item 14 exhibits financial statement schedules reports form 8k list documents filed part report 1 financial statements see index financial statements schedule page 19 2 financial statement schedule see index financial statements schedule page 19 3 financial information business segments 1996 see index financial statements schedule page 19 fiveyear selected financial data see index financial statements schedule page 19 4 exhibits see index exhibits page 22 indicates exhibits management contracts compensatory plans required filed exhibits responsive information appearing pages 1 24 exhibit 13 incorporated herein reference information appearing exhibit 13 shall deemed filed part form 10k b reports form 8k report form 8k filed october 15 1996 report item 5 events registrants board directors declared dividend one preferred stock purchase right outstanding share common stock signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized cognizant corporation registrant robert e weissman robert e weissman chairman chief executive officer victoria r fash victoria r fash executive vice president chief financial officer james c malone james c malone senior vice president finance controller date march 27 1997 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated clifford l alexander jr h eugene lockhart clifford l alexander jr director h eugene lockhart director john p imlay jr james r peterson john p imlay jr director james r peterson director robert kamerschen bernard puckett robert kamerschen director bernard puckett director robert j lanigan robert e weissman robert j lanigan director robert e weissman director date march 27 1997 index financial statements schedule financial statements companys consolidated financial statements notes thereto related report thereon coopers lybrand llp independent accountants years ended december 31 1996 1995 1994 appearing pages 6 23 accompanying 1996 report shareholders incorporated reference annual report form 10k see additional financial data indicated read conjunction consolidated financial statements schedules one listed omitted required inapplicable required information provided consolidated financial statements including notes thereto report independent accountants shareholders board directors cognizant corporation report consolidated financial statements cognizant corporation december 31 1996 1995 years ended december 31 1996 1995 1994 incorporated reference form 10k page 7 1996 report shareholders cognizant corporation connection audits financial statements also audited related financial statement schedule listed index page 19 form 10k opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information required included therein coopers lybrand llp stamford connecticut february 19 1997 schedule ii cognizant corporation subsidiaries schedule ii valuation qualifying accounts years ended december 31 1996 1995 1994 thousands note represents primarily chargeoff uncollectible accounts reserve provided index exhibits regulation sk exhibit number description 3 articles incorporation bylaws 1 restated certificate incorporation cognizant corporation dated october 7 1996 incorporated reference exhibit 31 registrants registration statement form 10 filed october 7 1996 file number 00112275 2 amended restated bylaws registrant incorporated reference exhibit 32 registrants registration statement form 10 filed october 7 1996 file number 00112275 10 material contracts 1 distribution agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 2 tax allocation agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 3 employee benefits agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 4 indemnity joint defense agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 5 tam master agreement cognizant corporation acnielsen corporation dated october 28 1996 6 intellectual property agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 7 1996 cognizant corporation nonemployee directors stock incentive plan adopted effective november 1 1996 8 1996 cognizant corporation nonemployee directors deferred compensation plan adopted effective october 15 1996 9 1996 cognizant corporation key employees stock incentive plan adopted effective november 1 1996 10 1996 cognizant corporation replacement plan certain employees holding dun bradstreet corporation equitybased awards adopted effective november 1 1996 11 1996 cognizant corporation replacement plan certain employees holding ims international inc stock options adopted november 1 1996 12 form nonemployee directors stock option agreement 13 form nonemployee directors restricted stock agreement 14 forms stock option agreement 15 forms purchased option agreement 16 forms limited stock appreciation right agreement 17 forms changeincontrol agreement certain executives cognizant corporation adopted october 15 1996 18 cognizant corporation executive transition plan adopted effective november 1 1996 19 cognizant corporation executive annual incentive plan adopted effective january 1 1997 20 cognizant corporation supplemental executive retirement plan adopted effective november 1 1996 21 rights agreement dated october 15 1996 cognizant corporation first chicago trust company new york incorporated reference exhibit 1 registrants current report form 8k filed october 15 1996 file number 00112275 11 computation earnings per share fully diluted basis 13 1996 report shareholders 21 list active subsidiaries january 31 1997 23 consent independent accountants 27 financial data schedules management contract compensatory plan arrangementitem 14 exhibits financial statement schedules reports form 8k list documents filed part report 1 financial statements see index financial statements schedule page 15 2 financial statement schedule see index financial statements schedule page 15 3 financial information business segments 1997 see index financial statements schedule page 15 fiveyear selected financial data see index financial statements schedule page 15 4 exhibits see index exhibits pages 1819 indicates exhibits management contracts compensatory plans required filed exhibits responsive information appearing pages 1 27 exhibit 13 incorporated herein reference information appearing exhibit 13 shall deemed filed part form 10k b reports form 8k none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized cognizant corporation registrant robert e weissman robert e weissman chairman chief exective officer director victoria r fash victoria r fash executive vice president chief financial officer james c malone james c malone senior vice presidentfinance controller date february 17 1998 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated clifford l alexander jr h eugene lockhart clifford l alexander jr h eugene lockhart director james r peterson john p imlay jr james r peterson director john p imlay jr director bernard puckett robert kamerschen bernard puckett director robert kamerschen director robert j lanigan robert j lanigan director date february 17 1998 index financial statements schedule financial statements companys consolidated financial statements notes thereto related report thereon coopers lybrand llp independent accountants years ended december 31 1997 1996 1995 appearing pages 6 25 accompanying 1997 annual report shareholders incorporated reference annual report form 10k see additional financial data indicated read conjunction consolidated financial statements schedules one listed omitted required inapplicable required information provided consolidated financial statements including notes thereto consolidated financial statements gartner group inc notes thereto years ended september 30 1997 1996 1995 related report thereon years ended september 30 1997 1996 appearing pages 13 37 gartner group inc annual report shareholders filed hereunder exhibit 993 incorporated reference annual report form 10k report price waterhouse llp previous independent accountants gartner group inc consolidated financial statements gartner group inc year ended september 30 1995 appearing exhibit 233 gartner group inc annual report form 10k year ended september 30 1997 filed hereunder exhibit 994 incorporated reference annual report form 10k report independent accountants shareholders board directors cognizant corporation report consolidated financial statements cognizant corporation december 31 1997 1996 three years period ended december 31 1997 incorporated reference form 10k page 8 1997 annual report shareholders cognizant corporation connection audits financial statements also audited related financial statement schedule listed index page 15 form 10k opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information required included therein coopers lybrand llp new york new york february 17 1998 cognizant corporation subsidiaries schedule iivaluation qualifying accounts years ended december 31 1997 1996 1995 thousands note primarily represents deconsolidation gartner