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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 001-14049.
IMS HEALTH INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 06-1506026
(State of incorporation) (I.R.S. Employer Identification No.)
200 NYALA FARMS, WESTPORT, CONNECTICUT 06880
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 222-4200.
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, par value $.01 per share........ New York Stock Exchange
Preferred Stock Purchase Rights............... New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of February 28, 2001, 294,170,502 shares of Common Stock of IMS Health
Incorporated were outstanding and the aggregate market value of such Common
Stock held by nonaffiliates (based upon its closing transaction price on the
Composite Tape on such date) was approximately $7,910 million.
(CONTINUED)
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DOCUMENTS INCORPORATED BY REFERENCE
PART I
Item 1 --Business Pages 1 to 13, "Financial Review" in the 2000 Annual
Report to Shareholders.
Pages 22 and 23, "Note 1. Basis of Presentation",
Pages 25 to 26, "Note 4. Investment in Gartner
Stock", Pages 27 to 29, "Note 7. Spin-Off of Synavant
Inc.", Pages 30 to 32, "Note 12. Investment in
TriZetto and Disposal of Erisco", Pages 45 to 47,
"Note 23. Operations by Business Segment" and Page
47, "Note 24. Discontinued Operations" to the
Consolidated Financial Statements in the 2000 Annual
Report to Shareholders.
Item 3 --Legal Proceedings Pages 42 to 44, "Note 21. Contingencies", of the
Notes to Consolidated Financial Statements in the
2000 Annual Report to Shareholders.
PART II
Item 5 --Market for the Registrant's Common Page 13, "Financial Review", in the 2000 Annual
Equity and Related Shareholder Matters Report to Shareholders.
Item 6 --Selected Financial Data Page 49, "Five-Year Selected Financial Data", in the
2000 Annual Report to Shareholders.
Item 7 --Management's Discussion and Analysis of Pages 1 to 13, "Financial Review", in the 2000 Annual
Financial Condition and Results of Report to Shareholders.
Operations
Item 7A --Quantitative and Qualitative Disclosure Pages 10 and 11, "Financial Review", and pages 32 and
About Market Risk 33, "Note 14. Financial Instruments", of the Notes to
Consolidated Financial Statements, in the 2000 Annual
Report to Shareholders.
Item 8 --Financial Statements and Supplementary Pages 15 to 49 of the 2000 Annual Report to
Data Shareholders.
PART III
Item 10 --Directors and Executive Officers of the Section entitled "Proposal No. 1: Election of
Registrant Directors" on pages 7 to 9 of the Company's
Definitive Proxy Statement (the "Proxy Statement")
relating to its Annual Meeting of Shareholders to be
held on May 3, 2001.
Item 11 --Executive Compensation Section entitled "Compensation of Executive Officers"
on pages 12 to 30 of the Proxy Statement.
Item 12 --Security Ownership of Certain Beneficial Section entitled "Security Ownership of Management
Owners and Management and Others" on pages 2 to 6 of the Proxy Statement.
Item 13 --Certain Relationships and Related Sections entitled "Certain Transactions" on page 30
Transactions and "Compensation of Executive Officers" on pages 28
and 29 of the Proxy Statement.
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The Index to Exhibits is located on Pages 27 to 31
PART I
As used in this report, except where the context indicates otherwise, the
terms "Company" and "IMS Health" mean IMS Health Incorporated and all
subsidiaries consolidated in the financial statements contained or incorporated
by reference herein.
ITEM 1. BUSINESS
IMS Health was incorporated under the laws of the State of Delaware on
February 3, 1998. The Company began operating as an independent publicly-held
company on July 1, 1998 as a result of its spin-off (the "Cognizant Spin-Off")
from Cognizant Corporation ("Cognizant"). Cognizant subsequently changed its
name to Nielsen Media Research, Inc. ("NMR"). (See Note 24 to the Consolidated
Financial Statements in the 2000 Annual Report to Shareholders). Cognizant began
operating as an independent publicly-held company on November 1, 1996 as a
result of its spin-off (the "D&B Spin-Off") from The Dun & Bradstreet
Corporation ("Dun & Bradstreet").
IMS Health is the world's leading provider of information solutions to the
pharmaceutical and healthcare industries. IMS Health operates in approximately
100 countries and its key products include:
- Sales management information to optimize sales force productivity;
- Market research for prescription and over-the-counter pharmaceutical
products; and
- Information Technology ("IT") application development, integration and
management services.
During 2000, IMS Health consisted of:
1. The IMS Segment, a leading global provider of market information, sales
management and decision-support services to the pharmaceutical and
healthcare industries. The IMS Segment is managed on a global business
model, with global leaders for the majority of its critical business
processes.
2. The Cognizant Technology Solutions Segment ("CTS" or "CTS Segment"), which
delivers high quality, cost-effective, full life cycle solutions to complex
software development and maintenance problems that companies face as they
transition to e-business. CTS's solutions include application development
and integration, application management and re-engineering services. The CTS
Segment represents IMS Health's ownership of 11,290,900 shares of the
Class B common stock of Cognizant Technology Solutions Corporation (60.53%
of all classes of Cognizant Technology Solutions Corporation's common shares
outstanding as of December 31, 2000).
3. The Transaction Businesses Segment, which includes:
- Synavant, Inc. ("Synavant"), comprised of the pharmaceutical industry
automated sales and marketing support businesses previously operated by
IMS Health Strategic Technologies Inc., and certain other foreign
subsidiaries of IMS Health; substantially all of IMS Health's interactive
and direct marketing business, including the business of Clark
O'Neill, Inc., which was a wholly-owned subsidiary of IMS Health; and a
majority stake in a foreign joint venture (collectively, the "Synavant
Business"). (See Notes 1 and 7 to the Consolidated Financial Statements in
the 2000 Annual Report to Shareholders).
- Erisco Managed Care Technologies, Inc. ("Erisco"), a leading supplier of
software-based administrative and analytical solutions to the managed care
industry. (See Notes 1 and 12 to the Consolidated Financial Statements in
the 2000 Annual Report to Shareholders).
- Three small non-strategic software companies.
All prior year segment information has been reclassified to conform with the
2000 presentation.
The Company spun-off the Synavant Business on August 31, 2000, by
distributing the common stock of Synavant to IMS Health's shareholders (the
"Synavant Spin-Off"). The Company sold Erisco to The TriZetto Group, Inc.
("TriZetto") and entered into a technology and data strategic alliance with
TriZetto on October 3, 2000. The Company also divested or discontinued the three
small non-strategic software businesses. Accordingly, as of December 31, 2000,
all components of the Transaction Businesses Segment had been either spun-off,
divested, or discontinued.
1
In addition to these three segments, the Company has a Corporate unit which
includes Enterprise Associates LLC ("Enterprises"), a venture capital unit
focused on investments in emerging businesses; and an equity interest in
TriZetto, consisting of 12,142,857 shares of TriZetto common stock, equivalent
to 33.2% of all TriZetto common shares outstanding as of December, 31, 2000. The
Company accounts for its interest in TriZetto on an equity basis. (See Note 23
to the Consolidated Financial Statements in the 2000 Annual Report to
Shareholders).
The Synavant Spin-Off and the sale of Erisco, together with the divestitures
or discontinuation of the three small non-strategic software businesses, have
resulted in a company concentrated on IMS Health's core data business of
providing market information and decision support services to the pharmaceutical
industry, together with CTS, Enterprises, and TriZetto. (See "Financial Review"
in the 2000 Annual Report to Shareholders).
On July 26, 1999, the Company completed a spin-off of the majority of its
equity investment in Gartner, Inc. ("Gartner", formerly known as "Gartner Group,
Inc.") to IMS Health shareholders. The Consolidated Financial Statements of the
Company have been reclassified for all periods to reflect the Gartner equity
investment as a discontinued operation. (See Note 4 and Note 24 to the
Consolidated Financial Statements in the 2000 Annual Report to Shareholders).
IMS SEGMENT
The IMS Segment provides sales management and market research information
services to the pharmaceutical and healthcare industries worldwide. IMS provides
information services covering approximately 100 countries and maintains offices
in 74 countries on six continents, with 69% of total 2000 IMS Segment revenue
generated outside the United States.
IMS SERVICES
Sales management services represented 60% of the IMS Segment's worldwide
revenue in 2000. Sales management services include sales territory reports,
prescription tracking reports, and doctor profiling services. Sales management
services are used principally by pharmaceutical manufacturers to measure and
forecast the effectiveness and efficiency of sales representatives and to target
the marketing and sales efforts of a client's sales force. They are also used by
customers to compensate pharmaceutical sales forces.
Sales management services are made available to clients and their sales
representatives and management via hardcopy reports, CD-ROMs, software
application tools, computer on-line services, Web-based access and magnetic
media for use in client computer systems and IMS's customized electronic
workstations. IMS's data delivery systems help clients to maximize efficiency by
aiding in the setting of sales targets and calculation of sales commissions;
giving fast access to sales data and permitting more sophisticated analyses;
improving call reporting; and improving communication between sales management
and their sales forces. In the United States, IMS has several customized
client-server decision support systems that allow a client to store large
amounts of data at its own site and integrate its own internal sales and
marketing data with IMS data and other external data. IMS also provides clients
with customized data warehouse tools and Web-based access capabilities. IMS's
principal sales management services are as follows:
- SALES TERRITORY REPORTING SERVICES. Sales territory reporting is the
principal sales management service offered by IMS to its pharmaceutical
clients. Sales territory reports can be precisely tailored for each
client, and measure the sales of a client's own products and those of
competitors within specified geographical configurations. These reports
are designed to provide marketing and sales managers with a reliable
measurement of each salesperson's activity and effectiveness in his or her
sales territory, and therefore are used by clients, among other things,
for determining sales force compensation. Data reported for multiple
territories are used for applications such as resource allocation,
territory alignment, market analyses and distribution management.
Depending on the particular market, sales territory reports are available
to clients on a weekly, monthly or quarterly basis. In the United States,
sales territory reports from IMS's Drug Distribution Data-TM- ("DDD")
service allow pharmaceutical clients to track the flow of their products
and those of their competitors to various levels of geography and channels
of distribution. The DDD database contains a virtual census of sales of
pharmaceutical products through all distribution channels, including
direct sales by pharmaceutical
2
manufacturers and indirect sales through drug wholesalers, mail order
distributors, warehousing chains and other market participants. IMS
provides sales territory reporting services covering 45 countries.
