28.1 Rights Agreement, dated January 12, 1988, between the Company and Bankers Trust Company, which includes, as Exhibit A thereto, the Rights Certificate and, as Exhibit B thereto, the Summary of Rights to Purchase Common Stock (Exhibit 28.1 to the Company's Form 8-K dated January 14, 1988); Certified Copy of Resolution amending the Company's Rights Agreement (Exhibit 28.4 to the Company's Form 8-K dated July 13, 1988); Amendment to Rights Agreement, dated April 9, 1990 (Exhibit 28.1 to the Company's Form 8-K dated April 12, 1990); Letter, dated May 10, 1990, regarding appointment of Bank of America as new Rights Agent under the Rights Agreement, as amended (Exhibit 28.1 to the Company's 1990 Form 10-K); Amendment to Rights Agreement, dated May 31, 1992, between the Company and Bank of America National Trust and Savings Association, as Rights Agent (Exhibit 28.1 to the Company's June 30, 1992 Form 10-Q); Letter dated July 31, 1992 regarding the appointment of The First National Bank of Boston as new Rights Agent (Exhibit 28.2 to the Company's June 30, 1992 Form 10-Q). - --------------- * Indicates document filed herewith.
For the Company's documents incorporated by reference, references are to File No. 1-8260. 21 EX-10.23 2 SECRETARY'S CERTIFICATE 9/22/95 1 Exhibit 10.23 PRIMARK CORPORATION SECRETARY'S CERTIFICATE I, Michael R. Kargula, Secretary of Primark Corporation, a Michigan corporation, DO HEREBY CERTIFY that following is a true copy of certain resolutions adopted by the Board of Directors at regular meetings of such Board held on September 22, 1995: RESOLVED, that effective September 22, 1995 Article V of the Primark Corporation Stock Option Plan for Non-Employee Directors is amended by adding a new paragraph 8 thereto to read in its entirety as follows: "8. Withholding Taxes. The Corporation's obligation to deliver Shares upon the exercise of an option by a Director who has become an employee of the Corporation or one of its affiliates since the date of grant of the option shall be subject to the satisfaction of applicable federal, state and local tax withholding requirements. Any such withholding tax obligation may be satisfied in whole or in part by any of the following means or by a combination of such means: (a) tendering a cash payment, (b) authorizing the Corporation to withhold Shares otherwise issuable to the Director, or (c) delivering to the Corporation already owned and unencumbered Shares. A director's election to pay the withholding tax obligation by either of the latter two methods of payment is irrevocable and may be made only during the period beginning the third business day following the date of release of the Corporation's quarterly or annual summary statement of sales and earnings and ending on the twelfth business day following such date." I have hereunto set my hand this 28th day of September, 1995. MICHAEL R. KARGULA ------------------------------ Secretary EX-10.24 3 SECRETARY'S CERTIFICATE 7/17/95 1 Exhibit 10.24 PRIMARK CORPORATION SECRETARY'S CERTIFICATE I, Michael R. Kargula, Secretary of Primark Corporation, a Michigan corporation, DO HEREBY CERTIFY that following is a true copy of certain resolutions adopted by the Board of Directors at regular meetings of such Board held on September 22, 1995: RESOLVED, that the Primark Corporation Executive Share Scheme ("Scheme") be amended as follows: (a) Rule 6.1(b) of the Scheme shall be amended to state as follows: "an Option granted prior to 17th July, 1995 shall not be exercisable after the expiry of 10 years from its Grant Date and an Option granted on or after 17th July, 1995 shall not be exercisable after the expiry of seven years from its Grant Date"; (b) Rule 6.3(a) of the Scheme shall be amended to state as follows: "the expiry of 10 years from its Grant Date in relation to an Option granted prior to 17th July, 1995 and the expiry of seven years from its Grant Date in relation to an Option granted on or after 17th July, 1995"; (c) Rule 6.3 of the Scheme shall be amended by the addition of the words "except that in relation to Options granted on or after 17th July, 1995 Rule 6.3(a) shall continue to apply" after the words "provisions of such Rules shall not apply" at the end of such Rule 6.3. FURTHER RESOLVED, that this Committee hereby recommends Messrs. Stephen Herman and Richard Anderson be appointed as a Committee to effect any changes to the Scheme necessary to obtain Inland Revenue approval. I have hereunto set my hand this 28th day of September, 1995. MICHAEL R. KARGULA ----------------------------- Secretary EX-10.26 4 SECRETARY'S CERTIFICATE 8/1/96 1 Exhibit 10.26 PRIMARK CORPORATION SECRETARY'S CERTIFICATE I, Michael R. Kargula, Secretary of Primark Corporation, a Michigan corporation, DO HEREBY CERTIFY that following is a true copy of certain resolutions adopted by the Board of Directors at regular meetings of such Board held on July 25, 1995: WHEREAS, the Corporation maintains the Primark Corporation 1992 Employee Stock Purchase Plan ("Plan"); and WHEREAS, Article 13 of the Plan authorizes the Board of Directors of the Corporation to amend the Plan from time to time; and WHEREAS, the Corporation has determined it is desirable to amend the Plan and related prospectus with respect to certain matters. NOW, THEREFORE BE IT RESOLVED, that effective as of August 1, 1995 the 1992 Employee Stock Purchase Plan ("Plan") and related prospectus is hereby amended to read substantially as presented to the Board of Directors at this meeting; and FURTHER RESOLVED, that the Corporation is hereby authorized to repurchase, prior to the expiration of the two-year holding period, shares of common stock of the Corporation which are purchased after August 1, 1995 by participants under the Plan as long as such participants are able to demonstrate a hardship. FURTHER RESOLVED, that the Corporation be, and it hereby is, authorized to take any and all action deemed necessary or appropriate by any officer of the Corporation to facilitate and accomplish the amendments contemplated by the foregoing resolutions; and FURTHER RESOLVED, that Disclosure Incorporated and I/B/E/S International, Inc. and their respective subsidiaries are hereby authorized to participate in the Corporation's 1992 Employee Stock Purchase Plan; and FURTHER RESOLVED, that all previous action taken by the Corporation in connection with the foregoing resolutions be, and they hereby are, ratified and approved in all respects. I have hereunto set my hand this 4th day of October 1995. MICHAEL R. KARGULA ----------------------------- Secretary EX-13.1 5 FY 1995 FINANCIAL STATEMENTS 1 Exhibit 13-1 CONSOLIDATED STATEMENTS OF INCOME
=========================================================================================================================== In Thousands Except Per Share Amounts For Year Ended December 31 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- OPERATING REVENUES $ 617,310 $ 477,026 $ 444,015 - --------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Cost of services 403,435 309,158 292,942 Selling, general and administrative 120,609 102,295 87,606 Depreciation 15,068 12,091 10,910 Amortization of goodwill 9,561 6,932 6,650 Amortization of other intangible assets 11,726 8,514 8,637 - --------------------------------------------------------------------------------------------------------------------------- Total operating expenses 560,399 438,990 406,745 - --------------------------------------------------------------------------------------------------------------------------- Operating income 56,911 38,036 37,270 - --------------------------------------------------------------------------------------------------------------------------- OTHER INCOME AND (DEDUCTIONS) Investment income 1,079 722 842 Interest expense (20,382) (14,246) (14,641) Foreign currency loss - net (2,620) (1,329) (1,477) Other (Note 3) (1,026) 334 (720) - --------------------------------------------------------------------------------------------------------------------------- Total other deductions (22,949) (14,519) (15,996) - --------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 33,962 23,517 21,274 INCOME TAX EXPENSE 15,112 9,767 9,545 - --------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 18,850 13,750 11,729 - --------------------------------------------------------------------------------------------------------------------------- DISCONTINUED OPERATIONS Loss from discontinued operations, net of income tax benefit of $306,000 -- -- (764) Loss from disposal of discontinued operations, net of income tax benefit of $2,668,000 -- -- (2,802) - --------------------------------------------------------------------------------------------------------------------------- Total discontinued operations -- -- (3,566) - --------------------------------------------------------------------------------------------------------------------------- INCOME BEFORE EXTRAORDINARY LOSS 18,850 13,750 8,163 EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, net of income tax benefit of $288,000 and $1,528,000, respectively (Note 6c) (534) -- (2,650) - --------------------------------------------------------------------------------------------------------------------------- NET INCOME 18,316 13,750 5,513 DIVIDENDS ON PREFERRED STOCK (1,434) (1,434) (1,426) - --------------------------------------------------------------------------------------------------------------------------- NET INCOME APPLICABLE TO COMMON STOCK $ 16,882 $ 12,316 $ 4,087 =========================================================================================================================== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Income from continuing operations $ 0.85 $ 0.62 $ 0.52 - --------------------------------------------------------------------------------------------------------------------------- Discontinued operations: Loss from discontinued operations -- -- (0.04) Loss from disposal of discontinued operations -- -- (0.14) - --------------------------------------------------------------------------------------------------------------------------- Total discontinued operations -- -- (0.18) - --------------------------------------------------------------------------------------------------------------------------- Income before extraordinary loss 0.85 0.62 0.34 Extraordinary loss (Note 6c) (0.03) -- (0.13) - --------------------------------------------------------------------------------------------------------------------------- Total earnings per share $ 0.82 $ 0.62 $ 0.21 =========================================================================================================================== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 20,602 19,909 19,805 ===========================================================================================================================
The accompanying notes to the consolidated financial statements are an integral part of these statements. Primark Corporation and Subsidiaries 22 2 CONSOLIDATED STATEMENTS OF CASH FLOWS
=============================================================================================================================== In Thousands For Year Ended December 31 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 18,316 $ 13,750 $ 5,513 Adjustments to reconcile net income to net cash flows from operating activities: Loss from discontinued operations -- -- 3,566 Extraordinary loss on early extinguishment of debt 534 -- 2,650 Depreciation and amortization 36,355 27,537 26,197 Foreign currency loss - net 2,620 1,329 1,477 Other (5,768) 185 1,803 Changes in assets and liabilities which provided (used) cash, exclusive of changes shown separately (3,488) (2,533) 7,180 - ------------------------------------------------------------------------------------------------------------------------------- Net cash provided from operating activities 48,569 40,268 48,386 - ------------------------------------------------------------------------------------------------------------------------------- Cash Flows From Financing Activities Issuance of short-term notes payable 318,601 157,898 266,204 Repayment of short-term notes payable (318,601) (174,898) (259,578) Issuance of long-term debt 125,000 -- 110,852 Repayment of long-term debt (3,768) (3,812) (153,162) Proceeds from common stock offering 107,784 -- -- Debt issue costs (4,737) -- (5,085) Other (3,924) 1,520 (894) - ------------------------------------------------------------------------------------------------------------------------------- Net cash provided from (used for) financing activities 220,355 (19,292) (41,663) - ------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (22,662) (22,616) (12,667) Capitalized software (6,232) (4,372) (4,021) Principal payments received under financing leases 3,106 3,106 3,105 Purchase of subsidiaries - net of acquired cash (199,734) (6,106) -- Proceeds from sale of a subsidiary -- 6,500 -- Proceeds returned from discontinued operations - net -- 910 7,181 Restriction of cash to secure long-term obligations -- 9,529 (4,307) Other - net (1,186) 2,769 (4,764) - ------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities (226,708) (10,280) (15,473) - ------------------------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 57 477 (290) - ------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 42,273 11,173 (9,040) CASH AND CASH EQUIVALENTS, JANUARY 1 20,059 8,886 17,926 - ------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 62,332 $ 20,059 $ 8,886 =============================================================================================================================== CHANGES IN ASSETS AND LIABILITIES WHICH PROVIDED (USED) CASH, EXCLUSIVE OF CHANGES SHOWN SEPARATELY Billed, unbilled and other receivables - net $ (11,250) $ (8,351) $ 5,170 Accounts payable (3,101) (4,559) (3,928) Federal income, property and other taxes payable - net 1,522 390 1,397 Other current assets and liabilities 6,989 6,262 6,208 Other noncurrent assets and liabilities 2,352 3,725 (1,667) - ------------------------------------------------------------------------------------------------------------------------------- $ (3,488) $ (2,533) $ 7,180 =============================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH PAID FOR: Income taxes, including amounts paid for discontinued operations $ 10,616 $ 8,086 $ 11,184 Interest $ 20,351 $ 14,503 $ 13,679 ===============================================================================================================================
