Nielsen Holdings N.V.
Item 1.
Business.
Background and Business Overview
We are a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. We deliver critical media and marketing information, analytics and industry expertise about what consumers buy (referred to herein as “Buy”) and what consumers watch and listen to (consumer interaction across the television, radio, online and mobile viewing and listening platforms referred to herein as “Watch”) on a global and local basis. Our information, insights and solutions help our clients maintain and strengthen their market positions and identify opportunities for profitable growth. We have a presence in more than 100 countries, including many developing and emerging markets, and hold leading market positions in many of our services and geographies. Based on the strength of the Nielsen brand, our scale and the breadth and depth of our solutions, we believe we are the global leader in measuring and analyzing consumer behavior in the segments in which we operate.
We help our clients enhance their interactions with consumers and make critical business decisions that we believe positively affect our clients’ sales. Our data and analytics solutions, which have been developed through substantial investment over many decades, are deeply embedded into our clients’ workflow as demonstrated by our long-term client relationships, multi-year contracts and high contract renewal rates. The average length of relationship with our top ten clients, which include The Coca-Cola Company, NBC Universal, Nestle S.A., The Procter & Gamble Company, Twenty-First Century Fox Inc. and the Unilever Group, is more than 30 years. Typically, before the start of each year, approximately 70% of our annual revenue has been committed under contracts in our combined Buy and Watch segments.
We align our business into two reporting segments, Buy (consumer purchasing measurement and analytics ) and Watch (media audience measurement and analytics ). In June 2013, we completed the sale of our Expositions reporting segment (see “Discontinued Operations” discussion included in “Factors Affecting Our Financial Results” for more information). Our consolidated statements of operations reflect the Expositions reporting segment as a discontinued operation. Our Buy and Watch segments are built on an extensive foundation of proprietary data assets designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses. The information from our Buy and Watch segments, when brought together, can deliver powerful insights into the effectiveness of advertising by linking media consumption trends with consumer purchasing data to better understand how media exposure drives purchasing behavior. We believe these integrated insights will better enable our clients to enhance the return on investment of their advertising and marketing spending.
Our Buy segment provides retail transactional measurement data, consumer behavior information and analytics primarily to businesses in the consumer packaged goods industry. According to Deloitte, the aggregate retail revenue of the Top 250 global retailers was over $4.0 trillion in 2011. Our extensive database of retail and consumer information, combined with our advanced analytical capabilities, helps generate strategic insights that influence our clients’ key business decisions. We track billions of sales transactions per month in retail outlets in more than 100 countries around the world and our data is used by our clients to measure their sales and market share. We are the only company offering such extensive global coverage for the collection, provision and analysis of this information for consumer packaged goods. Our Buy services also enable our clients to better manage their brands, uncover new sources of demand, launch and grow new services, analyze their sales, improve their marketing mix and establish more effective consumer relationships. Within our Buy segment, we have two primary geographic groups, developed and developing markets. Developed markets primarily include the United States, Canada, Western Europe, Japan and Australia while developing markets include Africa, Latin America, Eastern Europe, Russia, China, India and Southeast Asia. Our Buy segment represented approximately 60% of our consolidated revenues in 2013.
Our Watch segment provides viewership and listening data and analytics primarily to the media and advertising industries across the television, radio, online and mobile viewing and listening platforms. According to ZenithOptimedia, a leading global media services agency, total global spending on advertising across television, radio, online and mobile platforms was at least $320 billion in 2012.
Our Watch data is used by our media clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content, and by our advertising clients to plan and optimize their spending. Within our Watch segment, our television ratings are the primary metrics used to determine the value of programming and advertising in the U.S. total television advertising marketplace, which was approximately $76 billion in 2011 according to a report by Veronis Suhler Stevenson. In addition to the United States, we measure television viewing in 29 other countries. We also measure markets that account for approximately 75% of global internet users and offer mobile measurement and analytic services in 60 countries, including the United States, where we are the market leader. As a result of Arbitron acquisition, we now measure eight hours a day per person of dynamic media consumption. It allows us to measure unmeasured areas that are important to the industries and clients we serve, like streaming audio, out-of-home measurements for television consumption and deeper measurement of multicultural audiences in the U.S. Our Watch segment represented approximately 40% of our consolidated revenue in 2013.
Our Company was founded in 1923 by Arthur C. Nielsen, Sr., who invented an approach to measuring competitive sales results that made the concept of “market share” a practical management tool. For over 90 years, we have advanced the practice of market research and media audience measurement to provide our clients a better understanding of their consumers. Our Company, incorporated in the Netherlands, was purchased on May 24, 2006 by a consortium of private equity firms (AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co. and Thomas H. Lee Partners, the “Original Sponsors,” and together with subsequent investor Centerview Partners, the “Sponsors”). In January 2011, our Company consummated an initial public offering of our common stock and our shares trade on the New York Stock Exchange under the symbol “NLSN”. As of December 31, 2013, the Sponsors’ owned 125,224,724 shares (or approximately 33%) of our common stock.
Services and Solutions
What Consumers Buy
Our Buy segment provides retail transactional measurement data, consumer behavior information and analytics primarily to businesses in the consumer packaged goods industry. This segment is organized into two areas: Information, which provides retail scanner and consumer panel-based measurement, and Insights, which provides a broad range of analytics. For the year ended December 31, 2013, revenues from our Buy segment represented approximately 60% of our consolidated revenues. This segment has historically generated stable revenue streams that are characterized by multi-year contracts and high contract renewal rates. At the beginning of each year, over 60% of the segment’s revenue base for the upcoming year is typically committed under existing agreements. Our top five segment clients represented approximately 20% of our segment revenues for the year ended December 31, 2013 and the average length of relationship with these same clients is over 30 years. No single client accounted for 10% or more of our Buy segment revenues in 2013.
Information: Retail Measurement Services
We are a global leader in retail measurement services. Our purchasing data provides market share, competitive sales volumes, and insights into such activities as distribution, pricing, merchandising and promotion. By combining this detailed information with our in-house expertise and professional consultative services, we produce valuable insights that help our clients improve their marketing and sales decisions and grow their market share.
Depending on the sophistication of each country’s retailer systems, we collect retail sales information from stores using electronic point-of-sale technology and/or teams of local field auditors. Stores within our worldwide retail network include grocery, drug, convenience and discount retailers, who, through various cooperation arrangements, share their sales data with us. The electronic retail sales information collected by stores through checkout scanners is transmitted directly to us. In certain developing markets where electronic retail sales information is unavailable, we utilize field auditors to collect information through in-store inventory and price checks. For all information we collect, our quality control systems validate and confirm the source data. The data is then processed into databases that clients access using our proprietary software that allows them to query the information, conduct customized analysis and generate reports and alerts.
Information: Consumer Panel Measurement
We conduct consumer panels around the world that help our clients understand consumer purchasing dynamics at the household level. Among other things, this information offers insight into shopper behavior such as trial and repeat purchase for new products and likely substitutes, as well as customer segmentation. In addition, our panel data augments our retail measurement information in circumstances where we do not collect data from certain retailers.
Our consumer panels collect data from more than 250,000 household panelists across 27 countries that use in-home scanners to record purchases from each shopping trip. In the United States, for example, approximately 100,000 selected households, constituting a demographically balanced sample, participate in the panels. Data received from household panels undergo a quality control process including UPC verification and validation, before being processed into databases and reports. Clients may access these databases to perform analyses.
Insights: Analytical Services
Utilizing our foundation of consumer purchasing information, we provide a wide and growing selection of consumer intelligence and analytical services that help clients make smarter business decisions throughout their product development and marketing cycles. We draw actionable insights from our retail and consumer panel measurement data sets, our online behavioral information, as well as a variety of other proprietary data sets.
We use consumer trends and comprehensive data analysis to advise our clients across their innovation process and apply a demand-driven approach to identify unmet consumer needs so they can develop breakthrough products. We use intelligence from comprehensive retail and consumer data analysis to inform client decisions on marketing spend for media, price, promotion and assortment. We help clients influence purchase decisions that shoppers make whether pre-store, in-store or online, and provide insights on how to market effectively along a shopper’s path to purchase. We also help clients drive profitable growth using demand-driven strategies that close the gap between consumer demand and sales, aligning what people want to what people buy.
What Consumers Watch
Our Watch segment provides viewership and listening data and analytics primarily to the media and advertising industries across the television, radio, online and mobile viewing and listening platforms. For the year ended December 31, 2013, revenues from our Watch segment represented approximately 40% of our consolidated revenues. This segment has historically generated stable revenue streams that are characterized by multi-year contracts and high contract renewal rates. At the beginning of each year, over 85% of the segment’s revenues base for the upcoming year is typically committed under existing agreements. Our top five clients represented 27% of segment revenues for the year ended December 31, 2013 and the average length of relationship with these same clients is more than 30 years. No customer accounted for 10% or more of our Watch segment revenues in 2013.
Television Audience Measurement Services
We are the global leader in television audience measurement. In the United States, which is by far the world’s largest market for television programming, broadcasters and cable networks use our television audience ratings as the primary currency to establish the value of their airtime and more effectively schedule and promote their programming. Advertisers use this information to plan television advertising campaigns, evaluate the effectiveness of their commercial messages and negotiate advertising rates.
We provide two principal television ratings services in the United States: measurement of national television audiences and measurement of local television audiences in all 210 designated local television markets. We use various methods to collect the data from households including electronic meters, which provide minute-by-minute viewing information for next day consumption by our clients, and written diaries. These methods enable us to collect not only television device viewing data but also the demographics of the audience (i.e., who in the household is watching), from which we calculate statistically reliable and accurate estimates of total television viewership. We have made significant investments over decades to build an infrastructure that can accurately and efficiently track television audience viewing, a process that has become increasingly complex as the industry has converted to digital transmission and integrated new technologies allowing for developments such as time-shifted viewing.
Our measurement techniques are constantly evolving to account for new television viewing behavior, increased fragmentation and new media technologies. For example, to help advertisers and programmers understand time-shifted viewing behavior, we created the “C3” ratings, which is a measure of how many people watch programming and commercials during live and time-shifted viewing up to three days after the program aired. The C3 rating has become the primary metric for buying and selling advertising on national broadcast television. We are expanding our television audience measurement to incorporate viewing of video-on-demand and from connected devices such as gaming consoles. We are developing and testing ways to measure how consumers watch video on tablets and other devices, to help advertising and programmers incorporate this viewing behavior into their programming and advertising plans. In the U.S., we utilize a single-source TV and PC panel to provide information to clients about simultaneous usage of more than one screen (e.g., if a consumer uses Facebook while watching a TV program), unduplicated reach (i.e., total audience net of duplication across platforms), cause and effect analysis (e.g., if a TV advertisement spurs a consumer to view a specific website online) and program viewing behavior (e.g., what platforms consumers use to view certain programming). We are working with Twitter to establish a measurement of consumer interaction with television programming and social media to address the growing interest in social TV among advertisers and media players.
We measure television viewing in 29 countries outside the United States, including Australia, Indonesia, Italy and South Korea. The international television audience measurement industry operates on a different model than in the United States. In many international markets, a joint industry committee of broadcasters in each individual country selects a single official audience measurement provider, which is designated the “currency” through an organized bidding process that is typically revisited every several years. We have strong relationships in these countries and see a significant opportunity to expand our presence into additional countries around the world.
Radio Audience Measurement Services
We provide independent measurement and consumer research primarily servicing radio, advertisers and advertising agencies in the radio industry. We estimate the size and composition of radio audiences in local markets and of audiences to network radio programming and commercials in the U.S. We refer to our local and network radio audience ratings services, collectively, as our “syndicated radio ratings services.” We provide our syndicated radio ratings services in local markets in the United States to radio
broadcasters, advertising agencies, and advertisers. Our national services estimate the size and demographic composition of national radio audiences and the size and composition of audiences of network radio programs and commercials. Broadcasters use our data primarily to price and sell advertising time, and advertising agencies and advertisers use our data in purchasing advertising time.
In addition to the services described above, we also provide qualitative information about consumers, including their lifestyles, shopping patterns, and use of media in local markets and across the United States. Generally referred to as “qualitative services,” we market these services to customers of our syndicated radio ratings services who wish to demonstrate the value of their advertising propositions. We also market our quantitative and qualitative audience and consumer information to customers outside of our traditional base, such as the advertising sales organizations of local cable television companies, national cable and broadcast television networks, and out-of-home media sales organizations.
We provide software applications allowing our customers to access our proprietary databases of media and marketing information. These applications enable our customers to analyze this information more effectively for sales, management, and programming purposes. Some of our software applications also allow our customers to access data owned by third-parties, provided the customers have a separate license to use such third-party data.
We have developed our electronic Portable People MeterTM (“PPM®”) technology, which we deploy across many of our customer offerings and have licensed to other media information services companies to use in their media audience ratings services in countries outside of the United States. We have commercialized our PPM ratings service in 48 of the largest radio markets in the United States.
Digital Audience Measurement Services
We are a global provider of digital media and market research, audience analytics and social media measurement. We employ a variety of measurement offerings to provide online publishers, internet and media companies, marketers and retailers with metrics to better understand the behavior of online audiences. Our online measurement services have a presence in more than 40 countries including the United States, South Korea and Brazil - markets that account for approximately 75% of global internet users. Through a combination of patented panel and census data collection methods, we monitor and measure the internet surfing, online buying and video viewing (including television content) of digital audiences. We provide critical advertising metrics such as audience demographics, page and ad views, and time spent. Through our social media monitoring capabilities, 50 million new social media messages are collected every day from more than 30 countries in 15 languages, representing a 30% year over year growth in data collection. As newer forms of digital media such as video advertising, social media and applications become a greater proportion of consumer behavior, we are transitioning our portfolio of online services, including discontinuation of certain legacy services in certain markets and the launch of other services, to address the evolving requirements of measuring digital audiences and better serve our clients. Nielsen SocialGuide is the leading provider of social TV measurement, analytics and audience engagement solutions for TV networks, agencies and advertisers, helping the industry measure, understand and act on the activity and reach of TV-related conversation on Twitter. In addition to identifying, capturing and analyzing conversation on Twitter about every program across over 250 of the most popular U.S. television networks, Nielsen SocialGuide also tracks conversation on Twitter about over 500 brands on a 24/7 basis.
Mobile Measurement Services
We provide independent measurement and consumer research for telecom and media companies in the mobile telecommunications industry. Clients, principally mobile carriers and device manufacturers, rely upon our data to make consumer marketing, competitive strategy and resource allocation decisions. In the United States, our metrics are a leading indicator for market share, customer satisfaction, device share, service quality, revenue share, content audience and other key performance indicators. We also benchmark the end-to-end consumer experience to pinpoint problem areas in the service delivery chain, track key performance metrics for mobile devices and identify key market opportunities (e.g., demand tracking for device features and services). To address the rapid growth of mobile internet consumption, we are expanding our capabilities to capture internet, video and other media on mobile devices. As mobile adoption continues globally, there is an opportunity for us to measure media and data content on mobile devices worldwide and to incorporate mobile measurement into a more comprehensive view of consumer media behavior. We offer mobile measurement and analytic services in 60 countries worldwide, including the United States, where we are a leader in the nascent market for mobile audience measurement, and are focused on expanding our presence in other markets.
Advertiser Solutions
We provide a range of solutions to major advertisers, whether they are consumer packaged goods manufacturers, retailers, media companies, or other verticals such as automotive, telecom or financial services, to help validate and optimize their advertising spend. We quantify the effectiveness of advertising by reporting behavioral observations, attitudinal changes and actual offline purchase activity. We offer services specific to television, digital and social marketing to determine “resonance” or impact of specific campaigns, by measuring objectives such as breakthrough, brand recall, purchase intent and effect on product and brand loyalty. These services can also help clients determine which elements of their advertising campaigns are more or less effective, including frequency of repetition, length of commercial and context. As part of these efforts, we collect and analyze more than 16 million surveys annually to measure consumer engagement and recall of advertisements across television and online to provide important insights on advertising and content effectiveness.
We also combine intelligence on what consumers watch and buy to inform client decisions on their advertising spend. We integrate data from our Buy segment and other third party sources, including our Nielsen Catalina Solutions joint venture, with Watch data on audience exposure to help assess the effect of an advertising campaign on purchase activity. We believe these and other offerings of consumer behavior data and marketing insights can provide value to advertisers as well as media content owners and distributors, and help these clients answer some of their most important marketing questions.
Competitive Advantages
We are faced with a number of competitors in the markets in which we operate. Some of our competitors in each market may have substantially greater financial, marketing and other resources than we do and may benefit from other competitive advantages. See “ - Competitive Landscape” and “Risk Factors - We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.” Notwithstanding the challenges presented by the competitive landscape, we believe that we have several competitive advantages, including the following:
Global Scale and Brand. We provide a breadth of information and insights about the consumer in more than 100 countries. In our Buy segment, we track billions of sales transactions per month in retail outlets in more than 100 countries around the world. We also have approximately 250,000 household panelists across 27 countries. In our Watch segment, our ratings are the primary metrics used to determine the value of programming and advertising in the U.S. total television advertising marketplace, which was approximately $76 billion in 2011 according to Veronis Suhler Stevenson. We believe our footprint, neutrality, credibility and leading market positions will continue to contribute to our long-term growth and strong operating margins as the number and role of multinational companies expands. Our scale is supported by our global brand, which is defined by the original Nielsen code created by our founder, Arthur C. Nielsen, Sr.: impartiality, thoroughness, accuracy, integrity, economy, price, delivery and service.
Strong, Diversified Client Relationships. Many of the world’s largest brands rely on us as their information and analytics provider to create value for their business. We maintain long-standing relationships and multi-year contracts with high renewal rates due to the value of the services and solutions we provide. In our Buy segment, our clients include the largest consumer packaged goods and merchandising companies in the world such as The Coca-Cola Company, Kraft Foods and The Procter & Gamble Company, as well as leading retail chains such as Carrefour, Kroger, Safeway, Tesco, Walgreens and Wal-Mart Stores. In our Watch segment, our client base includes leading broadcast, radio, cable and internet companies such as CBS, Clear Channel Media, Disney/ABC, Facebook, Google, Microsoft, NBC Universal/Comcast, Twenty-First Century Fox, Inc., Time Warner, Twitter, Univision and Yahoo!; leading advertising agencies such as WPP, IPG, Omnicom, and Publicis; leading telecom companies such as AT&T, Verizon, Vodafone, and Nokia; and leading automotive companies such as Chrysler, Ford and Toyota. The average length of relationship with our top 10 clients across both our Buy and Watch segments is more than 30 years. In addition, due to our growing presence in developing markets, we have cultivated strong relationships with local market leaders that can benefit from our services as they expand globally. Our strong client relationships provide both a foundation for recurring revenues as well as a platform for growth.
Enhanced Data Assets and Measurement Science. Our extensive portfolio of transactional and consumer behavioral data across our Buy and Watch segments enables us to provide critical information to our clients. For decades, we have employed advanced measurement methodologies that yield statistically accurate information about consumer behavior while having due regard for their privacy. Our particular expertise in panel measurement includes a proven methodology to create statistically accurate research insights that are fully representative of designated audiences. This expertise is a distinct advantage as we extrapolate more precise insights from emerging large-scale census databases to provide greater granularity and segmentation for our clients. We continue to enhance our core competency in measurement science by improving research approaches and investing in new methodologies. We have also invested significantly in our data architecture to enable the integration of distinct large-scale census data sets including those owned by third parties. We believe that our expertise, established standards and increasingly granular and comprehensive data assets provide us with a distinct advantage as we deliver more precise insights to our clients.
Innovation. We have focused on innovation to deepen our capabilities, expand in new and emerging forms of measurement, enhance our analytical offerings and capitalize on industry trends. For example, we are investing in advanced delivery technologies to extend the value of the full suite of our data assets for our clients. We have further enhanced our information and analytics delivery platform, Nielsen Answers on Demand, to enable the management of consumer loyalty programs for retailers. The 2013 expansion of our Nielsen Campaign Ratings service provides “reach” metrics for TV and digital campaign ratings, and can offer advertisers and media companies a unique measurement of unduplicated audiences for their advertising and programming across television and online viewing.
Scalable Operating Model. Our global presence and operating model allow us to scale our services and solutions rapidly and efficiently. We have a long track record of establishing leading services that can be quickly expanded across clients, markets and geographies. Our global operations and technology organization enables us to achieve faster, higher quality outcomes for clients in a cost-efficient manner. Our flexible architecture allows us to incorporate leading third-party technologies as well as data from external sources, and enables our clients to use our technology and solutions on their own technology platforms. In addition, we work with leading technology partners such as IBM, Tata Consultancy Services and TIBCO, which allows for greater quality in client offerings and efficiency in our global operations.
Industry Trends
We believe companies, including our clients, require an increasing amount of data and analytics to set strategy and direct operations. This has resulted in a large market for business information and insight which we believe will continue to grow. Our clients are media, advertising and consumer packaged goods companies in the large and growing markets. We believe that significant economic, technological, demographic and competitive trends facing consumers and our clients will provide a competitive advantage to our business and enable us to capture a greater share of our significant market opportunity. We may not be able to realize these opportunities if these trends do not continue or if we are otherwise unable to execute our strategies. See “Risk Factors - We may be unable to adapt to significant technological change which could adversely affect our business” and “Risk Factors - Our international operations are exposed to risks which could impede growth in the future.”
Developing markets present significant expansion opportunities. Brand marketers are focused on attracting new consumers in developing countries as a result of the fast-paced population growth of the middle class in these regions. In addition, the retail trade in these markets is quickly evolving from small, local formats toward larger, more modern formats with electronic points of sale, a similar evolution to what occurred in developed markets over the last several decades. We provide established measurement methodologies to help give consumer packaged goods companies, retailers and media companies an accurate understanding of local consumers to allow them to harness growing consumer buying power in fast growing markets like Brazil, Russia, India and China.
Demographic shifts and changes in spending behavior are altering the consumer landscape. Consumer demographics and related trends are constantly evolving globally, leading to changes in consumer preferences and the relative size and buying power of major consumer groups. Shifts in population size, age, racial composition, family size and relative wealth are causing marketers continuously to re-evaluate and reprioritize their consumer marketing strategies. We track and interpret consumer demographics that help enable our clients to engage more effectively with their existing consumers as well as forge new relationships with emerging segments of the population.
The media landscape is dynamic and changing. Consumers are rapidly changing their media consumption patterns. The growing availability of the internet, and the proliferation of new formats and channels such as mobile devices, social networks and other forms of user-generated media have led to an increasingly fragmented consumer base that is more difficult to measure and analyze. In addition, simultaneous usage of more than one screen is becoming a regular aspect of daily consumer media consumption. We have effectively measured and tracked media consumption through numerous cycles in the industry’s evolution - from broadcast to cable, from analog to digital, from offline to online and from live to time-shifted. We believe our distinct ability to provide audience measurement and metrics across television, radio, online and mobile platforms helps clients better understand, adapt to and profit from the continued transformation of the global media landscape.
Consumers are more connected, informed and in control. Today, more than three-quarters of the world’s homes have access to television, there are more than 2.8 billion internet users around the globe, and mobile penetration rates have reached 96% globally. Advances in technology have given consumers a greater level of control of when, where and how they consume information and interact with media and brands. They can compare products and prices instantaneously and have new avenues to learn about, engage with and purchase products and services. These shifts in behavior create significant complexities for our clients. Our broad portfolio of information and insights enables our clients to engage consumers with more impact and efficiency, influence consumer purchasing decisions and actively participate in and shape conversations about their brands.
Increasing amounts of consumer information are leading to new marketing approaches. The advent of the internet and other digital platforms has created rapid growth in consumer data that is expected to intensify as more entertainment and commerce are delivered across these platforms. As a result, companies are looking for real-time access to more granular levels of data to understand growth opportunities more quickly and more precisely. This presents a significant opportunity for us to work with companies to effectively manage, integrate and analyze large amounts of information and extract meaningful insights that allow marketers to generate profitable growth.
Consumers are looking for greater value. Economic and social trends have spurred consumers to seek greater value in what they buy as exemplified by the rising demand for “private label” (store branded) products. For instance, in the United States, the absolute dollar share for private label consumer packaged goods increased more than $17 billion during 2009 and 2013.This increased focus on value is causing manufacturers, retailers and media companies to re-evaluate brand positioning, pricing and loyalty. We believe companies will increasingly look to our broad range of consumer purchasing insights and analytics to more precisely and effectively measure consumer behavior and target their products and marketing offers at the right place and at the right price.
Our Growth Strategy
We believe we are well-positioned for growth worldwide and have a multi-faceted strategy that builds upon our brand, strong client relationships and integral role in measuring and analyzing the global consumer. Our growth strategy is also subject to certain risks. For example, we may be unable to adapt to significant technological changes such as changes in the technology used to collect and process data or in methods of television viewing. In addition, consolidation in our customers’ industries may reduce the aggregate demand for our services. See “Risk Factors.”
Continue to grow in developing markets
Developing markets (measured in our Buy segment) comprised approximately 20% of our 2013 revenues and represent a significant long-term opportunity for us given the growth of the middle class and the rapid evolution and modernization of the retail trade in these regions. Currently, the middle class is expanding significantly each year on a global basis, with Africa, Brazil, Russia, India and China currently contributing nearly half of all global consumption growth. Key elements of our strategy include:
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Continuing to grow our existing services in local markets while simultaneously introducing into developing markets new services drawn from our global portfolio;
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Partnering with existing clients as they expand their businesses into developing and emerging markets and providing the high-quality measurement and insights to which they are accustomed; and
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Building relationships with local companies that are expanding beyond their home markets by capitalizing on the global credibility and integrity of the Nielsen brand.
Continue to develop innovative services
We intend to continue developing our service portfolio to provide our clients with comprehensive and advanced solutions. Key elements of our strategy include:
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Further developing our analytics offerings across all facets of our client base to provide a more comprehensive offering and help our clients think through their most important challenges;
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Continuing to grow our leadership in measurement and insight services related to television, radio, online and mobile and expanding our services in growth areas including social media to help our media clients more effectively reach their target audiences and better understand the value of their content; and
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Continuing to expand our Advertiser Solutions offering, which integrates our proprietary data and analytics from both the Buy and Watch segments, by developing powerful tools to help clients better understand the effectiveness of advertising and the impact of advertising spend on consumer purchasing behavior.
Continue to attract new clients and expand existing relationships
We believe that substantial opportunities exist to both attract new clients and to increase our revenue from existing clients. Building on our deep knowledge and the embedded position of our Buy and Watch segments, we expect to sell new and innovative solutions to our new and existing clients, increasing our importance to their decision making processes.
Continue to pursue strategic acquisitions to complement our leadership positions
We have increased our capabilities through investments and acquisitions in the areas of retail measurement, U.S. and international audience measurement, and advertising effectiveness for digital and social media campaigns. Going forward, we will consider select acquisitions of complementary businesses that enhance our product and geographic portfolio and can benefit from our scale, scope and status as a global leader.
Technology Infrastructure
We operate with an extensive data and technology infrastructure utilizing nine primary data centers in seven countries around the world. Our global database has the capacity to house approximately 36 petabytes of information, with our Buy segment processing approximately 6.7 billion purchasing data points each month in 2013 and our Watch segment processing approximately 2.3 billion tuning and viewing records each month in 2013, including Nielsen Audio. Our technology infrastructure plays an instrumental role in meeting service commitments to global clients and allows us to quickly scale our services across practice areas and geographies. Our technology platform utilizes an open approach that facilitates integration of distinct data sets, interoperability with client data and technology, and partnerships with leading technology companies such as IBM, Tata Consulting Services and TIBCO.
Intellectual Property
Our patents, trademarks, trade secrets, copyrights and all of our other intellectual property are important assets that afford protection to our business. Our success depends to a degree upon our ability to protect and preserve certain proprietary aspects of our technology and our brand. To ensure that objective, we control access to our proprietary technology. Our employees and consultants enter into confidentiality, non-disclosure and invention assignment agreements with us. We protect our rights to proprietary technology and confidential information in our business arrangements with third parties through confidentiality and other intellectual property and business agreements.
We hold a number of third-party patent and intellectual property license agreements that afford us rights to third-party patents, technology and other intellectual property. Such license agreements most often do not preclude either party from licensing our patents and technology to others. Such licenses may involve one-time payments or ongoing royalty obligations, and we cannot ensure that future license agreements can or will be obtained or renewed on acceptable terms, or at all.
Employees
As of December 31, 2013, we employed approximately 40,000 people worldwide. Approximately 21% of our employees are covered under collective bargaining agreements and an additional 14% are covered under works council agreements in Europe. We may become subject to additional agreements or experience labor disruptions which may result in higher operating costs over time. We believe that our employee relations are good.
Competitive Landscape
There is no single competitor that offers all of the services we offer in all of the markets in which we offer them. We have many competitors worldwide that offer some of the services we provide in selected markets. While we maintain leading positions in many markets in which we operate, our future success will depend on our ability to enhance and expand our suite of services, provide reliable and accurate measurement solutions and related information, drive innovation that anticipates and responds to emerging client needs, strengthen and expand our geographic footprint, and protect consumer privacy. See “Risk Factors - We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.” We believe our global presence and integrated portfolio of services are key assets in our ability to effectively compete in the marketplace. A summary of the competitive landscape for each of our segments is included below:
What Consumers Buy
While we do not have one global competitor in our Buy segment, we face numerous competitors in various areas of our service in different markets throughout the world. Competition includes companies specializing in marketing research, in-house research departments of manufacturers and advertising agencies, retailers that sell information directly or through brokers, information management and software companies, and consulting and accounting firms. In retail measurement, our principal competitor in the United States is Information Resources, Inc., which is also present in some European and Asia/Pacific markets. Our retail measurement service also faces competition in individual markets from local companies. Our consumer panel services and analytics services have many direct and/or indirect competitors in all markets around the world including in selected cases GfK, Ipsos, Kantar and local companies in individual countries.
What Consumers Watch
While we do not have one global competitor in our Watch segment, we face numerous competitors in various areas of our operations in different markets throughout the world. We are the clear market leader in U.S. television audience measurement; however, there are many emerging players and technologies that will increase competitive pressure. Numerous companies such as Dish Networks, Kantar (a unit of WPP), Rentrak and TiVo are attempting to provide measurement solutions using set-top box data to provide an alternative form of television audience measurement. Our principal competitor in television audience measurement outside the United States is Kantar, with additional companies such as Ipsos and GfK representing competitors in individual countries. Our online service faces competition in the United States and globally from companies that provide panel-based internet measurement services such as comScore, providers of site-centric Web analytics solutions, including IBM Digital Analytics (formerly Coremetrics), Google, Adobe and WebTrends; and companies that measure consumer generated media on the internet such as Twelvefold, Visible Technologies, and Radian6 (part of Salesforce.com). We are the market leader in U.S. radio audience measurement. Our principal competitors in radio audience measurement are Civolution, GfK, and Ipsos SA, which are developing technologies similar to our PPM ratings service.
Regulation
Our operations are subject to and affected by data protection laws in many countries. These laws constrain whether and how we collect personal data (i.e., information relating to an identifiable individual), how that data may be used and stored, and whether, to whom and where that data may be transferred. Data collection methods that may not always be obvious to the data subject, like the use of cookies online, or that present a higher risk of abuse, such as collecting data directly from children, tend to be more highly regulated; and data transfer constraints can impact multinational access to a central database and cross-border data transfers.