group recovery accounts 1997 chargeoff uncollectible accounts reserve provided 1996 1995 index exhibits regulation sk exhibit number description 3 articles incorporation bylaws 1 restated certificate incorporation cognizant corporation dated october 7 1996 incorporated reference exhibit 31 registrants registration statement form 10 filed october 7 1996 file number 00112275 2 amended restated bylaws registrant incorporated reference exhibit 32 registrants registration statement form 10 filed october 7 1996 file number 00112275 10 material contracts 1 distribution agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 101 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 2 tax allocation agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 102 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 3 employee benefits agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 103 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 4 indemnity joint defense agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 104 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 5 tam master agreement cognizant corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 105 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 6 intellectual property agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 106 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 7 1996 cognizant corporation nonemployee directors stock incentive plan adopted effective november 1 1996 incorporated reference exhibit 107 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 8 1996 cognizant corporation nonemployee directors deferred compensation plan adopted effective october 15 1996 incorporated reference exhibit 108 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 9 1996 cognizant corporation key employees stock incentive plan amended december 16 1997 10 1996 cognizant corporation replacement plan certain employees holding dun bradstreet corporation equitybased awards adopted effective november 1 1996 incorporated reference exhibit 1010 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 11 1996 cognizant corporation replacement plan certain employees holding ims international inc stock options adopted november 1 1996 incorporated reference exhibit 1011 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 12 form nonemployee directors stock option agreement incorporated reference exhibit 1012 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 13 form nonemployee directors restricted stock agreement incorporated reference exhibit 1013 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 14 forms stock option agreement incorporated reference exhibit 1014 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 15 forms purchased option agreement incorporated reference exhibit 1015 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 16 forms limited stock appreciation right agreement incorporated reference exhibit 1016 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 index exhibitscontinued regulation sk exhibit number description 17 forms changeincontrol agreement certain executives cognizant corporation adopted october 15 1996 incorporated reference exhibit 1017 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 18 cognizant corporation executive transition plan adopted effective november 1 1996 incorporated reference exhibit 1018 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 19 cognizant corporation executive annual incentive plan adopted effective january 1 1997 incorporated reference exhibit 1019 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 20 cognizant corporation supplemental executive retirement plan adopted effective november 1 1996 incorporated reference exhibit 1020 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 21 rights agreement dated october 15 1996 cognizant corporation first chicago trust company new york incorporated reference exhibit 1 registrants current report form 8k filed october 15 1996 file number 00112275 22 cognizant corporation retirement excess plan adopted effective january 1 1997 incorporated reference exhibit 1022 registrants quarterly report form 10q quarter ended march 31 1997 filed may 13 1997 file number 00112275 23 cognizant corporation savings equalization plan adopted effective november 1 1996 incorporated reference exhibit 1022 registrants quarterly report form 10q quarter ended march 31 1997 filed may 13 1997 file number 00112275 24 severance agreement release cognizant corporation dennis g sisco dated february 28 1997 incorporated reference exhibit 1024 registrants quarterly report form 10q quarter ended september 30 1997 filed november 14 1997 file number 00112275 13 1997 annual report shareholders 21 list active subsidiaries january 31 1997 23 consent independent accountants 27 financial data schedules 99 additional exhibits 1 consent kpmg peat marwick llp independent accountants gartner group inc 2 consent price waterhouse llp previous independent accountants gartner group inc 3 pages 13 37 gartner group inc 1997 annual report shareholders 4 report price waterhouse llp consolidated financial statements gartner group inc year ended september 30 1995 management contract compensatory plan arrangementitem 14 exhibits financial statement schedules reports form 8k list documents filed part report 1 financial statements see index financial statements schedule page 2 financial statement schedule see index financial statements schedule page 3 exhibits see index exhibits page 24 indicates exhibits management contracts compensatory plans required filed exhibits b reports form 8k report form 8k filed october 28 1999 report item 1 changes control registrant purchase shares niner acquisition inc wholly owned subsidiary vnu usa inc merger niner acquisition inc company report form 8k filed january 4 2000 report item 2 acquisition disposition assets acquisition majority issued outstanding shares netratings inc item 4 changes registrants certifying accountant dismissal pricewaterhousecoopers llp retention ernst young llp report form 8ka filed march 2 2000 file certain financial statements netratings inc signatures pursuant requirements section 13 15d securities act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized nielsen media research inc registrant john dimling john dimling president chief executive officer director thomas w young thomas w young executive vice president chief financial officer stuart j goldshein stuart j goldshein vice president controller date march 29 2000 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated thomas mastrelli thomas mastrelli director gerald hobbs gerald hobbs director date march 29 2000 index exhibits exhibit description 2 plan acquisition reorganization arrangement liquidation succession 21 agreement plan merger among nielsen media research inc niner acquisition inc vnu usa inc dated august 15 1999 incorporated reference exhibit 21 registrants current report form 8k filed august 19 1999 file number 00112275 22 amendment agreement plan merger among nielsen media research inc niner acquisition inc vnu usa inc dated october 8 1999 3 articles incorporation bylaws 31 restated certificate incorporation cognizant corporation dated october 7 1996 incorporated reference exhibit 31 registrants registration statement form 10 filed october 7 1996 file number 00112275 32 amended restated bylaws registrant incorporated reference exhibit 32 registrants registration statement form 10 filed october 7 1996 file number 00112275 33 certificate ownership merger merging nielsen media research inc cognizant corporation filed june 30 1998 secretary state delaware incorporated reference exhibit 33 registrants registration statement form s3 filed july 22 1998 registration number 33359563 34 certificate amendment restated certificate incorporation nielsen media research inc incorporated reference appendix registrants proxy statement filed august 5 1998 file number 00112275 35 certificate ownership merger merging niner acquisition corp nielsen media research inc filed october 27 1999 secretary state delaware 4 instruments defining rights security holders including indentures 41 form indenture 760 notes due 2009 nielsen media research inc chase manhattan bank trustee registrar paying agent incorporated reference exhibit 41 registrants registration statement form s3a filed june 14 1999 registration number 33359563 42 form registered security 760 notes due 2009 incorporated reference exhibit 991 registrants current report form 8k filed june 25 1999 file number 00112275 10 material contracts 101 distribution agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 101 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 102 tax allocation agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 102 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 103 employee benefits agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 103 