The accompanying notes to the consolidated financial statements are an integral part of these statements. Primark Corporation and Subsidiaries 23 3 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
============================================================================================================================== In Thousands At December 31 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------ ASSETS CURRENT ASSETS Cash and cash equivalents, at cost(which approximates market value) $ 62,332 $ 20,059 Receivables: Billed receivables less allowance for doubtful accounts of $4,371,000 and $2,226,000, respectively 107,636 78,940 Unbilled and other receivables 33,255 23,416 Other current assets 17,146 12,583 - ------------------------------------------------------------------------------------------------------------------------------ 220,369 134,998 - ------------------------------------------------------------------------------------------------------------------------------ DEFERRED CHARGES AND OTHER ASSETS Goodwill, less accumulated amortization of $27,330,000 and $18,072,000, respectively 436,203 256,345 Other intangible assets, less accumulated amortization of $9,308,000 and $15,981,000, respectively 29,074 29,280 Capitalized software, less accumulated amortization of $5,015,000 and $1,810,000, respectively 20,676 10,472 Net long-term investment in financing leases (Note 5a) 11,871 14,960 Other (Note 6c) 12,396 8,384 - ------------------------------------------------------------------------------------------------------------------------------ 510,220 319,441 - ------------------------------------------------------------------------------------------------------------------------------ PROPERTY, PLANT AND EQUIPMENT, AT COST Computer equipment 56,765 42,446 Leasehold improvements 23,928 15,268 Property leased to others 16,020 16,020 Other 16,806 9,370 - ------------------------------------------------------------------------------------------------------------------------------ 113,519 83,104 Less - Accumulated depreciation 41,709 29,627 - ------------------------------------------------------------------------------------------------------------------------------ 71,810 53,477 - ------------------------------------------------------------------------------------------------------------------------------ $802,399 $507,916 ============================================================================================================================== LIABILITIES AND COMMON SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 21,184 $ 13,375 Accrued employee payroll and benefits 30,233 18,618 Federal income, property and other taxes payable 9,582 12,383 Deferred income 41,940 20,983 Current portion of long-term debt, including capital lease obligations (Note 6b) 5,105 4,907 Other 30,675 26,842 - ------------------------------------------------------------------------------------------------------------------------------ 138,719 97,108 - ------------------------------------------------------------------------------------------------------------------------------ LONG-TERM DEBT AND OTHER LIABILITIES Long-term debt, including capital lease obligations (Note 6b) 265,863 145,926 Deferred income taxes 13,189 13,220 Other 13,625 10,007 - ------------------------------------------------------------------------------------------------------------------------------ 292,677 169,153 - ------------------------------------------------------------------------------------------------------------------------------ Total liabilities 431,396 266,261 - ------------------------------------------------------------------------------------------------------------------------------ CONTINGENCIES (Note 8) REDEEMABLE PREFERRED STOCK $1 par value-authorized, 4,000,000 shares; issued and outstanding, 674,943 shares 16,874 16,874 - ------------------------------------------------------------------------------------------------------------------------------ COMMON SHAREHOLDERS' EQUITY (SEE ACCOMPANYING STATEMENT) 354,129 224,781 - ------------------------------------------------------------------------------------------------------------------------------ $802,399 $507,916 ==============================================================================================================================
The accompanying notes to the consolidated financial statements are an integral part of these statements. Primark Corporation and Subsidiaries 24 4 CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
============================================================================================================================== In Thousands For Year Ended December 31 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK, without par value-authorized 65,000,000 shares, issued 24,435,968, 19,912,668, and 19,912,738 shares, respectively, at $0.02 stated value Balance - beginning of period $ 398 $ 398 $ 398 Issued in public offering 91 -- -- - ------------------------------------------------------------------------------------------------------------------------------ Balance - end of period 489 398 398 - ------------------------------------------------------------------------------------------------------------------------------ ADDITIONAL PAID-IN CAPITAL Balance - beginning of period 113,696 113,545 113,668 Issued in public offering 104,617 -- -- Tax benefit relating to stock option plans 4,177 -- -- Option exercises 3,076 -- -- Gain (loss) on treasury shares 439 151 (123) - ------------------------------------------------------------------------------------------------------------------------------ Balance - end of period 226,005 113,696 113,545 - ------------------------------------------------------------------------------------------------------------------------------ RETAINED EARNINGS Balance - beginning of period 124,964 112,648 108,561 Net income 18,316 13,750 5,513 Dividends on preferred stock (1,434) (1,434) (1,426) - ------------------------------------------------------------------------------------------------------------------------------ Balance - end of period 141,846 124,964 112,648 - ------------------------------------------------------------------------------------------------------------------------------ TREASURY STOCK, at average cost, 1,119,287, 1,392,789 and 1,534,463 shares, respectively, held in treasury Balance - beginning of period (13,145) (14,264) (15,918) Repurchased (6,944) (764) (140) Reissued for employee stock purchase plan 1,933 1,828 1,794 Reissued for stock option plans 3,342 55 -- - ------------------------------------------------------------------------------------------------------------------------------ Balance - end of period (14,814) (13,145) (14,264) - ------------------------------------------------------------------------------------------------------------------------------ UNEARNED COMPENSATION Balance - beginning of period (1,674) (2,678) (3,804) Amortization of unearned compensation 965 1,004 1,126 - ------------------------------------------------------------------------------------------------------------------------------ Balance - end of period (709) (1,674) (2,678) - ------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT Balance - beginning of period 542 (1,515) (1,350) Translation adjustment 1,224 3,070 (235) Income tax benefit (expense) on adjustment (454) (1,013) 70 - ------------------------------------------------------------------------------------------------------------------------------ Balance - end of period 1,312 542 (1,515) - ------------------------------------------------------------------------------------------------------------------------------ Total Common Shareholders' Equity $ 354,129 $ 224,781 $ 208,134 ==============================================================================================================================
The accompanying notes to the consolidated financial statements are an integral part of these statements. 25 Primark Corporation and Subsidiaries 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of Primark Corporation and all majority-owned subsidiaries (the "Company"). Investments in companies of fifty percent or less are carried at equity unless the Company has a controlling influence. Significant intercompany transactions and balances have been eliminated. To facilitate the timely preparation of the Company's calendar year financial statements, the foreign and domestic accounts of Datastream International Limited and affiliates ("Datastream") are included in the Company's consolidated accounts on a one-month lag based on a fiscal year ending November 30. 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 years' statements to conform to the current year presentation. b. 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 U.S. 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 translation are reported as a separate component of Common Shareholders' Equity. Gains and losses resulting from transactions and certain balance sheet accounts that are denominated in currencies other than the applicable functional currency are included in income. c. Derivative Financial Instruments The Company enters into currency exchange and interest rate swap agreements, consisting principally of forward exchange contracts and purchased currency options, to minimize interest rate and foreign exchange risks. Gains and losses related to qualifying accounting hedges of firm commitments are deferred and recognized in income when the hedged transaction occurs. Gains and losses from financial instruments which do not qualify for hedge accounting are marked to market currently and recognized as a gain or loss in the current period. The Company does not hold or issue derivative financial instruments for trading purposes. d. Contract Revenue Recognition Revenues are derived from services provided to the U.S. Government and commercial customers under various types of contracts. Revenues under cost reimbursement type contracts are recorded as work is performed. Revenues derived from fixed-price contracts are recorded using the percentage-of-completion method measured by costs incurred to date to estimated total costs for each contract. Revenues derived from time and materials contracts are recorded at contractual rates as work is performed and costs are incurred. Revisions in estimates of costs and profits related to contracts are reflected in income currently. Provisions for estimated losses on contracts are recorded to income when identified. e. Subscription Revenue Recognition Revenue derived from subscription contracts are generally billed in advance of services provided. Amounts billed in advance are recorded to deferred income and recognized ratably over the period in which services are performed. f. Lease Classification and Revenue Recognition The Company is the lessor of depreciable and non-depreciable property. Depreciable property included in capital leases is classified and accounted for as direct financing leases. Accordingly, the unearned interest is amortized to income over the lease term using a method which approximates the interest method. Nondepreciable property is classified and accounted for as operating leases. Revenues on operating leases are recognized when earned. Revenues from the Company's financing and operating leases also include