Some of the personal data we collect may be considered “sensitive” by the laws of many jurisdictions because they may include certain demographic information and consumption preferences. Sensitive personal data typically are more highly regulated than non-sensitive data. Generally, this means that for sensitive data the data subject’s consent should be more explicit and fully informed and security measures surrounding the storage of the data should be more rigorous. The greater constraints that apply to the collection and use of sensitive data increase the administrative and operational burdens and costs of panel recruitment and management.
The attention privacy and data protection issues attract can offer us a competitive advantage. Because we recognize the importance of privacy to our panelists, our customers, consumers in general, and regulators, we devote dedicated resources to enhancing our privacy and security practices in our product development plans and other areas of operation, and participate in privacy policy organizations and “think tanks.” We do this to improve both our practices and the perception of Nielsen as a leader in this area.
Iran Sanctions Related Disclosure
Under the Iran Threat Reduction and Syrian Human Rights Act of 2012, which added Section 13(r) of the Exchange Act, we are required to include certain disclosures in our periodic reports if we or any of our “affiliates” knowingly engaged in certain specified activities during the period covered by the report. Because the SEC defines the term “affiliate” broadly, it includes any entity controlled by us as well as any person or entity that controls us or is under common control with us (“control” is also construed broadly by the SEC). We are not presently aware that we and our consolidated subsidiaries have knowingly engaged in any transaction or dealing reportable under Section 13(r) of the Exchange Act during the year ended December 31, 2013. In addition, we sought confirmation from companies that may be considered our affiliates as to whether they have knowingly engaged in any such reportable transactions or dealings during such period and, except as described below or as previously disclosed by us, are not presently aware of any such reportable transactions or dealings by such companies. The information included in the section entitled “Item 5. Other Information - Iran Sanctions Related Disclosure” in the registrant’s quarterly reports on Form 10-Q for the quarterly periods ended March 31, June 30 and September 30, 2013 (File No. 001-35042) is incorporated herein by reference.
The Blackstone Group L.P. (“Blackstone”), one of our Sponsors, informed us that it included disclosures, as reproduced below, in its quarterly report on Form 10-Q as filed with the SEC on November 8, 2013 as required by Section 13(r) of the Exchange Act. We have no involvement in or control over the activities of either of these companies, any of their predecessor companies or any of their subsidiaries, and we have not independently verified or participated in the preparation of Blackstone’s disclosure.
Blackstone Disclosure
Travelport Limited, which may be considered our affiliate, included the disclosure reproduced below in its Form 10-Q for the fiscal quarter ended September 30, 2013. We have not independently verified or participated in the preparation of this disclosure.
“As part of our global business in the travel industry, we provide certain passenger travel related GDS and Airline IT Solutions services to Iran Air. We also provide certain Airline IT Solutions services to Iran Air Tours. All of these services are either exempt from applicable sanctions prohibitions pursuant to a statutory exemption in the International Emergency Economic
Powers Act permitting transactions ordinarily incident to travel or, to the extent not otherwise exempt, specifically licensed by the U.S. Office of Foreign Assets Control (“OFAC”). Subject to any changes in the exempt/licensed status of such activities, we intend to continue these business activities, which are directly related to and promote the arrangement of travel for individuals.
The gross revenue and net profit attributable to these activities in the quarter ended September 30, 2013 were approximately $164,000 and $122,000, respectively.”
Recent Developments
On February 3, 2014, we completed the tender offer to acquire all outstanding shares of common stock of Harris Interactive, Inc. (HPOL) a leading global market research firm for $2.04 per share (total purchase price of $116 million).
Financial Information about Segments and Geographic Areas
See Note 17 to our consolidated financial statements - “Segments,” for further information regarding our operating segments and our geographic areas.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports will be made available free of charge on our website at http://www.nielsen.com as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the Securities and Exchange Commission (“SEC”). Information on our website is not incorporated by reference herein and is not a part of this report.
From time to time, Nielsen may use its website and social media outlets as channels of distribution of material company information. Financial and other material information regarding the company is routinely posted and accessible on our website at http://www.nielsen.com/investors, our Twitter account at http://twitter.com/NielsenIR and our iPad App, NielsenIR, available on the App Store.
Item 1A.
Risk Factors
The risks described below are not the only risks facing us. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations.
Risks Related to Our Business
We may be unable to adapt to significant technological change which could adversely affect our business.
We operate in businesses that require sophisticated data collection, processing systems, software and other technology. Some of the technologies supporting the industries we serve are changing rapidly. We will be required to adapt to changing technologies, either by developing and marketing new services or by enhancing our existing services, to meet client demand.
Moreover, the introduction of new services embodying new technologies and the emergence of new industry standards could render existing services obsolete. Our continued success will depend on our ability to adapt to changing technologies, manage and process ever-increasing amounts of data and information and improve the performance, features and reliability of our existing services in response to changing client and industry demands. We may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of our services. New services, or enhancements to existing services, may not adequately meet the requirements of current and prospective clients or achieve any degree of significant market acceptance.
Traditional methods of television viewing are changing as a result of fragmentation of channels and digital and other new television technologies and devices such as video-on-demand, digital video recorders, game consoles, tablets, other mobile devices and internet viewing. If we are unable to continue to successfully adapt our media measurement systems to new viewing habits, our business, financial position and results of operations could be adversely affected.
Our ability to successfully manage ongoing organizational changes could impact our business results.
We recently experienced a CEO transition, as well as other senior leadership changes, and we continue to execute a number of significant business and organizational changes, including acquisitions, divestitures and workforce optimization projects to support our growth strategies. We expect these types of changes, which may include many staffing adjustments as well as employee
departures, to continue for the foreseeable future. Successfully managing these changes, including retention of particularly key employees, is critical to our business success. We are generally a build-from-within company and our success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. This includes developing organization capabilities in key growth markets where the depth of skilled or experienced employees may be limited and competition for these resources is intense. Finally, our financial targets assume a consistent level of productivity improvement. If we are unable to deliver expected productivity improvements, while continuing to invest in business growth, our financial results could be adversely impacted.
If we are unable to attract, retain and motivate employees, we may not be able to compete effectively and will not be able to expand our business.
Our success and ability to grow are dependent, in part, on our ability to hire, retain and motivate sufficient numbers of talented people, with the increasingly diverse skills needed to serve clients and expand our business, in many locations around the world. Competition for highly qualified, specialized technical and managerial, and particularly consulting personnel is intense. Recruiting, training and retention costs and benefits place significant demands on our resources. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have an adverse effect on us, including our ability to obtain and successfully complete important client engagements and thus maintain or increase our revenues.
Consolidation in the consumer packaged goods, media, entertainment, telecommunications and technology industries could put pressure on the pricing of our services, thereby leading to decreased earnings.
Consolidation in the consumer packaged goods, media, entertainment, telecommunications and technology industries could reduce aggregate demand for our services in the future and could limit the amounts we earn for our services. When companies merge, the services they previously purchased separately are often purchased by the combined entity in the aggregate in a lesser quantity than before, leading to volume compression and loss of revenue. While we attempt to mitigate the revenue impact of any consolidation by expanding our range of services, there can be no assurance as to the degree to which we will be able to do so as industry consolidation continues, which could adversely affect our business, financial position and results of operations.
Client procurement strategies could put additional pressure on the pricing of our information services, thereby leading to decreased earnings.
Certain of our clients may continue to seek further price concessions from us. This puts pressure on the pricing of our information services, which could limit the amounts we earn. While we attempt to mitigate the revenue impact of any pricing pressure through effective negotiations and by providing services to individual businesses within particular groups, there can be no assurance as to the degree to which we will be able to do so, which could adversely affect our business, financial position and results of operations.
Continued adverse market conditions, particularly in the consumer packaged goods, media, entertainment, telecommunications or technology industries could adversely impact our revenue.
A number of adverse financial developments continue to impact the U.S. and global financial markets. The current economic environment has witnessed continued malaise in consumer confidence and demand, impacting the demand for our customers’ products and services. Those reduced demands could adversely affect the ability of some of our customers to meet their current obligations to us and hinder their ability to incur new obligations until the economy and their businesses strengthen. The inability of our customers to pay us for our services and/or decisions by current or future customers to forego or defer purchases may adversely impact our business, financial condition, results of operations, profitability and cash flows and may continue to present risks for an extended period of time. We cannot predict the impact of economic slowdowns on our future financial performance.
We expect that revenues generated from our information and insights services will continue to represent a substantial portion of our overall revenue for the foreseeable future. To the extent the businesses we service, especially our clients in the consumer packaged goods, media, entertainment, telecommunications and technology industries, are subject to the financial pressures of, for example, increased costs or reduced demand for their products, the demand for our services, or the prices our clients are willing to pay for those services, may decline.
During challenging economic times, clients, typically advertisers, within our Buy segment may reduce their discretionary advertising expenditures and may be less likely to purchase our analytical services, which would have an adverse effect on our revenue.
Clients within our Watch segment derive a significant amount of their revenue from the sale or purchase of advertising. During challenging economic times, advertisers may reduce advertising expenditures and advertising agencies and other media may be less likely to purchase our media information services, which would have an adverse effect on our revenue.
We have suffered losses due to goodwill impairment charges in the past and could do so again in the future.
Goodwill and indefinite-lived intangible assets are subject to annual review for impairment (or more frequently should indications of impairment arise). In addition, other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. As of December 31, 2013, we had goodwill and intangible assets of $12,465 million. Any downward revisions in the fair value of our reporting units or our intangible assets could result in impairment charges for goodwill and intangible assets that could materially affect our financial performance.
Our substantial indebtedness could adversely affect our financial health.
We have now and will continue to have a significant amount of indebtedness. As of December 31, 2013, we had total indebtedness of $6,640 million. Furthermore, the interest payments on our indebtedness could reduce the availability of our cash flow.
Our substantial indebtedness could have important consequences. For example, it could:
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increase our vulnerability to the current general adverse economic and industry conditions;
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require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, service development efforts and other general corporate purposes;
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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
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expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
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restrict us from making strategic acquisitions or causing us to make non-strategic divestitures;
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limit our ability to obtain additional financing for working capital, capital expenditures, service development, debt service requirements, acquisitions and general corporate or other purposes;
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limit our ability to adjust to changing market conditions; and
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place us at a competitive disadvantage compared to our competitors that have less debt.
In addition, the indentures governing our outstanding notes and our credit facilities contain financial and other restrictive covenants that will limit the ability of our operating subsidiaries to engage in activities that may be in our best interests in the long term. The failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.
Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further increase the risks associated with our substantial leverage.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.
To service our indebtedness, we will require a significant amount of cash as well as continued access to the capital markets. Our ability to generate cash and our access to the capital markets depend on many factors beyond our control.
Our ability to make payments on our indebtedness and to fund planned capital expenditures and product development efforts will depend on our ability to generate cash in the future and our ability to refinance our indebtedness. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
We may not be able to generate sufficient cash flow from operations to pay our indebtedness or to fund our other liquidity needs. Our cash interest expense for the years ended December 31, 2013, 2012 and 2011 was $304 million, $384 million and $446 million, respectively. At December 31, 2013, we had $4,016 million of floating-rate debt under our senior secured credit facilities of which $2,872 million was subject to effective floating-fixed interest rate swaps. A one percent increase in interest rates applied to our floating rate indebtedness would therefore increase annual interest expense by approximately $11 million ($40 million without giving
effect to any of our interest rate swaps). We may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness, including our senior secured credit facilities, on commercially reasonable terms or at all. See Note 11 to our consolidated financial statements - “Long-term Debt and Other Financing Arrangements,” for a description of our debt maturities.
The success of our business depends on our ability to recruit sample participants to participate in our research samples.
Our business uses scanners and diaries to gather consumer data from sample households as well as Set Meters, People Meters, Active/Passive Meters, PPM’s and diaries to gather television and audio audience measurement data from sample households. It is increasingly difficult and costly to obtain consent from households to participate in the surveys. In addition, it is increasingly difficult and costly to ensure that the selected sample of households mirrors the behaviors and characteristics of the entire population and covers all of the demographic segments requested by our clients. Additionally, as consumers adopt modes of telecommunication other than traditional telephone service, such as mobile, cable and internet calling, it may become more difficult for our services to reach and recruit participants for consumer purchasing and audience measurement services. If we are unsuccessful in our efforts to recruit appropriate participants and maintain adequate participation levels, our clients may lose confidence in our ratings services and we could lose the support of the relevant industry groups. If this were to happen, our consumer purchasing and audience measurement services may be materially and adversely affected.
Data protection laws may restrict our activities and increase our costs.
Various statutes and rules regulate conduct in areas such as privacy and data protection which may affect our collection, use, storage and transfer of personally identifiable information both abroad and in the United States. Compliance with these laws may require us to make certain investments or may dictate that we not offer certain types of services or only offer such services after making necessary modifications. Failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity, data being blocked from use and liability under contractual warranties. In addition, there is an increasing public concern regarding data and consumer protection issues, and the number of jurisdictions with data protection laws has been slowly increasing. There is also the possibility that the scope of existing privacy laws may be expanded. For example, several countries, including the United States, have regulations that restrict telemarketing to individuals who request to be included on a do-not-call list. Typically, these regulations target sales activity and do not apply to survey research. If the laws were extended to include survey research, our ability to recruit research participants could be adversely affected. These or future initiatives may adversely affect our ability to generate or assemble data or to develop or market current or future services, which could negatively impact our business.
If we are unable to protect our intellectual property rights, our business could be adversely affected.
The success of our business will depend, in part, on:
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obtaining patent protection for our technology and services;
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defending our patents, copyrights, trademarks, service marks and other intellectual property;
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preserving our trade secrets and maintaining the security of our know-how and data; and
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operating our business without infringing upon intellectual property rights held by third parties.
We rely on a combination of contractual provisions, confidentiality procedures and the patent, copyright, trademark and trade secret laws of the United States and other countries to protect our intellectual property. These legal measures afford only limited protection and may not provide sufficient protection to prevent the infringement, misuse or misappropriation of our intellectual property. Intellectual property law in several foreign jurisdictions is subject to considerable uncertainty. There can be no assurances that the protections we have available for our proprietary technology in the United States and other countries will be available to us in all of the places we sell our services. Any infringement or misappropriation of our technology can have a negative impact on our business. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with meaningful protection or commercial advantage. The expiration of our patents may lead to increased competition. Although our employees, consultants, clients and collaborators enter into confidentiality agreements with us, our trade secrets, data and know-how could be subject to unauthorized use, misappropriation or unauthorized disclosure. The growing need for global data, along with increased competition and technological advances, puts increasing pressure on us to share our intellectual property for client applications with others, which could result in infringement. Competitors may gain access to our intellectual property and proprietary information. Our trademarks could be challenged, which could force us to rebrand our services, result in a loss of brand recognition and require us to devote resources to advertising and marketing new brands. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of our proprietary rights. Given the importance of our intellectual property, we will enforce our rights whenever it is necessary and prudent to do so. Any future litigation, regardless of the outcome, could result in substantial expense and diversion of time and attention of management, may not be resolved in our favor and could adversely affect our business.
If third parties claim that we infringe upon their intellectual property rights, our operating profits could be adversely affected.
We cannot be certain that we do not and will not infringe the intellectual property rights of others in operating our business. We may be subject to legal proceedings and claims in the ordinary course of our business, including claims that we have infringed third parties’ intellectual property rights. Any such claims of intellectual property infringement, even those without merit, could:
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be expensive and time-consuming to defend;
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result in our being required to pay possibly significant damages;
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cause us to cease providing our services that incorporate the challenged intellectual property;
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require us to redesign or rebrand our services;
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divert management’s attention and resources; or
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require us to enter into potentially costly royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property, although royalty or licensing agreements may not be available to us on acceptable terms or at all.
Any of the above could have a negative impact on our operating profits and harm our future prospects and financial condition.
We generate revenues throughout the world which are subject to exchange rate fluctuations, and our revenues and net income may suffer due to currency translations and repatriation of earnings to the U.S.
We operate globally, deriving approximately 48% of revenues for the year ended December 31, 2013 in currencies other than U.S. dollars, with approximately 12% of revenues deriving in Euros. Our U.S. operations earn revenues and incur expenses primarily in U.S. dollars, while our European operations earn revenues and incur expenses primarily in Euros. Outside the United States and the Euro Zone, we generate revenues and expenses predominantly in local currencies. Because of fluctuations (including possible devaluations) in currency exchange rates, we are subject to currency translation exposure on the profits of our operations, in addition to economic exposure. In certain instances, we may not be able to freely convert foreign currencies into U.S. dollars due to limitations placed on such conversions. Certain of the countries in which we operate, such as Venezuela, have currencies which are considered to be hyperinflationary. Although potentially significant currency devaluations could occur in Venezuela in the future, due to the unpredictability of the timing, form and amount, our outlook does not assume further currency devaluations in Venezuela beyond the most recent devaluation of the Venezuela Bolivares Fuertes in February 2013. As of December 31, 2013, net monetary assets subject to revaluation in Venezuela were $38 million.
As of December 31, 2013, of the $564 million in cash and cash equivalents, approximately $459 million was held in jurisdictions outside the U.S. and as a result there may be tax consequences if such amounts were moved out of these jurisdictions or repatriated to the U.S. We regularly review the amount of cash and cash equivalents held outside of the U.S. to determine the amounts necessary to fund the current operations of our foreign operations and their growth initiatives and amounts needed to service our U.S. indebtedness and related obligations.
Our international operations are exposed to risks which could impede growth in the future.
We continue to explore opportunities in major international markets around the world, including China, Russia, India and Brazil. International operations expose us to various additional risks, which could adversely affect our business, including:
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costs of customizing services for clients outside of the United States;
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reduced protection for intellectual property rights in some countries;
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the burdens of complying with a wide variety of foreign laws;
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difficulties in managing international operations;
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longer sales and payment cycles;
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exposure to foreign currency exchange rate fluctuation;
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exposure to local economic conditions;
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limitations on the repatriation of funds from foreign operations;
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exposure to local political conditions, including adverse tax policies, civil unrest and seizure of assets by a foreign government; and
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the risks of an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which we operate.
In countries where there has not been a historical practice of using consumer packaged goods retail information or audience measurement information in the buying and selling of advertising time, it may be difficult for us to maintain subscribers.
Criticism of our audience measurement service by various industry groups and market segments could adversely affect our business.
Due to the high-profile nature of our services in the media, internet and entertainment information industries, we could become the target of criticism by various industry groups and market segments. We strive to be fair, transparent and impartial in the production of audience measurement services, and the quality of our U.S. ratings services are voluntarily subject to review and accreditation by the Media Rating Council, a voluntary trade organization, whose members include many of our key client constituencies. However, criticism of our business by special interests, and by clients with competing and often conflicting demands on our measurement service, could result in government regulation. While we believe that government regulation is unnecessary, no assurance can be given that legislation will not be enacted in the future that would subject our business to regulation, which could adversely affect our business.
A loss of one of our largest clients could adversely impact our results of operations.
Our top ten clients accounted for approximately 23% of our total revenues for the year ended December 31, 2013. We cannot assure you that any of our clients will continue to use our services to the same extent, or at all, in the future. A loss of one or more of our largest clients, if not replaced by a new client or an increase in business from existing clients, would adversely affect our prospects, business, financial condition and results of operations.
We rely on third parties to provide certain data and services in connection with the provision of our current services.
We rely on third parties to provide certain data and services for use in connection with the provision of our current services. For example, our Buy segment enters into agreements with third parties (primarily retailers of fast-moving consumer goods) to obtain the raw data on retail product sales it processes and edits and from which it creates products and services. These suppliers of data may increase restrictions on our use of such data, fail to adhere to our quality control standards, increase the price they charge us for this data or refuse altogether to license the data to us. In addition, we may need to enter into agreements with third parties to assist with the marketing, technical and financial aspects of expanding our services for other types of media. In the event we are unable to use such third party data and services or if we are unable to enter into agreements with third parties, when necessary, our business and/or our potential growth could be adversely affected. In the event that such data and services are unavailable for our use or the cost of acquiring such data and services increases, our business could be adversely affected.
We rely on a third party for the performance of a significant portion of our worldwide information technology and operations functions, various services and assistance in certain integration projects. A failure to provide these functions, services or assistance in a satisfactory manner could have an adverse effect on our business.
Pursuant to the terms of a seven-year agreement with a one-year option, effective February 2013, we are dependent upon Tata America International Corporation and Tata Consultancy Services Limited (collectively, “TCS”) for the performance of a significant portion of our information technology and operations functions worldwide, the provision of a broad suite of information technology and business process services, including general and process consulting, product engineering, program management, application development and maintenance, coding, data management, finance and accounting services and human resource services, as well as assistance in integrating and centralizing multiple systems, technologies and processes on a global scale. The success of our business depends in part on maintaining our relationships with TCS and their continuing ability to perform these functions and services in a timely and satisfactory manner. If we experience a loss or disruption in the provision of any of these functions or services, or they are not performed in a satisfactory manner, we may have difficulty in finding alternate providers on terms favorable to us, or at all, and our business could be adversely affected.
Long-term disruptions in the mail, telecommunication infrastructure and/or air service could adversely affect our business.
Our business is dependent on the use of the mail, telecommunication infrastructure and air service. Long-term disruptions in one or more of these services, which could be caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism, could adversely affect our business, results of operations and financial condition.
Hardware and software failures, delays in the operation of our computer and communications systems or the failure to implement system enhancements may harm our business.
Our success depends on the efficient and uninterrupted operation of our computer and communications systems. A failure of our network or data gathering procedures could impede the processing of data, delivery of databases and services, client orders and day-to-day management of our business and could result in the corruption or loss of data. While many of our services have appropriate disaster recovery plans in place, we currently do not have full backup facilities everywhere in the world to provide redundant network capacity in the event of a system failure. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at our various computer facilities could result in interruptions in the flow of data to our servers and from our servers to our clients. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service. In the event of a delay in the delivery of data, we could be required to transfer our data collection operations to an alternative provider of server hosting services. Such a transfer could result in significant delays in our ability to deliver our services to our clients and could be costly to implement. Additionally, significant delays in the planned delivery of system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage our reputation and harm our business. Finally, long-term disruptions in infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism (particularly involving cities in which we have offices) could adversely affect our services. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.
The presence of our Global Technology and Information Center in Florida heightens our exposure to hurricanes and tropical storms, which could disrupt our business.
The technological data processing functions for certain of our U.S. operations are concentrated at our Global Technology and Information Center (“GTIC”) at a single location in Florida. Our geographic concentration in Florida heightens our exposure to a hurricane or tropical storm. These weather events could cause severe damage to our property and technology and could cause major disruptions to our operations. Although our GTIC was built in anticipation of severe weather events and we have insurance coverage, if we were to experience a catastrophic loss, we may exceed our policy limits and/or we may have difficulty obtaining similar insurance coverage in the future. As such, a hurricane or tropical storm could have an adverse effect on our business.
Our services involve the storage and transmission of proprietary information. If our security measures are breached and unauthorized access is obtained, our services may be perceived as not being secure and panelists and survey respondents may hold us liable for disclosure of personal data, and clients and venture partners may hold us liable or reduce their use of our services.
We store and transmit large volumes of proprietary information and data that contains personally identifiable information about individuals. Security breaches could expose us to a risk of loss of this information, litigation and possible liability and our reputation could be damaged. It may also make it more difficult to recruit panelists and survey respondents. For example, hackers or individuals who attempt to breach our network security could, if successful, misappropriate proprietary information or cause interruptions in our services. If we experience any breaches of our network security or sabotage, we might be required to expend significant capital and resources to protect against or to alleviate problems. We may not be able to remedy any problems caused by hackers or saboteurs in a timely manner, or at all. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target and, as a result, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose current and potential clients.
Changes in tax laws may adversely affect our reported results.
Changes in tax laws, regulations, related interpretations and tax accounting standards in the United States, the Netherlands and other countries in which we operate may adversely affect our financial results. For example, recent legislative proposals to reform U.S. taxation of non-U.S. earnings could have a material adverse effect on our financial results by subjecting a significant portion of our non-U.S. earnings to incremental U.S. taxation and/or by delaying or permanently deferring certain deductions otherwise allowed in calculating our U.S. tax liabilities. In addition, governments are increasingly considering tax law changes as a means to cover budgetary shortfalls resulting from the current economic environment.
We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.
We are faced with a number of competitors in the markets in which we operate. Some of our competitors in each market may have substantially greater financial, marketing and other resources than we do and may in the future engage in aggressive pricing action to compete with us. Although we believe we are currently able to compete effectively in each of the various markets in which we participate, we may not be able to do so in the future or be capable of maintaining or further increasing our current market share. Our failure to compete successfully in our various markets could adversely affect our business, financial condition, results of operations and cash flow.
We may be subject to antitrust litigation or government investigation in the future, which may result in an award of money damages or force us to change the way we do business.
In the past, certain of our business practices have been investigated by government antitrust or competition agencies, and we have on several occasions been sued by private parties for alleged violations of the antitrust and competition laws of various jurisdictions. Following some of these actions, we have changed certain of our business practices to reduce the likelihood of future litigation. Although each of these material prior legal actions have been resolved, there is a risk based upon the leading position of certain of our business operations that we could, in the future, be the target of investigations by government entities or actions by private parties challenging the legality of our business practices. Also, in markets where the retail trade is concentrated, regulatory authorities may perceive certain of our retail services as potential vehicles for collusive behavior by retailers or manufacturers. There can be no assurance that any such investigation or challenge will not result in an award of money damages, penalties or some form of order that might require a change in the way that we do business, any of which could adversely affect our revenue stream and/or profitability.
Failure to successfully complete or integrate acquisitions into our existing operations could have an adverse impact on our business, financial condition and results of operations.
We regularly evaluate opportunities for strategic growth through tuck-in acquisitions. Potential issues associated with these acquisitions could include, among other things, our ability to realize the full extent of the benefits or cost savings that we expect to realize as a result of the completion of the acquisition within the anticipated time frame, or at all; receipt of necessary consents, clearances and approvals in connection with the acquisition; diversion of management’s attention from base strategies and objectives; and, with respect to acquisitions, including the acquisition of Arbitron, our ability to successfully combine our businesses with the business of the acquired company in a manner that permits cost savings to be realized, including sales and administrative support activities and information technology systems among our company and the acquired company, motivating, recruiting and retaining executives and key employees, conforming standards, controls, procedures and policies, business cultures and compensation structures among our company and the acquired company, consolidating and streamlining corporate and administrative infrastructures, consolidating sales and marketing operations, retaining existing customers and attracting new customers, identifying and eliminating redundant and underperforming operations and assets, coordinating geographically dispersed organizations, and managing tax costs or inefficiencies associated with integrating our operations following completion of the acquisitions. In addition, acquisitions outside of the United States increase our exposure to risks associated with foreign operations, including fluctuations in foreign exchange rates and compliance with foreign laws and regulations. If an acquisition is not successfully completed or integrated into our existing operations, our business, financial condition and results of operations could be adversely impacted.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
We lease property in approximately 600 locations worldwide. We also own eight properties worldwide, including our offices in Oxford, United Kingdom, Mexico City, Mexico and Sao Paulo, Brazil. Our leased property includes offices in New York, New York, Oldsmar, Florida and Markham, Canada. In addition, we are subject to certain covenants including the requirement that we meet certain conditions in the event we merge into or convey, lease, transfer or sell our properties or assets as an entirety or substantially as an entirety to, any person or persons, in one or a series of transactions.
Item 3.
Legal Proceedings
Nielsen is subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does expect that the ultimate disposition of these matters will not have a material adverse effect on its operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period.
Item 4.
Mine Safety Disclosures
Not Applicable.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Nielsen’s common stock is listed on the New York Stock Exchange and is traded under the symbol “NLSN.” At the close of business on February 1, 2014, there were 42 stockholders of record, including our parent company, Valcon Acquisition Holding (Luxembourg) S.á.r.l (“Luxco”), which owned 125,224,724 shares (or approximately 33%) of our common stock. We believe that the number of beneficial owners is substantially greater than the number of record holders because a large portion of our common stock is held in “street name” by brokers.
In 2013, three secondary public offerings totaling 111,064,884 shares of our common stock were completed on behalf of certain selling stockholders, primarily comprised of the Sponsor group, at a weighted average price of $35.27 per share. All proceeds were received by the selling stockholders and the offerings did not have a significant impact on our operating results or financial position.
On August 14, 2013, we entered into the Agreement Terminating the Amended and Restated Shareholders’ Agreement Regarding Nielsen Holdings N.V. (the “Termination Agreement”), with The Nielsen Company B.V. (“TNC”), Valcon Acquisition B.V. (“Valcon”), Valcon Acquisition Holding (Luxembourg) S.ar.l. (“Luxco”) and funds associated with or designated by AlpInvest Partners (“AlpInvest”), The Blackstone Group (“Blackstone”), The Carlyle Group (“Carlyle”), Centerview Partners (“Centerview”), Hellman & Friedman LLC (“Hellman & Friedman”), Kohlberg Kravis Roberts & Co. (“KKR”) and Thomas H. Lee Partners (“THL” and, together with AlpInvest, Blackstone, Carlyle, Centerview, Hellman & Friedman and KKR, the “Sponsors”). The Termination Agreement terminates in all material respects the Amended and Restated Shareholders’ Agreement Regarding Nielsen Holdings N.V., dated as of January 31, 2011, as amended, by and among Nielsen, TNC, Valcon, Luxco and the Sponsors, other than with respect to certain specified provisions, including provisions regarding indemnification, access to information and confidentiality. The parties entered into the Termination Agreement in light of the Sponsor’s reduced ownership of Nielsen common stock.
In connection with the Termination Agreement, on August 14, 2013, Nielsen entered into separate letter agreements with affiliates of each of Blackstone, Carlyle, Hellman & Friedman, KKR and THL (each such affiliate, a “Counterparty”), which provides such Counterparty with the right to nominate one director to Nielsen’s Board of Directors directly, rather than through Luxco, if such Counterparty holds, directly or indirectly, at least 3% of Nielsen’s voting power.
Also in connection with the Termination Agreement, on August 14, 2013, Nielsen entered into a letter agreement with affiliates of AlpInvest, which provides AlpInvest with the right to receive information from the Company subject to confidentiality, insider trading restrictions and other provisions.
The high and low reported sale prices per share for our common stock for the quarterly periods for the years ended December 31, 2013 and 2012 were as follows:
Quarterly Period
High
Low
High
Low
First
$
35.84
$
30.69
$
31.10
$
26.57
Second
$
37.09
$
33.13
$
30.35
$
25.14
Third
$
37.30
$
32.40
$
30.50
$
25.02
Fourth
$
46.20
$
35.86
$
32.07
$
27.30
In January 2013, our Board of Directors (the “Board”) adopted a cash dividend policy with the present intent to pay quarterly cash dividends on our outstanding common stock. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will be subject to the Board’s continuing determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our shareholders, and are in compliance with all laws and agreements to which we are subject. In addition, our ability to pay dividends is limited by covenants in our senior secured credit facilities and in the indentures governing our notes. See the “Liquidity and Capital Resources” section of Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 11 to our consolidated financial statements - “Long-term Debt and Other Financing Arrangements,” for a description of our senior secured credit facility, debenture loans and these dividend restrictions.
The below table summarizes the dividends declared and paid on our common stock during 2013.
