Two Financially Strong Companies Become Independent in Mid-1998
WESTPORT, Conn., Feb. 25 /PRNewswire/ -- Cognizant Corporation
(NYSE: CZT), which plans to separate into IMS HEALTH and Nielsen Media
Research in mid-1998, today announced historical pro formas for the two
companies. IMS HEALTH is the premier global provider of information solutions
to the pharmaceutical and healthcare industries, and Nielsen Media Research is
the leader in electronic audience measurement services.
"IMS HEALTH and Nielsen Media Research are market leaders with excellent
performance records," said Robert E. Weissman, Cognizant chairman and chief
executive officer. "As independent companies, we create two pure-play
operating businesses which are able to develop unique business strategies and
quickly respond to customer needs. We are on-track for a mid-summer
completion of the transaction."
The preliminary information contained in this news release is provided to
assist understanding of the planned transaction. Investors will receive more
detailed information prepared in accordance with applicable Securities and
Exchange Commission requirements prior to completion of the transaction.
"The pro forma financials show the strong historical performance of IMS
HEALTH and Nielsen Media Research, and validate their excellent prospects as
independent companies," said Cognizant Chief Financial Officer Victoria R.
Fash. "We are revising expectations for Cognizant's 1998 EPS upward, from
17-to-20 percent to over 20 percent pre-spin, due to the positive outlook for
IMS HEALTH."
IMS HEALTH
IMS HEALTH, to be headquartered in London, England, incorporates IMS, the
leading global provider of market information and decision-support services to
the pharmaceutical and healthcare industries; Erisco, the premier supplier of
software-based administrative and analytical solutions to the managed care
industry; and Enterprises, the company's venture capital unit, focused on
investments in emerging healthcare businesses. IMS HEALTH becomes the largest
shareholder of Gartner Group, Inc. (Nasdaq: GART), the world's preeminent
supplier of research and analysis to the information technology industry, an
equity investment. IMS HEALTH will also own Cognizant Technology Solutions,
an outsourcer of software applications and development services specializing
in year 2000 conversion services.
Operating in over 90 countries and employing 7,500 professionals, IMS
HEALTH's pro forma revenue and operating income totaled $1,059.6 million and
$227.6 million, respectively, in 1997. Pro forma revenue of $986.8 million
and operating income of $186.9 million was generated in 1996. In 1997, pro
forma net income totaled $245.4 million, or $1.49 basic earnings per share.
Net income excluding after-tax net gains from dispositions and SAB 51 gains,
totaled $227.9 million, or $1.38 basic earnings per share. In 1996, pro forma
net income totaled $189.5 million, or $1.12 basic earnings per share. IMS
HEALTH's beginning balance sheet is expected to include a total of
$100 million in minority interest financing and $50 million in short-term
debt.
Nielsen Media Research
New York City-based Nielsen Media Research, the leading source of
television audience measurement services, employs 2,300 professionals in the
United States and Canada. Nielsen Media's National People Meter Service
provides audience estimates for all national programming sources, including
broadcast networks, cable networks and national syndicators. Local ratings
services estimate audiences for each of 211 television markets in the U.S.,
including electronic metered service in 38 cities.
Nielsen Media's pro forma revenue totaled $358.6 million in 1997, compared
with $319.4 million in 1996. Pro forma operating income was $90.2 million in
1997, versus $82.0 million a year-earlier. In 1997, Nielsen Media's pro
forma net income totaled $43.9 million, or $0.27 basic earnings per share,
compared with 1996 pro forma net income of $38.8 million, or $0.23 basic
earnings per share. Nielsen Media's beginning balance sheet is expected to
include debt of approximately $300 million.
"Nielsen Media's strong cash flow allows us to accelerate technology
investments necessary to measure the new digital television environment and to
service debt," said John A. Dimling, who will be president and chief executive
officer of the independent Nielsen Media Research. "We are expanding our
national and local measurement services, and launching software systems that
provide customers with rapid access to data and customized analyses. At the
same time, we are entering new markets with technology that measures PC and
Internet usage, as well as viewing behavior resulting from the convergence of
television and PCs equipped with Internet access."