reimbursements of certain executory costs. Primark Corporation and Subsidiaries 26 6 NOTES CONTINUED ================================================================================ g. Cash and Cash Equivalents Cash and cash equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less. h. Goodwill and Other Intangibles Goodwill represents the excess of the purchase price over the fair value of net tangible assets acquired and is being amortized over estimated useful lives ranging from 20 to 40 years. The Company annually evaluates the net balance of goodwill for recoverability based on the undiscounted projected cash flows of the respective businesses. Based upon the anticipated future income and cash from operations, in the opinion of Company management, there has been no impairment. Other intangible assets and liabilities consist of non-compete covenants, proprietary data, trademarks and unfavorable lease commitments. These costs are amortized on a straight-line basis over periods ranging from 3 to 20 years. i. Property, Equipment and Capitalized Software Computer equipment and other property, plant and equipment 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. Capitalized software is amortized on a straight-line basis over periods ranging from 3 to 5 years. j. Income Taxes The Company provides deferred income taxes for the expected future tax consequences of all temporary differences, and adjusts deferred tax balances to reflect changes in tax rates expected to be in effect during the periods in which the temporary differences reverse. As temporary differences reverse, the related deferrals are recorded to income. k. Earnings Per Share Earnings per share from continuing operations are computed by reducing the related income by preferred stock dividends to derive per share amounts applicable to common stock. Per share amounts are computed based on the weighted average common shares outstanding plus common equivalent shares. Common equivalent shares result from the assumed exercise of outstanding stock options, reduced by the number of shares that could be purchased from the proceeds of such exercise at the average market price of the Company's common stock. Common equivalent shares of 1,452,000, 1,399,000, and 1,479,000 shares were included in the computation of earnings per share amounts for the years ended December 31, 1995, 1994, and 1993, respectively. Earnings per share assuming full dilution have not been disclosed for any year presented as they do not differ materially from earnings per common and common equivalent share. l. Newly Issued Accounting Standards In March, 1995, Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), was issued. This statement, which will be required in 1996, establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and for long lived-assets and certain identifiable intangibles to be disposed of. In October, 1995, Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), was issued. This statement, which will be required in 1996, establishes financial accounting and reporting standards for stock-based employee compensation plans. The Company is continuing to evaluate whether it will elect to change to the recognition provisions of SFAS 123. The Company has not determined the effects of implementing SFAS 121 and SFAS 123 on its financial position and results of operations for any future periods. Primark Corporation and Subsidiaries 27 7 NOTES CONTINUED ================================================================================ 2. Acquisitions The Company's consolidated financial statements include the operations of Disclosure from its June 29, 1995 acquisition date and the operations of Vestek from its June 30, 1994 acquisition date for the years ended 1995 and 1994, respectively. a. Acquisition of Disclosure Incorporated and Affiliates On June 29, 1995, the Company acquired the entire equity interest of Disclosure Incorporated and certain of its affiliates ("Disclosure"), including I/B/E/S International Inc. ("I/B/E/S") and a 50% ownership of Worldscope for a total purchase price of $200,000,000 in cash. The Company obtained $215,000,000 of external financing, of which $185,000,000 was used to finance the cash consideration paid in the acquisition. Bank financing was obtained through a $125,000,000 term loan and a $45,000,000 draw on a $75,000,000 revolving line of credit, pursuant to a Term Loan Agreement and a Revolving Credit Facility (Note 6). The remaining $15,000,000 of bank financing was obtained pursuant to a loan agreement with one of the Company's wholly-owned subsidiaries (Note 6a). The Company incurred fees of approximately $6,076,000 associated with the acquisition. Founded in 1968, Disclosure is a provider of "as reported" and abstracted financial information, primarily derived from Securities and Exchange Commission filings and supplemented with information from companies, stock exchanges and other sources, both in the United States and worldwide. I/B/E/S is a source of earnings estimates for investors, financial institutions and portfolio managers on a global basis. The acquisition was accounted for as a purchase and, accordingly, the purchase price was allocated to Disclosure's tangible and intangible net assets acquired, based upon their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of total net assets acquired of approximately $188,065,000 was recorded to goodwill and will be amortized over lives ranging between 25 and 40 years. Future adjustments to the total purchase price allocation, if any, are not expected to materially affect the Company's financial statements. The following unaudited pro forma financial information reflects the consolidated results of operations of the Company for the years ended December 31, 1995 and 1994 as though the acquisition of Disclosure had occurred on January 1, 1994. 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 acquisition of Disclosure been consummated on January 1, 1994.
================================================================================ (000s except Earnings Per Share) 1995 1994 - -------------------------------------------------------------------------------- Operating revenues $668,586 $562,600 Income from continuing operations 16,838 7,056 Net income applicable to common stock 15,404 5,622 Earnings per share from continuing operations $ 0.75 $ 0.28 ================================================================================
A summary of the cash components of the Disclosure acquisition is shown below.
================================================================================ (000s) - -------------------------------------------------------------------------------- Fair value of assets acquired (including goodwill) $247,475 Liabilities assumed 47,475 - -------------------------------------------------------------------------------- Total purchase price 200,000 Acquisition fees paid to date 6,076 - -------------------------------------------------------------------------------- Total cash paid 206,076 Acquired cash (1,605) - -------------------------------------------------------------------------------- Cash paid - net of acquired cash $204,471 ================================================================================
b. Acquisition of Vestek Systems, Inc. On June 30, 1994, the Company acquired all of the assets and assumed substantially all of the liabilities of Vestek Systems, Inc. ("Vestek") for a total purchase price of approximately $6,900,000 in cash. Vestek is a provider of information services and applications software to customers in the U.S. and Canada. The acquisition was accounted for as a purchase and, accordingly, the purchase price (and related transaction fees) were allocated to the estimated fair value of Vestek's assets and assumed liabilities. The remainder of the purchase price of approximately $6,000,000 was recorded to goodwill and is being amortized over 20 years. Primark Corporation and Subsidiaries 28 8 NOTES CONTINUED ================================================================================ 3. Dispositions and Other Charges On May 20, 1994, the Company sold all of the issued and outstanding common stock of Wellmark Incorporated for $6,500,000 in cash. The sale resulted in a pre-tax gain of $1,781,000 which has been included in other income for 1994. The sale represented a disposal of a portion of the Company's information services business segment. Accordingly, Wellmark's operating results through the date of disposal, along with the gain resulting therefrom, have been included as part of income from continuing operations. On August 27, 1993, the Company sold all of the issued and outstanding common stock of Westmark for approximately $6,000,000 consisting of $3,500,000 in cash and two promissory notes. For the year ended December 31, 1993, the Company recognized a loss from discontinued operations of $764,000, and an after-tax loss from disposal of $1,594,000 for Westmark. During 1993, Westmark recorded $5,166,000 of revenues. In July 1994, the Company restructured the Westmark promissory notes. The Company agreed to cancel the notes with a remaining value of $2,195,000 in exchange for a $500,000 cash payment received in October 1994, 400,000 shares of Network Financial Services, Inc. common stock and a full release from all indemnity obligations given in connection with the Westmark sale. On June 30, 1994, the Company recorded a pre-tax charge of $1,251,000 reflecting the write-off of these notes. The loss was recorded to continuing operations in other deductions, as the revaluation of these notes occurred subsequent to the disposal date. On December 31, 1993, the Company liquidated its life insurance business (previously a subsidiary of Westmark) which, after payment of certain liquidation costs, resulted in net cash proceeds to the Company of approximately $1,100,000. Additionally, an after tax charge of $1,208,000 was recorded during the fourth quarter of 1993 for anticipated settlements of tax and legal matters related to previously discontinued operations. 4. Unbilled Receivables Unbilled receivables under U. S. Government and commercial contracts consisted of the following.
================================================================================ December 31 (000s) 1995 1994 - -------------------------------------------------------------------------------- U.S. Government $19,536 $15,866 Commercial 11,347 5,827 - -------------------------------------------------------------------------------- Total unbilled receivables $30,883 $21,693 ================================================================================
Unbilled receivables represent recoverable costs and accrued profit not billed to customers that will be billed on the basis of contractual terms and delivery schedules. At December 31, 1995 and 1994, U.S. Government unbilled receivables included a retainage of $4,418,000 and $4,487,000 respectively. Of the retainage amount at December 31, 1995, $2,627,000 is expected to be collected after one year, subject to government audit and approval. All other unbilled receivables are due within one year. ================================================================================ 5. Leases a. Lessor Primark Storage Leasing Corporation ("PSLC") leases to ANR Pipeline Company underground natural gas storage fields under noncancellable agreements expiring in 2003. Such agreements provide for renewal options which could extend the lease term to 2013. Future minimum lease receipts, as shown below, are reflected through the year 2003. The cost of nondepreciable property leased under related operating leases was $16,020,000 for the periods ending December 31, 1995 and 1994. The components of PSLC's net investment in financing leases are shown below.
================================================================================ December 31 (000s) 1995 1994 - -------------------------------------------------------------------------------- Total minimum lease receipts $ 37,927 $49,395 Less-executory costs 15,732 21,185 - -------------------------------------------------------------------------------- Minimum lease receipts 22,195 28,210 Less-unearned interest 7,218 10,144 - -------------------------------------------------------------------------------- Net investment in financing leases 14,977 18,066 Current portion 3,106 3,106 - -------------------------------------------------------------------------------- Net long-term investment in financing leases $11,871 $14,960 ================================================================================
Primark Corporation and Subsidiaries 29 9 NOTES CONTINUED ================================================================================ Future minimum lease receipts related to direct financing leases will vary from year to year as a result of the provisions of the lease agreements. Estimated future minimum lease receipts at December 31, 1995 are shown below.