Declaration Date
Record Date
Payment Date
Dividend Per Share
January 31, 2013
March 6, 2013
March 20, 2013
$
0.16
May 2, 2013
June 5, 2013
June 19, 2013
$
0.16
July 25, 2013
August 28, 2013
September 11, 2013
$
0.20
October 22, 2013
November 25, 2013
December 9, 2013
$
0.20
On February 20, 2014, our Board declared a cash dividend of $0.20 per share on our common stock. The dividend is payable on March 20, 2014 to stockholders of record at the close of business on March 6, 2014.
No dividends were declared on our common stock during the years ended December 31, 2012 or 2011.
On July 25, 2013, our Board approved a share repurchase program for up to $500 million of our outstanding common stock. The primary purpose of the program is to mitigate dilution associated with our equity compensation plans. Repurchases will be made in accordance with applicable securities laws from time to time in the open market depending on our management’s evaluation of market conditions and other factors. The program will be executed within the limitations of the existing authority granted at our 2013 Annual General Meeting of Shareholders. During the fourth quarter of 2013, we repurchased a total of 289,839 shares of our common stock for $11 million at an average price of $39.49 per share. The activity during the fourth quarter of 2013 consisted of open market share repurchases and is summarized in the following table:
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Dollar Value of Shares that may yet be Purchased under the Plans or Programs
October 1 - 31
-
n/a
-
$
500,000,000
November 1 - 30
289,839
$
39.49
289,839
$
488,554,427
December 1 - 31
-
$
n/a
-
$
488,554,427
Total
289,839
$
39.49
289,839
As of December 31, 2013, the cumulative repurchases under the program were 289,839 shares of our common stock for $11 million at an average price of $39.49 per share.
Dividend Tax
In general, the Company must withhold tax (dividend tax) from dividends distributed on our common stock at the rate of 15 percent.
Dividends include, without limitation:
(i)
Distributions of profits (including paid-in capital not recognized for dividend tax purposes) in cash or in kind, including deemed and constructive dividends;
(ii)
liquidation distributions and, generally, proceeds realized upon a repurchase of our common stock by the Company or upon the transfer of our common stock to a direct or indirect subsidiary of the Company, in excess of the average paid-in capital recognized for dividend tax purposes, with the exception of a repurchase that qualifies as a temporary portfolio investment (e.g. with a view to meeting obligations under an employee stock-option plan) or in certain specific cases where a specific statutory exemption applies;
(iii)
the par value of our common stock issued or any increase in the par value of our common stock, except where such (increase in) the par value of our common stock is funded out of the Company’s paid-in capital recognized for dividend tax purposes; and
(iv)
repayments of paid-in capital recognized for dividend tax purposes up to the amount of the Company’s profits (zuivere winst) unless the Company’s general meeting of stockholders has resolved in advance that the Company shall make such repayments and the par value of our common stock concerned has been reduced by a corresponding amount through an amendment of the Company’s articles of association.
A holder of our common stock which is, is deemed to be, or, in the case of an individual has elected to be treated as, resident in the Netherlands for the relevant tax purposes, is generally entitled to credit the dividend tax withheld against such holder’s liability to tax on income and capital gains or, in certain cases, to apply for a full refund of the withheld dividend tax.
A holder of our common stock which is not, is not deemed to be, and, in case the holder is an individual, has not elected to be treated as, resident in the Netherlands for the relevant tax purposes, may be eligible for a partial or full exemption or refund of the dividend tax under an income tax convention in effect between the Netherlands and the holder’s country of residence.
In addition, generally a non-resident holder of our common stock that is not an individual may be entitled to an exemption from dividend withholding tax, provided that the following tests are satisfied:
(i)
such holder is, according to the tax law of a member state of the European Union or a state designated by ministerial decree that is a party to the agreement regarding the European Economic Area, resident in such state and is not transparent for tax purposes according to the tax law of such state;
(ii)
any one or more of the following threshold conditions are satisfied:
(a)
at the time the dividend is distributed by us, such holder has shares representing at least 5 percent of our nominal paid up capital;
(b)
such holder has held shares representing at least 5 percent of our nominal paid-up capital for a continuous period of more than one year at any time during the four years preceding the time the dividend is distributed by us;
(c)
such holder is connected with us within the meaning of article 10a, paragraph 4, of the Dutch Corporation Tax Act 1969 (Wet op de Vennootschapsbelasting 1969); or
(d)
an entity connected with such holder within the meaning of article 10a, paragraph 4, of the Dutch Corporation Tax Act 1969 (Wet op de Vennootschapsbelasting 1969) holds at the time the dividend is distributed by us, shares representing at least 5 percent of our nominal paid up capital;
(iii)
such holder is not considered to be resident outside the member states of the European Union or the states designated by ministerial decree that are a party to the agreement regarding the European Economic Area, under the terms of a double taxation treaty concluded with a third state; and
(iv)
such holder does not perform a similar function as an investment institution (beleggingsinstelling) as meant by article 6a or article 28 of the Dutch Corporation Tax Act 1969 (Wet op de Vennootschapsbelasting 1969).
Dividend distributions to a U.S. holder of our common stock (with an interest of less than 10 percent of the voting rights in our common stock) are subject to 15 percent dividend withholding tax, which is equal to the rate such U.S. holder may be entitled to under the current income tax treaty between the Netherlands and the United States (the “Treaty”). As such, there is no need to claim a refund of the excess of the amount withheld over the Treaty rate.
On the basis of article 35 of the Treaty, qualifying U.S. pension trusts are under certain conditions entitled to a full exemption from or refund of Netherlands dividend withholding tax.
Under the terms of domestic anti-dividend stripping rules, a recipient of dividends distributed on our common stock will not be entitled to an exemption from, reduction, refund, or credit of dividend tax if the recipient is not the beneficial owner of such dividends as meant in those rules.
Investors are advised to consult their professional advisers as to the tax consequences of purchase, ownership and disposition of our common stock.
Item 6.
Selected Financial and Other Data
The following table sets forth selected historical consolidated financial data as of the dates and for the periods indicated. The selected consolidated statement of operations data for the years ended December 31, 2013, 2012 and 2011 and selected consolidated balance sheet data as of December 31, 2013 and 2012 have been derived from our audited consolidated financial statements and related notes appearing elsewhere in this Form 10-K. The selected consolidated statement of operations data for the years ended December 31, 2010 and 2009 and selected consolidated balance sheet data as of December 31, 2011, 2010 and 2009 have been derived from our audited consolidated financial statements, which are not included in this annual report on Form 10-K.
The results of operations for any period are not necessarily indicative of the results to be expected for any future period. The audited consolidated financial statements, from which the historical financial information for the periods set forth below have been derived, were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The selected historical consolidated financial data set forth below should be read in conjunction with, and are qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K.
As previously disclosed, in March 2013, we completed the exit and shut down of one of our legacy online businesses and, in June 2013, we completed the sale of our Expositions business. These businesses are reported as discontinued operations, which requires retrospective restatement of prior periods to classify operating results of these businesses as discontinued operations. See “
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis should be read together with the accompanying consolidated financial statements and related notes thereto. Further, this report may contain material that includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, Nielsen’s current views with respect to current events and financial performance. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those described in “Item 1A. Risk Factors.” Statements, other than those based on historical facts, which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to Nielsen’s operations and business environment that may cause actual results to be materially different from any future results, express or implied, by such forward-looking statements. See “Cautionary Statement Regarding Forward Looking Statements” in Part I of this Annual Report on Form 10-K. The terms “Company,” “Nielsen,” “we,” “our” or “us,” as used herein, refer to Nielsen Holdings N.V. and its consolidated subsidiaries unless otherwise stated or indicated by context.
Background and Executive Summary
We are a global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. We deliver critical media and marketing information, analytics and industry expertise about what consumers buy (referred to herein as “Buy”) and what consumers watch and listen to on a global and local basis (consumer interaction across the television, radio, online and mobile viewing and listening platforms referred to herein as “Watch”). Our information, insights and solutions help our clients maintain and strengthen their market positions and identify opportunities for profitable growth. We have a presence in more than 100 countries, including many developing and emerging markets, and hold leading market positions in many of our services and geographies.
On September 30, 2013, we completed the acquisition of Arbitron Inc., an international media and marketing research firm through the purchase of 100% of Arbitron’s outstanding common stock for a total cash purchase price of $1.3 billion Arbitron is expected to help us better address client needs in unmeasured areas of media consumption, including streaming audio and out-of-home, and our global distribution footprint can help expand Arbitron’s capabilities outside of the U.S. With Arbitron’s assets, we intend to further expand our Watch segment’s audience measurement across screens and forms of listening. Arbitron has been rebranded Nielsen Audio.
On February 3, 2014, we completed the tender offer to acquire all outstanding shares of common stock of Harris Interactive, Inc. (HPOL) a leading global market research firm for $2.04 per share (total purchase price of $116 million).
We believe that important measures of our results of operations include revenue, operating income and Adjusted EBITDA (defined below). Our long-term financial objectives include consistent revenue growth and expanding operating margins. Accordingly, we are focused on geographic market and service offering expansion to drive revenue growth and improving operating efficiencies including effective resource utilization, information technology leverage and overhead cost management.
Our business strategy is built upon a model that has traditionally yielded consistent revenue performance. Typically, before the start of each year, approximately 70% of our annual revenue has been committed under contracts in our combined Buy and Watch segments, which provides us with a high degree of stability to our revenue and allows us to effectively manage our profitability and cash flows. We continue to look for growth opportunities through global expansion, specifically within developing markets, as well as through the cross-platform expansion of our insights services and measurement services.
Our restructuring and other productivity initiatives have been focused on a combination of improving operating leverage through targeted cost-reduction programs, business process improvements and portfolio restructuring actions, while at the same time investing in key programs to enhance future growth opportunities.
Achieving our business objectives requires us to manage a number of key risk areas. Our growth objective of geographic market and service expansion requires us to maintain the consistency and integrity of our information and underlying processes on a global scale, and to invest effectively our capital in technology and infrastructure to keep pace with our clients’ demands and our competitors. Our operating footprint across more than 100 countries requires disciplined global and local resource management of internal and third party providers to ensure success. In addition, our high level of indebtedness requires active management of our debt profile, with a focus on underlying maturities, interest rate risk, liquidity and operating cash flows.
Business Segment Overview
We align our business into two reporting segments: what consumers buy (consumer purchasing measurement and analytics), and what consumers watch and listen to (media audience measurement and analytics). Our Buy and Watch segments are built on a foundation of proprietary data assets that are designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses.
Our Buy segment provides Information services, which include our core tracking and scan data (primarily transactional measurement data and consumer behavior information), and Insights services (primarily comprised of our analytical solutions) to businesses in the consumer packaged goods industry. Our services also enable our clients to better manage their brands, uncover new sources of demand, launch and grow new products, analyze their sales, improve their marketing mix and establish more effective consumer relationships. Our data is used by our clients to measure their market share, tracking billions of sales transactions per month in retail outlets around the world. Our extensive database of retail and consumer information, combined with our advanced analytical capabilities, helps generate strategic insights that influence our clients’ key business decisions. Within our Buy segment, we have two primary geographic groups, developed and developing markets. Developed markets primarily include the United States, Canada, Western Europe, Japan and Australia while developing markets include Africa, Latin America, Eastern Europe, Russia, China, India and Southeast Asia.
Our Watch segment provides viewership and listening data and analytics primarily to the media and advertising industries across the television, radio, online and mobile viewing and listening platforms. Our Watch data is used by our media clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content, and by our advertising clients to plan and optimize their spending.
In March 2013, we completed the exit and shut down of one of our legacy online businesses and recorded a net loss of $3 million associated with this divestiture. The consolidated statements of operations reflect the operating results of this business as a discontinued operation.
In June 2013, we completed the sale of our Expositions reporting segment (see “Discontinued Operations” discussion included in “Factors Affecting Our Financial Results” for more information). Our consolidated statements of operations reflect the Expositions reporting segment as a discontinued operation.
Certain corporate costs, other than those described above, including those related to selling, finance, legal, human resources, and information technology systems, are considered operating costs and are allocated to our segments based on either the actual amount of costs incurred or on a basis consistent with the operations of the underlying segment.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. The most significant of these estimates relate to: revenue recognition; business combinations including purchase price allocations; accruals for pension costs and other post-retirement benefits; accounting for income taxes; and valuation of long-lived assets including goodwill and indefinite-lived intangible assets, computer software and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the valuation of assets and liabilities that are not readily apparent from other sources. We evaluate these estimates on an ongoing basis. Actual results could vary from these estimates under different assumptions or conditions. For a summary of the significant accounting policies, including critical accounting policies discussed below, see Note 1 - “Description of Business, Basis of Presentation and Significant Accounting Policies” - to our consolidated financial statements.
Revenue Recognition
We recognize revenues when persuasive evidence of an arrangement exists, services have been rendered or information has been delivered, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured.
A significant portion of our revenue is generated from information (primarily retail measurement and consumer panel services) and measurement (primarily from television, radio, internet and mobile audiences) services. We generally recognize revenue from the sale of services as the services are performed, which is usually ratably over the term of the contract(s). Invoiced amounts are recorded as deferred revenue until earned. Substantially all of our customer contracts are non-cancelable and non-refundable.
Certain of our revenue arrangements include multiple deliverables and in these arrangements, the individual deliverables within the contract that have stand-alone value to the customer are separated and recognized upon delivery based upon our best estimate of their selling prices. These arrangements are not significant to our results of operations. In certain cases, software is included as part of these arrangements to allow our customers to view delivered information and is provided for the term of the arrangement and is not significant to the marketing effort and is not sold separately. Accordingly, software provided to our customers is considered to be incidental to the arrangements and is not recognized as a separate element.
A discussion of our revenue recognition policies, by segment, follows:
Buy
Revenue from our Buy segment, primarily from retail measurement services and consumer panel services, is recognized over the period during which the services are performed and information is delivered to the customer, primarily on a straight line basis.
We provide insights and solutions to customers through analytical studies that are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally or deferred until the end of the contract term and recognized when the information has been delivered to the customer.
Watch
Revenue from our Watch segment is primarily generated from television, radio, online and mobile measurement services and recognized over the contract period, as the service is delivered to the customer, primarily on a straight-line basis.
Stock-Based Compensation
Expense Recognition
Our stock-based compensation programs are comprised of both stock options and restricted stock units ( “RSUs”). We measure the cost of all stock-based payments, including stock options, at fair value on the grant date and recognize such costs within the consolidated statements of operations; however, no expense is recognized for stock-based payments that do not ultimately vest. We recognize expense associated with stock-based payments that vest upon a single date using the straight-line method. For those that vest over time, an accelerated graded vesting is used. We recorded $47 million, $34 million and $27 million of expense associated with stock-based compensation for the years ended December 31, 2013, 2012 and 2011, respectively. As of December 31, 2013, the aggregate grant date fair value of all outstanding vested and unvested options was $67 million and $56 million, respectively. As of December 31, 2013, approximately $26 million of unearned stock-based compensation related to unvested RSUs (net of estimated forfeitures) is expected to be recognized over a weighted average period of 3.3 years.
Fair Value Measurement
Determining the fair value of stock-based awards at the grant date requires considerable judgment. Stock-based compensation expense for stock options is primarily based on the estimated grant date fair value using the Black-Scholes option pricing model, which considers factors such as estimating the expected term of stock options, expected volatility of our stock, and the number of stock-based awards expected to be forfeited due to future terminations. Some of the critical assumptions used in estimating the grant date fair value are presented in the table below:
Year Ended December 31,
Expected life (years)
3.50-6.00
3.50 - 6.00
3.50 - 6.00
Risk-free interest rate
0.40-1.99
%
0.38 - 0.83
%
1.18 - 2.23
%
Expected dividend yield
0% - 2.19
%
%
%
Expected volatility
25.40-27.60
%
28.00 - 30.30
%
31.70 - 42.00
%
Weighted-average volatility
25.89
%
28.56
%
33.42
%
In addition, for stock-based awards where vesting is dependent upon achieving certain operating performance goals, we estimate the likelihood of achieving the performance goals. Differences between actual results and these estimates could have a material effect on our financial results. We consider several factors in estimating the expected life of our options granted, including the expected lives used by a peer group of companies and the historical option exercise behavior of our employees, which we believe are representative of future behavior. For 2013, expected volatility was based on our historical volatility. For 2012 and 2011, because of the Company’s limited trading history, expected volatility was based on a combination of the estimates of implied volatility of our peer group, our historical volatility adjusted for leverage and the implied volatility based on trading Nielsen call options.
The assumptions used in calculating the fair value of stock-based awards represent our best estimates and, although we believe them to be reasonable, these estimates involve inherent uncertainties and the application of management’s judgment. If factors change and we employ different assumptions in the application of our option-pricing model in future periods or if we experience different forfeiture rates, the compensation expense that is derived may differ significantly from what we have recorded in the current year.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are stated at historical cost less accumulated impairment losses, if any.
Goodwill and other indefinite-lived intangible assets, consisting of certain trade names and trademarks, are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. We have designated October 1st as the date in which the annual assessment is performed as this timing corresponds with the development of our formal budget and business plan review. We review the recoverability of our goodwill by comparing the estimated fair values of reporting units with their respective carrying amounts. We established, and continue to evaluate, our reporting units based on our internal reporting structure and define such reporting units at our operating segment level or one level below. The estimates of fair value of a reporting unit are determined using a combination of valuation techniques, primarily by an income approach using a discounted cash flow analysis and supplemented by a market-based approach.
A discounted cash flow analysis requires the use of various assumptions, including expectations of future cash flows, growth rates, discount rates and tax rates in developing the present value of future cash flow projections. Many of the factors used in assessing fair value are outside of the control of management, and these assumptions and estimates can change in future periods. Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit, and therefore could affect the amount of potential impairment. The following assumptions are significant to our discounted cash flow analysis:
·
Business projections - expected future cash flows and growth rates are based on assumptions about the level of business activity in the marketplace as well as applicable cost levels that drive our budget and business plans. The budget and business plans are updated at least annually and are frequently reviewed by management and our board of directors. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions and a slower or weaker economic recovery than currently estimated by management could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future. Should such events or circumstances arise, management would evaluate other options available at that time that, if executed, could result in future profitability.
·
Long-term growth rates - the assumed long-term growth rate representing the expected rate at which a reporting unit’s earnings stream, beyond that of the budget and business plan period, is projected to grow. These rates are used to calculate the terminal value, or value at the end of the future earnings stream, of our reporting units, and are added to the cash flows projected for the budget and business plan period. The long-term growth rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit such as the maturity of the underlying services. The long-term growth rates we used for our reporting units were between 2% and 4%.
·
Discount rates - the reporting unit’s combined future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that is likely to be used by market participants. The weighted-average cost of capital is our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. The discount rates we used for our reporting units were between 9.0% and 13.5%.
These estimates and assumptions vary between each reporting unit depending on the facts and circumstances specific to that unit. We believe that the estimates and assumptions we made are reasonable, but they are susceptible to change from period to period.
We also use a market-based approach in estimating the fair value of our reporting units. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings as well as recent comparable transactions.
To validate the reasonableness of the reporting unit fair values, we reconcile the aggregate fair values of our reporting units to our enterprise market capitalization. Enterprise market capitalization includes, among other factors, the market value of our common stock and the appropriate redemption values of our debt.
During 2013 we updated our reporting structure in a manner that changed the composition of our reporting units. As a result of this change in reporting units, we performed an interim goodwill impairment analysis during 2013 immediately prior to the change and determined the estimated fair values of the impacted reporting units exceeded their carrying value (including goodwill). As such, there was no impairment as a result of this change.
We did not have any indicators of impairment during the year ended December 31, 2013 that would require us to perform an interim impairment assessment. Our annual impairment assessment, performed as of October 1, 2013, was based on the updated reporting structure and resulted in no impairment. Further all six reporting units have fair values exceeding carrying values by at least 20% as of the annual impairment assessment date.
We perform sensitivity analyses on our assumptions, primarily around both long-term growth rate and discount rate assumptions. Our sensitivity analyses include several combinations of reasonably possible scenarios with regard to these assumptions. However, we consistently test a one percent movement in both our long-term growth rate and discount rate assumptions. When applying these sensitivity analyses, we noted that the fair value was greater than the underlying book value for all of our reporting units. While management believes that these sensitivity analyses provide a reasonable basis on which to evaluate the recovery of our goodwill, other facts or circumstances may arise that could impact the impairment assessment and therefore these analyses should not be used as a sole predictor of impairment.
The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of trade names and trademarks are determined using a “relief from royalty” discounted cash flow valuation methodology. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace.
Pension Costs
We provide a number of retirement benefits to our employees, including defined benefit pension plans and post-retirement medical plans. Pension costs, in respect of defined benefit pension plans, primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets. Differences between this expected return and the actual return on these plan assets and actuarial changes are not recognized in the statement of operations, unless the accumulated differences and changes exceed a certain threshold. The excess is amortized and charged to the statement of operations over, at the maximum, the average remaining term of employee service. We recognize obligations for contributions to defined contribution pension plans as expenses in the statement of operations as they are incurred.
The determination of benefit obligations and expenses is based on actuarial models. In order to measure benefit costs and obligations using these models, critical assumptions are made with regard to the discount rate, the expected return on plan assets and the assumed rate of compensation increases. We provide retiree medical benefits to a limited number of participants in the U.S. and have ceased to provide retiree health care benefits to certain of our Dutch retirees. Therefore, retiree medical care cost trend rates are not a significant driver of our post retirement costs. Management reviews these critical assumptions at least annually. Other assumptions involve demographic factors such as turnover, retirement and mortality rates. Management reviews these assumptions periodically and updates them as necessary.
The discount rate is the rate at which the benefit obligations could be effectively settled. For our U.S. plans, the discount rate is based on a bond portfolio that includes only long-term bonds with an Aa rating, or equivalent, from a major rating agency. For the Dutch and other non-U.S. plans, the discount rate is set by reference to market yields on high-quality corporate bonds. We believe the timing and amount of cash flows related to the bonds in these portfolios are expected to match the estimated payment benefit streams of our plans.
To determine the expected long-term rate of return on pension plan assets, we consider, for each country, the structure of the asset portfolio and the expected rates of return for each of the components. For our U.S. plans, a 50 basis point decrease in the expected return on assets would increase pension expense on our principal plans by approximately $1 million per year. A similar 50 basis point decrease in the expected return on assets would increase pension expense on our principal Dutch plans by approximately $3 million per year. We assumed that the weighted-averages of long-term returns on our pension plans were 6.0%, 6.2% and 6.3% for the years ended December 31, 2013, 2012 and 2011, respectively. The actual return on plan assets will vary year to year from this assumption. Although the actual return on plan assets will vary from year to year, we believe it is appropriate to use long-term expected forecasts in selecting our expected return on plan assets. As such, there can be no assurance that our actual return on plan assets will approximate the long-term expected forecasts.
Income Taxes
We have a presence in more than 100 countries. We have completed many material acquisitions and divestitures which have generated complex tax issues requiring management to use its judgment to make various tax determinations. We try to organize the affairs of our subsidiaries in a tax efficient manner, taking into consideration the jurisdictions in which we operate. Although we are confident that tax returns have been appropriately prepared and filed, there is risk that additional tax may be assessed on certain transactions or that the deductibility of certain expenditures may be disallowed for tax purposes. Our policy is to estimate tax risk to the best of our ability and provide accordingly for those risks and take positions in which a high degree of confidence exists that the tax treatment will be accepted by the tax authorities. The policy with respect to deferred taxation is to provide in full for temporary differences using the liability method.
Deferred tax assets and deferred tax liabilities are computed by assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The carrying value of deferred tax assets is adjusted by a valuation allowance to the extent that these deferred tax assets are not considered to be realized on a more likely than not basis. Realization of deferred tax assets is based, in part, on our judgment and various factors including reversal of deferred tax liabilities, our ability to generate future taxable income in jurisdictions where such assets have arisen and potential tax planning strategies. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount expected to be realized in the future.
Long-Lived Assets
We are required to assess whether the value of our long-lived assets, including our buildings, improvements, technical and other equipment, and amortizable intangible assets have been impaired whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. We do not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. Recoverability of assets that are held and used is measured by comparing the sum of the future undiscounted cash flows expected to be derived from an asset (or a group of assets) to their carrying value. If the carrying value of the asset (or the group of assets) exceeds the sum of the future undiscounted cash flows, impairment is considered to exist. If impairment is considered to exist based on undiscounted cash flows, the impairment charge is measured using an estimation of the assets’ fair value, typically using a discounted cash flow method. The identification of impairment indicators, the estimation of future cash flows and the determination of fair values for assets (or groups of assets) requires us to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows and applicable discount rates. These estimates are subject to revision as market conditions and our assessments change. No impairment indicators were noted for the years ended December 31, 2013, 2012 and 2011.
We capitalize software development costs with respect to major internal use software initiatives or enhancements. The costs are capitalized from the time that the preliminary project stage is completed, and we consider it probable that the software will be used to perform the function intended until the time the software is placed in service for its intended use. Once the software is placed in service, the capitalized costs are generally amortized over periods of three to seven years. If events or changes in circumstances indicate that the carrying value of software may not be recovered, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the software in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. These estimates are subject to revision as market conditions and as our assessments change. We noted no impairment charges at December 31, 2013.
Factors Affecting Nielsen’s Financial Results
Acquisitions and Investments in Affiliates
Arbitron Inc.
On September 30, 2013, we completed the acquisition of Arbitron, through the purchase of 100% of Arbitron’s outstanding common stock for a total cash purchase price of $1.3 billion. Arbitron is expected to help us better address client needs in unmeasured areas of media consumption, including streaming audio and out-of-home, and our global distribution footprint can help expand Arbitron’s capabilities outside of the U.S. With Arbitron’s assets, we intend to further expand our Watch segment’s audience measurement across screens and forms of listening. Arbitron has been rebranded Nielsen Audio.
As part of the acquisition, we acquired the remaining 49.5% interest in Scarborough Research, a joint venture between us and Arbitron (“Scarborough”) that we historically accounted for under the equity method of accounting. We accounted for this transaction as a step-acquisition and calculated the fair value of the investment immediately before the acquisition to be $75 million. As a result, during the third quarter of 2013, we recorded a $24 million gain on the investment in Scarborough to other expense, net in the consolidated statement of operations. Commencing October 1, 2013, the financial results of Scarborough were included within our consolidated financial statements.
The acquisition was accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. Since the date of the acquisition occurred on the last day of the third quarter of 2013, the financial results of Arbitron were included within our consolidated financial statements commencing October 1, 2013. Our consolidated statement of operations for the year ended December 31, 2013 includes $134 million of revenues related to the Arbitron acquisition.
The purchase price was allocated based upon the fair value of the assets acquired and liabilities assumed at the date of acquisition. The following table summarizes the purchase price allocation:
(IN MILLIONS)
Fair value of business combination:
Cash paid for Arbitron common stock
$
1,296
Accrued payment for directors’ and employees’ equity awards pertaining to pre-merger service
Accrued dividend payment on Arbitron common stock
Fair value of previously held equity interest in Scarborough
Total
$
1,416
Identifiable assets acquired and liabilities assumed:
Cash
$
Other current assets
Property and equipment
Goodwill
Amortizable intangible assets
Other long term assets
Deferred revenue
(47
)
Other current liabilities
(53
)
Deferred tax liabilities
(184
)
Other long term liabilities
(18
)
Total
$
1,416
As of the acquisition date, the expected fair value of accounts receivable approximated historical cost. The gross contractual receivable was $64 million, of which $4 million was deemed uncollectible.
The allocation of the purchase price to goodwill and identified intangible assets was $947 million and $472 million, respectively. All of the Arbitron related goodwill and intangible assets are attributable to our Watch segment.
Intangible assets and their estimated useful lives consist of the following:
(IN MILLIONS)
Description
Amount
Useful Life
Customer-related intangibles
$
10 - 15 years
Computer software
5 - 10 years
Trade names and trademarks
3 - 5 years
Covenants-not-to-compete
1 - 2 years
Total
$
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents expected synergies and the going concern nature of Arbitron.
We incurred acquisition-related expenses of $19 million and $9 million for the years ended December 31, 2013 and 2012, respectively, which primarily consisted of transaction fees, legal, accounting and other professional services that are included in selling, general and administrative expense in the consolidated statement of operations.
The following unaudited pro forma information presents the consolidated results of our operations and Arbitron’s for the year ended December 31, 2013 and 2012, as if the acquisition had occurred on January 1, 2012, with pro forma adjustments to give effect to amortization of intangible assets, an increase in interest expense from acquisition financing, and certain other adjustments:
Year Ended
December 31,
(IN MILLIONS)
Revenues
$
6,058
$
5,885
Income from continuing operations
$
$
The unaudited pro forma results do not reflect any synergies and are not necessarily indicative of the results that we would have attained had the acquisition of Arbitron been completed as of the beginning of the reporting period.
Other Acquisitions
For the year ended December 31, 2013, excluding Arbitron, we paid cash consideration of $43 million associated with both current period and previously executed acquisitions, net of cash acquired. Had that period’s acquisitions occurred as of January 1, 2013, the impact on our consolidated results of operations would not have been material.
For the year ended December 31, 2012, we paid cash consideration of $160 million associated with both current period and previously executed acquisitions, net of cash acquired. Had that period’s acquisitions occurred as of January 1, 2012, the impact on our consolidated results of operations would not have been material.
For the year ended December 31, 2011, we paid cash consideration of $123 million associated with both current period and previously executed acquisitions, net of cash acquired. Had that period’s acquisitions occurred as of January 1, 2011, the impact on our consolidated results of operations would not have been material.
Subsequent Event
On February 3, 2014, we completed the tender offer to acquire all outstanding shares of common stock of Harris Interactive, Inc. (HPOL) a leading global market research firm for $2.04 per share (total purchase price of $116 million).
Discontinued Operations
In June 2013, we completed the sale of our Expositions business, which operates one of the largest portfolios of business-to-business trade shows and conference events in the United States, for total cash consideration of $950 million and recorded a gain of $290 million. The consolidated statements of operations reflect the operating results of this business as a discontinued operation.
In March 2013, we completed the exit and shut down of one of our legacy online businesses and recorded a net loss of $3 million associated with this divestiture. The consolidated statements of operations reflect the operating results of this business as a discontinued operation.
Summarized results of operations for discontinued operations are as follows:
Year Ended December 31,
(IN MILLIONS)
Revenue
$
$
$
Operating income
Interest expense (1)
(8
)
(23
)
(28
)
Income from operations before income taxes
Provision for income taxes
(12
)
(18
)
(16
)
Income from operations
Gain on sale, net of tax (2)
-
Net (loss)/income attributable to noncontrolling interest
-
(1
)
Income from discontinued operations, net of tax
$
$
$
(1)
We allocated a portion of our consolidated interest expense to discontinued operations based upon the ratio of net assets sold as a proportion of consolidated net assets. For the years ended December 31, 2013, 2012 and 2011, interest expense of $8 million $23 million and $28 million, respectively, and was allocated to discontinued operations.
(2)
The gain for the year ended December 31, 2011 primarily related to the Publications property that was previously sold.