- PRESCRIPTION TRACKING REPORTING SERVICES. Prescription tracking reporting
services are designed to monitor prescription activity and to track the
movement of pharmaceutical products out of pharmacies. Prescription
tracking services are used by pharmaceutical companies to facilitate
product marketing at the prescriber level. In the United States and
Canada, the Xponent-Registered Trademark- service monitors prescription
activity at the retail pharmacy and mail order outlet level, and uses a
patented statistical methodology to project the prescription activity of
nearly one million individual prescribers on a monthly basis. Xponent is
now also available in six European countries. The European Xponent
database is built from prescription data collected from retail pharmacies
and coding centers which are linked to the geographical area in which the
prescription was written, and where permissible under local data privacy
laws, to individual prescribers.
- SELF-MEDICATION SERVICES. These services provide detailed product
movement, market share and pricing information for over-the-counter
personal care, patient care and nutritional products. IMS publishes
self-medication reports covering 34 countries and provides related
services. PharmaTrend-TM-, IMS Health's tracking service for
over-the-counter pharmaceutical products, is available in 12 European
countries
Market research services represented approximately 36% of the IMS Segment's
worldwide revenue in 2000. The principal market research services are
multinational integrated analytical tools, and syndicated pharmaceutical,
medical, hospital, promotional and prescription audits. Market research services
are utilized by clients for various strategic purposes, including analyzing
market shares, therapeutic prescribing trends and price movements at the
national and sub-national levels. The information reported in these services is
generated or derived from data collected primarily from pharmaceutical
manufacturers, pharmaceutical wholesalers, pharmacies, hospitals and doctors.
Market research services are delivered to clients via hardcopy reports, CD-ROMs,
software application tools, computer on-line services, and magnetic media for
use in client computer systems and IMS's customized electronic workstations.
IMS's principal market research services are as follows:
- IMS GLOBAL SERVICES. IMS's Global Services unit provides national level
information services to pharmaceutical clients operating on a
multinational level. Global Services' core service offering, MIDAS-TM-, is
an on-line multinational integrated data analysis tool that harnesses
IMS's worldwide databases and is used by the pharmaceutical industry to
assess and utilize pharmaceutical information and trends in multiple
markets. MIDAS gives clients on-line access to IMS-compiled
pharmaceutical, medical, promotional and chemical data. Using MIDAS,
clients are able to view information from the national databases compiled
by IMS and produce statistical reports in the required format. IMS Global
Services also publishes various in-depth reviews of the worldwide
pharmaceutical marketplace and provides custom market research and
strategic consultancy.
- PHARMACEUTICAL AUDITS. These audits measure the sale of pharmaceutical
products into pharmacies, supplemented in some countries by data collected
from prescribing physicians, retail chains and discount stores. These
audits contain data projected to national estimates, showing product sales
by therapeutic class broken down by package size and dosage form. IMS
publishes pharmaceutical audits covering 100 countries.
- MEDICAL AUDITS. These audits are based on information collected from
panels of practicing physicians and contain projected national estimates
of the number of consultations for each diagnosed disease with details of
the therapy prescribed. These audits also analyze the use physicians make
of individual drugs by listing the diseases for which they are prescribed,
the potential therapeutic action the physician is expecting, other drugs
prescribed at the same time, and estimates of the total number of drugs
used for each disease. IMS publishes medical audits covering 51 countries.
- HOSPITAL AUDITS. These audits contain data projected to national estimates
and show the sale of pharmaceutical products to hospitals by therapeutic
class. Related reports provide audits of laboratory diagnostic supplies,
hospital supplies, and hospital records. IMS publishes hospital audits
covering 43 countries.
- PROMOTIONAL AUDITS. These audits measure pharmaceutical promotion for a
particular market, including sales-force promotion and journal and mail
advertising, based on information received from panels of physicians and
from monitoring medical journals and direct mail. IMS publishes
promotional reports covering 21 countries.
3
- PRESCRIPTION AUDITS. These audits analyze the rate at which drugs move out
of the pharmacy and into the hands of the consumer, and measure both what
is prescribed by physicians and what is actually dispensed at the
pharmacy. IMS publishes prescription audits covering 15 countries.
- OTHER MARKET RESEARCH REPORTS. These include managed care reports which
offer an array of information to quantify the effects of managed care on
the pharmaceutical and healthcare industry; personal care reports which
measure the sale of healthcare accessories, wound care and dietetic aids;
and reports on bulk chemical shipments and molecules for R&D. IMS has
developed, in certain countries, disease and treatment information at the
patient level (in which information is not identifiable to any individual
patient) that gives participants in the healthcare industry new insights
into the treatment of diseases. The availability, scope and frequency of
the foregoing reports vary on a country-by-country basis.
The remaining 4% of the IMS Segment's 2000 revenue was derived primarily
through professional consulting, and research and development services. IMS
provides pharmaceutical and other clients with a range of value-added services
that are used (i) to study specific issues and trends in the pharmaceutical
marketplace and the healthcare industry, (ii) to manage sales and marketing,
(iii) to evaluate the effectiveness of marketing programs, (iv) to analyze
components of a product marketing program at any stage of its implementation,
and (v) for consultancy in optimizing strategy, marketing programs and product
commercialization. These services include:
- PROFESSIONAL CONSULTING SERVICES. IMS's professional consulting services
are provided to help clients analyze and evaluate market trends,
strategies and tactics, and to assist in the development and
implementation of customized software applications and data warehouse
tools. In the United States, IMS's professional consulting services
provide a wide range of custom market research, promotion optimization,
promotion effectiveness, managed care and other advanced analytics
services for the pharmaceutical and healthcare marketplace. The
professional services consulting group also helps clients to design
customized decision support systems based on a variety of cutting-edge
technologies, for the purpose of leveraging IMS data more rapidly. Outside
of the United States, consulting services are offered on a
country-by-country basis.
- RESEARCH AND DEVELOPMENT SERVICES. IMS's research and development services
provide clients with information and workstation tools intended to improve
the effectiveness and speed of clinical research and subsequent regulatory
approvals. IMS's regulatory affairs database, IDRAC, covers the European
Union, certain Eastern European countries, Japan and the United States,
and guides users through the drug development and registration process.
IMS DATA SUPPLIERS
Over the past four decades, IMS has developed strong relationships with its
data suppliers in each market in which it operates. As the supply of
pharmaceutical data is critical to IMS's business, IMS devotes significant human
and financial resources to its data collection efforts, and in many cases has
historical connections with the trade associations and professional associations
involved. In the United States, IMS has been designated as a database licensee
by the American Medical Association ("AMA") for use and sublicensing of the
AMA's physician database.
IMS CUSTOMERS
Sales to the pharmaceutical industry accounted for substantially all of the
IMS Segment's revenue in 2000. All major pharmaceutical and biotechnology
companies are customers of IMS, and many of the companies subscribe to reports
and services in several countries. IMS's customer base is broad in scope and
enables it to avoid dependence on any single customer. None of IMS's customers
accounted for more than 10% of the Company's gross revenues in 2000.
IMS COMPETITION
While no competitor provides the geographical reach or breadth of IMS's
services, IMS generally competes in the countries in which it operates with
other information services companies, as well as the in-house capabilities of
its customers. Generally, competition has arisen on a country-by-country basis.
In Europe, certain of IMS's services
4
compete with those offered by competitors such as Cegedim in France and Germany,
National Data Corporation in Germany and the United Kingdom, and AzyX Geopharma
in Belgium, Germany and Portugal. In the United States, certain of IMS's sales
management services, including its sales territory and prescription tracking
reports, compete with the services of National Data Corporation. Service,
quality, coverage and speed of delivery of information services and products are
the principal differentiators in IMS's market.
IMS FOREIGN OPERATIONS
As indicated above, IMS and its subsidiaries engage in a significant portion
of their business outside of the United States. IMS provides information
services covering approximately 100 countries and maintains offices in 74
countries on six continents, with 69% of total 2000 revenue generated outside
the United States. IMS's foreign operations are subject to the usual risks
inherent in carrying on business outside of the United States, including
fluctuation in relative currency values, possible nationalization,
expropriation, price controls and other restrictive government actions. IMS
Health believes that the risk of nationalization or expropriation is reduced
because its products are software, services and information, rather than the
production of products that require manufacturing facilities or the use of
natural resources.
IMS INTELLECTUAL PROPERTY
IMS owns and controls a number of trade secrets, confidential information,
trademarks, trade names, copyrights, patents and other intellectual property
rights which, in the aggregate, are of material importance to its business. IMS
owns two significant U.S. patents relating to its Xponent product, U.S. Patent
Nos. 5,420,786 and 5,781,893, each having a remaining life of twelve years. IMS
also has numerous trade secrets relating to data processing that are of material
importance to its business. Management believes that the "IMS" name and related
names, marks and logos are of material importance to IMS. IMS is licensed to use
certain technology and other intellectual property rights owned and controlled
by others, and similarly, other companies are licensed to use certain technology
and other intellectual property rights owned and controlled by IMS. The
technology and other intellectual property rights licensed by IMS are of
importance to its business, although management of IMS believes that IMS's
business, as a whole, is not dependent upon any one intellectual property or
group of such properties.
The names of IMS's and its subsidiaries' products and services referred to
herein are trademarks, service marks, registered trademarks or registered
service marks owned by or licensed to IMS or one of its subsidiaries.
IMS EMPLOYEES
The IMS Segment had approximately 5,000 employees worldwide as of
December 31, 2000. Almost all of these employees are full-time. None of the
Company's U.S. employees is represented by a union. In Austria, Belgium, France,
Germany, Italy, the Netherlands and Spain the Company has Works Councils, which
are a legal requirement in those countries. The Company also has a European
Works Council which is in compliance with European Union requirements.
Management considers its relations with its employees to be good and to have
been maintained in a normal and customary manner.
CTS SEGMENT
The CTS Segment ("CTS") delivers high-quality, cost-effective, full life
cycle solutions to complex software development and maintenance problems that
companies face as they transition to e-business. These services are delivered
through the use of a seamless on-site and offshore consulting project team.
CTS's solutions include application development and integration, application
management, and re-engineering services.
CTS markets and sells its technology consulting services directly through
its professional staff, senior management and sales personnel.