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 104 indemnity joint defense agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 104 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 exhibit description 105 tam master agreement cognizant corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 105 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 106 intellectual property agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 106 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 107 distribution agreement cognizant corporation ims health incorporated dated june 30 1998 incorporated reference exhibit 101 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 108 tax allocation agreement cognizant corporation ims health incorporated dated june 30 1998 incorporated reference exhibit 102 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 109 employee benefits agreement cognizant corporation ims health incorporated dated june 30 1998 incorporated reference exhibit 103 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 1010 amended restated transition services agreement dun bradstreet corporation new dun bradstreet corporation cognizant corporation ims health incorporated acnielsen corporation gartner group inc dated june 30 1998 incorporated reference exhibit 104 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 1011 undertaking ims health incorporated dated june 29 1998 incorporated reference exhibit 105 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 1012 forms changeincontrol agreement certain executives nielsen media research inc adopted effective july 1 1998 incorporated reference exhibit 1021 registrants annual report form 10k year ended december 31 1998 filed march 29 1999 file number 00112275 1013 cognizant corporation executive transition plan adopted effective november 1 1996 incorporated reference exhibit 1018 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1014 cognizant corporation executive annual incentive plan adopted effective january 1 1997 incorporated reference exhibit 1019 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1015 cognizant corporation supplemental executive retirement plan adopted effective november 1 1996 incorporated reference exhibit 1020 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1016 rights agreement dated october 15 1996 cognizant corporation first chicago trust company new york incorporated reference exhibit 1 registrants current report form 8k filed october 15 1996 file number 00112275 1017 amendment rights agreement nielsen media research inc first chicago trust company new york dated august 15 1999 incorporated reference exhibit 2 registrants form 8aa filed august 17 1999 file number 00112275 1018 cognizant corporation retirement excess plan adopted effective january 1 1997 incorporated reference exhibit 1022 registrants quarterly report form 10q quarter ended march 31 1997 filed may 13 1997 file number 00112275 exhibit description 1019 cognizant corporation savings equalization plan adopted effective november 1 1996 incorporated reference exhibit 1023 registrants quarterly report form 10q quarter ended march 31 1997 filed may 13 1997 file number 00112275 1020 operating agreement nielsen media research inc netratings inc dated august 15 1999 incorporated herein reference exhibit 109 netratings incs registration statement form s1a filed october 20 1999 registration number 33387717 1021 second restated rights agreement dated september 22 1999 incorporated herein reference exhibit 41 netratings incs registration statement form s1 filed september 24 1999 registration number 33387717 1022 agreement nielsen media research inc netratings inc dated november 9 1999 incorporated herein reference exhibit 44 netratings incs registration statement form s1a filed november 15 1999 registration number 33387717 1023 closing agreement nielsen media research inc netratings inc dated december 21 1999 incorporated reference exhibit 9 registrants schedule 13d filed january 3 2000 file number 00112275 1024 second restated stockholders agreement dated september 22 1999 incorporated herein reference exhibit 42 netratings incs registration statement form s1 filed september 24 1999 registration number 33387717 1025 software license agreement nielsen media research inc netratings inc dated august 15 1999 incorporated reference exhibit 1016 netratings incs registration statement form s1a filed october 20 1999 registration number 33387717 1026 panel maintenance agreement nielsen media research inc netratings inc dated august 15 1999 incorporated reference exhibit1017 netratings incs registration statement form s1a filed october 20 1999 registration number 33387717 21 list active subsidiaries january 31 2000 231 consent ernst young llp 232 consent pricewaterhousecoopers llp 27 financial data schedules 991 guarantee vnu nv dated august 15 1999 incorporated reference registrants current report form 8k filed august 19 1999 file number 00112275 management contract compensatory plan arrangement index financial statements schedule page consolidated financial statements reports independent accountants f3 consolidated statements operations period october 27 1999 december 31 1999 company period january 1 1999 october 26 1999 years ended december 31 1998 1997 predecessor consolidated statements financial position december 31 1999 company december 31 1998 predecessor consolidated statements cash flows period october 27 1999 december 31 1999 company period january 1 1999 october 26 1999 years ended december 31 1998 1997 predecessor consolidated statements shareholdersdivisional equity period october 27 1999 december 31 1999 company period january 1 1999 october 26 1999 years ended december 31 1998 1997 predecessor notes consolidated financial statements financial statement schedule nielsen media research inc subsidiaries ii valuation qualifying accounts years ended december 31 1999 1998 1997 schedules one listed omitted required inapplicable required information provided consolidated financial statements including notes thereto report independent accountants board directors shareholders nielsen media research inc audited accompanying consolidated statement financial position nielsen media research inc company december 31 1999 related consolidated statements operations cash flows shareholders divisional equity period october 27 1999 december 31 1999 also audited consolidated statements operations cash flows shareholders divisional equity period january 1 1999 october 26 1999 audit also included financial statement schedule listed index item 14a2 financial statements schedule responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position nielsen media research inc december 31 1999 consolidated results operations cash flows period october 27 1999 december 31 1999 consolidated results operations cash flows period january 1 1999 october 26 1999 conformity accounting principles generally accepted united states also opinion related statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein ernst young llp new york new york february 1 2000 report independent accountants shareholders nielsen media research inc opinion consolidated financial statements listed accompanying index appearing item 14 a1 page 21 present fairly material respects financial position nielsen media research inc subsidiaries december 31 1998 results operations cash flows two years period ended december 31 1998 conformity accounting principles generally accepted united states addition opinion financial statement schedule listed index appearing item 14 2 page 21 two years period ended december 31 1998 present fairly material respects information set forth therein read conjunction related consolidated financial statements financial statements financial statement schedule responsibility companys management responsibility express opinion financial statements financial statement schedule based audits conducted audits statements accordance auditing standards generally accepted united states require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation believe audits provide reasonable basis opinion expressed pricewaterhousecoopers llp new york ny january 27 1999 nielsen media research inc notes consolidated financial statements dollar amounts thousands except per share data note 1 basis presentation october 27 1999 common stock nielsen media research inc nielsen media research company acquired whollyowned subsidiary vnu nv vnu cash transaction aggregate value approximately 2700000 accounted purchase acquisition based preliminary estimates fair value assets acquired liabilities assumed goodwill approximately 2465000 established amortized 30 years december 21 1999 date acquisition company purchased 17188349 shares netratings inc netratings common stock exercise warrants purchase shares netratings several shareholders aggregate purchase price approximately 246000 approximately 236000 