Following are the major categories of cash flows from discontinued operations, as included in our consolidated statements of cash flows:
Year Ended December 31,
(IN MILLIONS)
Net cash provided by operating activities
$
$
$
Net cash used in investing activities
-
(11
)
(6
)
Net cash used in financing activities
-
-
-
$
$
$
Transactions with Sponsors
On May 17, 2006, Nielsen, formerly known as Valcon Acquisition Holding B.V., was formed by investment funds associated with the Original Sponsors as a subsidiary of Valcon Acquisition Holding (Luxembourg) S.à r.l. (“Luxco”). On May 24, 2006, The Nielsen Company B.V. (“TNC B.V.”) (formerly VNU Group B.V. and VNU N.V.) was acquired through a tender offer to stockholders by Valcon Acquisition B.V. (“Valcon”), a wholly owned subsidiary of Nielsen (herein referred to as the “Valcon Acquisition”).
In connection with the Valcon Acquisition, certain of our subsidiaries and the Sponsors entered into Advisory Agreements (the “Sponsor Advisory Agreements”), which provided for an annual management fee, in connection with planning, strategy, oversight and support to management, and were payable quarterly and in advance to each Sponsor, on a pro rata basis, for the eight year duration of the agreements, as well as reimbursements for each Sponsor’s respective out-of-pocket expenses in connection with the management services provided under the agreement (the “Sponsor Advisory Fees”).
On January 31, 2011, each of our subsidiaries party to the Sponsor Advisory Agreements agreed, along with the Sponsors, to terminate all such agreements in exchange for a settlement of $102 million and we recorded a charge of $61 million (net of tax of $41 million). The pre-tax amount of this charge was recorded as a component of selling, general and administrative expenses in our consolidated statement of operations.
Foreign Currency
Our financial results are reported in U.S. dollars and are therefore subject to the impact of movements in exchange rates on the translation of the financial information of individual businesses whose functional currencies are other than U.S. dollars. Our principal foreign exchange revenue exposure is spread across several currencies, primarily the Euro. The table below sets forth the profile of our revenue by principal currency.
Year ended
December 31,
Year ended
December 31,
Year ended
December 31,
U.S. Dollar
%
%
%
Euro
%
%
%
Other Currencies
%
%
%
Total
%
%
%
As a result, fluctuations in the value of foreign currencies relative to the U.S. dollar impact our operating results. Impacts associated with fluctuations in foreign currency are discussed in more detail under “
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and market prices such as interest rates, foreign currency exchange rates, and changes in the market value of equity instruments. We are exposed to market risk, primarily related to foreign exchange and interest rates. We actively monitor these exposures. Historically, in order to manage the volatility relating to these exposures, we entered into a variety of derivative financial instruments, mainly interest rate swaps, cross-currency swaps and forward rate agreements. Currently we only employ basic contracts, that is, without options, embedded or otherwise. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings, cash flows and the value of our net investments in subsidiaries resulting from changes in interest rates and foreign currency rates. It is our policy not to trade in financial instruments.
Foreign Currency Exchange Rate Risk
We operate globally and we predominantly generate revenues and expenses in local currencies. Because of fluctuations (including possible devaluations) in currency exchange rates or the imposition of limitations on conversion of foreign currencies into our reporting currency, we are subject to currency translation exposure on the profits of our operations, in addition to transaction exposure.
Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to our reporting currency (the U.S. Dollar) for consolidation purposes. Translation risk exposure is managed by creating “natural hedges” in our financing or by using derivative financial instruments aimed at offsetting certain exposures in the statement of earnings or the balance sheet. We do not use derivative financial instruments for trading or speculative purposes.
The table below details the percentage of revenues and expenses by currency for the years ended December 31, 2013 and 2012:
U.S. Dollars
Euro
Other Currencies
Year ended December 31, 2013
Revenues
%
%
%
Operating costs
%
%
%
Year ended December 31, 2012
Revenues
%
%
%
Operating costs
%
%
%
Based on the year ended December 31, 2013, a one cent change in the U.S. dollar/Euro exchange rate would have impacted revenues by approximately $7 million annually, with an immaterial impact on operating income.
We have operations in both our Buy and Watch segments in Venezuela and the functional currency for these operations was the Venezuelan Bolivares Fuertes. Venezuela’s currency was considered hyperinflationary as of January 1, 2010 and further, in January 2010, Venezuela’s currency was devalued and a new currency exchange rate system was announced. In 2010, we evaluated the new exchange rate system and concluded that the local currency transactions will be denominated in U.S. dollars effective as of January 1, 2010 and until Venezuela’s currency is deemed to be non-hyperinflationary
In February 2013, the Venezuelan government devalued its currency by 32%. The official exchange rate moved from 4.30 to 6.30 and the regulated System of Transactions with Securities in Foreign Currency market was suspended. As a result of this change, we recorded a charge of $12 million in 2013 in foreign currency exchange transaction losses, net in the consolidated statement of operations primarily reflecting the write-down of monetary assets and liabilities.
In January 2014, Venezuela announced the establishment of a dual exchange rate system. A rate of 6.3 Venezuelan Bolivares Fuertes to the US dollar will be applied to priority sectors, such as food and medicine, while other sectors of the economy will apply an exchange rate determined based on the results of the Venezuelan central bank’s system of weekly currency auctions. We are in the process of analyzing the impact, if any, of this change on our 2014 consolidated financial statements. As of December 31, 2013, net monetary assets subject to revaluation in Venezuela were $38 million.
Interest Rate Risk
We continually review our fixed and variable rate debt along with related hedging opportunities in order to ensure our portfolio is appropriately balanced as part of our overall interest rate risk management strategy and through this process we consider both short-term and long-term considerations in the U.S. and global financial markets in making adjustments to our tolerable exposures to interest rate risk. At December 31, 2013, we had $4,016 million of floating-rate debt under our senior secured credit facilities, of which $2,872 million was subject to effective floating-fixed interest rate swaps. A one percent increase in interest rates applied to our floating rate indebtedness would therefore increase annual interest expense by approximately $11 million ($40 million without giving effect to any of our interest rate swaps).
In October and November 2013, we entered into $1,000 million in aggregate notional amount of three-year interest rate swap agreements with starting dates in November 2013. These agreements fix the LIBOR related portion of interest rates of a corresponding amount of our variable-rate debt at a weighted average rate of 0.46%. The commencement date of these interest rate swaps coincided with the $1,000 million aggregate notional amount of interest rate swaps that matured in November 2013. These derivative instruments have been designated as interest rate cash flow hedges.
In July 2013, we entered into $575 million in aggregate notional amount of three-year interest swap agreements with starting dates in July 2013. These agreements fix the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 0.67%. These derivative instruments have been designated as interest rate cash flow hedges.
In November 2012, we entered into $500 million in aggregate notional amount of four-year interest rate swap agreements with starting dates in November 2012. These agreements fix the LIBOR related portion of interest rates of a corresponding amount of our variable-rate debt at a weighted average rate of 0.57%. The commencement date of these interest rate swaps coincided with the $500 million aggregate notional amount of interest rate swaps that matured in November 2012. These derivative instruments have been designated as interest rate cash flow hedges.
In November 2011, we entered into a $125 million notional amount and a €125 million notional amount of four-year interest rate swap agreements with starting dates in November 2011. These agreements fix the LIBOR and Euro LIBOR-related portion of interest rates of a corresponding amount of our variable-rate debt at a rate of 0.84% and 1.30%, respectively. These derivative instruments have been designated as interest rate cash flow hedges.
In August 2011, we entered into $250 million in aggregate notional amount of four-year forward interest swap agreements with starting dates in September 2011. These agreements fix the LIBOR-related portion of interest rates of a corresponding amount of our variable-rate debt at an average rate of 0.84%. These derivative instruments have been designated as interest rate cash flow hedges.
In November 2010 the Company entered into a $250 million notional amount three-year forward interest rate swap agreement with a starting date in November 2011, which fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at a rate of 1.26%. These derivative instruments have been designated as interest rate cash flow hedges.
Derivative instruments involve, to varying degrees, elements of non-performance, or credit risk. We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties associated with these instruments, as these transactions were executed with a diversified group of major financial institutions with a minimum investment-grade or better credit rating. Our credit risk exposure is managed through the continuous monitoring of our exposures to such counterparties.
Item 8.
Financial Statements and Supplementary Data
Nielsen Holdings N.V.
Index to Consolidated Financial Statements
Management’s Annual Report on Internal Controls Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income/(Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Equity
Notes to Consolidated Financial Statements
Schedule I - Consolidated Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company and has performed an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013, based on the framework and criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework).
Based on this evaluation, management has concluded that our internal controls over financial reporting were effective as of December 31, 2013.
Ernst & Young LLP, independent registered public accounting firm, has provided an attestation report on the Company’s internal control over financial reporting. The Company’s financial statements included in this annual report on Form 10-K also have been audited by Ernst & Young LLP. Their reports follow.
/s/ Dwight M. Barns
/s/ Brian West
Dwight M. Barns
Brian West
Chief Executive Officer
Chief Financial Officer
February 21, 2014
Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting
The Board and Stockholders
of Nielsen Holdings N.V.
We have audited Nielsen Holdings N.V.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Nielsen Holdings N.V. management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Nielsen Holdings N.V. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Nielsen Holdings N.V. as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income/(loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2013 of Nielsen Holdings N.V. and our report dated February 21, 2014, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
February 21, 2014
Report of Independent Registered Public Accounting Firm
The Board and Stockholders
of Nielsen Holdings N.V.
We have audited the accompanying consolidated balance sheets of Nielsen Holdings N.V. as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income/(loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedules listed in the Index at Item 8. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nielsen Holdings N.V. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Nielsen Holdings N.V.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 21, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
New York, New York
February 21, 2014
Nielsen Holdings N.V.
Consolidated Statements of Operations
Year Ended December 31,
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)
Revenues
$
5,703
$
5,407
$
5,328
Cost of revenues, exclusive of depreciation and amortization shown separately below
2,398
2,225
2,188
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below
1,815
1,724
1,829
Depreciation and amortization
Restructuring charges
Operating income
Interest income
Interest expense
(309
)
(390
)
(449
)
Foreign currency exchange transaction losses, net
(25
)
(17
)
(9
)
Other expense, net
(9
)
(118
)
(210
)
Income from continuing operations before income taxes and equity in net income of affiliates
Provision for income taxes
(91
)
(122
)
(6
)
Equity in net income of affiliates
Income from continuing operations
Income from discontinued operations, net of tax
Net income
Net (loss)/income attributable to noncontrolling interests
(4
)
(1
)
Net income attributable to Nielsen stockholders
$
$
$
Net income per share of common stock, basic
Income from continuing operations
$
1.16
$
0.67
$
0.17
Discontinued operations, net of tax
0.81
0.08
0.07
Net income attributable to Nielsen stockholders
$
1.97
$
0.75
$
0.24
Net income per share of common stock, diluted
Income from continuing operations
$
1.14
$
0.66
$
0.17
Discontinued operations, net of tax
0.80
0.08
0.07
Net income attributable to Nielsen stockholders
$
1.94
$
0.75
$
0.23
Weighted-average shares of common stock outstanding, basic
375,797,629
361,787,868
352,469,181
Dilutive shares of common stock
5,130,337
4,523,116
5,032,773
Weighted-average shares of common stock outstanding, diluted
380,927,966
366,310,984
357,501,954
Dividends declared per common share
$
0.72
$
-
$
-
The accompanying notes are an integral part of these consolidated financial statements.
Nielsen Holdings N.V.
Consolidated Statements of Comprehensive Income/(Loss)
Year Ended December 31,
(IN MILLIONS)
Net income
$
$
$
Other comprehensive (loss)/income, net of tax
Foreign currency translation adjustments(1)
(99
)
(135
)
Available for sale securities(2)
(1
)
Changes in the fair value of cash flow hedges(3)
Defined benefit pension plan adjustments(4)
(105
)
(71
)
Total other comprehensive loss
(52
)
(31
)
(204
)
Total comprehensive income/(loss)
(117
)
Comprehensive (loss)/income attributable to noncontrolling interests
(2
)
Total comprehensive income/(loss) attributable to Nielsen stockholders
$
$
$
(119
)
(1)
Net of tax of $3 million, $2 million and $6 million for the year ended December 31, 2013, 2012 and 2011 respectively.
(2)
Net of tax of $6 million, $0 million and $1 million for the year ended December 31, 2013, 2012 and 2011 respectively.
(3)
Net of tax of $5 million, $(1) million and $1 million for the year ended December 31, 2013, 2012 and 2011 respectively.
(4)
Net of tax of $18 million, $23 million and $29 million for the year ended December 31, 2013, 2012 and 2011 respectively.
The accompanying notes are an integral part of these consolidated financial statements
Nielsen Holdings N.V.
Consolidated Balance Sheets
December 31,
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Assets:
Current assets
Cash and cash equivalents
$
$
Trade and other receivables, net of allowances for doubtful accounts and sales returns of $39 and $38 as of December 31, 2013 and 2012, respectively
1,196
1,110
Prepaid expenses and other current assets
Total current assets
2,134
1,676
Non-current assets
Property, plant and equipment, net
Goodwill
7,684
7,352
Other intangible assets, net
4,781
4,555
Deferred tax assets
Other non-current assets
Total assets
$
15,530
$
14,585
Liabilities and equity:
Current liabilities
Accounts payable and other current liabilities
$
1,026
$
Deferred revenues
Income tax liabilities
Current portion of long-term debt, capital lease obligations and short-term borrowings
Total current liabilities
1,535
1,751
Non-current liabilities
Long-term debt and capital lease obligations
6,492
6,229
Deferred tax liabilities
1,006
Other non-current liabilities
Total liabilities
9,723
9,607
Commitments and contingencies (Note 16)
Equity:
Nielsen stockholders’ equity
Common stock, €0.07 par value, 1,185,800,000 and 1,185,800,000 shares authorized, 379,044,531 and 362,733,010 and shares issued and 378,635,464 and 362,519,883 shares outstanding at December 31, 2013 and 2012, respectively
Additional paid-in capital
6,596
6,485
Accumulated deficit
(512
)
(1,252
)
Accumulated other comprehensive loss, net of income taxes
(387
)
(333
)
Total Nielsen stockholders’ equity
5,729
4,930
Noncontrolling interests
Total equity
5,807
4,978
Total liabilities and equity
$
15,530
$
14,585
The accompanying notes are an integral part of these consolidated financial statements.
Nielsen Holdings N.V.
Consolidated Statements of Cash Flows
Year Ended
December 31,
(IN MILLIONS)
Operating Activities
Net income
$
$
$
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense
Gain on sale of discontinued operations, net of tax
(290
)
-
(1
)
Deferred income taxes
(107
)
(124
)
Currency exchange rate differences on financial transactions and other losses
Equity in net income from affiliates, net of dividends received
Depreciation and amortization
Changes in operating assets and liabilities, net of effect of businesses acquired and divested:
Trade and other receivables, net
(84
)
(13
)
(71
)
Prepaid expenses and other current assets
(18
)
(37
)
Accounts payable and other current liabilities and deferred revenues
(55
)
(190
)
(32
)
Other non-current liabilities
(6
)
(10
)
(2
)
Interest payable
Income taxes payable
(31
)
Net cash provided by operating activities
Investing Activities
Acquisition of subsidiaries and affiliates, net of cash acquired
(1,249
)
(160
)
(123
)
Proceeds from sale of subsidiaries and affiliates, net
(4
)
Additions to property, plant and equipment and other assets
(130
)
(132
)
(177
)
Additions to intangible assets
(244
)
(226
)
(190
)
Other investing activities
-
(1
)
Net cash used in investing activities
(687
)
(522
)
(486
)
Financing Activities
Proceeds from issuances of debt, net of issuance costs
2,485
1,998
Repayment of debt
(2,171
)
(2,230
)
(2,110
)
(Decrease)/increase in other short-term borrowings
(5
)
(6
)
Cash dividends paid to stockholders
(265
)
-
-
Proceeds from the issuance of common stock
-
-
1,801
Repurchase of common stock
(11
)
-
-
Proceeds from exercise of stock options
Other financing activities
(35
)
(98
)
(220
)
Net cash provided by/(used) in financing activities
(298
)
(250
)
Effect of exchange-rate changes on cash and cash equivalents
(21
)
(7
)
Net increase/(decrease) in cash and cash equivalents
(31
)
(102
)
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
$
$
Supplemental Cash Flow Information
Cash paid for income taxes
$
(147
)
$
(124
)
$
(132
)
Cash paid for interest, net of amounts capitalized
$
(304
)
$
(384
)
$
(446
)
The accompanying notes are an integral part of these consolidated financial statements.
Nielsen Holdings N.V.
Consolidated Statements of Changes in Equity
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other Comprehensive Income/
(Loss), Net
(IN MILLIONS)
Currency
Translation
Adjustments
Available
for Sale
Securities
Cash
Flow
Hedges
Post
Employment
Benefits
Total
Nielsen
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2010
$
$
4,570
$
(1,609
)
$
-
$
(15
)
$
(121
)
$
2,887
$
$
2,896
Net income
-
-
-
-
-
-
Currency translation adjustments, net of tax of $6
-
-
-
(134
)
-
-
-
(134
)
(1
)
(135
)
Unrealized loss on pension liability, net of tax of $29
-
-
-
-
-
-
(71
)
(71
)
-
(71
)
Unrealized gain on available for sale security, net of tax of $1
-
-
-
-
-
-
-
Cash flow hedges, net of tax of $1
-
-
-
-
-
-
-
Dividends paid to noncontrolling interests
-
-
-
-
-
-
-
-
(3
)
(3
)
Shares of common stock issued in business combinations
-
-
-
-
-
-
-
Common stock option activity
-
-
-
-
-
-
-
Net common stock issuances
1,814
-
-
-
-
-
1,822
-
1,822
Stock-based compensation expense
-
-
-
-
-
-
Balance, December 31, 2011
$
$
6,427
$
(1,525
)
$
(94
)
$
(14
)
$
(192
)
$
4,633
$
$
4,641
Accumulated Other Comprehensive Income/
(Loss), Net
(IN MILLIONS)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Currency
Translation
Adjustments
Available
for Sale
Securities
Cash
Flow
Hedges
Post
Employment
Benefits
Total
Nielsen
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2011
$
$
6,427
$
(1,525
)
$
(94
)
$
(14
)
$
(192
)
$
4,633
$
$
4,641
Net income
-
-
-
-
-
-
(1
)
Currency translation adjustments, net of tax of $2
-
-
-
-
-
-
Unrealized loss on pension liability, net of tax of $23
-
-
-
-
-
-
(105
)
(105
)
-
(105
)
Unrealized loss on available for sale security, net of tax
-
-
-
-
(1
)
-
-
(1
)
-
(1
)
Cash flow hedges, net of tax
of $(1)
-
-
-
-
-
-
-
Noncontrolling interest in a consolidated subsidiary
-
(11
)
-
-
-
-
-
(11
)
Dividends paid to noncontrolling interests
-
-
-
-
-
-
-
-
(1
)
(1
)
Shares of common stock issued in business combinations
-
-
-
-
-
-
-
Common stock option activity
-
-
-
-
-
-
-
Stock-based compensation expense
-
-
-
-
-
-
-
Balance, December 31, 2012
$
$
6,485
$
(1,252
)
$
(23
)
-
$
(13
)
$
(297
)
$
4,930
$
$
4,978
Accumulated Other Comprehensive Income/
(Loss), Net
(IN MILLIONS)
Common
Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Currency
Translation
Adjustments
Available
for Sale
Securities
Cash
Flow
Hedges
Post
Employment
Benefits
Total
Nielsen
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2012
$
$
6,485
$
(1,252
)
$
(23
)
$
-
$
(13
)
$
(297
)
$
4,930
$
$
4,978
Net income
-
-
-
-
-
-
(4
)
Currency translation adjustments, net of tax of $3
-
-
-
(101
)
-
-
-
(101
)
(99
)
Unrealized loss on pension liability, net of tax of $18
-
-
-
-
-
-
-
Unrealized loss on available for sale security, net of tax of $6
-
-
-
-
-
-
-
Cash flow hedges, net of tax
of $5
-
-
-
-
-
-
-
Divesture of interest in a consolidated subsidiary
(29
)
(29
)
Noncontrolling interest in a newly consolidated subsidiary
-
-
-
-
-
-
Dividends to stockholders
-
(271
)
-
-
-
-
-
(271
)
-
(271
)
Shares of common stock issued in business combinations
-
-
-
-
-
-
-
Exercise of stock options
-
-
-
-
-
-
Repurchase of common stock
-
(11
)
(11
)
(11
)
Stock-based compensation
expense
-
-
-
-
-
-
-
Conversion of mandatorily convertible bonds to shares
Balance, December 31, 2013
$
$
6,596
$
(512
)
$
(124
)
$
$
(5
)
$
(267
)
$
5,729
$
$
5,807
The accompanying notes are an integral part of these consolidated financial statements.
Nielsen Holdings N.V.
Notes to Consolidated Financial Statements
1. Description of Business, Basis of Presentation and Significant Accounting Policies
On May 17, 2006, Nielsen Holdings N.V. (the “Company” or “Nielsen”), formerly known as Valcon Acquisition Holding B.V. and Nielsen Holdings B.V., was formed by investment funds associated with AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co., and Thomas H. Lee Partners (collectively, and with subsequent investor Centerview Partners, the “Sponsors”) as a subsidiary of Valcon Acquisition Holding (Luxembourg) S.à r.l. (“Luxco”). On May 24, 2006, The Nielsen Company B.V. (“TNC B.V.”) (formerly VNU Group B.V. and VNU N.V.) was acquired through a tender offer to stockholders by Valcon Acquisition B.V. (“Valcon”), a wholly owned subsidiary of the Company (herein referred to as the “Valcon Acquisition”). On January 31, 2011, Nielsen completed an initial public offering of 82,142,858 shares of its €0.07 par value common stock at a price of $23.00 per share. Nielsen’s common stock is listed on the New York Stock Exchange and is traded under the symbol “NLSN.” During 2012 and 2013, Luxco and certain Nielsen employees (the “selling shareholders”) completed public offerings totaling 145,564,884 shares of our stock at a weighted average price of $34.08 per share. All proceeds went to the selling stockholders and the offering did not have a significant impact on our operating results or financial position. As of December 31, 2013, Luxco owned 125,224,724 shares (or approximately 33%) of the Company’s common stock.
Nielsen, together with its subsidiaries, is a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. Nielsen is aligned into two reportable segments: what consumers buy (“Buy”), what consumers watch and listen to (“Watch”). Nielsen has a presence in more than 100 countries, with its headquarters located in Diemen, the Netherlands and New York, USA. See Note 17 - “Segments” for a discussion of the Company’s reportable segments.
The accompanying consolidated financial statements are presented in conformity with U.S. generally accepted accounting principles (“GAAP”). All amounts are presented in U.S. Dollars (“$”), except for share and per share data or where expressly stated as being in other currencies, e.g., Euros (“€”). The consolidated financial statements include the accounts of Nielsen and all subsidiaries and other controlled entities. Supplemental cash flows from discontinued operations are presented in Note 4 to the consolidated financial statements “Discontinued Operations.” The Company has evaluated events occurring subsequent to December 31, 2013 for potential recognition or disclosure in the consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided.
Consolidation
The consolidated financial statements include the accounts of Nielsen and all subsidiaries and other controlled entities. Noncontrolling interests in subsidiaries are reported as a component of equity in the consolidated financial statements with disclosure on the face of the consolidated statements of operations of the amounts of consolidated net income attributable to Nielsen stockholders and to the noncontrolling interests. The equity method of accounting is used for investments in affiliates and joint ventures where Nielsen has significant influence but not control, usually supported by a shareholding of between 20% and 50% of the voting rights. Investments in which Nielsen owns less than 20% and does not have significant influence are accounted for either as available-for-sale securities if the shares are publicly traded or as cost method investments. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation.
Foreign Currency Translation
Nielsen has significant investments outside the United States, primarily in the Euro-zone, Canada and the United Kingdom. Therefore, changes in the value of foreign currencies affect the consolidated financial statements when translated into U.S. Dollars. The functional currency for substantially all subsidiaries outside the U.S. is the local currency. Financial statements for these subsidiaries are translated into U.S. Dollars at period-end exchange rates as to the assets and liabilities and monthly average exchange rates as to revenues, expenses and cash flows. For these countries, currency translation adjustments are recognized in stockholders’ equity as a component of accumulated other comprehensive income/(loss), net, whereas transaction gains and losses are recognized in foreign exchange transaction (losses)/gains, net in the consolidated statement of operations.
In February 2013, Venezuela devalued its currency by 32%. As the Company has operations in both its Buy and Watch segments in Venezuela, this devaluation resulted in a charge of approximately $12 million in the foreign exchange transaction (losses)/gains, net line in the consolidated statement of operations.
In January 2014, Venezuela announced the establishment of a dual exchange rate system. A rate of 6.3 Venezuelan Bolivares Fuertes to the US dollar will be applied to priority sectors, such as food and medicine, while other sectors of the economy will apply an exchange rate determined based on the results of the Venezuelan central bank’s system of weekly currency auctions. Nielsen is in the process of analyzing the impact, if any, of this change on its 2014 consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Investments
Investments include available-for-sale securities carried at fair value, or at cost if not publicly traded, investments in affiliates, and a trading asset portfolio maintained to generate returns to offset changes in certain liabilities related to deferred compensation arrangements. For the available-for-sale securities, any unrealized holding gains and losses, net of deferred income taxes, are excluded from operating results and are recognized in stockholders’ equity as a component of accumulated other comprehensive income/(loss) net, until realized. Nielsen assesses declines in the value of individual investments to determine whether such decline is other than temporary and thus the investment is impaired by considering available evidence. For the year ended December 31, 2012, the Company recorded a $6 million impairment in other expense, net in the consolidated statement of operations, for a decline in value of an investment in an equity security that was determined to be other-than-temporary. No such impairment was recorded for the years ended December 31, 2013 and 2011.
Financial Instruments
Nielsen’s financial instruments include cash and cash equivalents, investments, long-term debt and derivative financial instruments. These financial instruments potentially subject Nielsen to concentrations of credit risk. To minimize the risk of credit loss, these financial instruments are primarily held with acknowledged financial institutions. The carrying value of Nielsen’s financial instruments approximate fair value, except for differences with respect to long-term, fixed and variable-rate debt and certain differences relating to investments accounted for at cost. The fair value of financial instruments is generally determined by reference to market values resulting from trading on a national securities exchange or in an over-the-counter market. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques. Cash equivalents have original maturities of three months or less.
In addition, the Company has accounts receivable that are not collateralized. The Buy and Watch segments service high quality clients dispersed across many geographic areas. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends in determining the allowance for doubtful accounts.
Derivative Financial Instruments
Nielsen uses derivative instruments principally to manage the risk associated with movements in foreign currency exchange rates and the risk that changes in interest rates will affect the fair value or cash flows of its debt obligations.
To qualify for hedge accounting, the hedging relationship must meet several conditions with respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. Nielsen documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions as well as the hedge effectiveness assessment, both at the hedge inception and on an ongoing basis.
Nielsen recognizes all derivatives at fair value either as assets or liabilities in the consolidated balance sheets and changes in the fair values of such instruments are recognized currently in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, Nielsen recognizes the changes in fair value of these instruments in other comprehensive income, net of tax.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are stated at historical cost less accumulated impairment losses, if any. Goodwill and other indefinite-lived intangible assets, consisting of certain trade names and trademarks, are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. Nielsen has designated October 1st as the date in which the annual assessment is performed as this timing corresponds with the development of the Company’s formal budget and business plan review. Nielsen reviews the recoverability of its goodwill by comparing the estimated fair values of reporting units with their respective carrying amounts. The Company established, and continues to evaluate, its reporting units based on its internal reporting structure and defines such reporting units at its operating segment level or one level below. The estimates of fair value of a reporting unit are determined using a combination of valuation techniques, primarily an income approach using a discounted cash flow analysis supplemented by a market-based approach.
A discounted cash flow analysis requires the use of various assumptions, including expectations of future cash flows, growth rates, discount rates and tax rates in developing the present value of future cash flow projections. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings as well as recent comparable transactions.
The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of trade names and trademarks are determined using a “relief from royalty” discounted cash flow valuation methodology. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace. There was no impairment noted in any period presented with respect to the Company’s indefinite-lived intangible assets.
Software and Other Amortized Intangible Assets
Intangible assets with finite lives are stated at historical cost, less accumulated amortization and impairment losses.
These intangible assets are amortized on a straight-line basis over the following estimated useful lives, which are reviewed annually:
Weighted
Average
Trade names and trademarks (with finite lives)
5 - 20 years
Customer-related intangibles
6 - 25 years
Covenants-not-to-compete
1 - 7 years
Computer software
3 - 10 years
Patents and other
3 - 10 years
Nielsen has purchased and internally developed software to facilitate its global information processing, financial reporting and client access needs. Costs that are related to the conceptual formulation and design of software programs are expensed as incurred. Costs that are incurred to produce the finished product after technological feasibility has been established are capitalized as an intangible asset and are amortized over the estimated useful life. If events or changes in circumstances indicate that the carrying value of software may not be recovered, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the software in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. These estimates are subject to revision as market conditions and as our assessments change.
Research and Development Costs
Research and development costs, which were not material for any periods presented, are expensed as incurred.
Property, Plant and Equipment
Property, plant and equipment are carried at historical cost less accumulated depreciation and impairment losses. Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of 25 to 50 years for buildings and related leasehold improvements and 3 to 10 years for equipment, which includes computer hardware, metering equipment and office furniture.
Impairment of Long-Lived Assets Other than Goodwill and Indefinite-Lived Intangible Assets
Long-lived assets other than goodwill and indefinite-lived intangible assets held and used by Nielsen, including property, plant and equipment and amortized intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Nielsen evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to the future net undiscounted cash flows to be generated by the asset. If such asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value.
Revenue Recognition
Nielsen recognizes revenues when persuasive evidence of an arrangement exists, services have been rendered or information has been delivered, the fee is fixed or determinable and the collectability of the related revenue is reasonably assured.
A significant portion of the Company’s revenue is generated from information (primarily retail measurement and consumer panel services) and measurement (primarily from television, radio, online and mobile audiences) services. The Company generally recognizes revenue from the sale of services as the services are performed, which is usually ratably over the term of the contract(s). Invoiced amounts are recorded as deferred revenue until earned. Substantially all of the Company’s customer contracts are non-cancellable and non-refundable.
Certain of the Company’s revenue arrangements include multiple deliverables and in these arrangements, the individual deliverables within the contract that have stand-alone value to the customer are separated and recognized upon delivery based upon the Company’s best estimate of their selling prices. These arrangements are not significant to the Company’s results of operations. In certain cases, software is included as part of these arrangements to allow Nielsen’s customers to view delivered information and is provided for the term of the arrangement and is not significant to the marketing effort and is not sold separately. Accordingly, software provided to Nielsen’s customers is considered to be incidental to the arrangements and is not recognized as a separate element.
A discussion of Nielsen’s revenue recognition policies, by segment, follows:
Buy
Revenue from the Buy segment, primarily from retail measurement services and consumer panel services is recognized over the period during which the services are performed and information is delivered to the customer, primarily on a straight-line basis.
The Company provides insights and solutions to customers through analytical studies that are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally or deferred until the end of the contract term and recognized when the information has been delivered to the customer.
Watch
Revenue from the Watch segment is primarily generated from television, radio, online and mobile measurement services and recognized over the contract period, as the service is delivered to the customer, primarily on a straight-line basis.