================================================================================ (000s) Direct Financing Operating Leases Leases - -------------------------------------------------------------------------------- 1996 $ 7,289 $ 2,072 1997 6,814 2,070 1998 6,156 2,070 1999 5,594 2,069 2000 4,567 2,070 Thereafter 7,507 6,236 - -------------------------------------------------------------------------------- Total minimum lease receipts $37,927 $16,587 ================================================================================
b. Lessee The Company leases a variety of assets principally under noncancellable operating lease agreements, including office facilities, real property, computer and office equipment, and heavy aircraft maintenance facilities and related equipment. These leases expire at various dates through 2021. Certain of TASC's office facilities are leased from a related party under operating leases which expire through the year 2006. Rent expenses under these leases were $3,750,000, $3,708,000, and $3,613,000 for the years ended 1995, 1994, and 1993, respectively. In connection with these leases, the Company has an option to purchase TASC's corporate headquarters facility at any time through June 30, 1996 for approximately $30,000,000. Estimated future minimum commitments under noncancelable leases are shown below.
================================================================================ (000s) Capital Operating - -------------------------------------------------------------------------------- 1996 $ 1,714 $ 28,876 1997 1,161 20,036 1998 847 16,806 1999 49 13,564 2000 - 12,406 Thereafter - 62,338 - -------------------------------------------------------------------------------- Total minimum lease payments 3,771 $154,026 Amounts representing interest and other (435) - -------------------------------------------------------------- Present value of net minimum payments 3,336 - -------------------------------------------------------------- Current portion (1,353) - -------------------------------------------------------------- Long-term obligations $ 1,983 ================================================================================
Total rent expense for all operating leases, including TASC's related party rentals, was $27,524,000, $20,982,000, and $21,052,000 (net of sublease rentals of $250,000, $1,023,000, and $1,914,000) for the years ended December 31, 1995, 1994 and 1993, respectively. 6. Short-Term and Long-Term Debt a. Notes Payable Information relative to short-term bank borrowings of the Company and its subsidiaries is shown below.
================================================================================ (000s) 1995 1994 1993 - -------------------------------------------------------------------------------- Outstanding borrowings at December 31 $ - $ - $17,000 Available for future borrowings at December 31 $75,000 $75,000 $58,000 Weighted average effective interest rate on: Average bank borrowings 8.0% 6.1% 5.8% Bank borrowings at December 31 - - 5.4% Aggregate borrowings outstanding: Maximum outstanding $64,324 $21,858 $26,000 Average outstanding during the year $22,661 $ 6,653 $11,197 ================================================================================
On June 29, 1995, the Company entered into a new $75,000,000 revolving credit facility (the "Credit Facility") to replace its $75,000,000 credit agreement due to expire in 1996 (Note 6c). The Credit Facility expires on October 15, 2000. Interest on outstanding borrowings under the Credit Facility is payable at a rate of 1.75% above the current prevailing LIBOR rate or, at the Company's option, at 0.50% above the higher of the current prevailing Federal Funds rate plus 0.50% or the prime rate of interest. Commitment fees are payable quarterly at a rate of 0.375% per annum on the average daily unused portion of the facility. The Credit Facility contains various restrictive covenants which, among other things, require the Company to maintain certain minimum levels of consolidated net worth and specific consolidated liquidity and long-term solvency ratios. The Credit Facility is secured by a pledge of the outstanding common stock of certain of the Company's subsidiaries. Primark Corporation and Subsidiaries 30 10 NOTES CONTINUED ================================================================================ On June 29, 1995, TASC, a wholly-owned subsidiary of the Company, entered into a $15,000,000 unsecured Loan Agreement (the "Loan") due June 28, 1996 in connection with the Company's acquisition of Disclosure. Interest of approximately 7.625% was charged on outstanding borrowings under the Loan. On December 6, 1995, the Loan was retired through proceeds received from the Company's issuance of common stock (Note 10). b. Long-Term Debt The Company's outstanding long-term debt, including capital lease obligations, consisted of the following:
================================================================================ December 31 (000s) 1995 1994 - -------------------------------------------------------------------------------- Primark 8.75% Senior Notes $112,000,000 due 2000 $111,140 $111,003 Primark Storage Leasing 8.82% Senior Secured Note due through 2010 31,492 35,260 Primark bank Term Loan due through 2002 125,000 - Capital lease obligations 3,336 4,570 - -------------------------------------------------------------------------------- Total debt and capital lease obligations 270,968 150,833 Less - current maturities 5,105 4,907 - -------------------------------------------------------------------------------- Long-term debt and capital lease obligations $265,863 $145,926 ================================================================================
Required principal payments on long-term debt and notes payable over the next five years, excluding capital lease obligations are $3,752,000 in 1996, $8,929,000 in 1997, $18,947,000 in 1998, $23,884,000 in 1999, and $33,665,000 in 2000. Primark's 8.75% Senior Notes due 2000 ("Senior Notes") are carried at their principal amount due at maturity less unamortized discount. Interest on the Senior Notes is payable semi-annually on April 15 and October 15. The Senior 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 on or after October 15, 1997 at redemption prices ranging from 104.375% in 1997 to 100.00% in 1999 and thereafter, plus accrued interest. Under certain circumstances, the Company may redeem up to 35% of the originally issued principal amount of the Senior Notes prior to October 15, 1997, at a price of 109.00% plus accrued interest. The Indenture pursuant to which the Senior Notes were issued contains various restrictive covenants. Under the most 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: (1) $10,000,000; (2) 50% of the Company's consolidated net income (cumulative from the date of issuance of the Senior Notes); plus (3) 100% of the net proceeds received from sales of the Company's common stock for cash. On August 7, 1992, Primark Storage Leasing issued through private placement a $45,000,000, 8.82% Senior Secured Note. Proceeds from this note were transferred to the Company to finance the Datastream acquisition. Principal and interest payments on the note are due in quarterly installments until its October 15, 2010 maturity; principal installments paid during 1995 totaled $3,768,000. The note is nonrecourse and secured by principally all assets of Primark Storage Leasing, along with all of its leases and rental revenues. On June 29, 1995, the Company entered into a $125,000,000 Term Loan Agreement (the "Term Loan") due June 30, 2002. Principal payments are due semi-annually commencing on December 31, 1997. Interest on outstanding borrowings under the Term Loan is payable at a rate of 2.0% above the current prevailing LIBOR rate of interest or, at the Company's option, at 0.75% above the higher of the current prevailing Federal Funds rate plus 0.50% or the prime rate of interest. The Term Loan contains various restrictive covenants which, among other things, require the Company to maintain certain minimum levels of consolidated net worth and specific consolidated liquidity and long-term solvency ratios. The Term Loan is secured by a pledge of the outstanding common stock of certain of the Company's subsidiaries. Deferred debt issue costs are amortized over the terms of the related debt, ranging from 3 to 18 years. c. Debt Refinancing On June 29, 1995, the Company entered into a new Primark Corporation and Subsidiaries 31 11 NOTES CONTINUED ================================================================================ $75,000,000 revolving Credit Facility (Note 6a) to replace a similar facility due to expire in 1996. Pursuant to the terms of the Credit Facility, the Company's prior revolving credit agreement was terminated. The early extinguishment of such indebtedness generated an extraordinary after-tax loss of $534,000 for the write-off of unamortized debt issue costs associated with the credit agreement. On October 18, 1993, the Company issued Senior Notes (Note 6b) at a price of 98.975% which generated total proceeds to the Company of $110,852,000 before underwriting fees. Concurrent with the issuance of the Senior Notes, the Company entered into the three-year $75,000,000 revolving credit agreement with a bank. Proceeds from the issuance of the Senior Notes, together with an initial borrowing under the credit agreement and existing cash balances, were used to retire certain then existing indebtedness of the Company. The early extinguishment of the indebtedness generated an extraordinary after-tax loss of $2,650,000 for the year ended December 31, 1993. This loss primarily reflects the write-off of unamortized debt issue costs associated with the Company's retired indebtedness. ================================================================================ 7. FINANCIAL INSTRUMENTS a. Foreign Exchange Risk Management The Company enters into forward exchange contracts and purchases currency options to reduce the exposure of foreign currency fluctuations associated with certain firm commitments and anticipated cash flows. The Company's principal strategy is to protect the net cash flow from foreign customers' contracts. As these contracts are typically under two years in length, most of the derivative financial instruments are under two years in duration. The Company principally enters into contracts which deliver Japanese yen, Swiss francs, German deutsche marks and French francs for U.S. dollars at agreed-upon exchange rates. Other contracts include the exchange of German deutsche marks for British pounds. Counterparties to these agreements are major international financial institutions. The tables below illustrate the U.S. dollar equivalent of foreign exchange contracts at December 31, 1995 and 1994 along with unrecorded gross unrealized gains and losses.
================================================================================ December 31 (000s) 1995 - -------------------------------------------------------------------------------- Gross Gross Unrealized Unrealized Notional Gains Losses Amount Deferred Deferred - -------------------------------------------------------------------------------- FORWARD EXCHANGE CONTRACTS: Japanese Yen $ 5,199 $495 $ - Deutsche Mark/Sterling 2,986 - - Deutsche Mark 4,836 161 (133) Swiss Franc 3,798 165 (66) French Franc 2,827 41 (44) Other - - - - -------------------------------------------------------------------------------- $19,646 $862 $ (243) ================================================================================ OPTION CONTRACTS: Japanese Yen $ 876 $ 53 $ - Deutsche Mark/Sterling 2,800 - (13) Deutsche Mark 4,136 2 (24) Swiss Franc 3,582 - (26) French Franc 2,830 - (22) Other 726 4 (1) ================================================================================ $14,950 $ 59 $ (86)
================================================================================ December 31 (000s) 1994 - -------------------------------------------------------------------------------- Gross Gross Unrealized Unrealized Notional Gains Losses Amount Deferred Deferred - -------------------------------------------------------------------------------- FORWARD EXCHANGE CONTRACTS: Japanese Yen $ 6,795 $ 46 $ (50) Deutsche Mark/Sterling 5,717 - - Deutsche Mark 3,748 - (276) Swiss Franc 3,232 8 (147) French Franc 2,856 12 (94) Other 313 - (13) - -------------------------------------------------------------------------------- $ 22,661 $ 66 $ (580) ================================================================================ OPTION CONTRACTS: Deutsche Mark $ 1,419 $ 4 $ - Swiss Franc 1,462 3 - French Franc 710 1 - Other 288 - (3) - -------------------------------------------------------------------------------- $ 3,879 $ 8 $ (3) ================================================================================
b. Long-Term Foreign Currency Exchange Instruments In 1992, as required by the Company's bank group, Datastream entered into long-term foreign currency swap agreements. As a result of the 1993 refinancing pursuant Primark Corporation and Subsidiaries 32 12 NOTES CONTINUED ================================================================================ to which Datastream's debt was repaid in full, these swaps were sold on October 25, 1993 for a small amount of cash. Changes in the market value of the swaps were recorded to income which resulted in an after-tax loss of $939,000 for the year ended December 31, 1993. c. Interest Rate Swap Agreement On August 1, 1995, the Company entered into an interest rate swap agreement with a major bank, having a notional principal amount of $18,333,000. The swap agreement effectively changed the interest rate of a portion of Primark's long-term debt from a floating rate to a 6.1% fixed rate. This swap agreement expires in December of 1999. Though the Company is exposed to credit and market risk in the event of future non-performance by the bank, management does not anticipate that such an event will occur. d. Fair Value of Financial Instruments The carrying and estimated fair value of certain of the Company's financial instruments are shown below.