paid netratings approximately 10000 paid directly several shareholders acquisition accounted purchase method accounting aggregate purchase price including previous purchase third quarter 1999 netratings series c series redeemable convertible preferred stock automatically converted netratings common stock prior netratings initial public offering 257048 company made preliminary allocation purchase price estimated fair value assets acquired liabilities assumed netratings excess purchase price companys share estimated fair value net assets acquired 67089 established goodwill amortized period seven years accompanying financial statements december 31 1999 period october 27 1999 december 31 1999 reflect results operations company subsequent acquisition include adjustments required purchase method accounting accompanying predecessor financial statements periods prior date acquisition presented predecessor companys historical basis accounting reflect adjustments would required result acquisition vnu june 30 1998 nielsen media research operated part cognizant corporation cognizant also included business ims health incorporated ims health june 30 1998 cognizant distributed holders common stock shares ims health distribution relative significance ims health business cognizant ims health treated accounting successor cognizant predecessor financial statements nielsen media research prepared standalone basis although nielsen media research inc corporate legal entity cognizant corporation except specifically included disclosed consolidated financial statements specified agreements nielsen media research ims health nielsen media research indemnified ims health liabilities cognizant incurred date cognizant distribution used accompanying consolidated financial statements term nielsen media research company refers operations television audience measurement business term ims health refers operations pharmaceutical healthcare information business term cognizant refers precognizant distribution consolidated entity operated businesses term db refers cognizants former parent dun bradstreet corporation predecessor consolidated financial statements generally reflect financial position results operations cash flows company separate entity periods presented consolidated financial statements include allocations certain cognizant corporate expenses including cash management legal accounting tax employee benefits insurance services data services corporate overhead relating companys business six months ended june 30 1998 year ended december 31 1997 respective periods management believes allocations reasonable however financial information included herein may necessarily reflect consolidated financial position results operations cash flows company future would company separate entity periods presented nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data purposes governing certain ongoing relationships company ims health cognizant distribution provide orderly transition company ims health entered various agreements note 2 summary significant accounting policies consolidation consolidated financial statements company include accounts company subsidiaries elimination material intercompany accounts transactions cash equivalents company considers highly liquid investments maturity 90 days less time purchase cash equivalents restricted cash restricted cash represents funds held escrow option payments certain employees see note 8 property plant equipment buildings machinery equipment depreciated estimated useful lives 40 3 6 years respectively using straightline method leasehold improvements amortized straightline basis shorter term lease estimated useful life improvement computer software certain direct costs incurred development computer software external use meet internal needs company capitalized computer software costs incurred establish technological feasibility preliminary project stage development expensed periods incurred capitalization ceases amortization starts computer software product available general release customers computer software project placed service amortization computer software product computed using greater ratio products current gross revenues total current expected gross revenues b straightline method computed dividing capitalized costs estimated economic life product three five years costs computer software developed internal use amortized straightline basis three five years balance sheet date company reviews recoverability unamortized capitalized costs computer software comparing carrying value computer software estimated net realizable value intangibles primarily result deferral direct costs related installation meters markets customer contracts preexist intangibles amortized using straightline method life contracts generally five years goodwill represents excess purchase price fair value identifiable net assets businesses acquired amortized straightline basis seven netratings thirty nielsen media research years longlived assets longlived assets certain identifiable intangibles held used company reviewed impairment whenever events changes circumstances indicate carrying amount asset may nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data recoverable impairment loss recognized sum undiscounted expected future cash flows less carrying amount assets measurement impairment loss based fair value asset revenue recognition company recognizes subscription revenue earned generally pro rata oneyear period information delivered related services performed certain metered market contracts fixed payment terms revenue recognized straightline basis contract period generally five years difference amount recognized revenue amount billed service recorded unbilled receivables foreign currency translation company operations canada changes value canadian dollar functional currency affect companys consolidated financial statements translated us dollars operations canada assets liabilities translated using endofperiod exchange rates revenues expenses translated using average rates exchange currency translation adjustments accumulated separate component shareholdersdivisional equity whereas realized transaction gains losses recognized current income taxes company included federal certain state canadian income tax returns cognizant respective periods provision income taxes companys consolidated financial statements calculated separatecompany basis income taxes paid behalf company cognizant respective periods included divisional equity effective cognizant distribution company filed separate income tax returns subsequent acquisition company included vnus federal certain state canadian income tax returns deemed appropriate divisional equity divisional equity includes historical investments advances cognizant including net transfers tofrom cognizant thirdparty liabilities paid behalf company cognizant amounts due tofrom cognizant services charges well currentperiod income respective periods estimates preparation financial statements conformity generally accepted accounting principles requires management make estimates assumptions affect reported amounts assets liabilities revenues expenses disclosure contingent assets liabilities actual results could differ estimates used limited accounting allowance uncollectible accounts receivable depreciation amortization capitalized software costs intangibles employee benefit plans taxes contingencies segments company operates one segment providing national local television audience measurement services reclassifications certain prioryear amounts reclassified conform 1999 presentation nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data financial instruments company used interest rate hedge agreement manage exposure changes interest rate prior issuance longterm debt securities second quarter 1999 company use derivatives trading speculative purposes gain interest rate hedge agreement recognized adjustment interest expense life related debt securities concentrations credit risk company trade accounts receivable unbilled receivable balances 72023 69073 december 31 1999 1998 respectively principally us based customers television media industry recently issued accounting standards june 1998 financial accounting standards board issued sfas 133 accounting derivative instruments hedging activities sfas 133 establishes accounting reporting standards derivative instruments embedded contracts collectively referred derivatives hedging activities company required implement sfas 133 beginning january 1 2001 company expects adoption pronouncement material effect companys financial position results operations cash flows note 3 financial instruments december 31 1999 companys financial instruments included cash equivalents receivables accounts payable loans affiliates longterm debt december 31 1999 fair values cash equivalents trade receivables accounts payable approximated carrying values