Deferred Costs
Incremental direct costs incurred related to establishing or significantly expanding a panel or an electronic metered sample in a designated market and costs incurred to build the infrastructure to service new clients, are deferred at the point when Nielsen determines them to be recoverable. Prior to this point, these cost are expensed as incurred. These deferred costs are typically amortized over the original contract period beginning when the panel or electronic metered sample is ready for its intended use.
Advertising and Marketing Costs
Advertising and marketing costs are expensed as incurred and are reflected as selling, general and administrative expenses in the consolidated statements of operations. These costs include all brand advertising, telemarketing, direct mail and other sales promotion associated with marketing/media research services. Advertising and marketing costs totaled $19 million, $18 million and $20 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Stock-Based Compensation
Nielsen measures the cost of all stock-based payments, including stock options, at fair value on the grant date and recognizes such costs within the consolidated statements of operations; however, no expense is recognized for stock-based payments that do not ultimately vest. Nielsen recognizes the expense of its options that cliff vest using the straight-line method. For those that vest over time, an accelerated graded vesting is used. The Company recorded $47 million, $34 million and $27 million of expense associated with stock-based compensation for the years ended December 31, 2013, 2012 and 2011, respectively.
Computation of Net Income per Share
Basic net income or loss per share is computed using the weighted-average number of common stock outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock primarily consist of employee stock options and restricted stock.
Employee stock options, restricted stock and similar equity instruments granted by the Company are treated as potential common stock outstanding in computing diluted earnings per share. Diluted stock outstanding include restricted stock units and the dilutive effect of in-the-money options which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of benefits that would be recorded in additional paid-in capital when the award becomes deductible for tax purposes are assumed to be used to repurchase stock.
The effect of 2,433,400, 7,698,964 and 4,537,689 shares of common stock equivalents under stock compensation plans were excluded from the calculation of diluted earnings per share for the years ended December 31, 2013, 2012 and 2011, respectively, as such shares would have been anti-dilutive. Additionally, the Company’s mandatory convertible subordinated bonds due 2013 were converted into 10,416,700 shares of common stock on February 1, 2013, and were excluded from the calculation of diluted earnings per share for the year ended December 31, 2012 and 2011, as such shares would have been anti-dilutive.
Income Taxes
Nielsen provides for income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. If it is determined that it is more likely than not that future tax benefits associated with a deferred tax asset will not be realized, a valuation allowance is provided. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in the consolidated statements of operations as an adjustment to income tax expense in the period that includes the enactment date.
The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. See Note 14 - “Income Taxes” for further discussion of income taxes.
Comprehensive Income/(Loss)
Comprehensive income/(loss) is reported in the accompanying consolidated statements of comprehensive income/(loss) and consists of net income or loss and other gains and losses, net of tax affecting equity that are excluded from net income or loss.
2. Summary of Recent Accounting Pronouncements
Reclassification from accumulated other comprehensive income
In February 2013, the FASB issued an accounting update “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The Company has presented the significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification in Note 6 to these consolidated financial statements. This amended guidance does not have any other impact on the Company’s consolidated financial statements.
Foreign Currency Matters
In March 2013, the FASB issued an accounting update, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”, to resolve the diversity in practice regarding the release into net income of the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. The amendment requires an entity that ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance is effective for Nielsen interim and annual reporting periods in 2014. The adoption of this update is not expected to have a significant impact on the Company’s consolidated financial statements.
Income Taxes
In July 2013, the FASB issued an accounting update, “Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The update provides guidance on the financial statement presentation of an unrecognized tax benefit, as either a reduction of a deferred tax asset or as a liability, when a net operating loss carryforward, similar tax loss, or a tax credit carryforward exists. The update will be effective for interim and annual
periods beginning after December 15, 2013 and may be applied on a retrospective basis. Early adoption is permitted. The adoption of this update did not have a significant impact on the Company’s consolidated financial statements
3. Business Acquisitions
Arbitron Inc.
On September 30, 2013 (the “Acquisition Date”), Nielsen completed the acquisition of Arbitron Inc., an international media and marketing research firm (“Arbitron”), through the purchase of 100% of Arbitron’s outstanding common stock for a total cash purchase price of $1.3 billion (the “Acquisition”). Arbitron is expected to help Nielsen better address client needs in unmeasured areas of media consumption, including streaming audio and out-of-home and Nielsen’s global distribution footprint can help expand Arbitron’s capabilities outside of the U.S. With Arbitron’s assets, Nielsen intends to further expand its Watch segment’s audience measurement across screens and forms of listening. Arbitron has been rebranded Nielsen Audio.
As a part of the Acquisition, Nielsen acquired the remaining 49.5% interest in Scarborough Research, a joint venture between Nielsen and Arbitron (“Scarborough”) that Nielsen historically accounted for under the equity method of accounting. Nielsen accounted for this transaction as a step-acquisition and calculated the fair value of its investment immediately before the acquisition to be $75 million. As a result, during the third quarter of 2013, Nielsen recorded a $24 million gain on its investment in Scarborough to other expense, net in the consolidated statement of operations. As of October 1, 2013, the financial results of Scarborough were included within the consolidated financial statements of Nielsen.
The Acquisition was accounted for using the acquisition method of accounting which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. Since the date of the acquisition occurred on the last day of the quarter, the results of Arbitron were included within Company’s consolidated financial statements commencing October 1, 2013. The Company’s consolidated statement of operations for the year ended December 31, 2013 includes $134 million of revenues related to the Arbitron acquisition.
The purchase price was allocated based upon the fair value of the assets acquired and liabilities assumed at the date of acquisition. The following table summarizes the purchase price allocation:
(IN MILLIONS)
Fair value of business combination:
Cash paid for Arbitron common stock
$
1,296
Accrued payment for directors’ and employees’ equity awards pertaining to pre-merger service
Accrued dividend payment on Arbitron common stock
Fair value of previously held equity interest in Scarborough
Total
$
1,416
Identifiable assets acquired and liabilities assumed:
Cash
$
Other current assets
Property and equipment
Goodwill
Amortizable intangible assets
Other long term assets
Deferred revenue
(47
)
Other current liabilities
(53
)
Deferred tax liabilities
(184
)
Other long term liabilities
(18
)
Total
$
1,416
As of the Acquisition Date, the expected fair value of accounts receivable approximated historical cost. The gross contractual receivable was $64 million, of which $4 million was deemed uncollectible.
The allocation of the purchase price to goodwill and identified intangible assets was $947 million and $472 million, respectively. All of the Arbitron related goodwill and intangible assets are attributable to the Nielsen’s Watch segment.
Intangible assets and their estimated useful lives consist of the following:
(IN MILLIONS)
Description
Amount
Useful Life
Customer -related intangibles
$
10 - 15 years
Computer software
5 - 10 years
Trade names and trademarks
3 - 5 years
Covenants-not-to-compete
1 - 2 years
Total
$
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents expected synergies and the going concern nature of Arbitron.
The Company incurred acquisition related expenses of $19 million and $9 million for the years ended December 31, 2013 and 2012, respectively, which primarily consisted of transaction fees, legal, accounting and other professional services that are included in selling, general and administrative expense in the consolidated statement of operations.
The following unaudited pro forma information presents the consolidated results of operations of the Company and Arbitron for the years ended December 31, 2013 and 2012, as if the acquisition had occurred on January 1, 2012, with pro forma adjustments to give effect to amortization of intangible assets, an increase in interest expense from acquisition financing, and certain other adjustments:
December 31,
(IN MILLIONS)
Revenues
$
6,058
$
5,885
Income from continuing operations
$
$
The unaudited pro forma results do not reflect any synergies and are not necessarily indicative of the results that the Company would have attained had the acquisition of Arbitron been completed as of the beginning of the reporting period.
Other Acquisitions
For the year ended December 31, 2013, excluding Arbitron, Nielsen paid cash consideration of $43 million associated with both current period and previously executed acquisitions, net of cash acquired. Had that period’s acquisitions occurred as of January 1, 2013, the impact on Nielsen’s consolidated results of operations would not have been material.
For the year ended December 31, 2012, Nielsen paid cash consideration of $160 million associated with both current period and previously executed acquisitions, net of cash acquired. Had that period’s acquisitions occurred as of January 1, 2012, the impact on Nielsen’s consolidated results of operations would not have been material.
For the year ended December 31, 2011, Nielsen paid cash consideration of $123 million associated with both current period and previously executed acquisitions, net of cash acquired. Had that period’s acquisitions occurred as of January 1, 2011, the impact on Nielsen’s consolidated results of operations would not have been material.
Subsequent Event
On February 3, 2014, Nielsen completed the tender offer to acquire all outstanding shares of common stock of Harris Interactive, Inc. (HPOL) a leading global market research firm for $2.04 per share (total purchase price of $116 million).
4. Discontinued Operations
In June 2013, the Company completed the sale of its Expositions business, which operates one of the largest portfolios of business-to-business trade shows and conference events in the United States, for total cash consideration of $950 million and recorded a gain of $290 million, net of tax. The consolidated statements of operations reflect the operating results of this business as a discontinued operation.
In March 2013, Nielsen completed the exit and shut down of one of its legacy online businesses and recorded a net loss of $3 million associated with this exit. The consolidated statements of operations reflect the operating results of this business as a discontinued operation.
Summarized results of operations for discontinued operations for the years ended December 31, 2013, 2012 and 2011 are as follows:
Year Ended December 31,
(IN MILLIONS)
Revenue
$
$
$
Operating income
Interest expense
(8
)
(23
)
(28
)
Income from operations before income taxes
Provision for income taxes
(12
)
(18
)
(16
)
Income from operations
Net income/(loss) attributable to noncontrolling interests
-
(1
)
Gain on sale, net of tax
-
Income from discontinued operations
$
$
$
Nielsen allocated a portion of its consolidated interest expense to discontinued operations based upon the ratio of net assets sold as a proportion of consolidated net assets. For the years ended December 31, 2013, 2012 and 2011, interest expense of $8 million, $23 million and $28 million, respectively was allocated to discontinued operations.
Following are the major categories of cash flows from discontinued operations, as included in Nielsen’s consolidated statements of cash flows:
Year Ended December 31,
(IN MILLIONS)
Net cash provided by operating activities
$
$
$
Net cash provided by investing activities
-
(11
)
(6
)
Net cash provided by financing activities
-
-
-
$
$
5. Goodwill and Other Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2013 and 2012, respectively.
(IN MILLIONS)
Buy
Watch
Expositions
Total
Balance December 31, 2011(a)
$
2,990
$
3,605
$
$
7,155
Acquisitions, divestitures and other adjustments
Effect of foreign currency translation
-
Balance December 31, 2012
$
3,061
$
3,726
$
$
7,352
Acquisitions, divestitures and other adjustments
(565
)
Effect of foreign currency translation
(73
)
-
(65
)
Balance December 31, 2013
$
3,005
$
4,679
$
-
$
7,684
Cumulative Impairments
$
-
$
$
$
(a)
During the fourth quarter of 2013, to conform to a change in management reporting, Nielsen reclassified two products from the Buy segment to the Watch segment. Goodwill by segment has been retrospectively restated to reflect this change.
At December 31, 2013, $100 million of goodwill is expected to be deductible for income tax purposes.
Other Intangible Assets
(IN MILLIONS)
Gross Amounts
Accumulated Amortization
December 31,
December 31,
December 31,
December 31,
Indefinite-lived intangibles:
Trade names and trademarks
$
1,921
$
1,921
$
-
$
-
Amortized intangibles:
Trade names and trademarks
$
$
$
(53
)
$
(46
)
Customer-related intangibles
2,882
2,882
(897
)
(886
)
Covenants-not-to-compete
(19
)
(25
)
Computer software
1,668
1,316
(941
)
(804
)
Patents and other
(67
)
(57
)
Total
$
4,837
$
4,452
$
(1,977
)
$
(1,818
)
The amortization expense for the years ended December 31, 2013, 2012 and 2011 was $324 million, $294 million and $292 million, respectively. These amounts include amortization expense associated with computer software of $171 million, $151 million and $152 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Certain of the trade names associated with Nielsen are deemed indefinite-lived intangible assets, as their associated Nielsen brand awareness and recognition has existed for over 50 years and the Company intends to continue to utilize these trade names. There are also no legal, regulatory, contractual, competitive, economic or other factors that may limit their estimated useful lives. Nielsen reconsiders the remaining estimated useful life of indefinite-lived intangible assets each reporting period.
The Company’s 2013, 2012 and 2011 annual assessments did not result in an impairment for any of its underlying reporting units or indefinite-lived intangible assets.
All other intangible assets are subject to amortization. Future amortization expense is estimated to be as follows:
(IN MILLIONS)
For the year ending December 31:
$
Thereafter
1,427
Total
$
2,860
6. Changes in and Reclassification out of Accumulated Other Comprehensive Loss by Component
The table below summarizes the changes in accumulated other comprehensive loss, net of tax, by component for the year ended December 31, 2013.
Currency
Translation
Adjustments
Available-
for-Sale
Securities
Cash Flow Hedges
Post Employment
Benefits
Total
(IN MILLIONS)
Balance December 31, 2012
$
(23
)
$
-
$
(13
)
$
(297
)
$
(333
)
Other comprehensive (loss)/income before reclassifications
(99
)
(3
)
(78
)
Amounts reclassified from accumulated other comprehensive (loss)/income
-
-
Net current period other comprehensive (loss)/income
(99
)
(52
)
Net current period other comprehensive income attributable to noncontrolling interest
-
-
-
Net current period other comprehensive (loss)/income attributable to Nielsen stockholders
(101
)
(54
)
Balance December 31, 2013
$
(124
)
$
$
(5
)
$
(267
)
$
(387
)
The table below summarizes the reclassification of accumulated other comprehensive loss by component for the year ended December 31, 2013.
(IN MILLIONS)
Details about Accumulated Other Comprehensive
Income components
December 31,
Affected Line Item in the
Consolidated
Statement of Operations
Cash flow hedges
Interest rate swapsrate swaps
$
Interest expense
(5
)
Provision for income taxes
$
Total, net of tax
Amortization of Post Employment Benefits
Actuarial loss
$
(a)
(2
)
Provision for income taxes
$
Total, net of tax
Total reclassification for the period
$
Net of tax
(a)
This accumulated other comprehensive loss component is included in the computation of net periodic pension cost.
7. Property, Plant and Equipment
(IN MILLIONS)
December 31,
December 31,
Land and buildings
$
$
Information and communication equipment
Furniture, equipment and other
1,276
1,307
Less accumulated depreciation and amortization
(716
)
(747
)
$
$
Depreciation and amortization expense from continuing operations related to property, plant and equipment was $169 million, $183 million and $171 million for the years ended December 31, 2013, 2012 and 2011, respectively.
The above amounts include amortization expense on assets under capital leases and other financing obligations of $7 million in each of the years ended December 31, 2013, 2012 and 2011, respectively. The net book value of assets under capital leases and other financing obligations was $145 million and $139 million as of December 31, 2013 and 2012, respectively. Capital leases and other financing obligations are comprised primarily of buildings.
Gross and net book value of assets under capital leases were as follows:
(IN MILLIONS)
December 31, 2013
Gross Book Value
Accumulated Depreciation
Net Book Value
Land and buildings
$
$
(59
)
$
Information and communication equipment
(12
)
$
$
(71
)
$
December 31, 2012
Gross Book Value
Accumulated Depreciation
Net Book Value
Land and buildings
$
$
(56
)
$
Information and communication equipment
(8
)
$
$
(64
)
$
8. Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.
There are three levels of inputs that may be used to measure fair value:
Level 1:
Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2:
Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3:
Pricing inputs that are generally unobservable and may not be corroborated by market data.
Financial Assets and Liabilities Measured on a Recurring Basis
The Company’s financial assets and liabilities are measured and recorded at fair value, except for equity method investments, cost method investments, and long-term debt. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
The following table summarizes the valuation of the Company’s material financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012:
(IN MILLIONS)
December 31,
Level 1
Level 2
Level 3
Assets:
Investments in equity securities(1)
$
$
$
-
$
-
Plan assets for deferred compensation(2)
-
-
Investments in mutual funds(3)
-
-
Total
$
$
$
-
$
-
Liabilities:
Interest rate swap arrangements(4)
$
$
-
$
$
-
Deferred compensation liabilities(5)
-
-
Total
$
$
$
$
-
(IN MILLIONS)
December 31,
Level 1
Level 2
Level 3
Assets:
Investments in equity securities(1)
$
$
$
-
$
-
Plan assets for deferred compensation(2)
-
-
Investments in mutual funds(3)
-
-
Total
$
$
$
-
$
-
Liabilities:
Interest rate swap arrangements(4)
$
$
-
$
$
-
Deferred compensation liabilities(5)
-
-
Total
$
$
$
$
-
(1)
Investments in equity securities are carried at fair value, which is based on the quoted market price at period end in an active market. These investments are classified as available-for-sale with any unrealized gains or losses resulting from changes in fair value recorded, net of tax, as a component of accumulated other comprehensive income/(loss) until realized. Nielsen assesses declines in the value of individual investments to determine whether such decline is other than temporary and thus the investment is impaired by considering available evidence. No impairment charge was recorded for these available-for-sale securities during the year ended December 31, 2013. For the year ended December 31, 2012, the Company recorded a $6 million impairment in other expense, net in the consolidated statement of operations for a decline in value of an investment in an equity security that was determined to be other-than-temporary.
(2)
Plan assets are comprised of investments in mutual funds, which are intended to fund liabilities arising from deferred compensation plans. These investments are carried at fair value, which is based on quoted market prices at period end in active markets. These investments are classified as trading securities with any gains or losses resulting from changes in fair value recorded in other income/(expense), net in the consolidated statements of operations.
(3)
Investments in mutual funds are money-market accounts held with the intention of funding certain specific retirement plans.
(4)
Derivative financial instruments include interest rate swap arrangements recorded at fair value based on externally-developed valuation models that use readily observable market parameters and the consideration of counterparty risk.
(5)
The Company offers certain employees the opportunity to participate in a deferred compensation plan. A participant’s deferrals are invested in a variety of participant directed stock and bond mutual funds and are classified as trading securities. Changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation.
Derivative Financial Instruments
Nielsen uses interest rate swap derivative instruments principally to manage the risk that changes in interest rates will affect the cash flows of its underlying debt obligations.
To qualify for hedge accounting, the hedging relationship must meet several conditions with respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. Nielsen documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions as well as the hedge effectiveness assessment, both at the hedge inception and on an ongoing basis. Nielsen recognizes all derivatives at fair value either as assets or liabilities in the consolidated balance sheets and changes in the fair values of such instruments are recognized currently in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, Nielsen recognizes the changes in fair value of these instruments in accumulated other comprehensive income/(loss).
Nielsen manages exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that Nielsen has with any individual bank and through the use of minimum credit quality standards for all counterparties. Nielsen does not require collateral or other security in relation to derivative financial instruments. A derivative contract entered into between Nielsen or certain of its subsidiaries and a counterparty that was also a lender under Nielsen’s senior secured credit facilities at the time the derivative contract was entered into is guaranteed under the senior secured credit facilities by Nielsen and certain of its subsidiaries (see Note 11 - Long-term Debt and Other Financing Arrangements for more information). Since it is Nielsen’s policy to only enter into derivative contracts with banks of internationally acknowledged standing, Nielsen considers the counterparty risk to be remote.
It is Nielsen’s policy to have an International Swaps and Derivatives Association (“ISDA”) Master Agreement established with every bank with which it has entered into any derivative contract. Under each of these ISDA Master Agreements, Nielsen agrees to settle only the net amount of the combined market values of all derivative contracts outstanding with any one counterparty should that counterparty default. Certain of the ISDA Master Agreements contain cross-default provisions where if the Company either defaults in payment obligations under its credit facility or if such obligations are accelerated by the lenders, then the Company could also be
declared in default on its derivative obligations. At December 31, 2013, Nielsen had no material exposure to potential economic losses due to counterparty credit default risk or cross-default risk on its derivative financial instruments.
Interest Rate Risk
Nielsen is exposed to cash flow interest rate risk on the floating-rate U.S. Dollar and Euro Term Loans, and uses floating-to-fixed interest rate swaps to hedge this exposure. For these derivatives, Nielsen reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income/(loss) and reclassifies it into earnings in the same period or periods in which the hedged transaction affects earnings, and within the same income statement line item as the impact of the hedged transaction.
In October and November 2013, the Company entered into $1,000 million in aggregate notional amount of three-year interest rate swap agreements with starting dates in November 2013. These agreements fix the LIBOR related portion of interest rates of a corresponding amount of our variable-rate debt at a weighted average rate of 0.46%. The commencement date of these interest rate swaps coincided with the $1,000 million aggregate notional amount of interest rate swaps that matured in November 2013. These derivative instruments have been designated as interest rate cash flow hedges.
In July 2013, the Company entered into $575 million in aggregate notional amount of three-year interest swap agreements with starting dates in July 2013. These agreements fix the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 0.67%. These derivative instruments have been designated as interest rate cash flow hedges.
In November 2012, the Company entered into $500 million in aggregate notional amount of four-year interest rate swap agreements with starting dates in November 2012. These agreements fix the LIBOR related portion of interest rates of a corresponding amount of our variable-rate debt at a weighted average rate of 0.57%. The commencement date of these interest rate swaps coincided with the $500 million aggregate notional amount of interest rate swaps that matured in November 2012. These derivative instruments have been designated as interest rate cash flow hedges.
In November 2011, the Company entered into a $125 million notional amount and a €125 million notional amount of four-year interest rate swap agreements with starting dates in November 2011. These agreements fix the LIBOR and Euro LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at a rate of 0.84% and 1.30%, respectively. These derivative instruments have been designated as interest rate cash flow hedges.
In August 2011, the Company entered into $250 million in aggregate notional amount of four-year forward interest swap agreements with starting dates in September 2011. These agreements fix the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 0.84%. These derivative instruments have been designated as interest rate cash flow hedges.
In November 2010, the Company entered into a $250 million notional amount three-year forward interest rate swap agreement with a starting date in November 2011, which fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at a rate of 1.26%. These derivative instruments have been designated as interest rate cash flow hedges.
Nielsen expects to recognize approximately $13 million of net pre-tax losses from accumulated other comprehensive loss to interest expense in the next 12 months associated with its interest-related derivative financial instruments.
As of December 31, 2013 the Company had the following outstanding interest rate swaps utilized in the management of its interest rate risk:
Notional Amount
Maturity Date
Currency
Interest rate swaps designated as hedging instruments
US Dollar term loan floating-to-fixed rate swaps
$
250,000,000
November 2014
US Dollar
US Dollar term loan floating-to-fixed rate swaps
$
250,000,000
September 2015
US Dollar
US Dollar term loan floating-to-fixed rate swaps
$
125,000,000
November 2015
US Dollar
Euro term loan floating-to-fixed rate swaps
€
125,000,000
November 2015
Euro
US Dollar term loan floating-to-fixed rate swaps
$
1,575,000,000
May 2016
US Dollar
US Dollar term loan floating-to-fixed rate swaps
$
500,000,000
November 2016
US Dollar
Foreign Currency Risk
Nielsen has managed its exposure to changes in foreign currency exchange rates attributable to certain of its long-term debt through the use of foreign currency swap derivative instruments. When the derivative financial instrument is deemed to be highly effective in offsetting variability in the hedged item, changes in its fair value are recorded in accumulated other comprehensive loss and recognized contemporaneously with the earnings effects of the hedged item.
See Note 11 - “Long-term Debt and Other Financing Arrangements” for more information on the long-term debt transactions referenced in this note.
Fair Values of Derivative Instruments in the Consolidated Balance Sheets
The fair values of the Company’s derivative instruments as of December 31, 2013 and December 31, 2012 were as follows:
December 31, 2013
December 31, 2012
(IN MILLIONS)
Accounts
Payable and
Other
Current
Liabilities
Other
Non-
Current
Liabilities
Accounts
Payable and
Other
Current
Liabilities
Other
Non-
Current
Liabilities
Derivatives designated as hedging instruments
Interest rate swaps
$
$
$
$
Derivatives in Cash Flow Hedging Relationships
The pre-tax effect of derivative instruments in cash flow hedging relationships for the years ended December 31, 2013, 2012 and 2011 was as follows (amounts in millions):
Derivatives in
Cash Flow
Hedging
Relationships
Amount of
Loss
Recognized in OCI
on Derivatives
(Effective Portion)
December 31,
Location of
(Loss)/Gain
Reclassified from
OCI
into Income
(Effective Portion)
Amount of Loss
Reclassified from
OCI into Income
(Effective Portion)
December 31,
Amount of Loss
Recognized in
Income on
Derivatives
(Ineffective Portion
and Amount
Excluded from
Effectiveness
Testing)
December 31,
Interest rate swaps
$
$
$
Interest expense
$
$
$
$
-
$
-
$
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company is required, on a nonrecurring basis, to adjust the carrying value for certain assets using fair value measurements. The Company’s equity method investments, cost method investments, and non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.
The Company did not measure any material non-financial assets or liabilities at fair value during the years ended December 31, 2013 or 2012.
9. Restructuring Activities
A summary of the changes in the liabilities for restructuring activities is provided below:
(IN MILLIONS)
Productivity
Initiatives
and Legacy
Programs
Balance at December 31, 2010
$
Charges
Non-cash charges and other adjustments
Payments
(82
)
Balance at December 31, 2011
Charges
Non-cash charges and other adjustments
(6
)
Payments
(82
)
Balance at December 31, 2012
Charges
Non-cash charges and other adjustments
(4
)
Payments
(80
)
Balance at December 31, 2013
$
Of the $99 million in remaining liabilities for restructuring actions, $87 million is expected to be paid within one year and is classified as a current liability within the consolidated financial statements as of December 31, 2013.
Productivity Initiatives
The Company recorded $119 million in restructuring charges associated with productivity initiatives during the year ended December 31, 2013. The charges primarily related to employee severance associated with productivity initiatives and contract termination costs.
The Company recorded $85 million in restructuring charges associated with productivity initiatives during the year ended December 31, 2012. Of these amounts, $5 million related to property lease termination charges with the remainder relating to severance costs associated with employee terminations.
The Company recorded $83 million in restructuring charges associated with productivity initiatives during the year ended December 31, 2011. The charges primarily related to severance costs associated with employee terminations.
10. Pensions and Other Post-Retirement Benefits
Nielsen sponsors both funded and unfunded defined benefit pension plans (the “Pension Plans”) for some of its employees in the Netherlands, the United States and other international locations.
A summary of the activity for the Pension Plans follows:
Year Ended
December 31, 2013
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Change in projected benefit obligation
Benefit obligation at beginning of period
$
$
$
$
1,686
Service cost
-
Interest cost
Plan participants’ contributions
-
-
Actuarial losses/(gains)
(8
)
(27
)
(23
)
Benefits paid
(35
)
(11
)
(21
)
(67
)
Expenses paid
(2
)
-
(3
)
(5
)
Premiums paid
-
-
(1
)
(1
)
Amendments
-
-
(1
)
(1
)
Curtailments
-
-
(13
)
(13
)
Settlements
-
-
(1
)
(1
)
Acquisition
-
-
Effect of foreign currency translation
-
Benefit obligation at end of period
1,740
Change in plan assets
Fair value of plan assets at beginning of period
1,441
Actual return on plan assets
Employer contributions
-
Plan participants’ contributions
-
-
Benefits paid
(35
)
(11
)
(21
)
(67
)
Expenses paid
(2
)
-
(3
)
(5
)
Premiums paid
-
-
(1
)
(1
)
Settlements
-
-
(1
)
(1
)
Acquisition
-
-
Effect of foreign currency translation
-
Fair value of plan assets at end of period
1,588
Funded status
$
(25
)
$
(38
)
$
(89
)
$
(152
)
Amounts recognized in the Consolidated Balance Sheets
Pension assets included in other non-current assets
$
-
$
-
$
$
Current liabilities
-
(1
)
(1
)
(2
)
Accrued benefit liability included in other non-current liabilities
(25
)
(37
)
(128
)
(190
)
Net amount recognized
$
(25
)
$
(38
)
$
(89
)
$
(152
)
Amounts recognized in Accumulated Other Comprehensive Income/(Loss), before tax
Net loss/(gain)
$
$
(14
)
$
(56
)
$
(46
)
Amortization of net loss
(6
)
(5
)
(6
)
(17
)
Total recognized in other comprehensive income/(loss)
$
$
(19
)
$
(62
)
$
(63
)
Amounts not yet reflected in net periodic benefit cost and included in Accumulated Other Comprehensive Income/(Loss), before tax
Unrecognized losses
$
$
$
$
Year Ended
December 31, 2012
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Change in projected benefit obligation
Benefit obligation at beginning of period
$
$
$
$
1,441
Service cost
-
Interest cost
Plan participants’ contributions
-
-
Actuarial losses
Benefits paid
(33
)
(10
)
(26
)
(69
)
Expenses paid
(2
)
-
(1
)
(3
)
Premiums paid
-
-
(1
)
(1
)
Amendments
-
-
(2
)
(2
)
Curtailments
-
-
(1
)
(1
)
Settlements
-
-
(2
)
(2
)
Acquisition
-
-
Effect of foreign currency translation
-
Benefit obligation at end of period
1,686
Change in plan assets
Fair value of plan assets at beginning of period
1,272
Actual return on plan assets
Employer contributions
Plan participants’ contributions
Benefits paid
(33
)
(10
)
(26
)
(69
)
Expenses paid
(2
)
-
(1
)
(3
)
Premiums paid
-
-
(1
)
(1
)
Settlements
-
-
(2
)
(2
)
Insurance
-
-
Effect of foreign currency translation
-
Fair value of plan assets at end of period
1,441
Funded status
$
(20
)
$
(47
)
$
(178
)
$
(245
)
Amounts recognized in the Consolidated Balance Sheets
Pension assets included in other non-current assets
$
-
$
-
$
$
Current liabilities
-
-
(2
)
(2
)
Accrued benefit liability included in other non-current liabilities
(20
)
(47
)
(185
)
(252
)
Net amount recognized
$
(20
)
$
(47
)
$
(178
)
$
(245
)
Amounts recognized in Accumulated Other Comprehensive Income/(Loss), before tax
Net loss/(gain)
$
$
(3
)
$
$
Amortization of net loss
(3
)
(4
)
(4
)
(11
)
Total recognized in other comprehensive income/(loss)
$
$
(7
)
$
$
Amounts not yet reflected in net periodic benefit cost and included in Accumulated Other Comprehensive Income/(Loss), before tax
Unrecognized losses
$
$
$
$
The total accumulated benefit obligation and minimum liability changes for the Pension Plans were as follows:
(IN MILLIONS)
Year Ended
December 31,
Year Ended
December 31,
Year Ended
December 31,
Accumulated benefit obligation.