CTS provides professional services to its customers through an integrated
business model. CTS's business model combines a technical and account management
team located on-site at the customer location and eleven development centers
located in India. To support this business model, CTS has recruited and trained
in excess of 2,400
5
programmers in India. CTS has also put in place well developed facilities,
technology and communications infrastructure. By basing CTS's technical
operations in India, CTS has access to a large pool of skilled, English-
speaking IT and Internet technology professionals. Such IT and Internet
technology professionals service customers on a cost basis significantly lower
than in developed countries. The main elements of the CTS solution, which CTS
believes differentiates it from other IT service providers, include the
following:
- Established and scalable proprietary processes
- Highly-skilled workforce
- Research and development and competency centers
Because most of CTS's programmers are trained in multiple technologies and
architectures, CTS is able to react to customers' needs and quickly redeploy
programmers to new technologies. To facilitate this ability, CTS has made a
substantial investment in competency centers to leverage its knowledge base
across the company. In addition, through its investment in research and
development activities and the continuing education of technical personnel, CTS
assures that its knowledge base and collective skill set keeps pace with
emerging technologies. The ability to work in new technologies allows CTS to
foster long-term relationships by addressing the needs of both its existing and
new customers.
CTS's extensive facilities, technology and communications infrastructure
facilitates the seamless integration of its on-site and offshore workforces.
This is accomplished by permitting team members in different locations to access
common project information and to work directly on customer projects.
By using the excess capacity of a customer's existing computing facilities
during off-peak hours, CTS's offshore development centers can undertake
additional projects without substantial customer investment in new hardware and
software. In addition, for large projects with short time frames, CTS's offshore
facilities allow for parallel processing of various development phases to
accelerate delivery time.
CTS SERVICES
- APPLICATION DEVELOPMENT AND INTEGRATION. Define requirements, write
specifications and design, develop, test and integrate software across
multiple platforms including internet technologies.
- APPLICATION MANAGEMENT. Support some or all of a customer's applications,
ensuring that systems remain operational and responsive to changing user
requirements, and provide ongoing enhancement as required by the customer.
- RE-ENGINEERING. Modify and test applications to enable systems to function
in new operating environments.
CTS CUSTOMERS
A significant portion of the gross revenues reported by Cognizant Technology
Solutions Corporation ("CTS Corp.") is derived from services performed for IMS
Health, primarily the IMS Segment. IMS Health eliminates these intracompany
revenues in consolidation and excludes them from the reported CTS Segment
results. The following discussion of CTS customers refers to the gross reported
CTS Corp. results.
CTS Corp. provided services to a total of 40, 57 and 90 customers in 1998,
1999 and 2000, respectively. During 1998, 1999 and 2000, CTS Corp.'s top five
customers accounted for 61%, 57% and 40% of total CTS Corp. revenues,
respectively. During 1998, 1999 and 2000, IMS Health and its subsidiaries
accounted for 18%, 17% and 10% of revenues, respectively. The volume of work
performed for specific customers is likely to vary from year to year, and a
significant customer in one year may not use CTS Corp.'s services in a
subsequent year. CTS Corp.'s ten largest customers accounted for, in the
aggregate, approximately 81%, 75% and 59% of CTS Corp.'s revenues in 1998, 1999
and 2000, respectively. In 1998, IMS Health, First Data Corporation and
ACNielsen each accounted for more than 10% of revenue. In 1999, IMS Health and
First Data Corporation each accounted for more than 10% of revenue. In 2000, IMS
Health accounted for more than 10% of revenue. Approximately 44%, 16% and 0% of
CTS Corp.'s revenues were derived from Year 2000 compliance services in 1998,
1999 and 2000, respectively. Application
6
development services represented approximately 26%, 32% and 46% of CTS Corp.'s
revenues in 1998, 1999 and 2000, respectively. Application maintenance services
accounted for 21%, 44% and 47% of CTS revenues in 1998, 1999 and 2000,
respectively.
CTS COMPETITION
The IT services market includes a large number of participants, is subject
to rapid change and is intensely competitive. This market includes participants
from a variety of market segments, including:
- systems integration firms;
- contract programming companies;
- application software companies;
- Internet solutions providers;
- the professional services groups of computer equipment companies;
- facilities management and outsourcing companies; and
- "Big Five" accounting firms.
In certain markets in which CTS competes, there are no significant barriers
to entry. Current and potential competitors may introduce new and more
competitive services, make strategic acquisitions or establish cooperative
relationships among themselves or with third parties. As a result, these
competitors increase the ability of their services to address the needs of
customers. Many of CTS's competitors have significantly greater financial,
technical and marketing resources and greater name recognition than CTS. The
principal competitive factors affecting the markets for CTS's services include:
performance and reliability; quality of technical support, training and
services; responsiveness to customer needs; reputation, experience and financial
stability; and competitive pricing of services.
CTS competes by offering: a well-developed recruiting, training and
retention model; a successful service and delivery model; an excellent referral
base; continual investment in process improvement and knowledge capture;
investment in research and development; and continued focus on responsiveness to
customer needs, quality of services, competitive prices, project management
capabilities and technical expertise.
In order to be successful in the future, CTS must continue to respond
promptly and effectively to technological change and competitors' innovations.
There can be no assurance that CTS will be able to compete successfully against
current and future competitors. CTS's failure to successfully compete could have
a material adverse effect upon its business, results of operations and financial
condition.
CTS INTELLECTUAL PROPERTY
CTS's consulting business includes the co-development, with the customer, of
software applications and other technology deliverables. These include written
specifications and documentation in connection with specific customer
engagements. CTS's future success depends in part on its ability to protect its
intellectual property rights. CTS presently holds no patents or registered
copyrights. CTS relies upon a combination of copyright and trade secret laws,
non-disclosure and other contractual arrangements and various security measures
to protect its intellectual property rights. India is a member of the Berne
Convention, and has agreed to recognize protections on copyrights conferred
under the laws of foreign countries, including the laws of the United States.
CTS believes that laws, rules, regulations and treaties in effect in the United
States and India are adequate to protect it from misappropriation or
unauthorized use of the CTS's copyrights. However, there can be no assurance
that such laws will not change and, in particular, that the laws of India will
not change in ways that may prevent or restrict the transfer of software
components, libraries and toolsets from India to the United States. There can be
no assurance that the steps taken by CTS to protect its intellectual property
rights will be adequate to deter misappropriation of any of CTS's intellectual
property, or that CTS will be able to detect unauthorized use and take
appropriate steps to enforce CTS's rights.
Pursuant to the License Agreement between CTS and IMS Health, all rights to
the "Cognizant" name and certain related trade and service marks were
transferred to CTS in July, 1998.
7
CTS EMPLOYEES
At December 31, 2000, CTS employed approximately 631 persons on a full-time
basis in its North American headquarters and satellite offices and on-site North
American customer locations. CTS also employed approximately 117 persons on a
full-time basis in its European satellite office and on-site European customer
locations and approximately 2,416 persons on a full-time basis in its offshore
software development centers in India. None of CTS's employees is subject to a
collective bargaining arrangement. CTS considers its relations with employees to
be good.
TRANSACTION BUSINESSES SEGMENT
SYNAVANT
Synavant was spun off from IMS Health on August 31, 2000. (See Note 7 to the
Consolidated Financial Statements in the 2000 Annual Report to Shareholders).
The following reflects the business up to the date of the Synavant Spin-Off:
PHARMACEUTICAL RELATIONSHIP MANAGEMENT
Synavant provides sales and marketing effectiveness applications which can
be integrated with client-critical databases to provide customer and business
insights. Synavant configures solutions for clients' sales and marketing teams,
which include, among other things, supporting desktop, laptop, handheld PC, and
paper systems, linked to client companies' databases as required. More than
40,000 pharmaceutical sales and marketing representatives and executives
worldwide rely on Synavant's solutions to make critical decisions on a daily
basis. Synavant's solutions increase pharmaceutical sales-force performance and
productivity by providing access to up-to-the-minute profiling, targeting,
activity reporting, team selling and sample management information.
In response to the unique demands of the pharmaceutical industry's customer
relationship management ("CRM") systems, Synavant created an advanced approach
to CRM adapted specifically for the pharmaceutical industry, which it calls
Pharmaceutical Relationship Management ("PRM").
SYNAVANT PHARMACEUTICAL RELATIONSHIP MANAGEMENT PRODUCTS AND SERVICES
Cornerstone-TM- is a flexible, Windows-based, PRM system used by
pharmaceutical field sales representatives, district managers and headquarters
executives to access mission-critical sales and marketing, contact and territory
information via desktop, laptop or handheld PC's. Cornerstone's applications
include managing business opportunities and projects such as product launch
programs and formulary placement opportunities. Cornerstone can quickly generate
standard and customized reports, such as weekly activity summary reports,
division reports and product launch reports. It also provides fast updating of
customer activities. Cornerstone's MarketViews allows access to pharmaceutical
databases, which can be configured to deliver customized sales summaries by
territory, district and physician.
Premiere(SM) is a Windows-based, PRM system similar to Cornerstone with a
substantial user base in Europe, Brazil, Canada and Asia/Pacific. Core data can
be drawn from various sources and tailored by country, region, department or
individual user. Its unique application generators and builders are used to
customize and modify the system to a company's specific requirements quickly and
without the need for re-programming. Sales and marketing professionals at every
level of an organization can use Premiere to develop marketing strategies,
allocate and coordinate sales and marketing resources, track competitive
activity, and plan, monitor and evaluate sales and marketing activity. Up-to-the
minute integration to pharmaceutical sales forces and marketing by Premiere
enables faster and better informed sales and marketing decisions, enhancing
return-on-investment in pharmaceutical relationship activities.
Based upon the number of world-wide installations referenced below, Synavant
is a market leader in applications for a variety of hand-held PC ("HPC") devices
that offer greater portability in developed markets and a low-cost entry
strategy into sales-force activity management in emerging markets. Over 10,000
HPC device users are customers of Synavant's applications. Synavant's latest HPC
product, PhasTrak Standalone Handheld Solution, combines the power
8
and robustness of the Cornerstone backend system with the speed and agility of a
hand-held device. PhasTrak is a standalone solution that helps sales
representatives improve call quality. Its relational database integrates sales
information with call information, giving representatives a clearer, more
powerful view of each account at the point of contact. PhasTrak also provides
complete electronic sample signature capture as part of a total Prescription
Drug Marketing Act compliance solution. PhasTrak is powered by Windows CE and is
available for HPC size units. If contracted by the customer, Synavant will sell
the HPC device as part of the total customer solution.