================================================================================== Carrying Value Estimated Fair Value December 31 (000s) 1995 1994 1995 1994 - ---------------------------------------------------------------------------------- Options $ 335 $ 168 $ 308 $ 173 Forwards $ 109 $ 56 $ 728 $ (458) Interest rate swaps $ - $ - $ (298) $ - 8.75% Senior Notes $111,140 $ 111,003 $ 114,800 $107,520 8.82% Senior Secured Note $ 31,492 $ 35,260 $ 37,443 $ 34,552 Redeemable preferred stock $ 16,874 $ 16,874 $ 34,928 $ 17,717 ==================================================================================
Estimated fair values of these financial instruments at December 31, 1995 and 1994 were based upon quotes obtained from investment and commercial bankers using comparable securities. The fair values of currency forward contracts and purchased currency options were estimated based on quoted market prices of contracts with similar terms. Other financial instruments have been excluded as their carrying value approximates their market value. ================================================================================ 8. CONTINGENCIES On August 16, 1994, a jury in a civil case in the Federal District Court in Boston, Massachusetts returned an unfavorable verdict against the Company's wholly-owned subsidiary, TASC, for approximately $3.1 million plus accrued interest. The lawsuit was brought by a former TASC employee and involved a claim for compensation for intellectual property transferred to TASC and claims relating to such employee's termination of employment. The events underlying this lawsuit occurred prior to the Company's acquisition of TASC in August of 1991. In July 1995, TASC paid $3.3 million in full settlement of this lawsuit. The Company had previously reserved for the settlement. On June 24, 1994, a jury in a civil case in the Massachusetts Superior Court (the "Court") returned an unfavorable verdict against the two founders of TASC, and against TASC itself. The suit was brought by a former employee regarding a TASC stock transaction with took place in 1976, prior to the Company's acquisition of TASC in 1991. On June 28, 1994, the Court ordered that judgment be entered on the verdict requiring the two founders (but not TASC itself) to disgorge $19,800,000. Such amount accrues post-judgment interest at a statutory rate. As an alternative course of action, the plaintiff may pursue the two founders and TASC, jointly and severally, for $48,600. Based on the adjudication, the Company has denied requests of the two founders for indemnification. Certain post-verdict motions (including a motion for judgment notwithstanding the verdict, and in the alternative, a motion for a new trial) are pending. While the outcome of these motions cannot be predicted with certainty, the Company believes it will not be required to pay any portion of this judgment. On April 8, 1994, the Department of Defense Office of the Assistant Inspector General for Auditing (the "IG") issued a final report relative to its audit of contracting practices of the Ballistic Missile Defense Organization (the "BMDO"), which included a comprehensive review of one of TASC's contracts with the BMDO. The report included a recommendation for monetary recovery from TASC. All of the issues raised in the report were settled with the cognizant government contracting officer during 1995. The Company's reserves were adequate for the resolution of this matter. Primark Corporation and Subsidiaries 33 13 NOTES CONTINUED ================================================================================ The Company has received notifications from the Michigan Department of Natural Resources of three matters involving environmental contamination in the vicinity of natural gas storage fields in Michigan which the Company leases to an interstate pipeline company. The Company conducts no operations of its own on these properties. While the ultimate resolution of these matters cannot be predicted at this time, the Company believes that its existing reserves of approximately $250,000 are adequate for the resolution of such matters The Company and its subsidiaries are involved in certain 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 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. ================================================================================ 9. REDEEMABLE PREFERRED STOCK The Company's Series A Cumulative Convertible Preferred Stock pays cumulative quarterly dividends at an annual rate of 8.5%. Such dividends may be paid in the form of cash or additional shares of preferred stock through August 1996; all such dividends thereafter must be paid in the form of cash. Increases in the number of preferred shares outstanding as a result of dividends paid in the form of additional preferred shares were 14,044 for the year ended December 31, 1993. All subsequent preferred stock dividends declared have been paid in cash. Subject to certain anti-dilution provisions, each share of preferred stock may be converted, at any time, into the Company's common stock at a rate of $14.49. Commencing August 1996, the Company may redeem the preferred stock at its $25 per share liquidation preference, plus any accrued and unpaid dividends. Commencing August 1998, a mandatory sinking fund will be provided for the annual retirement of 150,000 preferred shares. All preferred shares must be redeemed by the Company by August 2001. Holders of the preferred stock have certain voting rights should dividend defaults occur. ================================================================================ 10. COMMON SHAREHOLDERS' EQUITY a. Common Stock On December 5, 1995, the Company completed an equity offering in which it sold 4,068,200 shares of its common stock and offered an additional 288,000 shares for certain selling shareholders. The sale of common stock together with option proceeds related to the selling shareholders provided the Company $107,784,000, net of commissions and expenses. A portion of the proceeds were used to pay down the outstanding balance of $48,166,000 on the Company's revolving credit agreement and to prepay the $15,000,000 TASC Loan (Note 6a). Changes in the number of shares of the Company's common stock are shown below.
================================================================================ December 31 1995 1994 1993 - -------------------------------------------------------------------------------- COMMON STOCK ISSUED 24,435,968 19,912,668 19,912,738 COMMON STOCK HELD IN TREASURY Balance - beginning of period (1,392,789) (1,534,463) (1,714,652) Treasury shares acquired (279,154) (61,030) (13,100) Treasury shares reissued: Employee stock purchase plan 203,647 196,617 193,289 Exercise of Stock Options 349,009 6,087 - - -------------------------------------------------------------------------------- Balance - end of period (1,119,287) (1,392,789) (1,534,463) - -------------------------------------------------------------------------------- COMMON STOCK OUTSTANDING 23,316,681 18,519,879 18,378,275 ================================================================================
In November 1993, the Company's Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company's common stock from time to time through open market and/or privately negotiated transactions. The Company repurchased 61,030 shares and 13,100 shares of its outstanding common stock on the open market for the years ended December 31, 1994 and 1993, respectively. During 1995, shares of the Company's common stock were delivered to satisfy the exercise price of stock options and shares were withheld from the exercise of stock options to Primark Corporation and Subsidiaries 34 14 NOTES CONTINUED ================================================================================ satisfy the related tax withholding requirements. All such repurchased shares are held in treasury to be used for general corporate purposes. The Company's 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, which expires on January 25, 1998, generally becomes effective when an "Acquiring Person" (as defined in the agreement) beneficially owns 20% or more of the outstanding shares of the Company's common stock. In general, upon a "Triggering Event" (as defined in the agreement), each share of the Company's common stock carries the right to convert the corresponding "Attached Rights" (as defined in the agreement) into one share of common stock at a specified price. At December 31, 1995, common stock reserved for issuance under the Rights Agreement was 23,316,681 shares. b. Employee Stock Ownership and Profit Sharing Plans The Primark Corporation Employee Stock Ownership Plan covers all of the employees of the Company and certain subsidiaries. The plan was pre-funded in 1989 with 965,000 shares of the Company's common stock which is being allocated to participants over an eight-year period. TASC's Profit Sharing and Stock Ownership Plan covers substantially all of its employees. Employer contributions primarily are determined by TASC's Board of Directors at amounts not exceeding the maximum amount deductible for Federal income tax purposes. Contributions to this plan were $10,625,000, $9,680,000 and $7,742,000 for the years ended December 31, 1995, 1994 and 1993, respectively. This plan holds all of the Company's outstanding preferred stock (Note 9). c. Employee Stock Purchase and Stock Option Plans Established in 1992, the Primark Corporation Employee Stock Purchase Plan is available for all employees of the Company and certain subsidiaries. Under this plan, employees may purchase, through periodic payroll deductions, up to a maximum of 1,000,000 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 provides for the granting of options to purchase common stock to officers and certain key employees of the Company and its subsidiaries. The Primark Corporation Stock Option Plan for Non-Employee Directors provides for the granting of options to purchase shares of common stock to each director who is not an employee. Common stock reserved for issuance under the Company's stock option plans is 1,438,380. Changes in the number of shares under option granted under the Company's various stock option plans are shown below.