$
1,683
$
1,618
$
1,392
Pension Plans with Accumulated
Benefit Obligation in Excess of Plan
Assets at December 31, 2013
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Projected benefit obligation
$
$
$
$
1,621
Accumulated benefit obligation
1,567
Fair value of plan assets
1,429
Pension Plans with Projected
Benefit Obligation in Excess of Plan
Assets at December 31, 2013
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Projected benefit obligation
$
$
$
$
1,621
Accumulated benefit obligation
1,567
Fair value of plan assets
1,429
Pension Plans with Accumulated
Benefit Obligation in Excess of Plan
Assets at December 31, 2012
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Projected benefit obligation
$
$
$
$
1,550
Accumulated benefit obligation
1,498
Fair value of plan assets
1,302
Pension Plans with Projected
Benefit Obligation in Excess of Plan
Assets at December 31, 2012
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Projected benefit obligation
$
$
$
$
1,647
Accumulated benefit obligation
1,582
Fair value of plan assets
1,394
Net periodic benefit cost for the years ended December 31, 2013, 2012 and 2011, respectively, includes the following components:
Net Periodic Pension Cost
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
Year ended December 31, 2013
Service cost
$
$
-
$
$
Interest cost
Expected return on plan assets
(34
)
(18
)
(31
)
(83
)
Amortization of net loss
Net periodic pension cost
$
$
-
$
$
Year ended December 31, 2012
Service cost
$
$
-
$
$
Interest cost
Expected return on plan assets
(34
)
(18
)
(29
)
(81
)
Amortization of net loss
Net periodic pension cost
$
-
$
(1
)
$
$
Year ended December 31, 2011
Service cost
$
$
-
$
$
Interest cost
Expected return on plan assets
(37
)
(18
)
(28
)
(83
)
Amortization of net gain
-
Curtailment gain
-
-
(1
)
(1
)
Net periodic pension cost
$
(2
)
$
(1
)
$
$
The curtailment gains of $1 million in 2011 resulted from employee terminations primarily in Europe.
The deferred loss included as a component of accumulated other comprehensive income/(loss) that is expected to be recognized as a component of net periodic benefit cost during 2014 is as follows:
The
Netherlands
United
States
Other
Total
Net actuarial loss
$
(6
)
$
(4
)
$
(2
)
$
(12
)
The weighted average assumptions underlying the pension computations were as follows:
Year Ended December 31,
(IN MILLIONS)
Pension benefit obligation:
-discount rate
4.1
%
3.8
%
4.7
%
-rate of compensation increase
2.1
%
2.1
%
2.0
%
Net periodic pension costs:
-discount rate
3.8
%
4.7
%
5.2
%
-rate of compensation increase
2.1
%
2.0
%
2.1
%
-expected long-term return on plan assets
6.0
%
6.2
%
6.3
%
The assumptions for the expected return on plan assets for the Pension Plans were based on a review of the historical returns of the asset classes in which the assets of the Pension Plans are invested and long-term economic forecast for the type of investments held by the plans. The historical returns on these asset classes were weighted based on the expected long-term allocation of the assets of the Pension Plans.
Nielsen’s pension plans’ weighted average asset allocations by asset category are as follows:
The
Netherlands
United
States
Other
Total
At December 31, 2013
Equity securities
%
%
%
%
Fixed income securities
Other
Total
%
%
%
%
At December 31, 2012
Equity securities
%
%
%
%
Fixed income securities
Other
-
Total
%
%
%
%
No Nielsen shares are held by the Pension Plans.
Nielsen’s primary objective with regard to the investment of the Pension Plans’ assets is to ensure that in each individual plan, sufficient funds are available to satisfy future benefit obligations. For this purpose, asset and liability management studies are made periodically at each pension fund. For each of the Pension Plans, an appropriate mix is determined on the basis of the outcome of these studies, taking into account the national rules and regulations. The overall target asset allocation among all plans for 2013 was 39% equity securities and 55% long-term interest-earning investments (debt or fixed income securities), and 6% other investments.
Equity securities primarily include investments in U.S. and non U.S. companies. Fixed income securities include corporate bonds of companies from diversified industries and mortgage-backed securities. Other types of investments are primarily insurance contracts.
Assets at fair value (See Note 8 - “Fair Value Measurements” for additional information on fair value measurement and the underlying fair value hierarchy) as of December 31, 2013 and 2012 are as follows:
(IN MILLIONS)
December 31, 2013
December 31, 2012
Asset Category
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Cash and equivalents
$
$
$
-
$
$
$
$
-
$
Equity securities - U.S.
-
-
Equity securities - Global.
-
-
Equity securities - non-U.S.
-
-
Real estate
-
-
-
-
Corporate bonds
-
-
Debt issued by national, state or local government
-
-
Other
-
Total Assets at Fair Value
$
$
1,238
$
$
1,588
$
$
1,110
$
$
1,441
The following is a summary of changes in the fair value of the Pension Plans’ Level 3 assets for the years ended December 31, 2013 and 2012:
(IN MILLIONS)
Real Estate
Other
Total
Balance, end of year December 31, 2011
$
$
$
Actual return on plan assets:
Unrealized gains
-
Effect of foreign currency translation
-
Balance, end of year December 31, 2012
$
$
$
Actual return on plan assets:
Investments
-
Unrealized gains
-
Effect of foreign currency translation
Balance, end of year December 31, 2013
$
$
$
Contributions to the Pension Plans in 2014 are expected to be approximately $11 million for the Dutch plan, $3 million for the U.S. plans and $27 million for other plans.
Estimated future benefit payments are as follows:
(IN MILLIONS)
The
Netherlands
United
States
Other
Total
For the years ending December 31,
$
$
$
$
2019-2023
Defined Contribution Plans
Nielsen also offers defined contribution plans to certain participants, primarily in the United States. Nielsen’s expense related to these plans was $39 million, $37 million and $37 million for the years ended December 31, 2013, 2012 and 2011, respectively. In the United States, Nielsen contributes cash to each employee’s account in an amount up to 3% of compensation (subject to IRS limitations) this contribution was increased to 4% upon the freeze of the U.S. defined benefit pension plan in 2006, and was decreased to 3% effective June 8, 2009. No contributions are made in shares of the Company’s common stock. Effective October 7, 2011, participants were allowed to invest in The Nielsen Company Stock Fund, which is an investment fund that exclusively invests in the Company’s common stock.
11. Long-term Debt and Other Financing Arrangements
Unless otherwise stated, interest rates are as of December 31, 2013.
(IN MILLIONS)
December 31, 2013
December 31, 2012
Weighted
Interest
Rate
Carrying
Amount
Fair
Value
Weighted
Interest
Rate
Carrying
Amount
Fair
Value
$1,610 million Senior secured term loan due 2013
$
-
$
-
$
$
$2,386 million Senior secured term loan due 2016
-
-
2,315
2,324
$2,532 million Senior secured term loan (LIBOR based variable rate of 2.92%) due 2016
2,507
2,512
-
-
$1,222 million Senior secured term loan (LIBOR based variable rate of 2.17%) due 2017
1,115
1,113
1,176
1,173
€227 million Senior secured term loan due 2013
-
-
€273 million Senior secured term loan due 2016
-
-
€289 million Senior secured term loan (Euro LIBOR based variable rate of 3.15%) due 2016
-
-
$635 million senior secured revolving credit facility (Euro LIBOR or LIBOR based variable rate) due 2016
-
-
-
-
Total senior secured credit facilities (with weighted average interest rate)
2.89
%
4,016
4,020
3.46
%
4,090
4,096
$215 million 11.625% senior debenture loan due 2014
-
-
$1,080 million 7.75% senior debenture loan due 2018
1,083
1,172
1,084
1,211
$800 million 4.50% senior debenture loan due 2020
$625 million 5.50% senior debenture loan due 2021
-
-
$288 million 6.25% mandatory convertible subordinated bonds due 2013
-
-
Total debenture loans (with weighted average interest rate)
6.51
%
2,508
2,587
7.70
%
2,381
2,562
Other loans
Total long-term debt
4.28
%
6,529
6,612
5.02
%
6,472
6,659
Capital lease and other financing obligations
Bank overdrafts
-
Total debt and other financing arrangements
6,640
6,584
Less: Current portion of long-term debt, capital lease and other financing obligations and other short-term borrowings
Non-current portion of long-term debt and capital lease and other financing obligations
$
6,492
$
6,229
The fair value of the Company’s long-term debt instruments was based on the yield on public debt where available or current borrowing rates available for financings with similar terms and maturities and such fair value measurements are considered Level 1 or Level 2 in nature, respectively.
The carrying amounts of Nielsen’s long-term debt are denominated in the following currencies:
(IN MILLIONS)
December 31,
December 31,
U.S. Dollars
$
6,135
$
6,091
Euro
$
6,529
$
6,472
Annual maturities of Nielsen’s long-term debt are as follows:
(IN MILLIONS)
$
2,996
1,083
Thereafter
1,425
$
6,529
Common Stock and Mandatory Convertible Bond Offerings and Related Transactions
On January 31, 2011, Nielsen completed an initial public offering of 82,142,858 shares of its €0.07 par value common stock at a price of $23.00 per share, generating proceeds of approximately $1,801 million, net of $88 million of underwriter discounts.
Concurrent with its offering of common stock, the Company issued $288 million in aggregate principal amount of 6.25% Mandatory Convertible Subordinated Bonds due February 1, 2013 (“the Bonds”), generating proceeds of approximately $277 million, net of $11 million of underwriter discounts. On February 1, 2013, the Bonds were converted into 10,416,700 shares of Nielsen’s common stock at per share price of $27.60.
The Company utilized substantially all of the combined net proceeds of approximately $2,078 million associated with the aforementioned transactions to settle the Advisory Agreements with the Sponsors (See Note 15 - “Investments in Affiliates and Related Party Transactions” for further information) and redeem and retire certain issuances of the Company’s long-term indebtedness as follows:
·
In February 2011, the Company paid approximately $201 million to redeem $164 million of its outstanding $467 million ($500 million aggregate principal amount) 11.50% Senior Discount Notes Due 2016 with a redemption cost of the stated rate applied to the principal amount being redeemed plus a proportionate amount of accrued interest to the principal amount.
·
In February 2011, the Company paid approximately $129 million to redeem $107 million of its outstanding $307 million ($330 million aggregate principal amount) 11.625% Senior Discount Notes Due 2014 with a redemption cost of the stated rate applied to the principal amount being redeemed plus a proportionate amount of accrued interest to the principal amount.
·
In February 2011, the Company paid approximately $1,133 million to redeem all of its outstanding $999 million ($1,070 million aggregate principal amount) 12.50% Senior Subordinated Discount Notes Due 2016 at a price of 105.89% of the aggregate principal amount.
·
In February and March 2011, the Company paid approximately $495 million to redeem all of its 11.125% Senior Discount Debenture Notes due 2016 at a price of 104.87% of the aggregate principal amount.
The Company recorded a total debt extinguishment charge of approximately $231 million in other expense, net in the consolidated statement of operations for the year ended December 31, 2011 associated with these redemptions.
Senior Secured Credit Facilities
Term Loan Facilities
In August 2006, certain of Nielsen’s subsidiaries entered into the Senior Secured Credit Agreement that was amended and restated in June 2009, February 2012 and February 2013. The Senior Secured Credit Agreement provides for term loan facilities as shown in the table above.
In February 2012, the Senior Secured Credit Agreement was amended and restated to provide for a new five-year amortizing term loan facility in an aggregate principal amount of $1,222 million, the proceeds from which were used to repay a corresponding amount of the existing senior secured term loans due 2013. Borrowings under this new term loan facility bear interest at a rate as determined by the type of borrowing, equal to either the “base rate” or LIBOR rate, plus, in each case, an applicable margin. The applicable margin on base rate loans under this new term loan facility ranges from 0.75% to 1.50% based on a total leverage ratio. The applicable margin on LIBOR loans under this new term loan facility ranges from 1.75% to 2.50% based on the total leverage ratio. Loans under this new term loan facility mature in full in February 2017, but the maturity date shall be January 2016 if at such time there is more than $750 million in the aggregate of existing other term loans under the Senior Secured Credit Agreement with a maturity of May 2016. The loans under this new term loan facility are required to be repaid in an amount equal to 5% of the original principal amount in the first year after the closing date, 5% in the second year, 10% in the third year, 10% in the fourth year and 70% in the fifth year (with payments in each year being made in equal quarterly installments other than the fifth year, in which payments shall be equal to 3.33% of the original principal amount of loans in each of the first three quarters and the remaining principal balance due in February 2017 (unless repayment is required in January 2016 as indicated above)). Loans under this new term loan facility are secured on a pari passu basis with the Company’s existing obligations under the Senior Secured Credit Agreement and Senior Secured Loan Agreement.
In February 2013, the Second Amended and Restated Senior Secured Credit Agreement was amended and restated to provide for a new class of term loans (the “Class E Term Loans”) in an aggregate principal amount of $2,532 million and €289 million, the proceeds of which were used to repay or replace in full a like amount of the Company’s existing Class A Term Loans maturing August 9, 2013, Class B Term Loans maturing May 1, 2016 and Class C Term Loans maturing May 1, 2016. As a result of this transaction, the Company recorded a charge of $12 million primarily related to the write-off of previously capitalized deferred financing fees associated with the Class A, B and C term loans to other expense, net in the consolidated statement of operations.
The Class E Term Loans will mature in full on May 1, 2016 and are required to be repaid in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount of Class E Term Loans, with the balance payable on May 1, 2016. Class E Term Loans denominated in dollars bear interest equal to, at our election, a base rate or eurocurrency rate, in each case plus an applicable margin, which is equal to 1.75% (in the case of base rate loans) or 2.75% (in the case of eurocurrency rate loans). Class E Term Loan denominated in Euros bear interest equal to the eurocurrency rate plus an applicable margin of 3.00%. The newly Amended and Restated Senior Secured Credit Agreement contains substantially the same affirmative and negative covenants as those of the Existing Credit Agreement, other than certain amendments to the limitation on the ability of Nielsen and certain of its subsidiaries and affiliates to incur indebtedness and make investments.
The Senior Secured Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of Nielsen Holding and Finance B.V. and its restricted subsidiaries (which together constitute most of our subsidiaries) to incur additional indebtedness or guarantees, incur liens and engage in sale and leaseback transactions, make certain loans and investments, declare dividends, make payments or redeem or repurchase capital stock, engage in certain mergers, acquisitions and other business combinations, prepay, redeem or purchase certain indebtedness, amend or otherwise alter terms of certain indebtedness, sell certain assets, transact with affiliates, enter into agreements limiting subsidiary distributions and alter the business they conduct. These entities are restricted, subject to certain exceptions, in their ability to transfer their net assets to Nielsen. Such restricted net assets amounted to approximately $5.7 billion at December 31, 2013. In addition, these entities are required to maintain a maximum total leverage ratio and a minimum interest coverage ratio. Neither Nielsen nor TNC B.V. is currently bound by any financial or negative covenants contained in the credit agreement. The Senior Secured Credit Agreement also contain certain customary affirmative covenants and events of default. Certain significant financial covenants are described further below.
Obligations under the Senior Secured Credit Agreement are guaranteed by TNC B.V., substantially all of the wholly owned U.S. subsidiaries of TNC B.V. and certain of the non-U.S. wholly-owned subsidiaries of TNC B.V., and are secured by substantially all of the existing and future property and assets of the U.S. subsidiaries of TNC B.V. and by a pledge of substantially all of the capital stock of the guarantors, the capital stock of substantially all of the U.S. subsidiaries of TNC B.V., and up to 65% of the capital stock of certain of the non-U.S. subsidiaries of TNC B.V. Under a separate security agreement, substantially all of the assets of TNC B.V. are pledged as collateral for amounts outstanding under the senior secured credit facilities.
Revolving Credit Facility
The Senior Secured Credit Agreement also contains a senior secured revolving credit facility under which Nielsen Finance LLC, TNC (US) Holdings, Inc., and Nielsen Holding and Finance B.V. can borrow revolving loans. The revolving credit facility can also be used for letters of credit, guarantees and swingline loans. In March 2011, the Company amended the Senior Secured Credit Agreement to provide for the termination of the existing revolving credit commitments totaling $688 million, which had a final maturity date of August 2012, and their replacement with new revolving credit commitments totaling $635 million with a final maturity date of April 2016.
Revolving loans made pursuant to the new revolving credit commitments may be drawn in U.S. Dollars or Euros (at the election of the borrowers) and bear a tiered floating interest rate depending on a total leverage ratio, from 2.25% to 3.50% in the case of LIBOR borrowings and from 1.25% to 2.50% in the case of base rate borrowings. A commitment fee is payable on the unused portion of the new revolving credit commitments ranging from 0.375% to 0.75% also depending on the total leverage ratio.
The senior secured revolving credit facility is provided under the Senior Secured Credit Agreement and so contains covenants and restrictions as noted above with respect to the Senior Secured Credit Agreement under the “Term loan facilities” section above. Obligations under the revolving credit facility are guaranteed by the same entities that guarantee obligations under the Senior Secured Credit Agreement and Senior Secured Loan Agreement.
As of December 31, 2013 and 2012, the Company had no borrowings outstanding, but had outstanding letters of credit of $12 million and $13 million, respectively. As of December 31, 2013, the Company had $623 million available for borrowing under the revolving credit facility.
Debenture Loans
The indentures governing the Senior Notes limit the majority of Nielsen’s subsidiaries’ ability to incur additional indebtedness, pay dividends or make other distributions or repurchase its capital stock, make certain investments, enter into certain types of transactions with affiliates, use assets as security in other transactions and sell certain assets or merge with or into other companies subject to certain exceptions. Upon a change in control, Nielsen is required to make an offer to redeem all of the Senior Notes at a redemption price equal to the 101% of the aggregate accreted principal amount plus accrued and unpaid interest. The Senior Notes are jointly and severally guaranteed by TNC B.V., substantially all of the wholly owned U.S. subsidiaries of TNC B.V., and certain of the non-U.S. wholly-owned subsidiaries of TNC B.V.
In September 2013, the Company issued $625 million aggregate principal amount of 5.50% Senior Notes due 2021 at par, receiving cash proceeds of approximately $616 million, net of fees and expenses. Concurrent with this issuance the Company called for redemption of all of its 11.625% Senior Notes due 2014 effective October 23, 2013, at a redemption price equal to 100% of the principal amount of such 2014 notes redeemed plus accrued and unpaid interest to the redemption date and an “applicable premium” as described in the indenture related to the 2014 note. The redemption of the 11.625% Senior Notes due 2014 resulted in a pre-tax charge of $8 million in other expense, net in the consolidated statements of operations in the fourth quarter of 2013.
In October 2012, the Company issued $800 million aggregate principal amount of 4.50% Senior Notes due 2020 which mature on October 1, 2020 at par, with cash proceeds of approximately $788 million, net of fees and expenses. Concurrent with this issuance, the Company redeemed and subsequently retired all of its 11.50% Senior Notes due 2016 and prepaid its 8.50% Senior Secured Term Loan due 2017. In connection with these transactions, the Company recorded a charge of $115 million in other expense, net in the consolidated statements of operations.
In October and November 2010, the Company issued a combined $1,080 million in aggregate principal amount of 7.75% Senior Notes due 2018 at an issue price of $1,085 million with cash proceeds of approximately $1,065 million, net of fees and expenses.
In August 2006, Nielsen issued $650 million 10% and €150 million 9% senior notes due 2014. On April 16, 2008, Nielsen issued $220 million aggregate principal amount of additional 10% Senior Notes due 2014. In November and December 2010 the Company redeemed all $870 million aggregate principal amount of its 10% Senior Notes due 2014 at a price of 105% of the amount redeemed as well as all €150 million aggregate principal amount of its 9% Senior Notes due 2014 at a price of 104.5% of the amount redeemed. The redemption and subsequent retirement of these collective notes resulted in a loss of $90 million associated with the redemption option premium and recognition of previously deferred debt issuance costs recorded as a component of other expense, net in the consolidated statement of operations in the fourth quarter of 2010. These redemptions were consummated using the proceeds from the issuance of a combined $1,080 million in aggregate principal amount of 7.75% Senior Notes due 2018 discussed above.
In January 2009, Nielsen issued $330 million in aggregate principal amount of 11.625 % Senior Notes due 2014 at an issue price of $297 million with cash proceeds of approximately $290 million, net of fees and expenses. These Senior Notes were partially redeemed during 2011 as described above with the balance redeemed in October 2013.
In April 2009, Nielsen issued $500 million in aggregate principal amount of 11.50% Senior Notes due 2016 at an issue price of $461 million with cash proceeds of approximately $452 million, net of fees and expenses. These Senior Notes were partially redeemed during 2011 as described above with the balance redeemed in October 2012.
In August 2006, Nielsen also issued $1,070 million 12.50% senior subordinated discount notes due 2016 (“Senior Subordinated Discount Notes”). The Senior Subordinated Discount Notes were entirely redeemed during 2011 as described above.
In August 2006, Nielsen issued €343 million 11.125% senior discount notes due 2016 (“Senior Discount Notes”). The Senior Discount Notes were entirely redeemed during 2011 as described above.
Nielsen has a Euro Medium Term Note (“EMTN”) program in place under which no further debenture loans and private placements can be issued. All debenture loans and most private placements are quoted on the Luxembourg Stock Exchange. As of December 31, 2012, all EMTN loans have matured and been repaid.
In December 2011, Nielsen’s JPY 4,000 million 2.50% EMTN matured and was repaid and in May 2010, Nielsen’s €50 million variable rate EMTN matured and was repaid.
In February 2012, Nielsen’s €30 million 6.75% EMTN matured and was repaid and in April 2012, Nielsen’s €50 million variable rate EMTN matured and was repaid.
Other Transactions
Effective July 1, 2010, the Company designated its Euro denominated variable rate senior secured term loans due 2013 and 2016 as non-derivative hedges of its net investment in a European subsidiary. Beginning on July 1, 2010, gains or losses attributable to fluctuations in the Euro as compared to the U.S. Dollar associated with this debenture were recorded to the cumulative translation adjustment within stockholders’ equity, net of income tax.
Deferred Financing Costs
The costs related to the issuance of debt are capitalized and amortized to interest expense using the effective interest method over the life of the related debt. Deferred financing costs were $50 million and $60 million at December 31, 2013 and 2012, respectively.
Related Party Lenders
A portion of the borrowings under the senior secured credit facility, as well as certain of the Company’s senior debenture loans, have been purchased by certain of the Sponsors in market transactions not involving the Company. Amounts held by the Sponsors were $379 million and $412 million as of December 31, 2013 and 2012, respectively. Interest expense associated with amounts held by the Sponsors approximated $12 million, $20 million and $26 million during the years ended December 31, 2013, 2012 and 2011, respectively.
Capital Lease and Other Obligations
Nielsen finances certain computer equipment, software, buildings and automobiles under capital leases and related transactions. These arrangements do not include terms of renewal, purchase options, or escalation clauses.
Assets under capital lease are recorded within property, plant and equipment. See Note 7 - “Property, Plant and Equipment.”
Future minimum capital lease payments under non-cancelable capital leases at December 31, 2013 are as follows:
(IN MILLIONS)
$
Thereafter
Total
Less: amount representing interest
Present value of minimum lease payments
$
Current portion
$
Total non-current portion
Present value of minimum lease payments
$
Capital leases and other financing transactions have effective interest rates primarily ranging from 8% to 10%. Interest expense recorded related to capital leases and other financing transactions during the years ended December 31, 2013, 2012 and 2011 was $9 million, $9 million and $10 million, respectively. Nielsen recognizes rental income from non-cancelable subleases. The total aggregate future rental income proceeds to be received under the non-cancelable subleases are $4 million.
12. Stockholders’ Equity
Common stock activity is as follows:
Year Ended
December 31,
Year Ended
December 31,
Year Ended
December 31,
(Actual number of shares of common stock outstanding)
Beginning of year
362,519,883
359,647,605
276,059,333
Shares of common stock issued through initial public offering
-
-
82,142,858
Shares of common stock converted from Mandatory Convertible Subordinated Bonds due February 2013
10,416,700
-
-
Shares of common stock issued through business
combinations
101,899
246,627
535,353
Shares of common stock issued through compensation plans
5,886,821
2,625,651
966,580
Repurchases of common stock
(289,839
)
-
(56,519
)
End of year
378,635,464
362,519,883
359,647,605
Cumulative shares of treasury stock were 409,067 and 213,127 as of December 31, 2013 and 2012, respectively, with a corresponding value of $13 million and $4 million, respectively.
On January 31, 2013, the Company’s board of directors (the “Board”) adopted a cash dividend policy to pay quarterly cash dividends on its outstanding common stock. The following table represents the cash dividends declared by the Board and paid for the year ended December 31, 2013.
Declaration Date
Record Date
Payment Date
Dividend Per Share
January 31, 2013
March 6, 2013
March 20, 2013
$
0.16
May 2, 2013
June 5, 2013
June 19, 2013
$
0.16
July 25, 2013
August 28, 2013
September 11, 2013
$
0.20
October 22, 2013
November 25, 2013
December 9, 2013
$
0.20
The dividend policy and payment of future cash dividends are subject to the discretion of the Board.
No dividends were declared or paid on the Company’s common stock in 2012 or 2011.
On July 25, 2013, Nielsen’s Board approved a share repurchase program for up to $500 million of its outstanding common stock. The primary purpose of the program is to mitigate dilution associated with Nielsen’s equity compensation plans. Repurchases will be made in accordance with applicable securities laws from time to time in the open market depending on our management’s evaluation of market conditions and other factors. The program will be executed within the limitations of the existing authority granted at our 2013 Annual General Meeting of Shareholders. As of December 31, 2013, there have been 289,839 shares of our common stock purchased at an average price of $39.49 per share (total consideration of $11 million) under this program.
Subsequent Event
On February 20, 2014, the Board declared a cash dividend of $0.20 per share on the Company’s common stock. The dividend is payable on March 20, 2014 to stockholders of record at the close of business on March 6, 2014.
13. Stock-Based Compensation
In connection with the Valcon Acquisition, Nielsen implemented an equity-based, management compensation plan (“Equity Participation Plan” or “EPP”) to align compensation for certain key executives with the performance of the Company. Under this plan, certain of the Company’s executives may be granted stock options, stock appreciation rights, restricted stock and dividend equivalent rights in the shares of the Company or purchase its shares. In connection with the completion of Nielsen’s initial public offering of common stock on January 31, 2011 the Company implemented the Nielsen Holdings 2010 Stock Incentive Plan (the “Stock Incentive Plan”) and suspended further grants under the EPP. The Stock Incentive Plan is the source of new equity-based awards permitting the Company to grant to its key employees, directors and other service providers the following types of awards: incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other awards valued in whole or in part by reference to shares of Nielsen’s common stock and performance-based awards denominated in shares or cash.
Under the Stock Incentive Plan, Nielsen granted 2,459,900 and 4,133,381 time-based stock options to purchase shares during the years ended December 31, 2013 and 2012, respectively. As of December 31, 2013, the total number of shares authorized for award of options or other equity-based awards was 44,095,000 under the Stock Incentive Plan. The 2013, 2012 and 2011 time-based awards become exercisable over a four-year vesting period at a rate of 25% per year on the anniversary day of the award, and are tied to the executives’ continuing employment. The majority of the 2010 time-based awards become exercisable ratably on the first three anniversaries of the grant date of the award, contingent on continuing employment on each vesting date. In addition, time-based awards granted in 2010 become exercisable over a four-year vesting period tied to the executives’ continuing employment and were fully vested as of December 31, 2013. The 2009, 2008 and 2007 time-based awards became exercisable over a four-year, four-year and five-year vesting period, respectively, and were fully vested as of December 31, 2012. The 2010, 2009 and 2008 performance options are tied to the executives’ continued employment and become vested and exercisable based on the achievement of certain annual EBITDA targets over a four-year vesting period. The 2007 and 2006 performance options are tied to the executives’ targets over a five-year vesting period. If the annual EBITDA targets are achieved on a cumulative basis for any current year and prior years, the options become vested as to a pro-rata portion for any prior year installments which were not vested because of failure to achieve the applicable annual EBITDA target. Both option tranches expire ten years from date of grant. Upon a change in control, any then-unvested time options will fully vest and any then-unvested performance options can vest, subject to certain conditions.
For the years ended December 31, 2013, 2012 and 2011, the fair values of the granted time-based awards were estimated using the Black-Scholes option pricing model. For 2013, expected volatility was based on the Company’s historical volatility. For 2012 and 2011, because of the Company’s limited trading history, expected volatility was based on a combination of the estimates of implied volatility of the Company’s peer-group, the Company’s historical volatility adjusted for leverage and implied volatility based on trading Nielsen call options.
The following assumptions were used during 2013, 2012 and 2011:
Year Ended December 31,
Expected life (years)
3.50-6.00
3.50-6.00
3.50-6.00
Risk-free interest rate
0.40-1.99
%
0.38-.083
%
1.18-2.23
%
Expected dividend yield
0 - 2.19
%
%
%
Expected volatility
25.40-27.60
%
28.00-30.30
%
31.70-42.00
%
Weighted average volatility
25.89
%
28.56
%
33.42
%
The Company recorded stock-based compensation expense of $47 million, $34 million and $27 million for the years ended December 31, 2013, 2012 and 2011, respectively. The tax benefit related to the stock compensation expense was $17 million, $13 million and $11 million, for the respective periods.
In connection with the resignation and retirement of two senior executives effective January 1, 2014, the Company entered into agreements with the executives that modified certain of their share based awards. The impact of these modifications was not material to reported share based compensation expense for the year ended December 31, 2013.
Nielsen’s stock option plan activity is summarized below:
Number of Options
(Time Based and
Performance Based)
Weighted-Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term in
Years
Aggregate
Intrinsic
Value in
Millions
Stock Option Plan activity
Outstanding at December 31, 2010
16,120,209
$
17.63
6.51
$
Granted
4,307,002
30.00
Forfeited
(684,306
)
(20.96
)
Exercised
(1,160,878
)
(13.20
)
Outstanding at December 31, 2011
18,582,027
20.65
5.77
$
Granted
4,133,381
28.00
Forfeited
(655,034
)
(24.30
)
Exercised
(2,372,536
)
(14.64
)
Outstanding at December 31, 2012
19,687,838
$
22.80
5.16
$
Granted
2,459,900
36.65
Forfeited
(383,163
)
(23.35
)
Exercised
(4,667,814
)
(19.11
)
Outstanding at December 31, 2013
17,096,761
$
25.78
4.61
$
Exercisable at December 31, 2013
8,787,104
$
22.02
3.87
$
As of December 31, 2013, 2012 and 2011, the weighted-average grant date fair value of the options granted was $6.63, $7.25 and $9.39, respectively, and the aggregate fair value of options vested was $27 million, $21 million and $12 million, respectively.
At December 31, 2013, there is approximately $27 million of unearned stock-based compensation related to stock options which the Company expects to record as stock-based compensation expense over the next four years. The compensation expense related to the time-based awards is amortized over the term of the award using the graded vesting method.
The intrinsic value of the options exercised during the years ended December 31, 2013, 2012 and 2011was $79 million, $34 million and $18 million, respectively. For the year ended December 31, 2013, cash proceeds from the exercise of options was $89 million.
As of December 31, 2013, affiliates of Centerview Partners, a stockholder of Luxco collectively hold 312,500 performance-based options and 218,750 time-based options to purchase shares in the Company. Cumulative expense related to these outstanding options amounted to approximately $5 million through December 31, 2013.
During the years ended December 31, 2013, 2012 and 2011, 859,544, 687,300 and 248,450, respectively, of restricted stock units (RSUs) ultimately payable in shares of common stock were granted under the Stock Incentive Plan. The awards vest at a rate of 25% per year over four years on the anniversary day of the award. There were 229,805 awards vested during the year ended December 31, 2013. The estimated weighted average grant date fair value of these units in 2013, 2012 and 2011 were $34.86, $27.99 and $30.05, respectively. The amounts above exclude any Arbitron activity in 2013.
