SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark one)

For the quarterly period ended June 30, 2004

OR

For the transition period from                     to                    

Commission file number 1-15967

The Dun & Bradstreet Corporation

Registrant’s telephone number, including area code: (973) 921-5500

     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 o

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

THE DUN & BRADSTREET CORPORATION

INDEX TO FORM 10-Q

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Item 1. Financial Statements

The Dun & Bradstreet Corporation
Consolidated Statements of Operations (Unaudited)
Amounts in millions, except share and per share data

The accompanying notes are an integral part of the consolidated financial statements.

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The Dun & Bradstreet Corporation
Consolidated Balance Sheets
Amounts in millions, except share data

The accompanying notes are an integral part of the consolidated financial statements.

2

The Dun & Bradstreet Corporation
Consolidated Statements of Cash Flows (Unaudited)
Amounts in millions

The accompanying notes are an integral part of the consolidated financial statements.

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THE DUN & BRADSTREET CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Tabular dollar amounts in millions, except per share data)

Note 1 – Basis of Presentation

     These interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q. They should be read in conjunction with the consolidated financial statements and related notes, which appear in The Dun & Bradstreet Corporation’s (“D&B” or “We”) Annual Report on Form 10-K for the year ended December 31, 2003. The consolidated results for interim periods do not include all disclosures required by accounting principles generally accepted in the United States of America for annual financial statements and are not necessarily indicative of results for the full year or any subsequent period. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the consolidated financial position, results of consolidated statement of operations, and cash flows at the dates and for the periods presented have been included. All significant inter-company transactions have been eliminated in consolidation. Where appropriate, we have reclassified certain prior period amounts to conform to our current presentation.

Note 2 – Recent Accounting Pronouncements

     In December 2003, the SEC issued Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which supercedes SAB No. 101, “Revenue Recognition in Financial Statements.” The primary purpose of SAB No. 104 is to rescind accounting guidance contained in SAB No. 101 related to multiple element revenue arrangements, superceded as a result of the issuance of Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” Additionally, SAB No. 104 rescinds the SEC’s Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (“FAQ”) issued with SAB No. 101. The adoption of SAB No. 104 in the first quarter of 2004 did not have a material impact on our consolidated financial statements.

     On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law. In connection with this Act, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.” FAS 106-2 provides guidance on accounting for the effects of the new Medicare prescription drug legislation for employers whose prescription drug benefits are actuarially equivalent to the drug benefit under Medicare Part D and are therefore entitled to receive subsidies from the federal government beginning in 2006. The FSP is effective as of the first interim or annual period beginning after June 15, 2004. Under the FSP, if a company concludes that its defined benefit postretirement benefit plan is actuarially equivalent to the Medicare Part D benefit, the employer should recognize the subsidies in the measurement of the accumulated postretirement benefit obligation (“APBO”) under FAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The resulting reduction of the APBO should be accounted for as an actuarial gain. Two alternative methods of transitioning to the guidance in the FSP are allowed – retroactive application to the date of enactment, or prospective application from the date of adoption. D&B has reviewed its postretirement benefit plan and estimated, based on the guidance included in the Act, that the plan will be actuarially equivalent in 2006 and for a certain amount of years thereafter. We are currently assessing the financial impact that the adoption of FSP 106-2 is expected to have on our financial statements. We will reflect this impact in our financial statements beginning in the quarter ended September 30, 2004.

     In April 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 clarifies the accounting and reporting for derivative instruments, including certain derivative instruments embedded in other

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contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” In particular, SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as described in SFAS No. 133. SFAS No. 149 is generally effective for derivative instruments entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The required adoption of SFAS No. 149 did not have a material impact on our consolidated financial statements.

     In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 requires certain financial instruments that have both equity and liability characteristics to be classified as a liability on the balance sheet. The adoption of SFAS No. 150, beginning on July 1, 2003, did not have a material impact on our consolidated financial statements.

     In January 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities,” which amended Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” and established standards for determining the circumstances under which a variable interest entity (“VIE”) should be consolidated with its primary beneficiary. FIN No. 46 also requires disclosure about VIEs that we are not required to consolidate but in which we have a significant variable interest. The consolidation requirements of FIN No. 46 apply immediately to VIEs created after January 31, 2003. The consolidation requirements apply to older entities in the first fiscal year or interim period beginning after December 31, 2003. In December 2003, the FASB issued FIN No. 46R which made some revisions and replaced the original FIN No. 46. The adoption of FIN No. 46R in the first quarter of 2004 did not have a material impact on our consolidated financial statements.

Note 3 – Impact of Implementation of the Blueprint for Growth Strategy

     Restructuring Charges

     Since the launch of our Blueprint for Growth strategy, we have leveraged financial flexibility to fund investments for growth and to create shareholder value. In each of these programs, we have incurred a restructuring charge, which generally consists of employee severance and termination costs, asset write-offs, and/or costs to terminate lease obligations.