The separation of Cognizant into two companies will be accomplished
through a tax-free dividend of one share of IMS HEALTH stock for each
Cognizant share held. Concurrent with the transaction, Cognizant Corporation
will change its name to Nielsen Media Research. Both IMS HEALTH and Nielsen
Media Research shares are expected to trade on the New York Stock Exchange.
Completion of the transaction is subject to the receipt of a favorable
ruling from the Internal Revenue Service with respect to the tax-free
treatment of the distribution. Cognizant plans to file spin-related
disclosure materials with the Securities and Exchange Commission in March.
Costs related to the transaction are expected to total $25-to-$30 million.
Cognizant Corporation integrates information and technology to create
business insight. Its principal operating units are IMS, which offers global
information solutions to the pharmaceutical and healthcare industries, and
Nielsen Media Research, the leader in audience measurement for electronic
media. Cognizant also is the largest shareholder of Gartner Group, the
premier provider of research and advisory services to the information
technology industry. Additional information is available at Cognizant's
website, http://www.cognizantcorp.com
This press release includes statements which may constitute forward-
looking statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Although Cognizant believes the
expectations contained in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove correct. This
information may involve risks and uncertainties that could cause actual
results of Cognizant, IMS HEALTH or Nielsen Media Research to differ
materially from the forward-looking statements. Factors which could cause or
contribute to such differences include, but are not limited to (i) the risks
associated with operating on a global basis, including fluctuations in the
value of foreign currencies relative to the U.S. dollar, and the ability to
successfully hedge such risks, (ii) to the extent they seek growth through
acquisition, the ability to identify and consummate acquisitions on
satisfactory terms, (iii) the ability to develop new or advanced technologies
and systems for their businesses on a cost-effective basis, (iv) the ability
to successfully achieve estimated effective tax rates and corporate overhead
levels, (v) competition in the market for audience measurement services, (vi)
regulatory and legislative initiatives, particularly in the area of medical
privacy, (vii) deterioration in economic conditions, particularly in the
pharmaceutical, healthcare, media, information technology or other industries
in which their customers operate, (viii) conditions in the securities markets
which may affect the value or liquidity of portfolio investments, (vix)
the final allocation of assets and liabilities between IMS HEALTH and Nielsen
Media Research, and other factors detailed in Cognizant's SEC filings.
Table 1
IMS HEALTH
Pro Forma Income Statement
Year Ended December 31
(unaudited, in millions except per share)
1997 1996* % Change Constant
$ Growth
Revenue
IMS $980.5 $904.4 8.4% 11.4%
Emerging Markets 79.1 82.4 (4.0) (2.4)
Total Revenue 1,059.6 986.8 7.4 10.2
Operating Income
IMS 275.2 234.8 17.2 18.2
Emerging Markets (9.8) (14.9) 34.5 35.8
Corporate and Other (28.0) (33.0) 15.2 15.2
Year 2000 Expenses (9.8) -- -- --
Total Operating Income 227.6 186.9 21.8 23.2
Interest Income 26.0 21.7 19.5 --
Gartner Equity Income 65.1 49.5 31.4
Gartner SAB 51 Gains 14.7 -- -- --
Disposition Gains 9.4 -- -- --
Other Income (Expense) (4.8) 4.8 -- --
Income Before Provision for
Income Taxes 338.0 262.9 28.6 --
Provision for Income Taxes(92.6) (73.4) (26.2) --
Net Income $245.4 $189.5 29.5% --
Basic Earnings Per Share $1.49 $1.12 33.0% --
Average Shares
Outstanding 165.2 169.9 (2.8)% --
Excluding Non-Recurring Items**
Net Income $227.9 $189.5 20.2% --
Basic Earnings Per Share $1.38 $1.12 23.2% --
Revenue and operating income are as reported by Cognizant Corporation,
excluding revenue, operating income, and year 2000 expenses ($2.7 million in
1997) of Nielsen Media Research. Interest income is as reported by Cognizant
Corporation, plus: pro forma interest income of $15.8 million on
$300.0 million proceeds from the Nielsen Media Research debt financing to
repay intercompany loans; pro forma interest income of $2.6 million on
$50.0 million proceeds from additional IMS HEALTH short-term debt; and pro
forma interest expense of $2.9 million on $50.0 million of short-term debt
financing at IMS HEALTH. All other line items in pretax income are as
reported by Cognizant Corporation. The tax provision reflects an effective
tax rate of 27.9% in 1996 and 27.4% in 1997, the same as reported by Cognizant
Corporation. Gartner Group results are reported under the equity method of
accounting in all periods. Average shares outstanding are as reported by
Cognizant Corporation.