=============================================================================== Year Ended December 31 1995 1994 1993 - ------------------------------------------------------------------------------- Outstanding at beginning of year 4,351,285 3,627,360 3,403,568 Granted 683,786 798,000 260,292 Canceled options (ranging from $10.625 to $14.625 per share) (17,244) (67,988) (36,500) Exercised (ranging from $4.436 to $14.625 per share) (804,109) (6,087) -- - ------------------------------------------------------------------------------- Outstanding at end of year (ranging from $4.512 to $25.250 per share) 4,213,718 4,351,285 3,627,360 Outstanding options not vested (1,008,072) (853,657) (636,950) - ------------------------------------------------------------------------------- Outstanding and exercisable at end of year 3,205,646 3,497,628 2,990,410 =============================================================================== Available for future grant at end of year 675,331 993,123 952,097 ===============================================================================
Stock options available for grant in any one year under Primark Corporation's 1992 Stock Option 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. Accordingly, stock options available for grant at December 31, 1995 included 365,383 stock options that are available for grant during 1996 under Primark Corporation's 1992 Stock Option Plan. Primark Corporation and Subsidiaries 35 15 NOTES CONTINUED ================================================================================ 11. INCOME TAXES
=============================================================================== December 31 (000s) 1995 1994 1993 - ------------------------------------------------------------------------------- FEDERAL AND OTHER INCOME TAXES CONSISTED OF: Current provision $ 14,273 $ 12,378 $ 13,582 Deferred provision (benefit) - net 839 (2,611) (4,037) - ------------------------------------------------------------------------------- Total Federal and other income tax expense $ 15,112 $ 9,767 $ 9,545 - ------------------------------------------------------------------------------- RECONCILIATION BETWEEN STATUTORY AND ACTUAL INCOME TAXES: Income from continuing operations $ 18,850 13,750 $ 11,729 Income tax expense 15,112 9,767 9,545 - ------------------------------------------------------------------------------- Book pretax income $ 33,962 $ 23,517 $ 21,274 =============================================================================== Statutory Federal income taxes at a rate of 35% $ 11,887 $ 8,231 $ 7,446 Adjustments to Federal income taxes: Amortization of goodwill 3,110 2,361 2,245 State income taxes - net 893 24 872 Effect of foreign tax rates (99) (27) (20) Federal income taxes received from lessee (189) (196) (193) Adjustment of Federal income taxes provided in prior years (205) (419) (670) Other - net (285) (207) (135) - ------------------------------------------------------------------------------- Total Federal and other income tax expense $ 15,112 $ 9,767 $ 9,545 ===============================================================================
Gross deferred income tax liabilities and benefits comprising the Company's net deferred income tax liability are shown below.
================================================================================ December 31 (000s) 1995 1994 - -------------------------------------------------------------------------------- Deferred income tax liability $24,229 $13,561 Deferred tax benefits (9,700) (2,293) Net deferred income tax liability 14,529 11,268 Current liability (benefit) 1,340 (1,952) Non-current portion $13,189 $13,220 ================================================================================
At December 31, 1995 and 1994, no valuation allowance relative to deferred income tax benefits was required. The tax effects of significant temporary differences which gave rise to the net deferred income tax liability are shown below.
================================================================================ December 31 (000s) 1995 1994 - -------------------------------------------------------------------------------- Intangible assets $ 7,370 $ 7,399 Unbilled receivables 7,567 6,816 Property, plant and equipment 3,164 2,024 Unearned ESOP compensation 248 586 Accruals not currently deductible (2,309) (3,019) Accrued vacation (2,260) (1,774) Other 749 (764) - -------------------------------------------------------------------------------- Net deferred income tax liability $14,529 $11,268 ================================================================================
12. SEGMENT AND GEOGRAPHIC INFORMATION The Company operates primarily in the information services industry. Information services and related products are provided by TASC, Datastream, Disclosure, I/B/E/S and Vestek principally in the United States and the United Kingdom. Most of Primark's international sales are generated through its affiliated operating structure ("affiliates"), which is located throughout Europe, Asia and the United States. The Company is also engaged in the transportation services industry as a provider of heavy aircraft maintenance and the financial services industry as a lessor of natural gas storage fields to an interstate pipeline company. The Company's operations by industry segment and geographic region are presented in the following table on a stand-alone basis. Information presented includes the operations of Disclosure from its June 29, 1995 acquisition date and includes the operations of Vestek from its June 30, 1994 acquisition date for the years ended 1995 and 1994, respectively. Primark Corporation and Subsidiaries 36 16 NOTES CONCLUDED
============================================================================================================= INDUSTRY SEGMENTS Information Transportation Financial Corporate Consolidated (000s) Services(1) Services Services & Other (2) - ------------------------------------------------------------------------------------------------------------- 1995 Operating Revenues $ 530,980 $ 79,236 $ 7,094 $ -- $ 617,310 Depreciation and Amortization $ 33,978 $ 952 $ 84 $ 1,341 $ 36,355 Operating Income (Loss) $ 52,846 $ 6,012 $ 4,068 $ (6,015) $ 56,911 Identifiable Assets $ 673,925 $ 39,197 $ 38,184 $ 51,093 $ 802,399 Capital expenditures $ 14,414 $ 7,466 $ 17 $ 765 $ 22,662 - ------------------------------------------------------------------------------------------------------------- 1994 Operating Revenues $ 423,193 $ 46,362 $ 7,471 $ -- $ 477,026 Depreciation and Amortization $ 25,569 $ 622 $ 85 $ 1,261 $ 27,537 Operating Income (Loss) $ 36,704 $ 3,016 $ 4,515 $ (6,199) $ 38,036 Identifiable Assets $ 434,910 $ 14,514 $ 42,778 $ 15,714 $ 507,916 Capital expenditures $ 16,772 $ 4,418 $ 119 $ 1,307 $ 22,616 - ------------------------------------------------------------------------------------------------------------- 1993 Operating Revenues $ 395,054 $ 40,834 $ 8,127 $ -- $ 444,015 Depreciation and Amortization $ 25,156 $ 558 $ 86 $ 397 $ 26,197 Operating Income (Loss) $ 34,752 $ 1,616 $ 4,722 $ (3,820) $ 37,270 Identifiable Assets $ 427,908 $ 10,606 $ 46,194 $ 12,870 $ 497,578 Capital expenditures $ 12,108 $ 480 $ 25 $ 54 $ 12,667
============================================================================================================= GEOGRAPHIC REGIONS Domestic United Other Corporate Consolidated (000s) Kingdom International & Other(2) - ------------------------------------------------------------------------------------------------------------- 1995 Operating Revenues Non-affiliate $ 491,006 $ 63,473 $ 62,831 $ -- $ 617,310 Affiliate (3) $ -- $ 33,621 $ -- $ (33,621) $ -- Operating Income (Loss) Non-affiliate $ 45,226 $ (16,491) $ 34,191 $ (6,015) $ 56,911 Affiliate (3) $ (4,834) $ 33,621 $ (28,787) $ -- $ -- Identifiable Assets $ 540,605 $ 163,647 $ 47,054 $ 51,093 $ 802,399 - ------------------------------------------------------------------------------------------------------------- 1994 Operating Revenues Non-affiliate $ 376,025 $ 55,068 $ 45,933 $ -- $ 477,026 Affiliate (3) $ -- $ 21,373 $ -- $ (21,373) $ -- Operating Income (Loss) Non-affiliate $ 31,171 $ (8,711) $ 21,775 $ (6,199) $ 38,036 Affiliate (3) $ (3,730) $ 21,373 $ (17,643) $ -- $ -- Identifiable Assets $ 284,936 $ 176,100 $ 31,166 $ 15,714 $ 507,916 - ------------------------------------------------------------------------------------------------------------- 1993 Operating Revenues Non-affiliate $ 353,038 $ 62,550 $ 28,427 $ -- $ 444,015 Affiliate (3) $ -- $ 17,387 $ -- $ (17,387) $ -- Operating Income (Loss) Non-affiliate $ 26,752 $ (2,024) $ 16,362 $ (3,820) $ 37,270 Affiliate (3) $ (3,002) $ 17,387 $ (14,385) $ -- $ -- Identifiable Assets $ 278,493 $ 175,189 $ 31,026 $ 12,870 $ 497,578 ============================================================================================================= (1) Information services provided to the U.S. Government accounted for $300,566,000 (49%), $273,541,000 (57%), and $265,439,000 (60%) of total operating revenues for the years ended December 31, 1995, 1994 and 1993, respectively. (2) Corporate and other includes corporate accounts, eliminations and reclassifications, as well as the net assets of the Company's discontinued operations. (3) Affiliate transfers represent service fees received by Datastream's United Kingdom operation from its international affiliates.