Synavant also provides services from Pharbase(SM), the industry-leading
(based upon number of licensed customers) reference medical database used in
pharmaceutical sales and marketing in the following countries: United Kingdom,
France, Italy, the Netherlands, Spain, Canada, Belgium, Luxembourg, Austria,
Australia, Germany and the Philippines. Pharbase(SM) is a syndicated database
which is updated and validated daily by a team of operators in each country,
providing a level of accuracy that cannot be achieved by in-house databases. The
extensive customer and industry information within Pharbase underpins all sales
and marketing activities and can be integrated with other internal, external or
third-party information to create an information solution tailored to the
individual needs of each customer. Insights from such information help improve
sales and marketing productivity by enhancing sales and marketing targeting and
customer relationship management activities.
Synavant provides advanced Business Intelligence solutions, Analyzer and
PharmaLyst, that work with integrated PRM databases and prescriber-level data to
give field and head office managers new, actionable insights into their
business. Through the use of these systems, customers can identify trends and
exceptions in call activity, benchmark sales and marketing performance by
product, market, or physician specialty, compare territory performance, track
call activity and sales and marketing by prescriber segment, and measure the
impact of promotions, sample activities, or other initiatives.
Through its strategic alliance with Siebel Systems, Inc. ("Siebel"),
Synavant will offer the Siebel products as part of the PRM solution offering.
While the sale and support of Cornerstone, Premiere and Phastrak products will
continue to be offered (see below), it is the intent of Synavant to ultimately
migrate its current customer base to Siebel products as appropriate to customer
needs. (See Note 6 to the Consolidated Financial Statements in the 2000 Annual
Report to Shareholders).
Synavant also offers an extensive suite of consulting, support, training,
and systems management services as part of the overall solution represented by
PRM. Synavant offers its customers total systems support, becoming an extension
of its customers' own IT support services. These services include help desk,
educational, implementation, PC staging and delivery, repair,
telecommunications, and complete systems outsourcing services.
Synavant Professional Services serves as an adjunct to the pharmaceutical
company's field support services for business operations and provides project
management, new hire training, field systems rollout, and analytical and
reporting services based on daily operational data to improve field force
operational efficiency and effectiveness. Synavant also provides data
integration management, integrating data from sales and marketing, IMS Health,
and client databases to provide advanced decision support and reporting for its
customers.
SYNAVANT INTERACTIVE MARKETING SERVICES
Synavant's interactive marketing services include prescription and OTC
sample distribution to physicians, pharmaceutical field sales force support
services, publication circulation management, direct mail, telemarketing
projects utilizing its staff of physicians and other healthcare professionals,
product recall and return goods services and other customized promotion
programs. In support of its sampling services, Synavant maintains a 180,000
square foot facility that meets the strict requirements of the FDA for storage
and repackaging of prescription drugs. Synavant maintains licenses and
registrations where required and distributes patient starter samples to
physicians throughout the United States. Direct mail marketing services are also
provided across Europe and in Canada and Australia. In the United States,
Synavant has been designated as a database licensee by the American Medical
Association ("AMA") for use and sublicensing of the AMA's physician database.
9
Through an arrangement with the Company, Synavant has instant access to the
leading (based on the number of sales representatives that use it as a targeting
tool) physician prescribing database, Xponent-TM-. This access enables Synavant
to provide unique services to its clients that set the standard for targeting of
marketing programs to the physician's community.
SYNAVANT FOREIGN OPERATIONS
As indicated above, Synavant and its subsidiaries engage in a significant
portion of their business outside of the United States. Synavant's foreign
operations are subject to the usual risks inherent in carrying on business
outside of the United States, including fluctuation in relative currency values,
possible nationalization, expropriation, price controls and other restrictive
government actions. Synavant believes that the risk of nationalization or
expropriation is reduced because its products are software, services and
information, rather than the production of products that require manufacturing
facilities or the use of natural resources.
INTELLECTUAL PROPERTY
Synavant owns and controls a number of trade secrets, confidential
information, trademarks, trade names, copyrights, and other intellectual
property rights which, in the aggregate, are of material importance to its
business. Management believes that the "Synavant" name and related names, marks
and logos are of material importance to Synavant. Synavant is licensed to use
certain technology and other intellectual property rights owned and controlled
by others, and similarly, other companies are licensed to use certain technology
and other intellectual property rights owned and controlled by Synavant. The
names of Synavant's and its subsidiaries' products and services referred to
herein are trademarks, service marks, registered trademarks or registered
service marks owned by or licensed to Synavant or one of its subsidiaries.
CUSTOMERS
Sales to the pharmaceutical industry accounted for substantially all of
Synavant's revenue in 2000. Substantially all major pharmaceutical companies are
customers of Synavant, and many of the companies use Synavant's products and
subscribe to its services in several countries. Synavant's customer base is
broad in scope and enables it to avoid dependence on any single customer. None
of Synavant's customers accounted for more than 10% of its gross revenues in
2000, 1999 or 1998.
COMPETITION
Synavant has competition from other automated sales support technology
companies that offer sales force automation solutions and enterprise-wide
solutions in some of the countries in which it operates, as well as competition
from the in-house capabilities of its customers. Synavant also faces competition
from many vendors that market and sell sales force automation solutions in the
consumer packaged goods industry. In addition, Synavant competes with various
companies that provide support and Interactive Marketing services similar to its
services. Generally, competition has arisen on a country-by-country basis. For
example, in the United States, certain Synavant products and services, including
its Cornerstone product and Siebel products, compete with the products and
services of Dendrite International Inc. ("Dendrite"), and in Europe, certain
Synavant products and services, including its Premiere product and Siebel
products, compete with the products and services of Cegedim, as well as
Dendrite. Quality, completeness and speed of delivery of information services
and products are the principal methods of competition in Synavant's market.
SYNAVANT EMPLOYEES
As of August 31, 2000, Synavant had approximately 1,400 employees in
approximately 20 countries. Of these, approximately 500 are located in the
United States, and none of these are represented by labor unions. In the
Netherlands, Italy, Belgium and Germany, Synavant has Works Councils, which are
a legal requirement in those countries. Synavant has also established a European
Works Council as required under European Union regulations.
10
Synavant believes that, generally, relations with its employees are good and
have been maintained in a normal and customary manner.
ERISCO
Erisco was sold to TriZetto on October 3, 2000. (See Note 12 to the
Consolidated Financial Statements in the 2000 Annual Report to Shareholders).
From October 4, 2000 the results of Erisco have been included in the results of
TriZetto.
Erisco is a leading provider of application software and services to the
healthcare industry, and has been for more than two decades. Erisco's legacy
system solutions, ClaimFacts-Registered Trademark- and
GroupFacts-Registered Trademark-, were designed to help indemnity insurance
carriers, third party administrators and self-administered corporations manage
the administration of group health and life insurance products.
Erisco's primary offering is Facets-Registered Trademark-, a client/server
system which integrates advanced technology with clinical information to help
managed care organizations ("MCOs") provide high-quality, cost-effective
solutions in their marketplace. Primary markets include health maintenance
organizations, preferred provider organizations, Blue Cross/Blue Shield
organizations, managed-indemnity carriers and specialized MCOs.
Erisco also extends its Facets business solution through a service bureau
offering for low-volume customers, and through alliances with strategic partners
for systems integration and implementation consulting.
Within the high-growth managed care industry, Erisco competes with other
information systems vendors including Computer Sciences Corporation, Health
Systems Design and Quality Care Solutions, Inc. Competition is principally based
on company reputation, system functionality and technology, and ease of use and
service. Essentially all of Erisco's revenue in 2000, 1999 and 1998 was
generated in the United States. Erisco had approximately 327 employees as of
October 3, 2000.
CORPORATE
IMS Health currently maintains its corporate center in Westport,
Connecticut. Other components of the Corporate unit are:
ENTERPRISES
Enterprises invests in venture capital funds that invest in emerging
businesses, with an emphasis on information technology and the healthcare
information industry. It has invested as a limited partner in Information
Partners Capital Fund, Information Associates, L.P. and Information Associates
II, L.P., all of which are venture capital limited partnerships. Enterprises
also has a limited number of direct investments.
TRIZETTO
The Company owns 12,142,857 of the common shares of TriZetto, which it
received as consideration for the sale of Erisco to TriZetto on October 3, 2000.
IMS's ownership interest in TriZetto represented 33.2% of the outstanding shares
of TriZetto as of December 31, 2000.
TriZetto is an information technology and services company focused on the
healthcare industry. The company hosts and licenses software and provides
e-business platforms, serving approximately 600 customers with more than
90 million enrollees. TriZetto's application service provider (ASP) unit hosts a
broad selection of applications from multiple vendors for a predictable monthly
fee. All of TriZetto's ASP offerings are configured for use over the Internet.
TriZetto's HealthWeb-Registered Trademark- technology allows all healthcare
participants--health plans, providers, employers and members--to exchange
information and conduct business over the Internet. HealthEWare-TM-, the
software engines unit, develops and licenses premium Erisco and Resource
Information Management Systems, Inc. ("RIMS") applications for payers and
benefits administrators.
IMS accounts for its ownership interest in TriZetto under the equity method.
11
RELATIONSHIPS BETWEEN IMS HEALTH AND SYNAVANT, IMS HEALTH
AND NMR AND AMONG IMS HEALTH, DUN & BRADSTREET AND ACNIELSEN
SYNAVANT SPIN-OFF (2000)
Prior to the Synavant Spin-Off, IMS Health and Synavant entered into certain
agreements governing their relationship subsequent to the Synavant Spin-Off and
providing for the allocation of certain liabilities and obligations arising from
periods prior to the Synavant Spin-Off, including those obligations and
liabilities that arose in connection with the D&B Spin-Off. The following
descriptions summarize certain terms of such agreements, but are qualified by
reference to the texts of such agreements, which are incorporated by reference
to the Exhibits to this Form 10-K.
SYNAVANT DISTRIBUTION AGREEMENT. IMS Health and Synavant entered into a
Distribution Agreement (the "Synavant Distribution Agreement"), providing for,
among other things, certain corporate transactions required to effect the
Synavant Spin-Off and other arrangements between IMS Health and Synavant
subsequent to the Distribution. In particular, the Synavant Distribution
Agreement defines the assets, liabilities and contractual relationships which
were allocated to and assumed by Synavant and those that remained with IMS
Health. This included IMS Health's agreement to indemnify Synavant with respect
to certain contingent liabilities and to provide credit support to Synavant
through August 31, 2001.