     During the second quarter of 2004, we recognized an $8.0 million restructuring charge in connection with our 2004 Financial Flexibility program in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The charge included $7.5 million for severance and termination costs and $0.5 million for lease termination obligations. During the second quarter of 2004, approximately 125 employees were terminated in connection with our current year Financial Flexibility program. During the first six months of 2004, we have recorded $18.2 million of restructuring charges in connection with the 2004 Financial Flexibility program. The year-to-date charge includes $16.8 million for severance and termination costs related to approximately 325 employees and $1.4 million for lease termination obligations. Under SFAS No. 146, the current period charge represents the liabilities incurred during the quarter for each of these obligations. Additional restructuring charges will be incurred throughout 2004 as additional program actions are taken. In total, we expect to record approximately $30 million to $35 million for all restructuring charges related to the 2004 Financial Flexibility program, including $28 million to $32 million for severance and termination costs related to approximately 1,000 positions and $2 million to $3 million for lease termination obligations and other costs to consolidate or close facilities and relocate employees.

     During the second quarter of 2003, we recorded a $4.9 million restructuring charge for severance and termination costs in connection with the fourth phase of our Financial Flexibility program announced on January 13, 2003, in accordance with SFAS No. 146. During the first six months of 2003, we recorded $15.8 million of restructuring charges in connection with the fourth phase of our Financial Flexibility program. The year-to-date charge included $15.5 million for severance and termination costs related to approximately 450 employees (including a $0.5 million pension plan curtailment charge due to the fourth phase headcount actions discussed in the following paragraph) and $0.3 million for lease termination obligations.

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     In accordance with SFAS No. 87, “Employers’ Accounting for Pension,” and SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” we are required to recognize a one-time curtailment charge for the estimated pension expense impact to the Dun & Bradstreet Corporation Retirement Account (the “U.S. Qualified Plan”) related to the headcount actions of the fourth phase of our Financial Flexibility program. The curtailment accounting requirement of SFAS No. 88 required us to recognize immediately a pro-rata portion of the unrecognized prior service cost and the cost of any special charges related to benefit enhancements that might occur as a result of the layoffs (e.g., full vesting). For the U.S. Qualified Plan, these items together resulted in an immediate curtailment charge to earnings of $0.5 million in the first quarter 2003, included in the $15.8 million year-to-date charge discussed above in this Note 3.

     As of June 30, 2004, we have terminated approximately 3,425 employees and eliminated 3,725 positions (including 300 open positions) since the inception of the Financial Flexibility program in October 2000, including the approximately 400 employees who were transitioned to Computer Sciences Corporation (“CSC”) as part of our outsourcing of certain technology functions. All severance related actions were completed as of September 30, 2003 for the first four phases of the Financial Flexibility program.

     The following table sets forth, in accordance with SFAS No. 146, the restructuring reserves and utilization to date related to our 2004 Financial Flexibility program.

     The following table sets forth, in accordance with SFAS No. 146, the restructuring reserves and utilization to date related to the fourth phase of our Financial Flexibility program, which occurred in 2003.

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Note 4 – Notes Payable and Indebtedness

     Our borrowings at June 30, 2004 and December 31, 2003, including interest rate swaps designated as hedges, are summarized below:

     The notes with face value of $300 million have a five-year term maturing in March 2006 and bear interest at a fixed annual rate of 6.625%, payable semiannually. We have entered into interest rate swap agreements to hedge a portion of this long-term debt (see our Annual Report on Form 10-K for the year ended December 31, 2003 for a more detailed description).

     Other Credit Facilities

     At June 30, 2004 we had a total of $275 million of bank credit facilities available at prevailing short-term interest rates, including a 364-day term facility and a multi-year term facility which will expire in September 2005. These facilities also support our commercial paper borrowings up to $275 million. We have not drawn on either facility since their inception nor did we have any borrowings outstanding under either facility at June 30, 2004. We have also not borrowed under our commercial paper program in 2004. We believe that cash flows generated from operations, supplemented as needed with readily available financing arrangements, are sufficient to meet our short-term and long-term needs. The facilities require the maintenance of interest coverage and total debt to EBITDA ratios (as defined in the agreement). As of June 30, 2004, we were in compliance with these requirements.

Note 5 –Reconciliation of Weighted Average Shares

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     During the second quarter of 2004 and 2003, we repurchased 426,493 and 531,000 shares of stock for $22.5 million and $20.9 million to mitigate the dilutive effect of the shares issued under our stock incentive plans and Employee Stock Purchase Plan. During the second quarter of 2004, we also repurchased 488,107 shares in connection with a previously announced $200 million share repurchase program for $26.0 million. During the second quarter of 2003, we repurchased 493,800 shares in connection with a previously announced $100 million share repurchase program for $19.5 million. For the six months ended June 30, 2004, we repurchased 1,627,379 shares in connection with the $200 million share repurchase program for $87.6 million. Additionally, during the first half of 2003, we repurchased 808,300 shares for $30.3 million related to a previously announced $100 million two-year share repurchase program approved by our Board in October, 2002. For the six months ended June 30, 2004 and 2003, we repurchased 862,261 and 601,000 for $45.6 million and $23.3 million, respectively