PRIMARK CORPORATION AND SUBSIDIARIES 37 17 REPORT OF MANAGEMENT ================================================================================ 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 judgments and estimates. The consolidated financial statements have been audited by Deloitte & Touche LLP, the Company's independent certified public accountants. Their audit was made in accordance with generally accepted auditing standards, as indicated in their report, and included a review of the Company's system of internal accounting controls and test of transactions to the extent they considered necessary to carry out their responsibilities. 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 that 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 and 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 may meet with the committee without management representatives present. /s/ Stephen H. Curran Stephen H. Curran Senior Vice President and Chief Financial Officer February 8, 1996 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ================================================================================ 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, 1995 and 1994 and the related consolidated statements of income, cash flows and common shareholders' equity for each of the three years in the period ended December 31, 1995. 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 misstatements. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Deloitte & Touche LLP Boston, Massachusetts February 8, 1996 Primark Corporation and Subsidiaries 38 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ================================================================================ RESULTS OF OPERATIONS 1995 Compared to 1994 Primark reported 1995 net income available for common stock of $16.9 million ($0.82 per share) compared to $12.3 million ($0.62 per share) earned in 1994. During 1995, $534 thousand ($0.03 per share) of accrued costs related to the refinancing of the Company's revolving bank credit were written-off as an extraordinary item. Excluding the effects of the extraordinary item, 1995 net income was $18.9 million ($0.85 per share), increasing 37.1% over 1994. Primark's 1995 revenues increased 29.4% to $617.3 million. Operating income for 1995 of $56.9 million increased $18.9 million over 1994, representing a 49.6% improvement. The significant increases in revenues and operating income reflect the June 29, 1995 acquisition of Disclosure and I/B/E/S coupled with strong sales efforts and improved profitability in Primark's existing information service and transportation segments. When the effects of the acquisition are excluded, the Company's 1995 revenues and operating income increased 18.6% and 29.9%, respectively, over 1994. Increases in net income were principally the result of operating improvements in Primark's existing businesses, as the impact of the acquisition was partially offset by additional interest costs. The earnings per share calculation was impacted by the December 5, 1995 issue of 4.4 million shares of common stock. However, the effect of the increase in shares outstanding was offset by lower interest costs, with a large portion of the proceeds used to pay off existing bank obligations. Primark's information services segment reported revenues of $531.0 million and operating income of $52.8 million for 1995, representing increases of 25.5% and 44.0%, respectively, over 1994. The information service segment benefited from the Disclosure and I/B/E/S acquisition, that accounted for $51.7 million of the increase in revenue. Primark's information services primarily support two markets, financial information and technology applications. The financial information markets accounted for $184.8 million of revenues and are served by Datastream, Disclosure, I/B/E/S and Vestek. Excluding the newly acquired companies, Datastream exhibited the strongest sales in this group, with a 17.3% increase in revenues. Approximately $6.4 million of Datastream's increased revenues resulted from favorable currency movements in its foreign source billings. Excluding the effects of currency, Datastream's revenues grew 10.6% with its research product growing 14.6%. The research product line represented 84.9% of Datastream's 1995 sales. Partially offsetting the research product sales was a 9.2% drop in sales associated with the fund management product, which is currently undergoing a transition to new generation offerings. Datastream's geographic regions demonstrated significant improvements in 1995 with Continental Europe growing 14.9%, the Pacific Basin up 19.9% and North America up 30.8%. The United Kingdom experienced 3.1% growth, reflecting lower sales for the transitioning fund management product sold primarily in that region. The technology applications market, served by TASC, reported 1995 revenues of $346.2 million, increasing 10.9% over 1994. The largest customer base in this market is the U. S. Government, representing $300.0 million of 1995 revenues. In December of 1994, TASC lost its contract with the Ballistic Missile Defense Organization (the "BMDO"). Although it had been decreasing in value over the last several years, the BMDO contract accounted for $16.5 million of 1994 revenue. During 1995, TASC replaced all of the lost BMDO revenues by growing its other government businesses 16.2%. When the effects of the BMDO contract are excluded, TASC's revenues grew 16.6% overall. TASC also grew its weather data business, WSI, 25.4% and other commercial businesses 11.5%. TASC ended 1995 with $452.8 million in backlog, a 57.3% increase over 1994. The backlog includes $222.7 million of contracts maturing within one year. Although the government may cancel any such contract at its discretion and many of the contracts are issued on a competitive bidding basis, TASC has a history of few cancellations and a high rate of success on competitively bid contracts. Primark Corporation and Subsidiaries 39 19 MANAGEMENT'S DISCUSSION CONTINUED ================================================================================ The transportation segment is represented by TIMCO, Primark's aircraft maintenance business which markets to large commercial aircraft operations. This segment reported $79.2 million of revenue and $6.0 million of operating income in 1995. These results represent increases of $32.9 million and $3.0 million over 1994 revenues and operating income, respectively. The dramatic improvement over 1994 was accomplished through additional hangar space added in December 1994, coupled with TIMCO's ability to market the added capacity. The company has further expanded its hangar space over 48% in December 1995 to take advantage of customer demands for 1996. The financial services industry segment is represented by Primark Storage Leasing Corporation, which leases underground natural gas storage facilities under long-term arrangements. The 1995 lease revenues of $7.1 million are based on a declining property base and reflect a $0.4 million decline from 1994 levels. Other income and deductions reflect increased interest costs associated with acquisition debt incurred on June 29, 1995 and partially repaid in December 1995. Foreign currency losses reflect transactions and valuations of currency hedges implemented to protect the Company's cash flows from dramatic currency exchange movements. The 1995 currency loss of $2.6 million was created by a relatively weak dollar and its effect on Primark's currency hedges. The currency loss in other income and deductions was in turn offset by gains in operating income when the stronger foreign operating revenues where converted to U. S. Dollars throughout the year. 1994 Compared to 1993 Net income applicable to common stock for 1994 of $12.3 million ($0.62 per share) increased $8.2 million over 1993 earnings of $4.1 million ($0.21 per share). During 1993 the Company recorded a $3.6 million loss on discontinued operations and a $2.7 million extraordinary loss associated with the 1993 debt refinancing. Primark's 1994 revenues of $477.0 million increased 7.4% over 1993. Operating income grew from $37.3 million in 1993 to $38.0 million in 1994. For 1994, the information service segment recorded improvements of 7.1% and 5.6% over 1993's revenue and operating income. Growth and profitability were masked by investments in new office expansion at Datastream and the impact of TASC's BMDO contract. Datastream experienced 1994 revenue growth of 8.5%, excluding the effects of currency. Datastream's research product grew 11.3% worldwide and total sales in each of Datastream's geographic regions improved over 10% with the exception of the United Kingdom. The 1994 fund management product sales were flat compared to 1993 and contributed to a 3.2% growth rate in the United Kingdom. Datastream opened new offices in Boston, San Francisco and Toronto, resulting in added expense and reducing operating income. However, these expenditures also resulted in a 31.9% increase in North American revenues. TASC reported 1994 revenues of $312.3 million or a 5.6% increase over 1993. TASC's BMDO contract represented $16.5 million of revenues in 1994 and $40.6 million in 1993. Excluding the effects of the BMDO contract, TASC's 1994 revenues grew 16.0% over 1993. During 1994, TASC increased other government business 14.3% and commercial product revenues over 20%. The transportation segment increased 1994 revenues 13.5% to $46.4 million and posted operating income of $3.0 million during the year. Other income and deductions during 1994 were favorably impacted by a pre-tax gain of $1.8 million from the sale of Wellmark. This was partially offset by a $1.3 million pre-tax charge related to the write-off of Westmark notes. ================================================================================ CAPITAL RESOURCES AND LIQUIDITY 1995 Compared to 1994 Primark ended the year 1995 with a $62.3 million balance in cash and cash equivalents compared to $20.1 million at year end 1994, an increase of over 200%. There were several events that either used or generated large amounts of cash during 1995 with offsetting effects. The purchase of Disclosure and I/B/E/S on June 29, 1995 required the use 40 Primark Corporation and Subsidiaries 20 MANAGEMENT'S DISCUSSION CONCLUDED ================================================================================ of $199.7 million and was financed with $185.0 million of commercial borrowings. The Company also generated $107.8 million through its December equity issue. Cash flows provided from operating activities of $48.6 million during 1995 represented an increase of $8.3 million or 20.6% over 1994. Excluding changes in working capital, operating cash flows totaled $52.1 million for 1995, a 21.6% increase over 1994. A large portion of the improvement in operations was absorbed in working capital requirements of $3.5 million, of which accounts receivable accounted for $11.3 million. TIMCO required the largest level of support in trade receivables due to its high growth in sales during 1995. Cash flow from financing activities provided $220.4 million dollars in 1995 compared to a use of cash in 1994 of $19.3 million. During 1994 Primark was in a position to repay debt while in 1995 the Company funded the acquisition of Disclosure and I/B/E/S with three separate credit agreements. Primark refinanced its $75.0 million revolving credit agreement and borrowed $45.0 million against that agreement for the purposes of funding the purchase. The Company, through one of its subsidiaries, also established a $15.0 million one year term loan. Finally, the Company borrowed $125.0 million under a newly established seven year bank loan. The Company incurred $4.7 million of costs associated with establishing these credit facilities during 1995. The $125.0 million seven year bank loan remained outstanding at December 31, 1995; however, the other acquisition related borrowings were repaid in conjunction with the fourth quarter equity offering. On December 5, 1995, Primark sold 4.1 million shares of common stock, generating gross proceeds of $110.3 million. The transaction incurred $5.2 million of commissions and $0.4 million of related expenses. There were also 288 thousand shares sold by other shareholders in conjunction with this offering and as a result, the Company received $3.1 million of related option proceeds. The net proceeds from this offering of $107.8 million were used to repay the loan balances noted above and for general corporate purposes. Financing activities also reflect $3.8 million of repayments under the PSLC note. Cash used for investing activities totaled $226.7 million in 1995 compared to $10.3 million in 1994. The 1994 period reflects $27.0 million of capital expenditures and capitalized software offset by the sale of Wellmark for $6.5 million and the release of $9.5 million of restricted cash. The 1995 period reflects $199.7 million of expenditures to purchase the stock of Disclosure and I/B/E/S on June 29, 1995. Expenditures on capital items during 1995 were consistent with 1994. The 1995 period reflected $10.7 million spent on computer equipment at TASC, Datastream and Disclosure and $5.4 million at TIMCO for the new hangar facility. Expenditures for software in 1995 were $6.2 million compared to $4.4 million in 1994 and reflect $2.3 million spent at Disclosure which was not present in 1994. 1994 Compared to 1993 Cash and cash equivalents for 1994 of $20.1 million represented an increase of $11.2 million over 1993. Cash flows from operating activities during 1994 and 1993 were dramatically influenced by changes in working capital. Accounts receivable led the change in working capital largely due to increased sales activity. Financing activities in 1993 absorbed $41.7 million of cash compared to $19.3 million in 1994. Primark refinanced its commercial bank debt in 1993 with the $112 million 8.75% public bond issue. There were also $5.1 million of related debt issue cost paid in 1993. Cash flow from investing activities in 1993 reflects cash restricted by various credit agreements, that were subsequently released in 1994. Inflation and Foreign Exchange Risk Currency and inflation had little impact on cash balances during all periods presented. The rate of inflation in all of Primark's operating areas around the world were consistently absorbed through the local product pricing structures. Currency transactions did not have a material cash impact on any of the years reported due, in part, to Primark's hedging programs. Primark Corporation and Subsidiaries 41 21 SELECTED FINANCIAL INFORMATION-FIVE YEAR DATA
============================================================================================================================== ($000s) Except Per Share Amounts 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL AND OPERATING DATA (1) Operating revenues $ 617,310 $ 477,026 $ 444,015 $ 344,959 $ 133,647 Operating income (loss) $ 56,911 $ 38,036 $ 37,270 $ 21,739 $ (3,905) Income from continuing operations $ 18,850 $ 13,750 $ 11,729 $ 9,220 $ 1,052 Net income applicable to common stock (2) $ 16,882 $ 12,316 $ 4,087 $ 5,821 $ 375 Earnings per share from continuing operations $ 0.85 $ 0.62 $ 0.52 $ 0.41 $ 0.03 Total earnings per share (2) $ 0.82 $ 0.62 $ 0.21 $ 0.30 $ 0.02 Total assets $ 802,399 $ 507,916 $ 497,578 $ 524,404 $ 309,788 Total debt, including capital lease obligations $ 270,968 $ 150,833 $ 169,458 $ 204,545 $ 55,182 Redeemable preferred stock $ 16,874 $ 16,874 $ 16,874 $ 16,522 $ 15,190 Common shareholders' equity (4) $ 354,129 $ 224,781 $ 208,134 $ 201,555 $ 195,393 EBITDA (3) $ 93,266 $ 65,573 $ 63,467 $ 33,446 $ (286) Debt to total capitalization 42.2% 38.4% 43.0% 48.4% 20.8% Capital expenditures $ 22,662 $ 22,616 $ 12,667 $ 8,238 $ 4,747 Capitalized software $ 6,232 $ 4,372 $ 4,021 $ 529 $ 175 Total employees 5,131 3,789 3,439 3,272 3,182 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK DATA Actual shares outstanding (000) 23,317 18,520 18,378 18,198 18,169 Weighted average common and equivalent shares outstanding (000) 20,602 19,909 19,805 19,388 19,689 Book value per share $ 15.19 $ 12.14 $ 11.33 $ 11.08 $ 10.75 Market price per share on NYSE/PSE: High $ 30-1/4 $ 15 $ 16-3/8 $ 14-3/4 $ 14-3/4 Low $ 12-3/4 $ 11 $ 10-1/2 $ 9-3/4 $ 6-3/4 ============================================================================================================================== 1 - The financial data for the Company includes the following acquisitions: Disclosure in June 1995 for $200 million; Vestek in June 1994 for $6.9 million; Datastream in September 1992 for $191 million; and TASC in August 1991 for $167 million. 2 - Includes an after-tax extraordinary loss of $534 thousand for 1995 and $2.7 million for 1993 resulting from the early extinguishment of debt. Also includes dividends on the Company's outstanding preferred stock and losses associated with discontinued operations of the Company for all years presented. 3 - EBITDA represents operating income plus depreciation and amortization expense. Due to the high non-cash amortization expense recorded to net income, the Company presents EBITDA to provide the shareholder a measure of cash flows within operations. EBITDA represents supplemental information only and is not to be construed as an alternative to operating income or to cash flows as defined by GAAP. 4 - In December 1995, the Company issued common stock - see Note 10 to the Consolidated Financial Statements.