shortterm nature instruments company believes carrying value loans affiliates approximate fair market value recent issuance december 31 1999 companys 150000 760 senior notes trading public market 965 note 4 investment netratings inc december 21 1999 date acquisition company purchased 17188349 shares netratings inc netratings common stock exercise warrants purchase shares netratings several shareholders aggregate purchase price approximately 246000 approximately 236000 paid netratings approximately 10000 paid directly several shareholders acquisition accounted purchase method accounting aggregate purchase price including previous purchase third quarter 1999 netratings series c series redeemable convertible preferred stock automatically converted netratings common stock prior netratings initial public offering 257048 company made preliminary allocation purchase price estimated fair value assets acquired liabilities assumed netratings excess purchase price companys share estimated fair value net assets acquired 67089 established goodwill amortized period seven years december 31 1999 company owned approximately 57 outstanding common stock netratings results operations netratings included companys consolidated statements operations date acquisition since material following table reflects unaudited pro forma combined results operations company netratings basis acquisition taken place beginning year presented 1999 1998 revenues 456344 402169 net income 23838 23076 nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data managements opinion unaudited pro forma combined results operations necessarily indicative actual results would occurred acquisition consummated beginning 1998 1999 future operations combined companies company netratings signed operating agreement guide coordinate development nielsennetratings internet measurement service launched march 22 1999 agreement covering research panel recruitment netratings pays company services also signed note 5 debt second quarter 1999 company completed public offering 150000 760 senior notes due 2009 notes proceeds offering used repay existing indebtedness companys bank credit facilities notes contain certain restrictive covenants connection acquisition company borrowed 808360 328340 vnu loans payable 2009 bear interest 87 82 per annum respectively additionally connection acquisition netratings company borrowed 246000 vnu loan payable 2009 bears interest 83 per annum connection distribution 1998 company borrowed 275000 unsecured revolving credit facility revolving credit facility provided group lenders led chase manhattan bank revolving credit facility consisted two tranches 364day 225000 tranche threeyear 100000 tranche second quarter 1999 outstanding balance 364day tranche 150000 repaid using proceeds notes 364day facility terminated 1999 outstanding balance threeyear tranche repaid facility terminated company one subsidiaries serves general partner participate limited partnership june 1998 third party investor contributed 25000 partnership exchange limited partnership interest third quarter 1999 investor contributed additional 25000 partnership additional limited partnership interest partnership obligated make distributions third party limited partner approximately 68 per annum third party limited partner ability retire limited interest obtained june 1998 december 31 2000 time one partners elect purchase retiring interest third party limited partner partnership licenses computer software nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data note 6 pension defined contribution plans connection distribution company assumed responsibility pension benefits active employees retirees company allocation assets liabilities expenses benefits prior july 1 1998 included consolidated financial statements following tables set forth change benefit obligation plan assets funded status amounts recognized companys balance sheet plans weightedaverage assumptions end period except indicated discount rate july 1 1998 700 december 31 1998 675 october 26 1999 775 december 31 1999 775 expected return plan assets 975 rate compensation increase 416 nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data components net pension expense plans follows june 30 1998 company participated cognizants defined benefit pension plan covering eligible employees us accordingly company recorded pension expense allocated cognizant totaling 334 six months ended june 30 1998 1571 year ended december 31 1997 certain us employees company also eligible participate companys defined contribution plan cognizant defined contribution plan respective periods company makes matching contribution 50 employees contribution based specified limits employees salary companys expense related plans 430 period october 27 december 31 1999 2150 period january 1 october 26 1999 2278 2021 years ended december 31 1998 1997 respectively nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data note 7 postretirement benefit plans connection distribution company assumed responsibility postretirement benefits active employees retirees company allocation liabilities expenses benefits prior july 1 1998 included consolidated financial statements following tables set forth change benefit obligation plan assets funded status amounts recognized companys balance sheet plans weightedaverage assumptions end period except indicated discount rate july 1 1998 700 december 31 1998 675 october 26 1999 775 december 31 1999 775 expected return plan assets na rate compensation increase 416 nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data components net postretirement benefit expense plans follows measurement purposes assumed rate future increases per capita cost covered postretirement health care benefits 65 2000 decreasing gradually 50 year 2021 remaining constant thereafter assumed health care cost trend rates significant effect amounts reported postretirement health care plans onepercentagepoint change assumed health care cost trend rates would following effects nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data note 8 employee stock plans nielsen media research key employees stock incentive plan provided grant stock options restricted stock eligible employees options life ten years vested proportionally three six years exercise price equal fair value common stock grant date immediately following cognizant distribution outstanding awards cognizant key employees stock incentive plan held company employees adjusted accordance nielsen media research plan adjusted awards ratio exercise price per option market value per share aggregate difference market value exercise price vesting provisions option periods terms conditions original options adjusted awards adjusted reflect companys oneforthree reverse stock split effective august 26 1998 connection acquisition outstanding options nielsen media research common stock held company employees cancelled exchange consideration equal difference 3775 acquisition price respective option exercise price payments options vested november 15 1999 made 1999 payment options scheduled vest subsequent november 15 1999 paid next two years aggregate future payment former option holders included captions restricted cash deferred compensation accrued current liabilities consolidated statements financial position prior acquisition company maintained employee stock purchase plan allowed eligible employees purchase limited amount common stock end quarter price equal lesser 90 fair market value first trading day quarter b last trading day quarter fair market value defined average high low prices shares relevant day plan discontinued connection acquisition nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data note 9 income taxes nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data companys deferred tax assets liabilities comprised following december 31 1999 1998 deferred tax assets postretirement benefits 4270 3855 bad debts 1276 1226 liabilities former option holders 100296 net operating losses 53233 6828 425 165903 5506 deferred tax liabilities computer software intangibles 50908 38860 unbilled revenue 4605 5299 postretirement benefits 2694 2966 depreciation 4670 4669 sfas 115 2149 65026 51794 valuation allowance 100877 net deferred tax liability 46288 note 10 lease commitments company leases office production facilities computers equipment operating leases expiring 2007 rental expense leases amounted 1619 period october 27 december 31 1999 11950 period october 27 december 31 1999 11309 10911 years ended december 31 1998 1997 respectively aggregate minimum rentals noncancellable leases follows years ending december 31 2000 12724 2001 12078 2002 10398 2003 8797 2004 2206 thereafter 5182 51385 distribution company assumed certain cognizant leases entered sublease agreements ims health third parties certain facilities computer equipment sublease agreements principally continuation