In addition to the Distribution Agreement, IMS Health and Synavant also
entered into other agreements governing the relationship between IMS Health and
Synavant. These include two Data Rights Agreements, a Tax Allocation Agreement
and an Employee Benefits Agreement, each of which is described below, as well as
a Data and Telecommunications Service Agreement, certain sublease arrangements,
a Corporate Services Agreement, Shared Transaction Services Agreements, an
Information Service Agreement and certain credit support arrangements. After the
date of the Synavant Spin-Off (the "Synavant Spin-Off Date"), there were
individuals on the Boards of Directors of IMS Health and Synavant who were also
serving on the Board of Directors of the other company.
SYNAVANT DATA RIGHTS AGREEMENTS. Pursuant to the Xponent Data License
Agreement, IMS Health granted to Synavant a non-transferable and non-exclusive
license to use IMS Health's Xponent data solely for the purpose of
(i) selecting a list of doctors to whom its healthcare company clients can send
proprietary materials, (ii) providing its single source sampling products to
pharmaceutical clients, (iii) providing data to publishers of journals or other
media for the purpose of determining advertising, and (iv) selecting doctors to
whom its pharmaceutical clients can send certain drug samples. Pursuant to the
Pharbase Cross License Agreement, Synavant granted to IMS Health a worldwide,
perpetual, non-transferable and non-exclusive license to use all Synavant data
(including Pharbase) in order to (i) update its prescriber databases,
(ii) update its sales, prescription and market research databases, and
(iii) create derivative works from such databases in connection with the
delivery of services to its clients. IMS Health granted to Synavant a
non-transferable and non-exclusive license to certain IMS Health data to be used
solely to update its Pharbase database. Both parties agreed not to use certain
data in products delivered to certain competitors of the other party.
SYNAVANT TAX ALLOCATION AGREEMENT. IMS Health and Synavant entered into a
Tax Allocation Agreement under which IMS Health agreed to pay any taxes, or
receive any refunds or credits of taxes, shown as due on a U.S. federal, state
or local income or franchise tax return for a taxable period beginning prior to
August 31, 2000, the Synavant Spin-Off Date (including the current taxable
period to the extent such taxes, refunds or credits are attributable to the
portion of such taxable period up to and including Synavant Spin-Off Date). All
taxes other than U.S. federal, state and local income and franchise taxes will
be the responsibility of Synavant if they are attributable to the Synavant
Business and of IMS Health if they are attributable to all other businesses of
IMS Health (the "IMS Health Business"). For taxable periods beginning on or
after Synavant Spin-Off Date (and the portion of the current taxable period
beginning after Synavant Spin-Off Date), Synavant and IMS Health agreed to be
responsible for their own taxes.
SYNAVANT EMPLOYEE BENEFITS AGREEMENT. IMS Health and Synavant entered into
an Employee Benefits Agreement which allocated responsibility with respect to
certain employee benefit plans and other employment-related matters on and after
August 1, 2000. Among other things, the Synavant Employee Benefits Agreement
12
requires IMS Health to continue to sponsor its current qualified and
non-qualified defined benefit pension plans, qualified and non-qualified defined
contribution savings plans and welfare plans for the benefit of employees and
former employees of the IMS Health Business. IMS Health will retain all assets
and liabilities relating to its defined benefit plans, including those relating
to benefits accrued by Synavant employees through July 31, 2000. As of
August 1, 2000, Synavant shall maintain qualified and non-qualified defined
contribution savings plans and welfare plans for the benefit of current and
former employees of the Synavant Business. With respect to equity based plans,
all awards were adjusted or converted so that IMS Health employee awards and
Synavant employee awards related solely to their respective company stock and so
that the value of the awards were preserved.
COGNIZANT SPIN-OFF (1998)
Prior to the Cognizant Spin-Off, IMS Health and Cognizant (now NMR) entered
into certain agreements governing their relationship subsequent to the Cognizant
Spin-Off and providing for the allocation of certain liabilities and obligations
arising from periods prior to the Cognizant Spin-Off, including those
obligations and liabilities that arose in connection with the D&B Spin-Off. The
following descriptions summarize certain terms of such agreements, but are
qualified by reference to the texts of such agreements, which are incorporated
by reference to the Exhibits to this Form 10-K.
COGNIZANT DISTRIBUTION AGREEMENT. NMR and IMS Health entered into a
Distribution Agreement (the "Cognizant Distribution Agreement") providing for,
among other things, assumption of liabilities and cross indemnities designed to
allocate generally, effective as of the date of the Cognizant Spin-Off,
financial responsibility for (i) the liabilities arising out of or in connection
with Cognizant's businesses (i.e. NMR) and certain other specified liabilities
to NMR and (ii) all other liabilities to IMS Health. Pursuant to the terms of
the Distribution Agreement (the "D&B Distribution Agreement") among Cognizant,
Dun & Bradstreet and ACNielsen Corporation ("ACNielsen"), as a condition to the
Cognizant Spin-Off, IMS Health and NMR were required to and did undertake to be
jointly and severally liable to Dun & Bradstreet and ACNielsen for any Cognizant
liabilities arising thereunder. The Cognizant Distribution Agreement allocates
between IMS Health and NMR the financial responsibility for such liabilities,
including contingent liabilities related to certain prior business transactions
and certain liabilities to Dun & Bradstreet that may arise in connection with
the D&B Spin-Off. (See Note 21 to the Consolidated Financial Statements in the
2000 Annual Report to Shareholders).
COGNIZANT TAX ALLOCATION AGREEMENT. NMR and IMS Health entered into a Tax
Allocation Agreement under which IMS Health agreed to pay any taxes, or receive
any refunds or credits of taxes, shown as due on a U.S. federal, state or local
income or franchise tax return for a taxable period beginning prior to the date
of the Cognizant Spin-Off. Any subsequent adjustment of such taxes will be
allocated to IMS Health if such adjustment relates to IMS Health's business and
to NMR if such adjustment relates to the NMR business, except that any
adjustment of such taxes attributable to tax items or positions initially
determined by NMR's corporate office will be allocated to IMS Health. All taxes
other than U.S. federal, state and local income and franchise taxes will be the
responsibility of IMS Health if they are attributable to IMS Health's business
and of NMR if they are attributable to NMR's business. For taxable periods
beginning on or after the date of the Cognizant Spin-Off, IMS Health and NMR
will be responsible for their own taxes.
D&B SPIN-OFF (1996)
Prior to the D&B Spin-Off, Dun & Bradstreet, Cognizant and ACNielsen entered
into certain agreements governing their relationship subsequent to the D&B
Spin-Off and providing for certain liabilities and obligations arising from
periods prior to the D&B Spin-Off. The following descriptions summarize certain
terms of certain of those agreements, but are qualified by reference to the
texts of such agreements, which are incorporated by reference to the Exhibits to
this Form 10-K.
D&B DISTRIBUTION AGREEMENT. Dun & Bradstreet, Cognizant and ACNielsen
entered into the D&B Distribution Agreement providing for, among other things,
assumptions of liabilities and cross indemnities designed generally to allocate
to Dun & Bradstreet, effective as of November 1, 1996 (the "D&B Spin-Off Date"),
financial responsibility
13
for all liabilities of Dun & Bradstreet, except for certain liabilities arising
out of or in connection with the businesses that became part of Cognizant or
ACNielsen as a result of the D&B Spin-Off. Similarly, the D&B Distribution
Agreement provided for the allocation generally to Dun & Bradstreet of the
financial responsibility for the liabilities arising out of or in connection
with then-former businesses, including those formerly conducted by or associated
with Cognizant or ACNielsen, provided that liabilities related to certain prior
business transactions were allocated to Cognizant if such liabilities exceed
certain specified amounts. (See Note 21 to the Consolidated Financial Statements
in the 2000 Annual Report to Shareholders).
D&B TAX ALLOCATION AGREEMENT. Dun & Bradstreet, Cognizant and ACNielsen
entered into a Tax Allocation Agreement (the "1996 Tax Allocation Agreement").
Except as otherwise provided in the D&B Distribution Agreement, the D&B Tax
Allocation Agreement provided, among other things, that Dun & Bradstreet must
pay Dun & Bradstreet's entire consolidated tax liability for the tax years that
Cognizant and ACNielsen were included in Dun & Bradstreet's consolidated Federal
income tax return. For periods prior to the D&B Spin-Off, Dun & Bradstreet is
generally liable for state and local taxes measured by income or imposed in lieu
of income taxes. The D&B Tax Allocation Agreement allocated liability to Dun &
Bradstreet, Cognizant and ACNielsen for their respective shares of other state
and local taxes, as well as any foreign taxes attributable to periods prior to
the D&B Spin-Off.
INDEMNITY AND JOINT DEFENSE AGREEMENT ("IJDA"). Under the IJDA, ACNielsen
assumed exclusive liability for the Information Resources Litigation, discussed
in Note 21 to the Consolidated Financial Statements in the 2000 Annual Report to
Shareholders, up to a specified amount (the "ACN Maximum Amount"), which is to
be calculated at the time such liabilities, if any, become payable, and that
Cognizant and Dun & Bradstreet will share liability equally for any amounts in
excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by
an investment banking firm as the maximum amount which ACNielsen is able to pay
after giving effect to (i) any plan submitted by such investment bank which is
designed to maximize the claims-paying ability of ACNielsen without impairing
the investment banking firm's ability to deliver a viability opinion (but which
will not require any action requiring shareholder approval) and (ii) payment of
related fees and expenses. For these purposes, financial viability means the
ability of ACNielsen, after giving effect to such plan, the payment of related
fees and expenses and the payment of the ACN Maximum Amount, to pay its debts as
they become due and to finance the current and anticipated operating and capital
requirements of its business, as reconstituted by such plan, for two years from
the date any such plan is expected to be implemented.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, information and statements provided by the Company may
contain "forward-looking statements" as defined by the Private Securities
Litigation Reform Act of 1995. The Company cautions shareholders and investors
that actual results may differ materially from those projected or suggested in
any forward-looking statement as a result of a wide variety of factors,
including but not limited to the factors set forth below and under the caption
"Forward Looking Statements" in the Company's 2000 Annual Report to
Shareholders, which is incorporated herein by reference:
- Results could be affected by the costs and other effects of litigation and
other contingencies involving the Company. In particular, management of
the Company is unable to predict at this time the final outcome of the
Information Resources Litigation, the Matters before the European
Commission and the D&B Tax Matters described in Note 21 to the
Consolidated Financial Statements in the 2000 Annual Report to
Shareholders, or whether the resolution of these matters could materially
affect the Company's results of operations, cash flows or financial
position.