On September 30, 2013, Nielsen completed the acquisition of Nielsen Audio and concurrently provided 95,599 replacement restricted stock units under Nielsen’s existing Stock Incentive Plan. The exchange was accounted for as a modification in accordance with ASC 718. The aggregate fair value of the replacement awards granted on September 30, 2013, was $3 million, of which $2 million was attributed to post merger service and $1 million was included in purchase price consideration.
As of December 31, 2013, approximately $26 million of unearned stock-based compensation related to unvested RSUs (net of estimated forfeitures) is expected to be recognized over a weighted average period of 3.3 years.
During the year ended December 31, 2013, the Company granted 510,280 performance restricted shares, representing the target number of performance restricted shares subject to the award. The weighted average grant date fair value of the awards was $ 34.02 per share. The total number of performance restricted shares to be earned is subject to achievement of cumulative performance goals for the three year period ending December 31, 2015. Forty percent of the target award will be determined based on the Company’s relative total shareholder return and sixty percent of the target award will be determined based on free cash flow achievements. The maximum payout is 200% of target. The fair value of the target award related to free cash flow was the fair value on the date of the grant, and the fair value of the target award related to relative shareholder return was based on a lattice model. As of December 31, 2013, there is approximately $12 million of unearned stock-based compensation related to unvested performance restricted shares (net of estimated forfeitures). The compensation expense is amortized over the term of the award, which is 3 years after the grant date.
14. Income Taxes
The components of income from continuing operations before income taxes and equity in net income of affiliates, were:
Year Ended December 31,
(IN MILLIONS)
Dutch
$
$
$
Non-Dutch
Income from continuing operations before income taxes and equity in net income of affiliates
$
$
$
The above amounts for Dutch and non-Dutch activities were determined based on the location of the taxing authorities.
The provision for income taxes attributable to the income from continuing operations before income taxes and equity in net income of affiliates consisted of:
Year Ended December 31,
(IN MILLIONS)
Current:
Dutch
$
$
(20
)
$
Non-Dutch
Deferred:
Dutch
(13
)
Non-Dutch
(110
)
(111
)
(107
)
(124
)
Total
$
$
$
The Company’s provision for income taxes for the years ended December 31, 2013, 2012 and 2011 was different from the amount computed by applying the statutory Dutch federal income tax rates to the underlying income from continuing operations before income taxes and equity in net income of affiliates as a result of the following:
Year Ended December 31,
(IN MILLIONS)
Income from continuing operations before income taxes and equity in net income of affiliates
$
$
$
Dutch statutory tax rate
25.0
%
25.0
%
25.0
%
Provision for income taxes at the Dutch statutory rate
$
$
$
Tax impact on distributions from foreign subsidiaries
(38
)
Effect of operations in non-Dutch jurisdictions, including foreign tax credits
(8
)
U.S. state and local taxation
(5
)
Withholding and other taxation
Effect of global financing activities
(60
)
(51
)
(38
)
Changes in estimates for uncertain tax positions
Changes in valuation allowances
(69
)
(15
)
(25
)
Effect of change in deferred tax rates
(40
)
-
Other, net
Total provision for income taxes
$
$
$
Effective tax rate
17.5
%
34.0
%
9.4
%
The components of current and non-current deferred income tax assets/(liabilities) were:
(IN MILLIONS)
December 31,
December 31,
Deferred tax assets (on balance):
Net operating loss carryforwards
$
$
Interest expense limitation
Deferred compensation
Deferred revenues / costs
Employee benefits
Tax credit carryforwards
Share-based payments
Accrued expenses
Financial instruments
Other assets
1,419
1,247
Valuation allowances
(150
)
(232
)
Deferred tax assets, net of valuation allowances
1,269
1,015
Deferred tax liabilities (on balance):
Intangible assets
(1,715
)
(1,630
)
Fixed asset depreciation
(27
)
(30
)
Computer software
(174
)
(134
)
(1,916
)
(1,794
)
Net deferred tax liability
$
(647
)
$
(779
)
Recognized as:
Deferred income taxes, current
$
$
Deferred income taxes, non-current
(749
)
(842
)
Total
$
(647
)
$
(779
)
The presentation of the components of deferred taxes as of December 31, 2012 has been adjusted from the presentation in our 2012 financial statements. There is no change to the amount and classification of our deferred taxes on our December 31, 2012 balance sheet.
At December 31, 2013 and 2012 the Company had net operating loss carryforwards of approximately $942 million and $1,260 million, respectively, which begin to expire in 2014. In addition, the Company had tax credit carryforwards of approximately $179 million and $117 million at December 31, 2013 and 2012, respectively, which will begin to expire in 2014.
In certain jurisdictions, the Company has operating losses and other tax attributes that, due to the uncertainty of achieving sufficient profits to utilize these operating loss carryforwards and tax credit carryforwards, the Company currently believes it is more likely than not that a portion of these losses will not be realized. Therefore, the Company has a valuation allowance of approximately $140 million and $189 million at December 31, 2013 and 2012, respectively, related to these net operating loss carryforwards and tax credit carryforwards. In addition, the Company has valuation allowances of $10 million and $43 million at December 31, 2013 and 2012, respectively, on deferred tax assets related to other temporary differences, which the Company currently believes will not be realized.
As a consequence of the significant restructuring of the ownership of the Nielsen non-U.S. subsidiaries in 2007 and 2008 the Company has determined that as of December 31, 2013 no income taxes are required to be provided for on the approximately $3.2 billion, which is the excess of the book value of its investment in non-U.S. subsidiaries over the corresponding tax basis. Certain of these differences can be eliminated at a future date.
At December 31, 2013 and 2012, the Company had gross uncertain tax positions of $475 million and $409 million, respectively, that included accrued interest and penalties associated with these unrecognized tax benefits as of December 31, 2013 and 2012 of $52 million and $45 million, respectively. Estimated interest and penalties related to the underpayment of income taxes is classified as a component of provision for income taxes in the consolidated statement of operations. It is reasonably possible that a reduction in a range of $47 million to $57 million of uncertain tax positions may occur within the next twelve months as a result of projected resolutions of worldwide tax disputes.
A reconciliation of the beginning and ending amount of gross uncertain tax positions is as follows:
(IN MILLIONS)
December 31,
December 31,
December 31,
Balance as of the beginning of period
$
$
$
Additions for current year tax positions
Additions for tax positions of prior years
Reductions for lapses of statute of limitations
(17
)
(19
)
(23
)
Balance as of the end of the period
$
$
$
The presentation of our reserves for uncertain tax positions has been adjusted from the presentation in our 2012 financial statements to present such reserves on a gross basis. In prior periods, such reserves were presented net of offsetting deferred tax assets.
If the balance of the Company’s uncertain tax positions is sustained by the taxing authorities in the Company’s favor, the reversal of the entire balance would reduce the Company’s effective tax rate in future periods.
The Company files numerous consolidated and separate income tax returns in the U.S. Federal jurisdiction and in many state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal income tax examinations for 2006 and prior periods. In addition, the Company has subsidiaries in various states, provinces and countries that are currently under audit for years ranging from 2004 through 2012.
15. Investments in Affiliates and Related Party Transactions
Related Party Transactions with Affiliates
As of December 31, 2013 and 2012, Nielsen had investments in affiliates of $18 million and $77 million, respectively. One of Nielsen’s investments as of December 31, 2012, was its 50.5% non-controlling ownership interest in Scarborough, a joint venture between Nielsen and Arbitron. As a part of the Arbitron Acquisition in September 2013, Nielsen acquired the remaining 49.5% interest in Scarborough that was historically accounted for under the equity method of accounting. Nielsen accounted for this transaction as a step-acquisition and calculated the fair value of its investment immediately before the acquisition to be $75 million. As a result, Nielsen recorded a $24 million gain on its investment in Scarborough to other expense, net in the consolidated statement of operations. Commencing October 1, 2013, the financial results of Scarborough were included within the consolidated financial statements of Nielsen.
Prior to the Acquisition, Nielsen and Scarborough entered into various related party transactions in the ordinary course of business, including Nielsen providing certain general and administrative services to Scarborough. Nielsen paid royalties to Scarborough for the right to include Scarborough data in Nielsen services sold directly to Nielsen customers. Additionally, Nielsen sold various Scarborough services directly to its clients, for which it received a commission from Scarborough. As a result of these transactions, Nielsen received net payments from Scarborough of $3 million through September 30, 2013, and $15 million and $14 million for the years ended December 31, 2012 and 2011, respectively. Obligations between Nielsen and its affiliates are regularly settled in cash in the ordinary course of business. Nielsen had net receivables from its affiliates of approximately $6 million for the year ending December 31, 2013 and 2012, respectively.
Transactions with Sponsors
In connection with the Valcon Acquisition, two of Nielsen’s subsidiaries and the Sponsors entered into Advisory Agreements, which provided for an annual management fee, in connection with planning, strategy, oversight and support to management, and were payable quarterly and in advance to each Sponsor, on a pro rata basis, for the eight year duration of the agreements, as well as reimbursements for each Sponsor’s respective out-of-pocket expenses in connection with the management services provided under the agreement.
The Advisory Agreements provided that upon the consummation of a change in control transaction or an initial public offering in excess of $200 million, each of the Sponsors would receive, in lieu of quarterly payments of the annual management fee, a fee equal to the net present value of the aggregate annual management fee that would have been payable to the Sponsors during the remainder of the term of the agreements (assuming an eight year term of the agreements), calculated using the treasury rate having a final maturity date that is closest to the eighth anniversary of the date of the agreements.
In January 2011 in conjunction with the Company’s initial public offering of common stock, the Advisory Agreements with the Sponsors were terminated for a settlement amount of $102 million and the Company recorded this charge as a component of selling, general and administrative expenses in the consolidated statement of operations.
Equity Healthcare LLC
Effective in January 2009, Nielsen entered into an employer health program arrangement with Equity Healthcare LLC (“Equity Healthcare”). Equity Healthcare negotiates with providers of standard administrative services for health benefit plans and other related services for cost discounts, quality of service monitoring, data services and clinical consulting and oversight by Equity Healthcare. Because of the combined purchasing power of its client participants, Equity Healthcare is able to negotiate pricing terms from providers that are believed to be more favorable than the companies could obtain for themselves on an individual basis. Equity Healthcare is an affiliate of The Blackstone Group, one of the Sponsors.
In consideration for Equity Healthcare’s provision of access to these favorable arrangements and its monitoring of the contracted third parties’ delivery of contracted services to Nielsen, the Company pays Equity Healthcare a fee of $2.50 per participating employee per month (“PEPM Fee”). As of December 31, 2013, Nielsen had approximately 7,300 employees enrolled in its self-insured health benefit plans in the United States. Equity Healthcare may also receive a fee (“Health Plan Fees”) from one or more of the health plans with whom Equity Healthcare has contractual arrangements if the total number of employees joining such health plans from participating companies exceeds specified thresholds.
TIBCO
On July 26, 2012, Vivek Y. Ranadivé was elected as a member of the unitary Board of Directors of Nielsen Holdings, N.V. and The Nielsen Company B.V. Mr. Ranadivé has been the Chief Executive Officer and Chairman of the Board of Directors of TIBCO Software Inc. (“TIBCO”) since its inception in 1997. The Company has an ongoing contractual relationship with TIBCO. The Board of Directors of the Company affirmatively determined that Mr. Ranadivé is independent for purposes of the New York Stock Exchange listing rules and the Company’s Corporate Governance Guidelines. For the years ended December 31, 2013 and 2012, Nielsen purchased $10 million and $12 million, respectively, of software licenses and related IT support services and training from TIBCO and sold data to TIBCO of $2 million and $0, respectively. As of December 31, 2013 and 2012, Nielsen had no outstanding payables, and outstanding receivables of $2 million and $0, respectively.
16. Commitments and Contingencies
Leases and Other Contractual Arrangements
In February 2013, the Company amended its Amended and Restated Master Services Agreement (the “MSA”), dated as of October 1, 2007 with Tata America International Corporation and Tata Consultancy Services Limited (jointly, “TCS”). The term of the MSA has been extended for an additional three years, so as to expire on December 31, 2020, with a one-year renewal option granted to Nielsen. In addition, the Company has increased its commitment to purchase services from TCS (the “Minimum Commitment”) from $1.0 billion to $2.5 billion over the life of the contract (from October 1, 2007), including a commitment to purchase at least $100 million in services per year (the “Annual Commitment”) until the Minimum Commitment is met. TCS’ charges under the separate Global Infrastructure Services Agreement between the parties will be credited against the Minimum Commitment and the Annual Commitment. TCS will continue to globally provide the Company with professional services relating to information technology (including application development and maintenance), business process outsourcing, client service knowledge process outsourcing, management sciences, analytics, and financial planning and analytics. As Nielsen orders specific services under the Agreement, the parties will execute Statements of Work (“SOWs”) describing the specific scope of the services to be performed by TCS. The amount of the Minimum Commitment and the Annual Commitment may be reduced on the occurrence of certain events, some of which also provide the Company with the right to terminate the Agreement or SOWs, as applicable. As of December 31, 2013, the remaining TCS commitment was approximately $1,000 million.
Nielsen has also entered into operating leases and other contractual obligations to secure real estate facilities, agreements to purchase data processing services and leases of computers and other equipment used in the ordinary course of business and various outsourcing contracts. These agreements are not unilaterally cancelable by Nielsen, are legally enforceable and specify fixed or minimum amounts or quantities of goods or services at fixed or minimum prices.
The amounts presented below represent the minimum annual payments under Nielsen’s purchase obligations that have initial or remaining non-cancelable terms in excess of one year. These purchase obligations include data processing, building maintenance, equipment purchasing, photocopiers, land and mobile telephone service, computer software and hardware maintenance, and outsourcing.
For the Years Ending December 31,
(IN MILLIONS)
Thereafter
Total
Operating leases
$
$
$
$
$
$
$
Other contractual obligations(a)
1,474
Total
$
$
$
$
$
$
$
1,869
(a) Other contractual obligations represent obligations under agreement, which are not unilaterally cancelable by Nielsen, are legally enforceable and specify fixed or minimum amounts or quantities of goods or services at fixed or minimum prices. Nielsen generally requires purchase orders for vendor and third party spending. The amounts presented above represent the minimum future annual services covered by purchase obligations including data processing, building maintenance, equipment purchasing, photocopiers, land and mobile telephone service, computer software and hardware maintenance, and outsourcing. Nielsen’s remaining commitments as of December 31, 2013 under the outsourced services agreements with TCS have been included above on an estimated basis over the years within the contractual period in which we expect to satisfy its obligations. As of December 31, 2013, the remaining TCS commitment was approximately $1,000 million.
Total expenses incurred under operating leases were $81 million, $88 million and $97 million for the years ended December 31, 2013, 2012 and 2011, respectively. Nielsen recognized rental income received under subleases of $11 million, $8 million and $10 million for the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, Nielsen had aggregate future proceeds to be received under non-cancelable subleases of $34 million.
Nielsen also has minimum commitments under non-cancelable capital leases. See Note 11 “Long-term Debt and Other Financing Arrangements” for further discussion.
Guarantees and Other Contingent Commitments
At December 31, 2013, Nielsen was committed under the following significant guarantee arrangements:
Sub-lease guarantees
Nielsen provides sub-lease guarantees in accordance with certain agreements pursuant to which Nielsen guarantees all rental payments upon default of rental payment by the sub-lessee. To date, the Company has not been required to perform under such arrangements, does not anticipate making any significant payments related to such guarantees and, accordingly, no amounts have been recorded.
Letters of credit
Letters of credit issued and outstanding amount to $12 million and $13 million at December 31, 2013 and 2012, respectively.
Legal Proceedings and Contingencies
Nielsen is subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does expect that the ultimate disposition of these matters will not have a material adverse effect on its operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period.
17. Segments
The Company aligns its operating segments in order to conform to management’s internal reporting structure, which is reflective of service offerings by industry. Management aggregates such operating segments into two reporting segments: what consumers buy, consisting principally of market research information and analytical services and what consumers watch and listen to, consisting principally of television, radio, online and mobile audience and advertising measurement services and corresponding analytics. In March 2013, Nielsen completed the exit and shut down of one of its legacy online businesses and in June 2013, Nielsen completed the
sale of its expositions business. These divestitures were reported as discontinued operations, which require retrospective restatement of prior periods to classify operating results of these businesses as discontinued operations. (See Note 4 “Discontinued Operations”, for more information). The consolidated statements of operations reflect the operating results of these businesses as discontinued operations.
During the fourth quarter of 2013, to conform to a change in management reporting, Nielsen reclassified two products from the Buy segment to the Watch segment. The business segment results have been reclassified for comparison purposes for all periods presented in the consolidated financial statements.
Corporate consists principally of unallocated items such as certain facilities and infrastructure costs as well as intersegment eliminations. Certain corporate costs, other than those described in Item 7 “Management Discussion and Analysis”, including those related to selling, finance, legal, human resources, and information technology systems, are considered operating costs and are allocated to the Company’s segments based on either the actual amount of costs incurred or on a basis consistent with the operations of the underlying segment. Information with respect to the operations of each of Nielsen’s business segments is set forth below based on the nature of the services offered and geographic areas of operations.
Business Segment Information
Year Ended December 31,
(IN MILLIONS)
Revenues
Buy
$
3,406
$
3,341
$
3,339
Watch
2,297
2,066
1,989
Total
$
5,703
$
5,407
$
5,328
Year Ended December 31,
(IN MILLIONS)
Business segment income/(loss)(1)
Buy
$
$
$
Watch
Corporate and eliminations
(32
)
(28
)
(27
)
Total
$
1,617
$
1,504
$
1,450
Year Ended December 31,
(IN MILLIONS)
Depreciation and amortization
Buy
$
$
$
Watch
Corporate and eliminations
Total
$
$
$
Year Ended December 31,
(IN MILLIONS)
Restructuring charges
Buy
$
$
$
Watch
Corporate and eliminations
Total
$
$
$
Year Ended December 31,
(IN MILLIONS)
Stock-based compensation expense
Buy
$
$
$
Watch
Corporate and eliminations
Total
$
$
$
Year Ended December 31,
(IN MILLIONS)
Other items(2)
Buy
$
$
$
Watch
(9
)
-
Corporate and eliminations
Total
$
$
$
Year Ended December 31,
(IN MILLIONS)
Operating income/(loss)
Buy
$
$
$
Watch
Corporate and eliminations
(108
)
(76
)
(170
)
Total
$
$
$
(IN MILLIONS)
December 31,
December 31,
Total assets
Buy
$
6,768
$
6,773
Watch
8,326
6,817
Expositions
-
Corporate and eliminations(3)
Total
$
15,530
$
14,585
(1)
The Company’s chief operating decision making group uses business segment income/(loss) to measure performance from period to period both at the consolidated level as well as within its operating segments
(2)
Other items for the years ended December 31, 2013 and 2012 consist primarily of one-time items associated with the acquisition of Arbitron, including non-cash purchase accounting adjustments and transaction related costs.
(3)
Includes deferred financing costs of $50 million and $60 million as of December 31, 2013 and 2012, respectively.
(IN MILLIONS)
Year ended December 31,
Capital expenditures
Buy
$
$
$
Watch
Expositions
-
Corporate and eliminations
-
Total
$
$
$
Geographic Segment Information
(IN MILLIONS)
Revenues(1)
Operating
Income/
(Loss)
Long-
lived
Assets(2)
United States
$
2,857
$
$
10,203
North and South America, excluding the United States
1,268
The Netherlands
(3
)
(6
)
Other Europe, Middle East & Africa
1,388
1,137
Asia Pacific
Total
$
5,703
$
$
13,025
(IN MILLIONS)
Revenues(1)
Operating
Income/
(Loss)
Long-
lived
Assets(2)
United States
$
2,637
$
$
9,540
North and South America, excluding the United States
1,313
The Netherlands
Other Europe, Middle East & Africa
1,353
1,097
Asia Pacific
Total
$
5,407
$
$
12,467
(IN MILLIONS)
Revenues(1)
Operating
Income/
(Loss)
United States
$
2,498
$
North and South America, excluding the United States
The Netherlands
(92
)
Other Europe, Middle East & Africa
1,447
Asia Pacific
Total
$
5,328
$
(1)
Revenues are attributed to geographic areas based on the location of customers.
(2)
Long-lived assets include property, plant and equipment, goodwill and other intangible assets.
18. Additional Financial Information
Accounts payable and other current liabilities
(IN MILLIONS)
December 31,
December 31,
Trade payables
$
$
Personnel costs
Current portion of restructuring liabilities
Data and professional services
Interest payable
Other current liabilities(1)
Total accounts payable and other current liabilities
$
1,026
$
(1)
Other includes multiple items, none of which is individually significant.
19. Quarterly Financial Data (unaudited)
(IN MILLIONS, EXCEPT PER SHARE DATA)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Revenues
$
1,319
$
1,386
$
1,387
$
1,611
Operating income
Income from continuing operations before income taxes and equity in net income of affiliates
$
$
$
$
Income from discontinued operations, net of tax
$
$
$
-
$
(14)
Net income attributable to Nielsen stockholders
$
$
$
$
Net income per share of common stock, basic
Income from continuing operations
$
0.06
0.32
0.35
0.42
Discontinued operations, net of tax
$
0.03
0.82
-
(0.04
)
Net income attributable to Nielsen stockholders
$
0.09
1.14
0.35
0.38
Net income per share of common stock, diluted
Income from continuing operations
$
0.06
0.31
0.35
0.41
Discontinued operations, net of tax
$
0.03
0.80
-
(0.03
)
Net income attributable to Nielsen stockholders
$
0.09
$
1.12
$
0.35
$
0.38
(IN MILLIONS, EXCEPT PER SHARE DATA)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Revenues
$
1,273
$
1,342
$
1,351
$
1,441
Operating income
Income from continuing operations before income taxes and equity in net income of affiliates
$
$
$
$
Income from discontinued operations, net of tax
$
$
$
$
(7
)
Net income attributable to Nielsen stockholders
$
$
$
$
Net income per share of common stock, basic
Income from continuing operations
$
0.03
$
0.28
$
0.23
$
0.13
Discontinued operations, net of tax
0.04
0.01
0.06
(0.02
)
Net income attributable to Nielsen stockholders
$
0.07
$
0.29
$
0.29
$
0.11
Net income per share of common stock, diluted
Income from continuing operations
$
0.03
$
0.28
$
0.23
$
0.13
Discontinued operations, net of tax
0.04
0.01
0.05
(0.02
)
Net income attributable to Nielsen stockholders
$
0.07
$
0.28
$
0.29
$
0.11
Schedule I-Condensed Financial Information of Registrant
Nielsen Holdings N.V.
Parent Company Only
Statements of Operations
Year Ended December 31,
(IN MILLIONS)
Selling, general and administrative expenses
$
$
$
Operating loss
(4
)
(2
)
(2
)
Interest income
-
-
Interest expense
(2
)
(23
)
(21
)
Foreign currency exchange transaction (loss)/gain
(1
)
-
Loss from continuing operations before income taxes and equity in net income of subsidiaries
(5
)
(26
)
(23
)
(Provision)/benefit for income taxes
(1
)
(2
)
Equity in net income of subsidiaries
Net income
$
$
$
Nielsen Holdings N.V.
Parent Company Only
Balance Sheets
December 31,
(IN MILLIONS)
Assets:
Current assets
Cash and cash equivalents
$
$
Amounts receivable from subsidiary
Loan receivable from subsidiary
-
Total current assets
Investment in subsidiaries
5,728
5,216
Other non-current assets
-
Total assets
$
5,742
$
5,232
Liabilities and equity:
Current liabilities
Accounts payable and other current liabilities
Total current liabilities
Long-term debt
-
Other non-current liabilities
Total liabilities
Total equity
5,729
4,936
Total liabilities and equity
$
5,742
$
5,232
Nielsen Holdings N.V.
Parent Company Only
Statements of Cash Flows
Year Ended December 31,
(IN MILLIONS)
Net cash provided by/(used in) operating activities
$
$
(18
)
$
(16
)
Investing Activities:
Investment in subsidiaries
-
(2,078
)
Intercompany loans and advances with subsidiaries
(1
)
(6
)
Net cash (used in)/provided by investing activities
(1
)
(2,084
)
Financing Activities:
Proceeds from the Issuance of debt
-
Issuance of common stock
-
-
1,810
Dividends paid to stockholders
(265
)
-
-
Capital Contributions from/(to) Subsidiary
-
(14
)
-
Shares of common stock issued in business combination
-
-
Repurchase of common stock
(11
)
-
-
Activity under stock plans
Net cash (used in)/provided by financing activities
(178)
2,097
Net increase/(decrease) in cash and cash equivalents
(3
)
Cash and cash equivalents, beginning of period
-
Cash and cash equivalents, end of period
$
$
$
-
The notes to the consolidated financial statements of Nielsen Holdings N.V. (the “Company”) are an integral part of these nonconsolidated financial statements.
Notes to Schedule I
1. Basis of Presentation
The Company has accounted for the earnings of its subsidiaries under the equity method in these financial statements.
2. Commitments and Contingencies
The Company had no material commitments or contingencies during the reported periods.
3. Related Party Transactions
The Company executed a $6 million short-term loan with one of its subsidiaries with an original maturity in June 2012 and began accreting interest in December 2011 at a rate of 3.01%. In 2012, the loan was extended at a rate of 2.99% and matured in December 2013.
The Company enters into certain transactions with its subsidiaries through the normal course of operations and periodically settles these transactions in cash. During the year ended December 31, 2013, the Company received a net cash payment of $3 million associated with the sale of shares of common stock in conjunction with acquisitions made by its subsidiaries, net of reimbursements of fees paid on behalf of the Company by its subsidiaries. On December 31, 2012, the Company had a $7 million receivable from subsidiary associated with the sale of shares of common stock in conjunction with acquisitions made by its subsidiaries. During the year ended December 31, 2011, the Company received a net cash payment of $5 million associated with the sale of shares of common stock in conjunction with acquisitions made by its subsidiaries, net of reimbursements of fees paid on behalf of the Company by its subsidiaries.
4. Common Stock and Mandatory Convertible Bond Offerings and Related Transactions
On July 25, 2013, the Company’s board of directors approved a share repurchase program for up to $500 million of Nielsen’s outstanding common stock. The primary purpose of the program is to mitigate dilution associated with the Company’s equity compensation plans. Repurchases will be made in accordance with applicable securities laws from time to time in the open market depending on Nielsen management’s evaluation of market conditions and other factors. The program will be executed within the
limitations of the existing authority granted at Nielsen’s 2013 Annual General Meeting of Shareholders. As of December 31, 2013, there have been 289,839 shares of Nielsen’s common stock purchased at an average price of $34.49 per share (total consideration of $11 million). Cumulative shares of treasury stock were 409,067 and 213,127 with a corresponding value of $13 million and $4 million as of December 31, 2013 and December 31, 2012, respectively.
On January 31, 2013, the Company’s board of directors (the “Board”) adopted a cash dividend policy to pay quarterly cash dividends on its outstanding common stock. The following table represents the cash dividends paid for the year ended December 31, 2013.
Declaration Date
Shareholder of Record Date
Payment Date
Dividend Per Share
January 31, 2013
March 6, 2013
March 20, 2013
$
0.16
May 2, 2013
June 5, 2013
June 19, 2013
$
0.16
July 25, 2013
August 28, 2013
September 11, 2013
$
0.20
October 22, 2013
November 25, 2013
December 9, 2013
$
0.20
The dividend policy and payment of future cash dividends are subject to the discretion of the Board.
No dividends were declared or paid on the Company’s common stock in 2012 or 2011.
On January 31, 2011, the Company completed an initial public offering of 82,142,858 shares of its €0.07 par value common stock at a price of $23.00 per share, generating proceeds of approximately $1,801 million, net of $88 million of underwriter discounts. During 2012 and 2013, Luxco and certain Nielsen employees (the “selling shareholders”) completed public offerings totaling 145,564,884 shares of our stock at a weighted average price of $34.08 per share. All proceeds went to the selling stockholders and the offering did not have a significant impact on our operating results or financial position. As of December 31, 2013, Luxco owned 125,224,724 shares (or approximately 33%) of the Company’s common stock.
Concurrent with its offering of common stock, the Company issued $288 million in aggregate principal amount of 6.25% Mandatory Convertible Subordinated Bonds due February 1, 2013 (“the Bonds”), generating proceeds of approximately $277 million, net of $11 million of underwriter discounts. Interest on the Bonds was payable quarterly in arrears in February, May, August and November of each year, and commenced in May 2011. The Bonds provided for mandatory conversion into between 10,416,700 and 12,499,925 shares of Nielsen’s common stock on February 1, 2013 at a conversion rate per $50.00 principal amount of the bonds of not more than 2.1739 shares and not less than 1.8116 shares depending on the market value of its common stock (the average of the volume weighted-average price of its common stock for a 20 consecutive trading day period beginning on the 25 trading day immediately preceding February 1, 2013) relative to the initial price and the threshold appreciation price per share of $23.00 and $27.60, respectively. On February 1, 2013, the Bonds were converted into 10,416,700 shares of Nielsen’s common stock at per share price of $27.60.
The Company remitted and utilized substantially all of the combined net proceeds of approximately $2,078 million associated with the aforementioned transactions to certain of its subsidiaries to settle the Advisory Agreements in place between the Sponsors and certain of such subsidiaries and to redeem and retire certain issuances of the Company’s subsidiary long-term indebtedness.
Subsequent Event
On February 3, 2014, Nielsen completed the tender offer through Prime Acquisition, a wholly owned subsidiary, to acquire all outstanding shares of common stock of Harris Interactive, Inc. (HPOL) a leading global market research firm for $2.04 per share (total purchase price of $116 million).
Schedule II-Valuation and Qualifying Accounts
For the Years ended December 31, 2013, 2012 and 2011
(IN MILLIONS)
Balance
Beginning
of
Period
Charges to
Expense
Acquisitions
and
Divestitures
Deductions
Effect of
Foreign
Currency
Translation
Balance at
End of
Period
Allowance for accounts receivable and sales returns
For the year ended December 31, 2011
$
$
$
$
(10
)
$
$
For the year ended December 31, 2012
$
$
$
$
$
$
For the year ended December 31, 2013
$
$
$
-
$
(2)
$
$
(IN MILLIONS)
Balance
Beginning of
Period
Charges/
(Credits) to
Expense
Charged
to
Other
Accounts
Effect of
Foreign
Currency
Translation
Balance at
End of
Period
Valuation allowance for deferred taxes
For the year ended December 31, 2011
$
$
(25
)
$
$
(6
)
$
For the year ended December 31, 2012
$
$
(15
)
$
$
$
For the year ended December 31, 2013
$
$
(69
)
$
(5)
$
(8)
$
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as the Company’s disclosure controls and procedures are designed to do.
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2013 (the “Evaluation Date”). Based on such evaluation and subject to the foregoing, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
(b)
Management’s Annual Report on Internal Control Over Financial Reporting
Management’s Annual Report on Internal Control Over Financial Reporting appears in Part II, Item 8. “Financial Statements and Supplementary Data” of this annual report on Form 10-K.
(c) Attestation Report of the Registered Public Accounting Firm
The Company’s financial statements included in this annual report on Form 10-K have been audited by Ernst & Young LLP, independent registered public accounting firm. Ernst & Young LLP has also provided an attestation report on the Company’s internal control over financial reporting. Their reports appear in Part II, Item 8. “Financial Statements and Supplementary Data” of this annual report on Form 10-K.