existing lease commitments included amounts disclosed many leases also require lessee make additional payments based upon various escalation clauses relating increases real estate taxes maintenance costs consumer price index note 11 transactions affiliates cognizant provided certain centralized services see note 1 company expenses related services allocated company based utilization specific services estimable based revenue company proportion cognizants consolidated revenue management believes allocation methods reasonable allocations 16903 six months ended june 30 1998 34146 year ended nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data december 31 1997 included operating costs selling administrative expenses consolidated statements operations amounts due cognizant allocated expenses included divisional equity net transfers cognizant included divisional equity include advances loans affiliates net cash transfers cognizant thirdparty liabilities paid behalf company cognizant amounts due cognizant services charges income taxes paid behalf company cognizant respective periods interest charged transactions weighted average balance due cognizant 338061 six months ended june 30 1998 334329 year ended december 31 1997 activity net transfers cognizant account periods included divisional equity consolidated statements shareholdersdivisional equity comprehensive income summarized follows six months ended year ended june 30 1998 december 31 1997 cognizant services charges 16903 37738 loans advances net 14714 12151 us income taxes 12551 23600 cash transfers net 322066 100294 net transfers cognizant 307326 51107 purposes governing certain ongoing relationships company ims health cognizant distribution provide orderly transition company ims health entered various agreements including distribution agreement tax allocation agreement employee benefits agreement shared transaction services agreement transition services agreement among things agreements set forth principles applied allocating certain cognizant distributionrelated costs specify portions contingent liabilities including certain contingent liabilities shared certain amounts exceeded note 12 capital stock october 27 1999 common stock nielsen media research inc acquired wholly owned subsidiary vnu subsidiary merged nielsen media research inc nielsen media research inc surviving legal accounting entity concurrent merger number shares common stock company reduced 1000 shares july 8 1998 nielsen media research board directors authorized oneforthree reverse stock split approved special shareholders meeting held august 26 1998 shareholders close business date right receive one new share nielsen media research common stock exchange three old shares note 13 litigation contingencies company subsidiaries involved legal proceedings litigation arising ordinary course business opinion management outcome current legal proceedings litigation decided adversely could material adverse effect quarterly annual operating results cash flows resolved future period however opinion management matters materially affect companys consolidated financial position july 29 1996 information resources inc iri filed complaint united states district court southern district new york naming defendants db ac nielsen company ims unit cognizant iri action complaint alleges among things various violations antitrust laws damages excess 350000 amount iri asked trebled antitrust laws iri also seeks punitive damages unspecified amount connection distribution cognizant common stock holders dun bradstreet corporation db common stock november 1996 db distribution db acnielsen corporation nielsen media research inc notes consolidated financial statementscontinued dollar amounts thousands except per share data acnielsen parent ac nielsen company cognizant entered indemnity joint defense agreement indemnity joint defense agreement pursuant acnielsen agreed responsible potential liabilities may ultimately incurred db cognizant result action maximum amount determined independent investment bank liabilities incurred determination maximum amount based acnielsens ability satisfy liabilities remain financially viable subject certain assumptions limitations however cognizant db agreed extent acnielsen unable satisfy liabilities full remain financially viable cognizant db responsible 50 difference amount may payable result litigation maximum amount acnielsen able pay determined investment bank terms db distribution agreement dated october 28 1996 among cognizant db acnielsen 1996 distribution agreement pursuant shares cognizant acnielsen distributed stockholders db condition cognizant distribution nielsen media research ims health required undertake jointly severally liable db acnielsen cognizants obligations respect iri action however pursuant distribution agreement dated june 30 1998 cognizant ims health ims health nielsen media research agreed ims health assume 75 nielsen media research assume 25 payments made respect iri action indemnity joint defense agreement otherwise including ongoing legal fees expenses related thereto incurred 1999 ims health agreed fully responsible legal fees expenses incurred 1998 terms 1996 distribution agreement nielsen media research ims health also jointly severally liable db taxes accrued interest arising certain tax assessments may levied internal revenue service irs related certain db tax planning strategies pursuant distribution agreement nielsen media research liable pay 25 payments made db irs net related tax benefits excess first 397000 payable db andor ims health irs currently reviewing dbs utilization certain capital losses generated 1989 1990 db stated expects assessment issued irs second quarter 2000 time db consider options include satisfying obligation irs share liability however assessment made irs prevail opinion management impact transaction would material effect results operations cash flows financial position nielsen media research accordance distribution agreement nielsen media researchs aggregate liability ims health payments respect iri action share future db tax interest payments relating tax uncertainties referred paragraphs shall exceed 125000 payable 2001 management unable predict time final outcome iri action amount future db tax interest payments whether resolution matters could materially affect nielsen media researchs results operations cash flows financial position nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share data note 14 supplemental financial data amounts thousands except per share data accumulated amortization computer software intangibles 2873 751 december 31 1999 43173 19501 december 31 1998 respectively nielsen media research inc notes consolidated financial statements continued dollar amounts thousands except per share dataitem 14 exhibits financial statement schedules reports form 8k list documents filed part report 1 financial statements see index financial statements schedule page 14 2 financial statement schedule see index financial statements schedule page 14 3 financial information fiveyear selected financial data see index financial statements schedule page 14 4 exhibits see index exhibits page 17 indicates exhibits management contracts compensatory plans required filed exhibits b reports form 8k none signatures pursuant requirements section 13 15d securities act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized nielsen media research inc registrant john dimling john dimling president chief executive officer director thomas w young thomas w young executive vice president chief financial officer stuart j goldshein stuart j goldshein vice president controller date march 29 1999 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated james r craigie michael moore james r craigie director michael moore director william g jacobi bernard puckett william g jacobi chairman director bernard puckett director peter lund robert e weissman peter lund director robert e weissman director date march 29 1999 index financial statements schedule financial statements companys consolidated financial statements notes thereto related report thereon pricewaterhousecoopers llp independent accountants years ended december 31 1998 1997 1996 appearing pages 28 44 accompanying 1998 annual report shareholders incorporated reference annual report form 10k see additional financial data indicated read conjunction consolidated financial statements schedules one listed omitted required inapplicable required information provided consolidated financial statements including notes thereto report independent accountants shareholders board directors nielsen media research inc audits consolidated financial statements referred report dated january 27 1999 appearing page 31 1998 annual report shareholders nielsen media research inc report consolidated financial statements incorporated reference annual report form 10k also included audits