- The Company operates globally, deriving 54% of its $1,424,359 in revenue
from non-U.S. operations. As a result, fluctuations in the value of
foreign currencies relative to the U.S. dollar may increase the volatility
of U.S. dollar-denominated operating results. Emerging markets currencies
tend to be considerably less stable than in established markets, which may
further contribute to volatility in operating results. In addition, the
Company is subject to the usual risks inherent in carrying on business in
certain countries outside the United
14
States, including possible nationalization, expropriation, price controls
or other restrictive government actions. Management believes that the risk
of nationalization or expropriation is reduced because its basic service
is the delivery of information, rather than the production of products
which require manufacturing facilities or use of natural resources.
- The Company competes in businesses which demand or sell sophisticated
information systems, software and other technology, including the
technology utilized to deliver products and services. The types of systems
which the Company's businesses require or sell can be expected to be
subject to refinements, some of which may be major, as such systems and
underlying technologies are upgraded or advanced or new technologies are
introduced. There can be no guarantee that as various systems and
technologies become outdated, the Company will be able to replace them, to
replace them as quickly as the Company's competition or develop and market
new and better products and services and technology in the future on time
and on a cost-effective basis. Further there can be no guarantee regarding
the degree and rate which customers will adopt new technologies or
products that may result in the Company not achieving the benefits that
might have been anticipated from such new technologies or products.
- Currently, the Company's assets include a majority interest in CTS
consisting of 11,290,900 shares of CTS Class B common stock, (representing
60.53% of the outstanding shares of all classes of CTS common stock at
December 31, 2000); an equity investment in Gartner (which at
December 31, 2000 consisted of 6,597,262 shares of Gartner Class A common
stock representing 7.6% of the outstanding shares of all classes of
Gartner common stock); and an equity investment in TriZetto consisting of
12,142,857 shares of TriZetto common stock, which represented 33.2% of the
outstanding shares of TriZetto common stock; as well as, directly or
through its investment in various limited partnerships, shares of various
other companies, both public and private. In addition, the Company may
decide, or in the case of certain venture capital investments may be
obligated, to make future investments. Variations will occur in the market
value of the Company's securities, and such variations may have an impact
on the trading price of the Company's Common Stock. The results of
operations of CTS, Gartner and TriZetto may be subject to the various
factors described in their respective reports filed with the SEC from time
to time. Declines in the values of the Company's CTS, Gartner and TriZetto
investments, which the Company determines to be other than temporary, will
have an impact on the Company's operating results in the period in which
such determination is made.
- A number of countries in which the Company operates have enacted
regulations limiting the prices pharmaceutical companies may charge for
drugs. The Company believes that such cost containment measures will cause
pharmaceutical companies to seek more effective means of marketing their
products (which will benefit the Company in the medium and long term).
However, such governmental regulation may cause pharmaceutical companies
to revise or reduce their marketing programs in the near term.
- Certain of the data services provided by the Company relate to the
diagnosis and treatment of disease, including prescription data. The use
of anonymized patient-specific information is anticipated to be an
increasingly important tool in the design, development and marketing of
pharmaceuticals. Recently, there have been a number of regulatory and
legislative initiatives in the area of medical privacy at the federal,
state and foreign government levels. Most of these initiatives seek to
place restrictions on the use and disclosure of patient-identifiable
information without consent and, in some cases, seek to extend
restrictions to non-patient-identifiable information or the process of
anonymizing data. In addition, there are initiatives that seek to restrict
access to this information to non-commercial uses. To protect privacy, no
individual patient is identified in any IMS database so that many of these
initiatives would not apply to the Company's business. However, there can
be no assurance that these initiatives or future initiatives would not
adversely affect the Company's ability to generate or assemble data or to
develop or market current or future products or services.
- An important aspect of the Company's business strategy has in the past
been growth through acquisitions or joint ventures, and, although the
Company expects to continue to pursue acquisitions and joint ventures,
there can be no assurance that management of the Company will be able to
identify and consummate acquisitions or joint ventures on satisfactory
terms. Furthermore, every acquisition or joint venture will entail some
degree of
15
uncertainty and risk, and even if consummated, may not produce the
operating results or increases in value over time which were expected at
the time of acquisition or joint venture.
- Each of the Company's businesses is subject to significant or potential
competition, which is likely to intensify in the future.
- The Company's results could be adversely affected by general or specific
weakening of economic conditions, including weak economic conditions in
the pharmaceutical, healthcare, information technology or other industries
in which the Company's customers operate.
The names of the Company's products used in this report are trademarks or
registered trademarks of IMS Health Incorporated or one of its subsidiaries.
16
ITEM 2. PROPERTIES
The principal properties of the Company as at December 31, 2000 are set
forth below.
The executive offices of IMS Health Incorporated are located at 200 Nyala
Farms, Westport, Connecticut in a leased property.
Property of the Company is geographically distributed to meet sales and
operating requirements worldwide. The properties of the Company are generally
considered to be both suitable and adequate to meet current operating
requirements and virtually all space is being utilized.
IMS SEGMENT
Owned properties located within the United States include three facilities.
The properties are located in Totowa, New Jersey, and Plymouth Meeting and West
Norriton, Pennsylvania.
Owned properties located outside the United States include: one property in
each of Buenos Aires, Argentina; Crows Nest, Australia; Brussels, Belgium;
Santiago, Chile; Lisbon, Portugal; Caracas, Venezuela; and London, Stanmore and
Pinner, England.
The operations of the IMS Segment are also conducted from seven leased
offices located throughout the United States and eighty-four non-United States
locations.
CTS SEGMENT
Headquartered in Teaneck, New Jersey, operations are conducted from eight
leased office locations in the United States and fifteen non-United States
locations.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to "Note 21. Contingencies" of the Notes to the
Consolidated Financial Statements on pages 42 to 44 of the 2000 Annual Report to
Shareholders, which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
17
EXECUTIVE OFFICERS OF THE REGISTRANT*
Officers are appointed by the Board of Directors to hold office until their
respective successors are chosen and qualified. Listed below are the executive
officers of the registrant at March 15, 2001 and brief summaries of their
business experience during the past five years.
NAME TITLE AGE
---- ----- --------
David M. Thomas................................ Chairman and Chief Executive Officer** 51
Gilles Pajot................................... Executive Vice President** 51
Gary W. Noon................................... President, IMS Health North America 47
James C. Malone................................ Chief Financial Officer 52
Robert H. Steinfeld............................ Senior Vice President, General Counsel and 47
Corporate Secretary
Matthew L. Friedman............................ Vice President and Treasurer 43
Wendy J. Timmins............................... Vice President, Controller 38
------------------------
* Set forth as a separate item pursuant to Items 401(b) and (e) of
Regulation S-K.
** Member of the Board of Directors.
Mr. Thomas was appointed Chairman and Chief Executive Officer of IMS Health
in November, 2000. Prior to that, he was Senior Vice President/Group Executive
at IBM, responsible for the global Personal Systems Group, from January, 1998 to
September, 2000. Mr. Thomas also was a member of the IBM Corporate Executive
Committee, which oversees all IBM operations worldwide. Joining IBM in 1972,
Mr. Thomas held progressively responsible executive positions at the company,
including General Manager, IBM North America from October, 1995 to January,
1996, and General Manager, Global Industries from January, 1996 to January,
1998.
Mr. Pajot was appointed Executive Vice President of IMS Health in November,
2000. He joined the Company as president of IMS Health Europe Region in
December, 1997. Previously, Mr. Pajot worked for 20 years with Pharmacia &
Upjohn and its predecessor company, serving as Senior Vice President at
Pharmacia from July, 1997 to December, 1997, with responsibility for global
restructuring initiatives following the 1995 merger of Pharmacia and Upjohn.
From November, 1995 to July, 1997, he was Senior Vice President,
President-Market Region Europe, responsible for the planning phase of global
integration of the two companies. Prior to that, he served as Executive Vice
President, Worldwide Pharmacia AB from September, 1994 to November, 1995.
Mr. Noon was appointed President of IMS Health North America in November,
2000. Previously, he was Vice President, Global Marketing for Pfizer/Warner
Lambert, a position he held since September, 1999. Mr. Noon was Founder and
Managing Director of U.K.-based Practice Resource Systems (PRS) from April, 1996
to September, 1999, where he developed a clinical information system to
integrate data across physician, pharmacy and hospital settings. From 1991 to
1995, Mr. Noon held a series of progressively responsible executive positions at
GlaxoWellcome, including UK Integration Executive for the International
Business & Commercial Development Task Force from March, 1995 to October, 1995
and Regional Director, Wellcome Pharmaceutical U.K. and Northern Europe from
November, 1994 to March, 1995.
Mr. Malone was appointed Chief Financial Officer in April, 2000, having
served as Acting CFO since December, 1999. He had been named Senior Vice
President--Finance and Controller of IMS Health in July, 1998. Prior to that,
Mr. Malone served as Senior Vice President--Finance and Controller of Cognizant
Corporation from December, 1996 to July, 1998 and Vice President--Finance and
Controller from September, 1996 to December, 1996. From February, 1995 to
December, 1996, he was Assistant Vice President and Leader--North American
Shared Transaction Services Center for Cognizant Corporation.
Mr. Steinfeld was appointed Senior Vice President, General Counsel and
Corporate Secretary in November, 2000. He was appointed Vice President, Taxes in
April, 1998, and named Senior Vice President, Tax and Corporate Development in
October, 2000. Mr. Steinfeld joined Cognizant Corporation in February, 1997 as
Director of Taxes. Previously, he was Vice President, Taxation at Ultramar
Corporation, a multinational petroleum refining and
18
marketing company, from September, 1993 to February, 1997. From 1991 to 1993, he
served as Vice President, Taxes, at GAF Corporation and its publicly traded
subsidiary, International Specialty Products, Inc. Prior to that, Mr. Steinfeld
was a Partner and Chairman of the Tax Department at the law firm of Webster &
Sheffield.