*1996 results are continuing operations, defined as operating results for
IMS HEALTH businesses on an on-going basis, which excludes all discontinued
operations, one-time charges and gains, and non-recurring items (e.g., a
$33.2 million one-time charge related to Gartner's acquisition of J3 Learning
Corporation.)
**Non-recurring items include the Gartner SAB 51 gains, disposition gains
from Enterprises monetizations, and the non-cash write-off related to the
divestiture of Pilot Software.
Table 2
Nielsen Media Research
Pro Forma Income Statement
Year Ended December 31
(unaudited, in millions except per share)
1997 1996 % Change
Revenue $358.6 $319.4 12.3%
Operating Income 110.4 99.5 11.0
Corporate and Other (17.5) (17.5) --
Year 2000 Expenses (2.7) -- --
Total Operating Income 90.2 82.0 10.1
Interest Expense (19.3) (19.3) --
Income Before Provision for
Income Taxes 71.0 62.7 13.2
Provision for Income Taxes (27.1) (23.9) (13.2)
Net Income $43.9 $38.8 13.2%
Basic Earnings Per Share $0.27 $0.23 17.4%
Average Shares Outstanding 165.2 169.9 (2.8)%
Revenue and operating income are as reported by Cognizant Corporation for
the Nielsen Media Research business. Corporate and Other includes the pro
forma expense of maintaining a separate corporate office facility
($15.0 million) and separate employee benefit and business insurance plans
($2.5 million), as if Nielsen Media Research had been a standalone publicly
traded company in all periods. Nielsen Media Research's share of Cognizant's
total year 2000 expenses ($2.7 million in 1997) is included as a separate line
item. Interest expense is pro forma interest expense on $300.0 million of
debt financing at Nielsen Media Research ($19.3 million). The tax provision
reflects a pro forma effective tax rate of 38.2%, consistent with Nielsen
Media Research's pro forma effective tax rate as a standalone company
operating in the United States and Canada. Average shares outstanding are as
reported by Cognizant Corporation.
Table 3
IMS HEALTH
Pro Forma Cash Flow Highlights
(unaudited, in millions except per share)
December 31, December 31,
1997 1996
Depreciation and Amortization $88.7 $92.7
Capital Expenditures (47.0) (41.1)
Software (49.5) (34.4)
Deferred Charges (25.3) (13.7)
Depreciation and amortization, capital expenditures, software and deferred
charges are equal to the total amounts for Cognizant Corporation, less amounts
applicable to Nielsen Media Research.
Table 4
Nielsen Media Research
Pro Forma Cash Flow Highlights
(unaudited, in millions except per share)
December 31, December 31,
1997 1996
Depreciation and Amortization $28.7 $25.2
Capital Expenditures (24.9) (17.9)
Software (17.1) (14.3)
Deferred Charges (7.7) (5.3)
SOURCE Cognizant Corporation
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Related links:
http://www.cognizantcorp.com
CONTACT:
Joseph C. Allen of Cognizant Corporation,
203-222-4235
CNOC: http://www.prnewswire.com or fax, 800-758-5804, ext.
115785
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