financial statement schedule listed item 14a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp new york new york january 27 1999 nielsen media research inc subsidiaries schedule ii valuation qualifying accounts years ended december 31 1998 1997 1996 thousands index exhibits exhibit description 3 articles incorporation bylaws 31 restated certificate incorporation cognizant corporation dated october 7 1996 incorporated reference exhibit 31 registrants registration statement form 10 filed october 7 1996 file number 00112275 32 amended restated bylaws registrant incorporated reference exhibit 32 registrants registration statement form 10 filed october 7 1996 file number 00112275 33 certificate ownership merger merging nielsen media research inc cognizant corporation filed june 30 1998 secretary state delaware incorporated reference exhibit 33 registrants registration statement form s3 filed july 22 1998 registration number 33359563 34 certificate amendment restated certificate incorporation nielsen media research inc incorporated reference appendix registrants proxy statement filed august 5 1998 file number 00112275 10 material contracts 101 distribution agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 101 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 102 tax allocation agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 102 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 0112275 103 employee benefits agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 103 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 104 indemnity joint defense agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 104 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 105 tam master agreement cognizant corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 105 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 106 intellectual property agreement among cognizant corporation dun bradstreet corporation acnielsen corporation dated october 28 1996 incorporated reference exhibit 106 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 107 distribution agreement cognizant corporation ims health incorporated dated june 30 1998 incorporated reference exhibit 101 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 108 tax allocation agreement cognizant corporation ims health incorporated dated june 30 1998 incorporated reference exhibit 102 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 exhibit description 109 employee benefits agreement cognizant corporation ims health incorporated dated june 30 1998 incorporated reference exhibit 103 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 1010 amended restated transition services agreement dun bradstreet corporation new dun bradstreet corporation cognizant corporation ims health incorporated acnielsen corporation gartner group inc dated june 30 1998 incorporated reference exhibit 104 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 1011 undertaking ims health incorporated dated june 29 1998 incorporated reference exhibit 105 registrants quarterly report form 10q quarter ended june 30 1998 filed august 13 1998 file number 00112275 1012 1996 cognizant corporation nonemployee directors stock incentive plan adopted effective november 1 1996 incorporated reference exhibit 107 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1013 1996 cognizant corporation nonemployee directors deferred compensation plan adopted effective october 15 1996 incorporated reference exhibit 108 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1014 1996 cognizant corporation key employees stock incentive plan amended december 16 1997 incorporated reference exhibit 109 registrants annual report form 10k year ended december 31 1997 filed march 18 1998 file number 00112275 1015 1996 cognizant corporation replacement plan certain employees holding dun bradstreet corporation equitybased awards adopted effective november 1 1996 incorporated reference exhibit 1010 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1016 form nonemployee directors stock option agreement incorporated reference exhibit 1012 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1017 form nonemployee directors restricted stock agreement incorporated reference exhibit 1013 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1018 forms stock option agreement incorporated reference exhibit 1014 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1019 forms purchased option agreement incorporated reference exhibit 1015 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1020 forms limited stock appreciation right agreement incorporated reference exhibit 1016 registrants annual report form 10k year ended december 31 1996 file march 27 1997 file number 00112275 1021 forms changeincontrol agreement certain executives nielsen media research inc adopted effective july 1 1998 1022 cognizant corporation executive transition plan adopted effective november 1 1996 incorporated reference exhibit 1018 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 exhibit description 1023 cognizant corporation executive annual incentive plan adopted effective january 1 1997 incorporated reference exhibit 1019 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1024 cognizant corporation supplemental executive retirement plan adopted effective november 1 1996 incorporated reference exhibit 1020 registrants annual report form 10k year ended december 31 1996 filed march 27 1997 file number 00112275 1025 rights agreement dated october 15 1996 cognizant corporation first chicago trust company new york incorporated reference exhibit 1 registrants current report form 8k filed october 15 1996 file number 00112275 1026 cognizant corporation retirement excess plan adopted effective january 1 1997 incorporated reference exhibit 1022 registrants quarterly report form 10q quarter ended march 31 1997 filed may 13 1997 file number 00112275 1027 cognizant corporation savings equalization plan adopted effective november 1 1996 incorporated reference exhibit 1023 registrants quarterly report form 10q quarter ended march 31 1997 filed may 13 1997 file number 00112275 1028 severance agreement release cognizant corporation dennis g sisco dated february 28 1997 incorporated reference exhibit 1024 registrants quarterly report form 10q quarter ended september 30 1997 filed november 14 1997 file number 00112275 13 1998 annual report shareholders 21 list active subsidiaries january 31 1999 23 consent pricewaterhousecoopers llp 27 financial data schedules management contract compensatory plan arrangement item 7 managements discussion analysis financial condition results operations information response item set forth financial review pages 1 6 1996 report shareholders information incorporated herein reference item 8item 7 managements discussion analysis financial condition results operations information response item set forth financial review pages 1 7 1997 annual report shareholders information incorporated herein reference item 8item 7 managements discussion analysis financial condition results operations dollar amounts thousands overview october 27 1999 common stock nielsen media research acquired whollyowned subsidiary vnu cash transaction aggregate value approximately 2700000 accounted purchase acquisition based preliminary estimates fair value assets acquired liabilities assumed goodwill approximately 2465000 established amortized 30 years december 21 1999 company purchased 17188349 shares netratings common stock exercise warrants purchase shares netratings several shareholders aggregate purchase price approximately 246000 approximately 236000 paid netratings approximately 10000 paid directly several shareholders netratings acquisition accounted purchase method accounting aggregate purchase price including previous purchase third quarter 1999 netratings series c series redeemable convertible preferred stock automatically converted netratings common stock prior netratings initial public offering 257048 company made preliminary allocation purchase price estimated fair value assets acquired liabilities assumed netratings excess purchase price companys share estimated fair value net assets acquired 67089 established goodwill amortized period seven years accompanying financial statements december 31 1999 period october 27 1999 december 31 1999 reflect results operations company subsequent acquisition include adjustments required purchase method accounting accompanying predecessor financial statements periods prior date acquisition presented predecessor companys historical basis accounting reflect adjustments would required result acquisition vnu june 30 1998 company operated subsidiary cognizant also included business ims health prior november 1 1996 company division db june 30 1998 cognizant distributed shares ims health distribution holders common stock relative significance ims health business cognizant ims health