(d)
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B.
Other Information
None.
PART III
Item 10.
Directors, Executive Officers, and Corporate Governance
The information required by this Item is incorporated by reference to the following sections of our definitive Proxy Statement related to the 2014 Annual Meeting of Stockholders (the “2014 Proxy Statement”), which will be filed with the SEC on or before April 30, 2014: “Proposal No. 3 - Election of Directors”, “The Board of Directors and Certain Governance Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance”.
Item 11.
Executive Compensation
The information required by this Item is incorporated by reference to the following sections of the 2014 Proxy Statement, which will be filed with the SEC on or before April 30, 2014: “Executive Compensation” and “Director Compensation”.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated by reference to the following sections of the 2014 Proxy Statement, which will be filed with the SEC on or before April 30, 2014: “Equity Compensation Plan Information” and “Ownership of Securities”.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated by reference to the following sections of the 2014 Proxy Statement, which will be filed with the SEC on or before April 30, 2014: “Certain Relationships and Related Party Transactions” and “The Board of Directors and Certain Governance Matters”.
Item 14.
Principal Accounting Fees and Services
The information required by this Item is incorporated by reference to the following section of the 2014 Proxy Statement, which will be filed with the SEC on or before April 30, 2014: “Proposal No. 4 - Ratification of Independent Registered Public Accounting Firm”.
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
The Financial Statements listed in the Index to Financial Statements in Item 8 are filed as part of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
The Financial Statement Schedules listed in the Index to Financial Statements in Item 8 are filed as part of this Annual Report on Form 10-K.
(a)(3) Exhibits
The exhibit index attached hereto is incorporated herein by reference
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.
Nielsen Holdings N.V.
(Registrant)
Date: February 21, 2014
/S/ JEFFREY R. CHARLTON
JEFFREY R. CHARLTON
Senior Vice President and Corporate Controller
Duly Authorized Officer and Principal Accounting Officer
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.
Signature
Title
Date
/s/ BRIAN J. WEST
Brian J. West
Chief Financial Officer (Principal Financial Officer)
February 21, 2014
/s/ JEFFREY R. CHARLTON
Jeffrey R. Charlton
Senior Vice President and Corporate Controller (Principal Accounting Officer)
February 21, 2014
/s/ DWIGHT M. BARNS
Dwight M. Barns
Chief Executive Officer (Principal Executive Officer)
February 21, 2014
/s/ DAVID CALHOUN
David Calhoun
Chairman of the Board
February 21, 2014
/s/ JAMES ATTWOOD
James Attwood
Director
February 21, 2014
/s/ GANESH RAO
Ganesh Rao
Director
February 21, 2014
/s/ JAMES KILTS
James Kilts
Director
February 21, 2014
/s/ KAREN HOGUET
Karen Hoguet
Director
February 21, 2014
/s/ ALEXANDER NAVAB
Alexander Navab
Director
February 21, 2014
/s/ ROBERT POZEN
Robert Pozen
Director
February 21, 2014
/s/ VIVEK RANADIVÉ
Vivek Ranadivé
Director
February 21, 2014
/s/ JAVIER TERUEL
Javier Teruel
Director
February 21, 2014
EXHIBIT INDEX
The agreements and other documents filed as exhibits to this annual report on Form 10-K are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the registrant in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Exhibit No.
Description
2.1(a)(1)
Agreement and Plan of Merger, dated as of December 17, 2012, among Arbitron Inc., Nielsen Holdings N.V. and TNC Sub I Corporation (incorporated herein by reference to Exhibit 2.1 to the Form 8-K of Nielsen Holdings N.V. filed on December 18, 2012 (File No. 001-35042))
2.1(b) (1)
Stock Purchase Agreement between VNU International B.V. and Expo Event Transco Inc., dated May 4, 2013 (incorporated herein by reference to Exhibit 2.2 to the Amendment No. 1 to the Form S-4 filed by The Nielsen Company B.V. on July 17, 2013 (File No. 333-189456))
3.1
Deed of Incorporation of Nielsen Holdings N.V. (formerly Valcon Acquisition Holding B.V.) (incorporated herein by reference to Exhibit 3.1 to Amendment No. 4 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on November 1, 2010 (File No. 333-167271))
3.2
Amended and Restated Articles of Association of Nielsen Holdings N.V. (unofficial English translation) (incorporated herein by reference to Exhibit 3.1 to the Form 8-K of Nielsen Holdings N.V. filed on February 1, 2011 (File No. 001-35042))
4.1(a)
Second Amended and Restated Credit Agreement, dated August 9, 2006 and amended and restated as of June 23, 2009, and further amended and restated as of February 2, 2012 among Nielsen Finance LLC, as a U.S. Borrower, TNC (US) Holdings Inc., as a U.S. Borrower, Nielsen Holding and Finance B.V., as Dutch Borrower, the Guarantors party thereto from time to time, Citibank, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, ABN AMRO Bank N.V., as Swing Line Lender, the other Lenders party thereto from time to time, Deutsche Bank Securities Inc., as Syndication Agent and JPMorgan Chase Bank, N.A., ABN AMRO Bank N.V. and ING Bank N.V., as Co-Documentation Agents (incorporated herein by reference to Exhibit 4.2 to the Form 8-K of Nielsen Holdings N.V. filed on February 6, 2012 (File No. 001-35042))
4.1(b)
Amended and Restated Security Agreement, dated as of August 9, 2006 and amended and restated as of June 23, 2009, among Nielsen Finance LLC, the other Grantors identified therein, and Citibank, N.A., as Collateral Agent (incorporated herein by reference to Exhibit 4.1(j) to Amendment No. 2 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 30, 2010 (File No. 333-167271))
4.1(c)
Intellectual Property Security Agreement, dated as of August 9, 2006, among Nielsen Finance LLC, the other Grantors identified therein and Citibank, N.A. as Collateral Agent (incorporated herein by reference to Exhibit 4.1(c) to Amendment No. 2 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 30, 2010 (File No. 333-167271))
4.1(d)
Senior Secured Loan Agreement, dated June 8, 2009, by and among Nielsen Finance LLC, the Guarantors party thereto from time to time, Goldman Sachs Lending Partners LLC and the other Lenders party thereto from time to time (incorporated herein by reference to Exhibit 4.1(g) to Amendment No. 2 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 30, 2010 (File No. 333-167271))
4.1(e)
First Lien Intercreditor Agreement, dated as of June 23, 2009, among Citibank, N.A., as Collateral Agent and Authorized Representative under the Credit Agreement, Goldman Sachs Lending Partners LLC, as the Initial Additional Authorized Representative, and each additional Authorized Representative from time to time party thereto (incorporated herein by reference to Exhibit 4.1(c) to the Form 8-K/A of The Nielsen Company B.V. filed on June 26, 2009 (File No. 333-142546-29))
Exhibit No.
Description
4.1(f)
Amendment No. 1, dated as of August 13, 2010, to the Amended and Restated Credit Agreement, dated August 9, 2006 and amended and restated as of June 23, 2009, among Nielsen Finance LLC, as a U.S. Borrower, TNC (US) Holdings Inc., as a U.S. Borrower, Nielsen Holding and Finance B.V., as Dutch Borrower, the Guarantors party thereto from time to time, Citibank, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, ABN AMRO Bank N.V., as Swing Line Lender, the other Lenders party thereto from time to time, Deutsche Bank Securities Inc., as Syndication Agent and JPMorgan Chase Bank, N.A., ABN AMRO Bank N.V. and ING Bank N.V., as Co-Documentation Agents (incorporated herein by reference to Exhibit 4.1 to the Form 8-K of The Nielsen Company B.V. filed on August 16, 2010 (File No. 333-142546-29))
4.1(g)
Amendment No. 2, dated as of March 23, 2011, to the Amended and Restated Credit Agreement, dated August 9, 2006 and amended and restated as of June 23, 2009, among Nielsen Finance LLC, the other borrowers and guarantors party thereto, the lenders and other parties from time to time party thereto, and Citibank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q of Nielsen Holdings N.V. filed on April 28, 2011 (File No. 001-35042))
4.1(h)
Amendment Agreement, dated February 2, 2012, by and among Nielsen Finance LLC, the other borrowers party thereto, the guarantors party thereto, Citibank, N.A., as administrative agent and collateral agent, and certain of the lenders (incorporated herein by reference to Exhibit 4.1 to the Form 8-K of Nielsen Holdings N.V. filed on February 6, 2012 (File No. 001-35042))
4.1(i)
Amendment Agreement, dated February 28, 2013, by and among Nielsen Finance LLC, the other borrowers party thereto, the guarantors party thereto, Citibank, N.A., as administrative agent, and certain of the lenders ((incorporated herein by reference to Exhibit 4.1 to the Form 8-K of Nielsen Holdings N.V. filed on March 4, 2013 (File No. 001-35042))
4.1(j)
Form of Third Amended and Restated Credit Agreement (incorporated herein by reference to Exhibit 4.2 to the Form 8-K of Nielsen Holdings N.V. filed on March 4, 2013 (File No. 001-35042))
4.2(a)
Indenture, dated as of October 12, 2010, among Nielsen Finance LLC, Nielsen Finance Co., the Guarantors and Law Debenture Trust Company of New York, as Trustee for the 7.75% Senior Notes due 2018 (incorporated herein by reference to Exhibit 4.1(a) to the Form 8-K of The Nielsen Company B.V. filed on October 14, 2010 (File No. 333-142546-29))
4.2(b)
First Supplemental Indenture, dated as of November 9, 2010, among Nielsen Finance LLC, Nielsen Finance Co., the Guarantors and Law Debenture Trust Company of New York (incorporated herein by reference to Exhibit 4.1(a) to the Form 8-K of The Nielsen Company B.V. filed on November 12, 2010 (File No. 333-142546-29))
4.2(c)
Second Supplemental Indenture, dated as of December 31, 2010, among The Nielsen Company (Luxembourg) S.à r.l., an affiliate of Nielsen Finance LLC and Nielsen Finance Co. and Law Debenture Trust Company of New York (incorporated herein by reference to Exhibit 4.4(a) to the Form 8-K of The Nielsen Company B.V. filed on January 5, 2011 (File No. 333-142546-29))
4.2(d)
Third Supplemental Indenture, dated as of December 31, 2010, among Hamilton Hes Limited in the process of changing its name to The Nielsen Company Finance (Ireland) Limited, an affiliate of Nielsen Finance LLC and Nielsen Finance Co. and Law Debenture Trust Company of New York (incorporated herein by reference to Exhibit 4.4(b) to the Form 8-K of The Nielsen Company B.V. filed on January 5, 2011 (File No. 333-142546-29))
4.2(e)
Fourth Supplemental Indenture, dated as of February 17, 2012, among NeuroFocus, Inc., an affiliate of Nielsen Finance LLC and Nielsen Finance Co. and Law Debenture Trust Company of New York (incorporated herein by reference to Exhibit 4.8(e) to the Annual Report on Form 10-K of Nielsen Holdings N.V. for the year ended December 31, 2011 (File No. 001-34052))
Exhibit No.
Description
4.2(f)
Fifth Supplemental Indenture, dated as of May 3, 2012, between Marketing Analytics, Inc. an affiliate of Nielsen Finance LLC, a Delaware limited liability company and Nielsen Finance Co., a Delaware corporation and Law Debenture Trust Company of New York, as trustee for the 7.75% Senior Notes due 2018 (incorporated herein by reference to Exhibit 4.3 to the Form 10-Q of Nielsen Holdings N.V. filed on July 25, 2012 (File No. 001-35042))
4.2(g)
Sixth Supplemental Indenture, dated as of May 3, 2012, between The Perishables Group, Inc., an affiliate of Nielsen Finance LLC, a Delaware limited liability company and Nielsen Finance Co., a Delaware corporation and Law Debenture Trust Company of New York, as trustee for the 7.75% Senior Notes due 2018 (incorporated herein by reference to Exhibit 4.4 to the Form 10-Q of Nielsen Holdings N.V. filed on July 25, 2012 (File No. 001-35042))
4.2(h)
Seventh Supplemental Indenture, dated as of December 12, 2012, between Vizu Corporation, an affiliate of Nielsen Finance LLC, a Delaware limited liability company and Nielsen Finance Co., a Delaware corporation, and Law Debenture Trust Company of New York, as trustee for the 7.75% Senior Notes due 2018 (incorporated herein by reference to Exhibit 4.6(h) to the Registration Statement on Form S-4 filed by The Nielsen Company B.V. on June 19, 2013 (File No. 333-189456))
4.2(i)
Eighth Supplemental Indenture, dated as of June 17, 2013, between G4 Analytics, Inc., an affiliate of Nielsen Finance LLC, a Delaware limited liability company and Nielsen Finance Co., a Delaware corporation, and Law Debenture Trust Company of New York, as trustee for the 7.75% Senior Notes due 2018 (incorporated herein by reference to Exhibit 4.6(i) to the Registration Statement on Form S-4 filed by The Nielsen Company B.V. on June 19, 2013 (File No. 333-189456))
4.2(j)*
Ninth Supplemental Indenture, dated as of December 31, 2013, between Nielsen Audio, Inc. and Nielsen Finance Co., and Law Debenture Trust Company of New York, as trustee
4.2(k)*
Tenth Supplemental Indenture, dated as of December 31, 2013, between Cardinal North LLC and Nielsen Finance Co., and Law Debenture Trust Company of New York, as trustee
4.2(l)*
Eleventh Supplemental Indenture, dated as of December 31, 2013, between Nielsen International Holdings, Inc. and Nielsen Finance Co., and Law Debenture Trust Company of New York, as trustee
4.3(a)
Indenture, dated as of October 2, 2012, among Nielsen Finance LLC, Nielsen Finance Co., the Guarantors (as defined therein) and Law Debenture Trust Company of New York, as Trustee (incorporated herein by reference to Exhibit 4.1 (a) to the Form 8-K of Nielsen Holdings N.V. filed on October 4, 2012 (File No. 001-35042))
4.3(b)
First Supplemental Indenture, dated as of December 12, 2012, among Vizu Corporation, Nielsen Finance Co. and Law Debenture Trust Company of New York, as trustee (incorporated herein by reference to Exhibit 4.1(b) to the Registration Statement on Form S-4 filed by The Nielsen Company B.V. on June 19, 2013 (File No. 333-189456))
4.3(c)
Second Supplemental Indenture, dated as of June 17, 2013, among G4 Analytics, Inc., Nielsen Finance Co. and Law Debenture Trust Company of New York, as trustee (incorporated herein by reference to Exhibit 4.1(c) to Registration Statement on Form S-4 filed by The Nielsen Company B.V. on June 19, 2013 (File No. 333-189456))
4.3(d)*
Third Supplemental Indenture, dated as of December 31, 2013, between Nielsen Audio, Inc. and Nielsen Finance Co., and Law Debenture Trust Company of New York, as trustee
4.3(e)*
Fourth Supplemental Indenture, dated as of December 31, 2013, between Cardinal North LLC and Nielsen Finance Co., and Law Debenture Trust Company of New York, as trustee
4.3(f)*
Fifth Supplemental Indenture, dated as of December 31, 2013, between Nielsen International Holdings, Inc. and Nielsen Finance Co., and Law Debenture Trust Company of New York, as trustee
4.4(a)
Indenture, dated as of September 27, 2013, among The Nielsen Company (Luxembourg) S.ar.l., the Guarantors (as defined therein) and Deutsche Bank Trust Company Americas, as Trustee (incorporated herein by reference to the Current Report on Form 8-K filed on September 27, 2013 (File No. 001-35042))
Exhibit No.
Description
4.4(b)*
First Supplemental Indenture, dated as of December 31, 2013, between Nielsen Audio, Inc. and Deutsche Bank Trust Company Americas, as trustee
4.4(c)*
Second Supplemental Indenture, dated as of December 31, 2013, between Cardinal North LLC and Deutsche Bank Trust Company Americas, as trustee
4.4(d)*
Third Supplemental Indenture, dated as of December 31, 2013, between Nielsen International Holdings, Inc. and Deutsche Bank Trust Company Americas, as trustee
10.1(a)
Amended and Restated Shareholders’ Agreement regarding Nielsen Holdings N.V., dated January 31, 2011, among AlpInvest, Blackstone, Carlyle, Hellman & Friedman, KKR, Thomas H. Lee Partners, Valcon Acquisition Holding (Luxembourg) S.à r.l., Nielsen Holdings N.V., Valcon Acquisition B.V. and The Nielsen Company B.V. (incorporated herein by reference to Exhibit 10.1 to the Form 8-K of Nielsen Holdings N.V. filed on February 1, 2011 (file No. 001-35042))
10.1(b)
Form of Amendment No. 1 to the Amended and Restated Shareholders’ Agreement regarding Nielsen Holdings N.V., dated July 26, 2012, among AlpInvest, Blackstone, Carlyle, Hellman & Friedman, KKR, Thomas H. Lee Partners, Valcon Acquisition Holding (Luxembourg) S.à r.l., Nielsen Holdings N.V., Valcon Acquisition B.V. and The Nielsen Company B.V (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q of Nielsen Holdings N.V. filed on October 22, 2012 (File No. 001-35042))
10.1(c)
Amendment No 2 to the Amended and Restated Shareholders’ Agreement regarding Nielsen Holdings N.V., dated January 31, 2012, among AlpInvest, Blackstone, Carlyle, Hellman & Friedman, KKR, Thomas H. Lee Partners, Valcon Acquisition Holding (Luxembourg) S.à r.l., Nielsen Holdings N.V., Valcon Acquisition B.V. and The Nielsen Company B.V. (incorporated herein by reference to Exhibit 10.1(c) to the Form 10-K of Nielsen Holdings N.V. filed on February 22, 2013 (File No. 001-35042))
10.1(d)
Agreement Terminating the Amended and Restated Shareholders’ Agreement Regarding Nielsen Holdings N.V., dated as of August 14, 2013, with The Nielsen Company B.V., Valcon Acquisition B.V., Valcon Acquisition Holding (Luxembourg) S.ar.l. and funds associated with or designated by AlpInvest Partners, The Blackstone Group, The Carlyle Group, Centerview Partners, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. and Thomas H. Lee Partners (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q of Nielsen Holdings N.V. filed on October 23, 2013 (File No. 001-35042))
10.1(e)
Form of Letter Agreement with affiliates of each of The Blackstone Group, The Carlyle Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. and Thomas H. Lee Partners, dated as of August 14, 2013 (incorporated herein by reference to Exhibit 10.2 to the Form 10-Q of Nielsen Holdings N.V. filed on October 23, 2013 (File No. 001-35042))
10.2(a)**
Employment Agreement, as amended and restated, dated as of December 15, 2008, by and among David L. Calhoun, Valcon Acquisition Holding (Luxembourg) S.à r.l. and TNC (US) Holdings, Inc. (incorporated herein by reference to Exhibit 10.5(c) to the Annual Report on Form 10-K of The Nielsen Company B.V. for the year ended December 31, 2008 (File No. 333-142546-29))
10.2(b)**
Second Amended and Restated Employment Agreement, dated as of October 27, 2010, by and among David L. Calhoun and Nielsen Holdings, N.V., The Nielsen Company B.V., a Netherlands corporation, and TNC (US) Holdings, Inc. (formerly VNU, Inc.), a Delaware corporation (incorporated herein by reference to Exhibit 10.3 to the Form 10-Q of The Nielsen Company B.V. filed on October 27, 2010 (File No. 333-142546-29))
10.2(c)* **
Transition Agreement, dated as of November 5, 2013, by and among David L. Calhoun, Nielsen Holdings N.V., The Nielsen Company B.V. and TNC (US) Holdings, Inc.
10.2(d)**
Stock Option Agreement, dated as of November 22, 2006, between Valcon Acquisition Holding B.V. and David L. Calhoun (incorporated herein by reference to Exhibit 10.29 to Amendment No. 4. to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on November 1, 2010 (File No. 333-167271))
Exhibit No.
Description
10.2(e)**
Management Stockholder’s Agreement, dated as of November 22, 2006, between Valcon Acquisition Holding B.V., Valcon Acquisition Holding (Luxembourg) S.à r.l and David L. Calhoun (incorporated herein by reference to Exhibit 10.22 to Amendment No. 4 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on November 1, 2010 (File No. 333-167271))
10.2(f)**
Amendment No. 1, dated as of October 27, 2010, to the Management Stockholders’ Agreement by and among Nielsen Holdings B.V. (f/k/a Valcon Acquisition Holding B.V. a private company with limited liability incorporated under the laws of The Netherlands, Valcon Acquisition Holding (Luxembourg) S.à r.l., a private limited company incorporated under the laws of Luxembourg and David L. Calhoun (incorporated herein by reference to Exhibit 10.2 to the Form 10-Q of The Nielsen Company B.V. filed on October 27, 2010 (File No. 333-142546-29))
10.3**
Nielsen Holdings N.V. Directors Deferred Compensation Plan, effective September 11, 2012 (incorporated herein by reference to Exhibit 10.3 to the Form 10-Q of Nielsen Holdings N.V. filed on October 22, 2012 (File No. 001-35042))
10.4**
Form of Severance Agreement (incorporated herein by reference to Exhibit 10.10(b) to Amendment No. 1 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
10.5**
The Nielsen Company Deferred Compensation Plan, as amended and restated, effective September 11, 2012 (incorporated herein by reference to Exhibit 10.2 to the Form 10-Q of Nielsen Holdings N.V. filed on October 22, 2012 (File No. 001-35042))
10.6**
Form of Nielsen Holdings N.V. Performance Restricted Share Award Agreement (incorporated herein by reference to Exhibit 10.2 to the Form 10-Q of Nielsen Holdings N.V. filed on April 25, 2013 (File No. 001-35042))
10.7(a)**
Restricted Stock Unit Award Agreement, dated as of June 19, 2009, between Valcon Acquisition Holding B.V. and Mitchell Habib (incorporated herein by reference to Exhibit 10.10(h) to the quarterly report on Form 10-Q of The Nielsen Company B.V. for the fiscal quarter ended June 30, 2009 (File No. 333-142546-29))
10.7(b)**
Form of Offer Letter, dated March 22, 2007, by and between The Nielsen Company B.V. and Mitchell J. Habib (incorporated herein by reference to Exhibit 10.20 to the Form 10-K of The Nielsen Company B.V. filed on March 31, 2008 (File No. 333-142546-29))
10.8**
Form of Deferred Stock Unit Grant, dated as of September 11, 2012, for non-employee directors of Nielsen Holdings N.V. (incorporated herein by reference to Exhibit 10.4 to the Form 10-Q of Nielsen Holdings N.V. filed on October 22, 2012 (File No. 001-35042))
10.9(a)**
VNU Excess Plan, as amended and restated, effective April 1, 2002 (incorporated herein by reference to Exhibit 10.12(a) to Amendment No. 1 to the Company’s Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
10.9(b)**
Amendment to the VNU Excess Plan, effective August 31, 2006 (incorporated herein by reference to Exhibit 10.12(b) to Amendment No. 1 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
10.9(c)**
Second Amendment to the VNU Excess Plan, effective January 23, 2007 (incorporated herein by reference to Exhibit 10.12(c) to Amendment No. 1 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
10.10(a)**
VNU Deferred Compensation Plan, dated April 1, 2003 (incorporated herein by reference to Exhibit 10.13(a) to Amendment No. 1 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
10.10(b)**
Amendment to VNU, ACNielsen Corporation and VNU USA, Inc. Deferred Compensation Plan, dated May 10, 2006 (incorporated herein by reference to Exhibit 10.13(b) to Amendment No. 1 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
Exhibit No.
Description
10.10(c)**
The Nielsen Company Deferred Compensation Plan, as amended and restated, effective October 28, 2008 (incorporated herein by reference to Exhibit 10.13(c) to the quarterly report on Form 10-Q of The Nielsen Company B.V. for the fiscal quarter ended September 30, 2008, (File No. 333-142546-29))
10.11**
2006 Stock Acquisition and Option Plan for Key Employees of Nielsen Holding N.V. and its Subsidiaries, as amended and restated, effective August 23, 2010 (incorporated herein by reference to Exhibit 10.1 to the Form S-8 of Nielsen Holdings N.V. filed on February 14, 2012 (File No. 333-172256))
10.12(a)**
Form of Management Stockholder’s Agreement (incorporated herein by reference to Exhibit 10.15 to the Form 10-K of The Nielsen Company B.V. filed on March 31, 2008 (File No. 333-142546-29))
10.12(b)**
Form of Sale Participation Agreement (incorporated herein by reference to Exhibit 10.16 to the Form 10-K of The Nielsen Company B.V. filed on March 31, 2008 (File No. 333-142546-29))
10.12(c)**
Form of Amendment to Management Stockholder’s Agreement and Sale Participation Agreement dated September 29, 2011, originally filed on March 31, 2008 (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q of Nielsen Holdings N.V. filed on October 27, 2011 (File No. 001-35042))
10.13(a)**
Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.24(b) to the quarterly report on Form 10-Q of The Nielsen Company B.V. for the fiscal quarter ended March 31, 2010 (File No. 333-142546-29))
10.13(b)**
Form of Stock Option Agreement (incorporated herein by reference to Exhibit 10.26 to Amendment No. 2 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 30, 2010 (File No. 333-167271))
10.14(a)†
Amended and Restated Master Services Agreement, effective as of October 1, 2007, by and between Tata America International Corporation & Tata Consultancy Services Limited and ACNielsen (US), Inc. (incorporated herein by reference to Exhibit 10.16(a) to Amendment No. 1 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 8, 2010 (File No. 333-167271))
10.14(b)†
Amendment Number 1 to the Amended and Restated Master Services Agreement, effective as of March 31, 2008, by and between Tata America International Corporation, Tata Consultancy Services Limited and ACNielsen (US), Inc. (incorporated herein by reference to Exhibit 10.16(b) to Amendment No. 1 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on January July 8, 2010 (File No. 333-167271))
10.14(c)
Amendment Number 2 to the Amended and Restated Master Services Agreement, effective as of October 31, 2007, by and between Tata America International Corporation, Tata Consultancy Services Limited and ACNielsen (US), Inc. (incorporated herein by reference to Exhibit 10.16(c) to Amendment No. 1 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 8, 2010 (File No. 333-167271))
10.14(d)†
Amendment Number 3 to the Amended and Restated Master Services Agreement, effective as of May 11, 2009, by and between Tata America International Corporation, Tata Consultancy Services Limited and ACNielsen (US), Inc. (incorporated herein by reference to Exhibit 10.16(d) to Amendment No. 1 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 8, 2010 (File No. 333-167271))
10.14(e)†
Amendment Number Four to the Amended and Restated Master Services Agreement, dated and made effective as of February 7, 2013, by and between Tata America International Corporation, Tata Consultancy Services Limited and The Nielsen Company (US), LLC. (incorporated herein by reference to Exhibit 10.1 to the Form 10-Q of Nielsen Holdings N.V. filed on April 25, 2013 (File No. 001-35042))
10.15**
Form of Offer Letter, dated February 20, 2007, by and between The Nielsen Company B.V. and Brian J. West (incorporated herein by reference to Exhibit 10.19 to the Form 10-K of The Nielsen Company B.V. filed on March 31, 2008 (File No. 333-142546-29))
Exhibit No.
Description
10.16**
Amended and Restated Arbitron Inc. 2008 Equity Compensation Plan (incorporated herein by reference to the Registration Statement on Form S-8 filed on September 30, 2013 (File No. 333-191458))
10.17**
Form of Centerview Stock Option Agreement (incorporated herein by reference to Exhibit 10.22(f) to the quarterly report on Form 10-Q of The Nielsen Company B.V. for the fiscal quarter ended June 30, 2009 (File No. 333-142546-29))
10.18**
Investment Agreement regarding Valcon Acquisition Holding (Luxembourg) S.á r.l., made as of November 6, 2006, among each of the AlpInvest Funds, each of the Blackstone Funds, each of the Carlyle Funds, each of the Hellman & Friedman Funds, each of the KKR Funds, each of the Thomas H. Lee Funds (all as listed on Schedule 1 thereto), Valcon Acquisition Holding (Luxembourg) S.A.R.L. and Centerview Partners Holdings L.L.C. (incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on May 2, 2007 (File No. 333-142546-29))
10.19**
Amended and Restated Nielsen Holdings 2010 Stock Incentive Plan (incorporated herein by reference to Annex A to the
Form DEF14A of Nielsen Holdings N.V. filed on April 15, 2013 (File No. 001-35042))
10.20**
Form of Termination Protection Agreement (incorporated herein by reference to Exhibit 10.11 to Amendment No. 1 to the Registration Statement on Form S-4 of The Nielsen Company B.V. filed on June 21, 2007 (File No. 333-142546-29))
10.21
Registration Rights Agreement, dated January 31, 2011, among Nielsen Holdings N.V., Valcon Acquisition Holding (Luxembourg) S.à r.l., AlpInvest Partners CS Investments 2006 C.V., Blackstone Capital Partners (Cayman) V L.P., Carlyle Partners IV Cayman, L.P., Hellman & Friedman Capital Partners V (Cayman), L.P., KKR VNU (Millennium) Limited, THL Fund VI Alternative Corp. and Centerview Partners Holdings L.L.C. (incorporated herein by reference to Exhibit 10.2 to the Form 8-K of Nielsen Holdings N.V. filed on February 1, 2011 (File No. 001-35042))
10.22**
Nielsen Holdings Executive Annual Incentive Plan for Nielsen Holdings B.V. and its Subsidiaries (incorporated herein by reference to Exhibit 10.25 to Amendment No. 2 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 30, 2010 (File No. 333-167271))
10.23**
Form of Restricted Stock Unit Award Agreement (incorporated herein by reference to Exhibit 10.27 to Amendment No. 2 to the Registration Statement on Form S-1 of Nielsen Holdings N.V. filed on July 30, 2010 (File No. 333-167271))
21.1*
Nielsen Holdings N.V. Active Subsidiaries
23.1*
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1*
CEO 302 Certification pursuant to Rule 13a-15(e)/15d-15(e)
31.2*
CFO 302 Certification pursuant to Rule 13a-15(e)/15d-15(e)
32.1*
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
32.2*
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Exhibit No.
Description
101*
The following financial information from Nielsen Holdings N.V.’s Annual Report on Form 10-K for the year ended December 31, 2013, formatted in XBRL includes: (i) Consolidated Statements of Operations for the three years ended December 31, 2013, 2012 and 2011, (ii) Consolidated Statements of Comprehensive Income for the three years ended December 31, 2013, 2012 and 2011; (iii) Consolidated Balance Sheets at December 31, 2013 and 2012, (iv) Consolidated Statements of Cash Flows for the three years ended December 31, 2013, 2012 and 2011, (v) Consolidated Statements of Changes in Equity for the three years ended December 31, 2013, 2012 and 2011, and (vi) the Notes to the Consolidated Financial Statements.
*
Filed or furnished herewith.
**
Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.
†
Certain portions have been omitted in accordance with a request for confidential treatment that the Company has submitted to the SEC. Omitted information has been filed separately with the SEC.
(1)
Certain of the schedules and exhibits to the agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Nielsen hereby undertakes to furnish supplementally to the Securities and Exchange Commission copies of any omitted schedules and exhibits upon request therefor by the Securities and Exchange Commission.