Mr. Friedman was appointed Vice President and Treasurer of the Company in
February, 1999, having served as Interim Treasurer since July, 1998. Previously,
he was Assistant Treasurer of Cognizant Corporation from May, 1996 to June,
1998. Prior to that, he served as Director--International Finance for Dun &
Bradstreet from December, 1994 to May, 1996.
Ms. Timmins was named Vice President, Controller of the Company in October,
2000, having served as Director, Financial Planning and Analysis since October,
1998. Prior to that, she was Controller of Walsh International Inc., a developer
of salesforce automation systems that was acquired by IMS Health in 1998.
Ms. Timmins was named to that position in June, 1996. From May, 1994 to June,
1996, she was Senior Financial Analyst of Walsh International and Source
Informatics.
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Information in response to this Item is set forth under Dividends and Common
Stock Information in the "Financial Review" on pages 12 and 13 in the 2000
Annual Report to Shareholders, which information is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data required by this Item is incorporated herein by
reference to the information relating to the years 1996 through 2000 set forth
in the "Five-Year Selected Financial Data" on page 49 in the 2000 Annual Report
to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information in response to this Item is set forth in the "Financial Review"
on pages 1 to 13 in the 2000 Annual Report to Shareholders, which information is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Information in response to this Item is set forth under Market Risk in the
"Financial Review" on pages 10 and 11 and in "Note 14. Financial Instruments" of
Notes to Consolidated Financial Statements on pages 32 and 33 in the 2000 Annual
Report to Shareholders, which information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedule under Item 14 on
page 24.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by reference to
the section entitled "Election of Directors" on pages 7 to 9 of the Company's
Definitive Proxy Statement (the "Proxy Statement") relating to its Annual
Meeting of Shareholders to be held on May 3, 2001, except that "Executive
Officers of the Registrant" on pages 18 and 19 of this report responds to Items
401(b) and (e) of Regulation S-K with respect to the Company's executive
officers.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference to
the section entitled "Compensation of Executive Officers" on pages 12 to 30 of
the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by reference to
the section entitled "Security Ownership of Management and Others" on pages 2 to
6 of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by reference to
the sections entitled "Certain Transactions" on page 30, and "Compensation of
Executive Officers" on pages 28 and 29, of the Proxy Statement.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report.
(1) Consolidated Financial Statements.
See Index to Consolidated Financial Statements and Schedule on page 24.
(2) Consolidated Financial Statement Schedule.
See Index to Consolidated Financial Statements and Schedule on page 24.
(3) Other Financial Information.
Five-year Selected Financial Data. See Index to Consolidated Financial
Statements and Schedule on page 24.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on October 18, 2000 to present under Item 2,
Acquisition or Disposition of Assets, a description of the closing of the
Company's disposition of Erisco Managed Care Technologies, Inc. ("Erisco")
to The TriZetto Group, Inc., and under Item 7, Financial Statements, Pro
Forma Financial Information and Exhibits, Pro Forma Financial Information
regarding the disposition of Erisco.
(c) Exhibits.
See Index to Exhibits on pages 27 to 31, which indicates which Exhibits are
management contracts or compensatory plans required to be filed as Exhibits.
Only responsive information appearing on pages 1 to 49 to Exhibit 13 is
incorporated herein by reference, and no other information appearing in
Exhibit 13 is or shall be deemed to be filed as part of this Form 10-K.
(d) Financial Statement Schedule.
See Index to Consolidated Financial Statements and Schedule on page 24.
22
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.
IMS HEALTH INCORPORATED
(Registrant)
By: /s/ DAVID M. THOMAS
---------------------------------------------------
David M. Thomas
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ DAVID M. THOMAS /s/ ROBERT J. LANIGAN
------------------------------------------------- -------------------------------------------------
(David M. Thomas, (Robert J. Lanigan, Director)
Chairman, Chief Executive Officer and Director)
(principal executive officer)
/s/ JAMES C. MALONE /s/ H. EUGENE LOCKHART
------------------------------------------------- -------------------------------------------------
(James C. Malone, Chief Financial Officer) (H. Eugene Lockhart, Director)
(principal financial officer)
/s/ WENDY J. TIMMINS /s/ GILLES PAJOT
------------------------------------------------- -------------------------------------------------
(Wendy J. Timmins, Vice President, Controller) (Gilles Pajot, Executive Vice President and
(principal accounting officer) Director)
/s/ CLIFFORD L. ALEXANDER /s/ M. BERNARD PUCKETT
------------------------------------------------- -------------------------------------------------
(Clifford L. Alexander, Jr., Director) (M. Bernard Puckett, Director)
/s/ JOHN P. IMLAY /s/ WILLIAM C. VAN FAASEN
------------------------------------------------- -------------------------------------------------
(John P. Imlay, Jr., Director) (William C. Van Faasen, Director)
/s/ ROBERT KAMERSCHEN
-------------------------------------------------
(Robert Kamerschen, Director)
Date: March 30, 2001
23
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS:
The Company's consolidated financial statements, the notes thereto and the
related report thereon of PricewaterhouseCoopers LLP, independent accountants,
as of December 31, 2000 and 1999 and for the years ended December 31, 2000,
1999, and 1998, appearing on pages 15 to 47 of the 2000 Annual Report to
Shareholders, are incorporated by reference into this Annual Report on
Form 10-K (see below). The additional financial data indicated below should be
read in conjunction with such consolidated financial statements.
PAGE
-----------------------------------
2000 ANNUAL
REPORT TO
FORM 10-K SHAREHOLDERS
-------------------- ------------
Statement of Management's Responsibility for Financial Exhibit 13 Pg 14 14
Statements................................................
Report of Independent Accountants........................... Exhibit 13 Pg 14 14
As of December 31, 2000 and 1999:
Consolidated Statements of Financial Position............. Exhibit 13 Pg 16 16
For the years ended December 31, 2000, 1999 and 1998:
Consolidated Statements of Income......................... Exhibit 13 Pg 15 15
Consolidated Statements of Cash Flows..................... Exhibit 13 Pg 17-18 17-18
Consolidated Statements of Shareholders' Equity........... Exhibit 13 Pg 19-21 19-21
Notes to Consolidated Financial Statements.................. Exhibit 13 Pg 22-47 22-47
Other Financial Information:
Quarterly Financial Data (Unaudited) for the years ended Exhibit 13 Pg 48 48
December 31, 2000 and 1999................................
Management's Discussion and Analysis of Financial Condition Exhibit 13 Pg 1-13 1-13
and Results of Operations.................................
Business Segments is included in "Notes to Consolidated
Financial Statements"
Five-Year Selected Financial Data (Unaudited)............... Exhibit 13 Pg 49 49
SCHEDULE:
Report of Independent Accountants on Financial Statement Pg 25 --
Schedule..................................................
II. Valuation and Qualifying Accounts for the years ended Pg 26 --
December 31, 2000, 1999 and 1998..........................
OTHER:
IMS Health Incorporated and Subsidiaries.................. Exhibit 21 Pg 32-34 --
Schedules other than the one listed above are omitted as not required or
inapplicable or because the required information is provided in the consolidated
financial statements, including the notes thereto.
24
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of IMS Health Incorporated:
Our audits of the consolidated financial statements referred to in our
report dated February 16, 2001, appearing in the 2000 Annual Report to
Shareholders of IMS Health Incorporated (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the financial statement schedule listed in the index
under Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PricewaterhouseCoopers LLP
New York, New York
February 16, 2001
25
IMS HEALTH INCORPORATED AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
COL. A COL. B COL. C COL. D COL. E
------------------------------------------------ ------------ ----------------------- ---------- ----------
ADDITIONS
-----------------------
BALANCE CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------
Allowance for Doubtful Accounts:
For the Year Ended December 31, 2000.......... $ 7,625 $ 3,378 $(1,601)(e) $ 1,386(b) $ 8,016
For the Year Ended December 31, 1999.......... $11,246 $ 108 $ 2,035 $ 5,764(b) $ 7,625
For the Year Ended December 31, 1998.......... $ 4,236 $ 1,828 $ 5,562(a) $ 380(b) $11,246
Valuation Allowance Deferred Income Taxes:
For the Year Ended December 31, 2000.......... $23,325 $ 2,493(c) $ 0 $14,100(d) $11,718
For the Year Ended December 31, 1999.......... $21,239 $10,270 $ 0 $ 8,184 $23,325
For the Year Ended December 31, 1998.......... $21,826 $ 4,948 $ 0 $ 5,535 $21,239
------------------------
NOTE:
(a) Includes the allowance for doubtful accounts related to the Walsh and PMSI
businesses acquired in 1998.
(b) The charge-off of uncollectible accounts for which a reserve was provided in
prior periods.
(c) Valuation allowances on assets related to additional NOLs created in 2000
where, based on available evidence, it is more likely than not that such
assets will not be realized.
(d) Includes valuation allowances related to the net operating losses ("NOLs")
of Erisco and the Synavant Business, $204 and $2,276, respectively; the
recognition of the benefit of certain NOLs due to the implementation of
global tax planning strategies ($10,072) and the expiration and true-up of
certain NOLs ($1,548).
(e) Includes the allowance for doubtful accounts transferred to Synavant and
Erisco in 2000.
26
INDEX TO EXHIBITS
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
-------------- -----------
3 Articles of Incorporation and By-laws
.1 Restated Certificate of Incorporation of IMS Health
Incorporated dated May 29, 1998 (incorporated by reference
to Exhibit 3.1 to Registrant's Registration Statement on
Form 10 filed on June 12, 1998).
.2 Certificate of Amendment of Restated Certificate of
Incorporation of IMS Health Incorporated dated March 22,
1999 (incorporated by reference to Exhibit 3.2 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 filed on May 17, 1999).
.3 Amended and Restated By-laws of IMS Health Incorporated
(incorporated by reference to Exhibit 3.2 to Registrant's
Registration Statement on Form 10 filed on June 12, 1998).
4 Instruments Defining Rights of Security Holders
.1 Rights Agreement dated as of June 15, 1998 between IMS
Health Incorporated and First Chicago Trust Company of New
York (incorporated by reference to Exhibit 10.20 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.2 Amendment No. 1 to the Rights Agreement dated as of
March 28, 2000 between IMS Health Incorporated and First
Chicago Trust Company of New York (incorporated by reference
to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000 filed on May 15, 2000).
.3 Amendment No. 2 to the Rights Agreement dated as of
July 18, 2000 between IMS Health Incorporated and First
Chicago Trust Company of New York (incorporated by reference
to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 filed on
November 13, 2000).