treated accounting successor cognizant predecessor financial statements nielsen media research prepared standalone basis periods prior distribution companys results operations reflect allocation cognizant corporate expenses see notes 1 11 notes consolidated financial statements report results operations year ended december 31 1999 compared year ended december 31 1998 revenue year ended december 31 1999 increased 128 453343 401932 prior year national revenues fueled addition four new cable networks subscriber growth cable networks addition paxson broadcast network latter part 1998 continued penetration data delivery analysis products customer base local revenues continued positively impacted addition six new metered markets 1998 addition three new metered markets 1999 addition paxson affiliates operating costs selling administrative expenses year ended december 31 1999 increased 113 307321 276168 prior year reflecting increase investment spending offset part reduction corporate overhead expenses year 2000 compliance expense operating income decreased 179 77506 year ended december 31 1999 compared 94379 prior year decrease operating income primarily reflected amortization goodwill deferred compensation related acquisition third party interest expense increased 717 14081 year ended december 31 1999 compared 8156 prior year reflecting fullyear impact debt outstanding debt outstanding portion 1998 offset reduction average debt outstanding 1999 related party interest expense primarily related acquisition company vnu companys effective tax rate 419 1998 increase effective tax rate 1999 reflects companys inability recognize tax benefits loss period subsequent acquisition companys net income year ended december 31 1999 decreased 12940 54748 prior year reflecting factors discussed particularly incurrence amortization goodwill deferred compensation related party interest expense connection acquisition absence gain sale marketable securities prior year ended december 31 1998 compared year ended december 31 1997 revenue year ended december 31 1998 increased 121 401932 358594 1997 national revenues fueled addition two new cable network customers 1998 higher sales special analyses derivative products launch new paxson network september growth wb network local revenues benefited fullyear effect three markets metered 1997 startup six additional metered markets 1998 operating costs selling administrative expenses 1998 276168 compared 239670 1997 increase 152 increase reflects higher costs related increased investment business including opening new metered markets increase year 2000 expenses 9944 1998 2681 1997 excluding year 2000 expenses operating costs selling administrative expenses would increased 123 operating income 1998 94379 compared 90261 1997 increase 46 increase resulted primarily factors noted excluding year 2000 expenses operating income would increased 122 interest expense 1998 8156 reflecting debt assumed connection distribution gain sales marketable securities 1998 8008 operating margin 1998 235 compared 252 1997 excluding year 2000 expenses mentioned 1998 operating margin 260 nielsen media researchs consolidated 1998 1997 effective tax rates 419 tax rates computed separatecompany basis net income 1998 54748 compared 52475 1997 increase 43 recently issued accounting standards june 1998 financial accounting standards board issued sfas 133 accounting derivative instruments hedging activities sfas 133 establishes accounting reporting standards derivative instruments embedded contracts collectively referred derivatives hedging activities company required implement sfas 133 beginning january 1 2001 company expects adoption pronouncement material effect companys financial position results operations cash flows year 2000 prior years company discussed nature progress plans become year 2000 ready late 1999 company completed remediation testing systems result planning implementation efforts company experienced significant disruptions missioncritical information technology noninformation technology systems believes systems successfully responded year 2000 date change company expensed approximately 7812 1999 connection remediating systems company aware material problems resulting year 2000 issues either products internal systems products services third parties company continue monitor missioncritical computer applications suppliers vendors throughout year 2000 ensure latent year 2000 matters may arise addressed promptly nonus operating results monetary assets nielsen media research operates us canada approximately 3 nielsen media researchs revenues period october 27 december 31 1999 january 1 october 26 1999 years ended december 31 1998 1997 derived canadian operations result fluctuations value canadian dollar relative us dollar significantly affect nielsen media researchs results operations nonus monetary assets maintained canadian dollars changes value currency relative us dollar charged credited shareholdersdivisional equity effects exchange rate changes 1999 1998 1997 material liquidity capital resources cash equivalents totaled 349996 including 332257 cash equivalents netratings inc consolidated subsidiary 7799 december 31 1999 1998 respectively increase 342196 net cash provided operating activities 91586 122436 years ended december 31 1999 1998 respectively decrease 30850 cash provided operating activities compared prior year primarily reflected lower earnings decrease accrued current liabilities primarily related liabilities assumed 1998 connection distribution net cash used investing activities totaled 2433217 year ended december 31 1999 compared 68086 prior year increase 2365131 primarily reflected acquisition company netratings net cash provided financing activities 2683818 year ended december 31 1999 compared net cash used financing activities 52496 prior year increase 2736314 cash provided financing activities primarily reflected related party borrowings capital contribution connection acquisition company netratings offset part repayment debt companys existing balances cash equivalents cash generated operations might sufficient meet companys longterm shortterm cash requirements including continued investment business payment interest expense loans third parties vnu affiliates company may dependent vnu andor affiliates satisfy cash requirements company forward looking statements certain statements captions liquidity capital resources year 2000 item 5 forwardlooking may identified use forwardlooking words phrases believe expect intend could preliminary estimated target efforts pro forma scheduled among others private securities litigation reform act 1995 provides safe harbor forwardlooking statements factors could cause actual results differ materially forwardlooking statements relating liquidity dividends include limited results litigation contingencies affecting company deterioration economic conditions ability obtain future financing satisfactory terms item 7aitem 7 managements discussion analysis financial condition results operations information response item set forth pages 28 30 1998 annual report shareholders information incorporated herein reference item 8 nannanitem 7a quantitative qualitative disclosures market risk companys revenues expenses us dollars result fluctuations value foreign currency relative us dollar significantly affect companys results operations financial position company used interest rate hedge agreement manage exposure changes interest rate prior issuance longterm debt securities second quarter 1999 december 31 1999 companys debt substantially tenyear fixed interest securities company use derivatives trading speculative purposes item 8nan item 8 financial statements supplementary data see index financial statements schedules item 14 page 17 item 9item 8 financial statements supplementary data see index financial statements schedules item 14 page 15 item 9item 8 financial statements supplementary data following consolidated financial statements company subsidiaries together reports independent accountants thereon filed part report consolidated financial statements reports independent accountants consolidated statements operations period october 27 1999 december 31 1999 company period january 1 1999 october 26 1999 years ended december 31 1998 1997 predecessor consolidated statements financial position december 31 1999 company december 31 1998 predecessor consolidated statements cash flows period october 27 1999 december 31 1999 company period january 1 1999 october 26 1999 years ended december 31 1998 1997 predecessor consolidated statements shareholdersdivisional equity period october 27 1999 december 31 1999 company period january 1 1999 october 26 1999 years ended december 31 1998 1997 predecessor notes consolidated financial statements item 9item 8 financial statements supplementary data see index financial statements schedules item 14 page 12 item 9 nannannannan