[GRAPH] [GRAPH]
Operating Revenues Operating Income (In Millions of Dollars) (In Millions of Dollars) $134-1991 $(4)-1991 $345-1992 $ 22-1992 $444-1993 $ 37-1993 $477-1994 $ 38-1994 $617-1995 $ 57-1995
42 Primark Corporation and Subsidiaries 22 SUPPLEMENTARY FINANCIAL INFORMATION-QUARTERLY DATA ================================================================================ The following quarterly operating results include the acquired operations of Disclosure and I/B/E/S from June 29, 1995 and Vestek from June 30, 1994. Quarterly earnings per share may not total for the year as quarterly computations are based on weighted average common and common equivalent shares outstanding during each quarter. The following quarterly common stock prices set forth the intraday high and low market prices per share on the NYSE Composite Tape. As of the close of business of February 29, 1996, there were 10,605 holders of record of the Company's common stock.
================================================================================================================ (000s) Except Per Share Amounts First Second Third Fourth - ---------------------------------------------------------------------------------------------------------------- 1995 - ---------------------------------------------------------------------------------------------------------------- Operating revenues $ 135,861 $143,041 $168,710 $ 169,698 Operating income $ 11,817 $ 13,113 $ 16,249 $ 15,732 Income from continuing operations $ 4,454 $ 4,576 $ 4,701 $ 5,119 Net income applicable to common stock (1) (2) $ 4,096 $ 3,683 $ 4,342 $ 4,761 Earnings per share before extraordinary loss (2) $ 0.20 $ 0.21 $ 0.21 $ 0.22 Earnings per share (1) (2) $ 0.20 $ 0.18 $ 0.21 $ 0.22 - ---------------------------------------------------------------------------------------------------------------- Market price per share: High $ 14 1/2 $ 18 3/4 $ 26 1/4 $ 30 1/4 Low $ 12 3/4 $ 14 1/2 $ 17 5/8 $ 21 7/8 ================================================================================================================ 1994 - ---------------------------------------------------------------------------------------------------------------- Operating revenues $ 112,387 $119,016 $120,997 $ 124,626 Operating income $ 9,918 $ 8,836 $ 10,372 $ 8,910 Income from continuing operations (3) $ 3,140 $ 3,561 $ 3,284 $ 3,765 Net income applicable to common stock (2) $ 2,782 $ 3,202 $ 2,925 $ 3,407 Earnings per share (2) $ 0.14 $ 0.16 $ 0.15 $ 0.17 - ---------------------------------------------------------------------------------------------------------------- Market price per share: High $ 15 $ 14 5/8 $ 13 3/8 $ 13 1/4 Low $ 11 $ 11 1/8 $ 11 1/8 $ 12 1/4 ================================================================================================================ (1) Includes, for the 1995 second quarter, an after tax extraordinary loss of $534,000 which resulted from the early extinguishment of debt. (2) Includes, for all interim periods presented, dividends on the Company's outstanding preferred stock. (3) Includes, for the 1994 second quarter, an after tax gain of $1,394,000 from the sale of a portion of the Company's information segment and an after tax loss of $813,000 on the restructuring of notes associated with the sale of Westmark Mortgage Corporation. The 1994 fourth quarter includes before-tax charges of $1,565,000 for completed or anticipated settlements of legal and other matters.
Primark Corporation and Subsidiaries 43 23 SHAREHOLDER INFORMATION ================================================================================ 1996 Annual Meeting The Annual Meeting of Shareholders will be held at the Colonial Hilton Hotel, 127 Walnut Street, Lynnfield, Massachusetts on Wednesday, May 22, 1996 at 11:00 a.m. (Eastern Time). Information with respect to this meeting, the proxy statement and proxy will be mailed on or about April 4, 1996. 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 (exhibits filed as part of this report are available upon payment of a specified fee) - - Quarterly Report to Shareholders - - Quarterly Report 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: Investor Relations 1000 Winter Street, Suite 4300N Waltham, MA 02154-1248 (617) 466-6611 (800) 755-1032 E-mail: investor-relations@primark.com Shareholder Services All inquiries regarding the following items should be directed to the Stock Transfer Agent. - - Change of address - - Lost stock certificates - - Duplicate mailings - - Transfer of stock to another person - - Other administrative concerns Stock Transfer Agent and Registrar The First National Bank of Boston c/o Boston EquiServ Shareholder Services Department P.O. Box 644, Mail Stop 45-02-09 Boston, MA 02102-0644 (617) 575-3120 (800) 730-6001 Independent Accountants Deloitte & Touche LLP 125 Summer Street Boston, MA 02110-1617 (617) 261-8000 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. [GRAPHIC] Primark Corporation and Subsidiaries 44 EX-21.1 6 SUBSIDIARIES OF PRIMARK 1 EXHIBIT NO. 21.1 SUBSIDIARIES OF PRIMARK CORPORATION Primark Corporation owns all of the issued and outstanding common stock of Primark Holding Corporation, and Triad International Maintenance Corporation both of which are Delaware corporations, and Primark Storage Leasing Corporation, a Michigan corporation. Primark Holding Corporation owns all of the issued and outstanding common stock of: - TASC, Inc., a Massachusetts corporation, which owns all of the issued and outstanding common stock of: - WSI Corporation, a Massachusetts corporation; and - TASC Services Corporation, a Delaware corporation. - Primark Information Services U.K. Limited (U.K.) which owns all the common stock of: - The Analytic Sciences Corporation Limited (U.K.) which owns all of the issued and outstanding common stock of The Weather Department Limited (U.K.) and The Computer Department Limited (United Kingdom); - Datastream Group (U.K.); - Datastream Pension Trustees Limited (U.K.); - Datastream Investment Management Services Limited (U.K.); - Datastream International Limited (U.K.) which owns all the common stock of Datastream International B.V. (the Netherlands); - I/B/E/S (U.K.) LTD; and - Disclosure LTD (England). - Datastream International (France) S.A. which owns all of the common stock of Primark France S.A. - Datastream International (Switzerland) Limited - Datastream International GmbH (Germany) - Datastream International (Hong Kong) Limited which owns all of the common stock of Primark Hong Kong Limited - Datastream International Inc. (Delaware) - Datastream International (Japan) K.K. - Datastream International (Australia) Pty. Limited which owns all of the common stock of ACN 3802444 Pty. Limited - Datastream International (D.C.), Inc. - Datastream International (Canada) Ltd. - Datastream International (Italy) Srl - Datastream International (Sweden) Aktiebolag - Datastream International (South Africa) Proprietary Limited - Datastream International (Korea) Limited - Vestek Systems, Inc., a California corporation 2 - Disclosure Incorporated (Delaware) which owns all the issued and outstanding stock of: - Disclosure International, Inc. (Delaware) which owns a 50% interest in: - Worldscope/Disclosure Partners (Connecticut); and - Worldscope/Disclosure Incorporated LLC (Connecticut) which owns all of the issued and outstanding stock of Worldscope/Disclosure Incorporated (India) Pty. Ltd. - Worldscope/Disclosure International Partners (Ireland) - Disclosure Information Services, Inc. (Delaware) - I/B/E/S International, Inc. (Delaware) which owns all the issued and outstanding stock of: - I/B/E/S Inc. (Delaware) - I/B/E/S (Japan) K.K. - Disclosure GmbH (Germany) EX-23.1 7 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT NO. 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the incorporation by reference in Primark Corporation's Registration Statement Nos. 2-92579, 33-77751, 33-23876, 33-6009, 33-49132 and 33-49134 on Form S-8 of our report dated February 8, 1996, incorporated by reference in the Annual Report on Form 10-K of Primark Corporation for the year ended December 31, 1995. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Boston, Massachusetts March 29, 1996 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) PRIMARK CORPORATIONS CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. 0000356064 PRIMARK 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 62,332 0 140,891 4,371 0 220,369 113,519 41,709 802,399 138,719 265,863 16,874 0 489 353,640 802,399 0 617,310 0 403,435 156,964 0 20,382 33,962 15,112 18,850 0 (534) 0 18,316 .82 .82
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