10 Material Contracts
.1 Distribution Agreement between Cognizant Corporation and IMS
Health Incorporated, dated as of June 30, 1998
(incorporated by reference to the Exhibit 10.1 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.2 Tax Allocation Agreement between Cognizant Corporation and
IMS Health Incorporated, dated as of June 30, 1998
(incorporated by reference to the Exhibit 10.2 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.3 Employee Benefits Agreement between Cognizant Corporation
and IMS Health Incorporated, dated as of June 30, 1998
(incorporated by reference to the Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
.4 Amended and Restated Transition Services Agreement among The
Dun & Bradstreet Corporation, The New Dun & Bradstreet
Corporation, Cognizant Corporation, IMS Health Incorporated,
ACNielsen Corporation and Gartner, Inc. (p.k.a. Gartner
Group Inc.), dated as of June 30, 1998 (incorporated by
reference to the Exhibit 10.4 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998 filed on
March 1, 1999).
.5 1998 IMS Health Incorporated Non-Employee Directors' Stock
Incentive Plan, as amended on July 25, 2000 and restated to
reflect such amendment (incorporated by reference to Exhibit
10.2 to the Registrant's Registration Statement on Form S-8
filed on January 16, 2001).*
.6 1998 IMS Health Incorporated Non-Employee Directors'
Deferred Compensation Plan, as adopted effective July 1,
1998 (incorporated by reference to the Exhibit 10.6 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999). *
.7 1998 IMS Health Incorporated Employees' Stock Incentive Plan
(As amended and restated effective July 25, 2000). +*
27
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
-------------- -----------
.8 1998 IMS Health Incorporated Replacement Plan for Certain
Employees Holding Cognizant Corporation Equity-Based Awards,
as adopted effective July 1, 1998 (incorporated by reference
to the Exhibit 10.8 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1998 filed on March 1,
1999).*
.9 1998 IMS Health Incorporated Replacement Plan for Certain
Non-Employee Directors Holding Cognizant Corporation
Equity-Based Awards, as adopted effective July 1, 1998
(incorporated by reference to the Exhibit 10.9 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).*
.10 Form of Non-Employee Directors' Stock Option Agreement
(incorporated by reference to the Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).*
.11 Form of Non-Employee Directors' Restricted Stock Agreement
(incorporated by reference to the Exhibit 10.11 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).*
.12 Form of Restricted Stock Unit Agreements (incorporated by
reference to the Exhibit 10.12 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998 filed on
March 1, 1999).*
.13 Form of Stock Option Agreement (incorporated by reference to
the Exhibit 10.13 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 filed on March 1,
1999).*
.14 Form of Purchased Option Agreement (incorporated by
reference to the Exhibit 10.14 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1998 filed on
March 1, 1999).*
.15 Forms of Change-in-Control Agreement for Certain Executives
of IMS Health Incorporated (incorporated by reference to the
Exhibit 10.15 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.16 IMS Health Incorporated Employee Protection Plan, as adopted
effective December 1, 1998 (incorporated by reference to the
Exhibit 10.16 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.17 IMS Health Incorporated Executive Annual Incentive Plan, as
adopted effective July 1, 1998 (incorporated by reference to
the Exhibit 10.17 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998 filed on March 1,
1999).*
.18 IMS Health Incorporated Supplemental Executive Retirement
Plan (As amended and restated effective December 19, 2000).
+*
.19 IMS Health Incorporated Retirement Excess Plan, as adopted
effective July 1, 1998 (incorporated by reference to the
Exhibit 10.19 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.20 IMS Health Incorporated Savings Equalization Plan, as
adopted effective July 1, 1998 (incorporated by reference to
Exhibit 10.21 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 1, 1999).*
.21 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and Robert E. Weissman, dated as of
January 1, 2000 (incorporated by reference to Exhibit 10.22
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 filed on March 17, 2000).*
.22 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and Victoria R. Fash, dated as of
January 1, 2000 (incorporated by reference to Exhibit 10.23
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 filed on March 17, 2000).*
.23 Undertaking of IMS Health Incorporated, dated June 30, 1998
(incorporated by reference to the Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 1, 1999).
28
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
-------------- -----------
.23.1 Distribution Agreement among R.H. Donnelley Corporation
(p.k.a. The Dun & Bradstreet Corporation), Cognizant
Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit 10(x)
to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.23.2 Tax Allocation Agreement among R.H. Donnelley Corporation
(p.k.a. The Dun & Bradstreet Corporation), Cognizant
Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit 10(y)
to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.23.3 Employee Benefits Agreement among R.H. Donnelley Corporation
(p.k.a. The Dun & Bradstreet Corporation), Cognizant
Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit 10(z)
to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.23.4 Indemnity and Joint Defense Agreement among R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation),
Cognizant Corporation and ACNielsen Corporation, dated as of
October 28, 1996 (incorporated by reference to Exhibit
10(aa) to the Annual Report on Form 10-K of R.H. Donnelley
Corporation (p.k.a. The Dun & Bradstreet Corporation) for
the year ended December 31, 1996 filed on March 27, 1997).
.24 Distribution Agreement between IMS Health Incorporated and
Gartner, Inc., (p.k.a. Gartner Group Inc.) dated as of
June 17, 1999 (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999 filed on August 10, 1999).
.25 Agreement and Plan of Merger among Gartner, Inc., (p.k.a.
Gartner Group Inc.) IMS Health Incorporated and GRGI, Inc.
dated as of June 17, 1999 (incorporated by reference to
Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999 filed on August 10,
1999).
.26 IMS Health Incorporated Executive Deferred Compensation
Plan, dated July 20, 1999 (incorporated by reference to
Exhibit 10.4.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999 filed on
November 15, 1999).*
.26.1 Selected portions of the Prospectus Supplement, dated
September 27, 1999 setting forth certain terms and
conditions of the Executive Deferred Compensation Plan for
U.S. employees (incorporated by reference to Exhibit 10.4.2
to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 filed on November 15,
1999).*
.26.2 Selected portions of the Private Placement Memorandum, dated
September 27, 1999 setting forth certain terms and
conditions of the Executive Deferred Compensation Plan for
U.S. employees (incorporated by reference to Exhibit 10.4.3
to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 filed on November 15,
1999).*
.27 First Amendment to the IMS Health Incorporated Retirement
Excess Plan, dated September 1, 1999 (incorporated by
reference to Exhibit 10.7 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 filed
on November 15, 1999).*
.28 First Amendment to the IMS Health Incorporated Savings
Equalization Plan, dated September 1, 1999 (incorporated by
reference to Exhibit 10.8 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1999 filed
on November 15, 1999).*
.29 Second Amendment to the IMS Health Incorporated Savings
Equalization Plan, dated October 1, 1999 (incorporated by
reference to Exhibit 10.31 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2000 filed on
March 17, 2000).*
.30 Second Amendment to the IMS Health Incorporate Retirement
Excess Plan, dated October 1, 1999 (incorporated by
reference to Exhibit 10.32 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 2000 filed on
March 17, 2000).*
29
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
-------------- -----------
.31 IMS Health European Deferred Compensation Plan, dated
December 1, 1999 (incorporated by reference to Exhibit 10.31
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000 filed on March 17, 2000).*
32 Agreement and Plan of Reorganization, dated as of May 16,
2000, by and among The TriZetto Group, Inc., Elbejay
Acquisition Corp., IMS Health Incorporated and Erisco
Managed Care Technologies, Inc. (incorporated by reference
to Exhibit 2.1 to the Registrant's Current Report on Form
8-K, filed May 17, 2000).
.33 Stockholder Agreement, dated as of October 2, 2000, by and
between The TriZetto Group, Inc. and IMS Health Incorporated
(incorporated by reference to Exhibit C to the Registrant's
Schedule 13D/A2 filed October 6, 2000).
.34 Registration Rights Agreement, dated as of October 2, 2000,
by and between The TriZetto Group, Inc. and IMS Health
Incorporated (incorporated by reference to Exhibit D to the
Registrant's Schedule 13D/A2 filed October 6, 2000).
.35 Distribution Agreement between IMS Health Incorporated and
Synavant Inc., dated August 31, 2000 (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.36 Xponent Data License Agreement between IMS Health
Incorporated and Synavant Inc. dated August 31, 2000
(incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K filed September 15,
2000).
.37 Cross License Agreement between IMS Health Incorporated and
Synavant Inc. dated August 31, 2000 (incorporated by
reference to Exhibit 2.3 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.38 Tax Allocation Agreement between IMS Health Incorporated and
Synavant Inc. dated August 31, 2000 (incorporated by
reference to Exhibit 2.4 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.39 Employee Benefits Agreement between IMS Health Incorporated
and Synavant Inc. dated August 31, 2000 (incorporated by
reference to Exhibit 2.5 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.40 Credit Support Letter, dated July 25, 2000, between IMS
Health Incorporated and Synavant Inc. (incorporated by
reference to Exhibit 2.11 to the Registrant's Current Report
on Form 8-K filed September 15, 2000).
.41 IMS Health Incorporated U.S. Retirement Plan (As amended and
restated effective December 19, 2000).+*
.42 Amended and Restated Amendment dated as of January 15, 2001
to the Amended and Restated Employment Agreement by and
between IMS Health Incorporated and Robert E. Weissman,
dated as of January 1, 2000.+*
.43 Amended and Restated Amendment dated as of January 15, 2001
to the Amended and Restated Employment Agreement by and
between IMS Health Incorporated and Victoria R. Fash, dated
as of January 1, 2000.+*
.44 Amended and Restated Employment Agreement by and between IMS
Health Incorporated and David M. Thomas effective as of
November 14, 2000.+*
.45 Employment Agreement by and between IMS Health Incorporated
and Gilles Pajot effective as of November 14, 2000.+*
.46 Employment Agreement by and between IMS Health Incorporated
and James C. Malone effective as of November 14, 2000.+*
30
REGULATION
S-K EXHIBIT
NUMBER DESCRIPTION
-------------- -----------
.47 Employment Agreement by and between IMS Health Incorporated
and Robert H. Steinfeld effective as of November 14, 2000.+*
13 2000 Annual Report to Shareholders.
21 List of Active Subsidiaries as of December 31, 2000.
23 Consent of Independent Accountants.
--------------------------
+ Filed herewith
* Management contract or compensatory plan or arrangement
31