UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017March 31, 2021
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission file number 001-35042
Nielsen Holdings plc
(Exact name of registrant as specified in its charter)
England and Wales |
| 98-1225347 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
| |
85 Broad Street New York, New York 10004 (646) 654-5000 |
|
Oxford Oxfordshire, United Kingdom +1 (646) 654-5000 |
(Address of principal executive offices) (Zip Code) (Registrant’s telephone numbers including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Ordinary shares, par value €0.07 per share | NLSN | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company,”" and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer |
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| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 356,168,000358,497,131 shares of the registrant’s Common Stock outstanding as of September 30, 2017.March 31, 2021.
Contents
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| PAGE | ||
PART I. |
| - 3 - | |||
Item 1. |
| - 3 - | |||
Item 2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | - | ||
Item 3. |
| - | |||
Item 4. |
| - | |||
PART II. |
| - | |||
Item 1. |
| - | |||
Item 1A. |
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Item 2. |
| - | |||
Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
| - | |||
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| - |
PARTPART I. FINANCIAL INFORMATION
Item 1. | Condensed Consolidated Financial Statements |
Item 1.Condensed Consolidated Financial Statements
Nielsen Holdings plc
Condensed Consolidated Statements of Operations (Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| |||||||||||||||
|
| September 30, |
|
| September 30, |
|
| March 31, |
|
| |||||||||||||||
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
|
| ||||||
Revenues |
| $ | 1,641 |
|
| $ | 1,570 |
|
| $ | 4,811 |
|
| $ | 4,653 |
|
| $ | 863 |
|
| $ | 842 |
|
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| 692 |
|
|
| 642 |
|
|
| 2,031 |
|
|
| 1,937 |
|
|
| 277 |
|
|
| 324 |
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 445 |
|
|
| 452 |
|
|
| 1,387 |
|
|
| 1,391 |
|
|
| 206 |
|
|
| 202 |
|
|
Depreciation and amortization |
|
| 160 |
|
|
| 151 |
|
|
| 477 |
|
|
| 450 |
|
|
| 127 |
|
|
| 136 |
|
|
Restructuring charges |
|
| 7 |
|
|
| 29 |
|
|
| 48 |
|
|
| 73 |
|
|
| — |
|
|
| 3 |
|
|
Operating income |
|
| 337 |
|
|
| 296 |
|
|
| 868 |
|
|
| 802 |
|
|
| 253 |
|
|
| 177 |
|
|
Interest income |
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 3 |
|
|
| — |
|
|
| 1 |
|
|
Interest expense |
|
| (95 | ) |
|
| (85 | ) |
|
| (277 | ) |
|
| (247 | ) |
|
| (80 | ) |
|
| (83 | ) |
|
Foreign currency exchange transaction gains/(losses), net |
| — |
|
|
| 2 |
|
|
| (9 | ) |
|
| (3 | ) | ||||||||||
Foreign currency exchange transaction losses, net |
|
| (4 | ) |
|
| (9 | ) |
| ||||||||||||||||
Other expense, net |
|
| (1 | ) |
| — |
|
|
| (3 | ) |
| — |
|
|
| — |
|
| (1 | ) |
| |||
Income from continuing operations before income taxes |
|
| 242 |
|
|
| 214 |
|
|
| 582 |
|
| 555 |
|
|
| 169 |
|
|
| 85 |
|
| |
Provision for income taxes |
|
| (92 | ) |
|
| (82 | ) |
|
| (226 | ) |
|
| (208 | ) |
|
| (60 | ) |
|
| (25 | ) |
|
Net income |
|
| 150 |
|
|
| 132 |
|
|
| 356 |
|
|
| 347 |
| |||||||||
Net income from continuing operations |
|
| 109 |
|
|
| 60 |
|
| ||||||||||||||||
Net income/(loss) from discontinued operations, net of income taxes |
|
| 467 |
|
|
| (73 | ) |
| ||||||||||||||||
Net income/(loss) |
|
| 576 |
|
|
| (13 | ) |
| ||||||||||||||||
Net income attributable to noncontrolling interests |
|
| 4 |
|
|
| 2 |
|
|
| 8 |
|
|
| 4 |
|
|
| 3 |
|
|
| 5 |
|
|
Net income attributable to Nielsen stockholders |
| $ | 146 |
|
| $ | 130 |
|
| $ | 348 |
|
| $ | 343 |
| |||||||||
Net income per share of common stock, basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net income attributable to Nielsen stockholders |
| $ | 0.41 |
|
| $ | 0.36 |
|
| $ | 0.98 |
|
| $ | 0.95 |
| |||||||||
Net income per share of common stock, diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net income attributable to Nielsen stockholders |
| $ | 0.41 |
|
| $ | 0.36 |
|
| $ | 0.97 |
|
| $ | 0.94 |
| |||||||||
Net income/(loss) attributable to Nielsen shareholders |
| $ | 573 |
|
| $ | (18 | ) |
| ||||||||||||||||
Net income/(loss) per share of common stock, basic |
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income from continuing operations attributable to Nielsen shareholders |
|
| 0.30 |
|
|
| 0.16 |
|
| ||||||||||||||||
Net income/(loss) from discontinued operations attributable to Nielsen shareholders |
|
| 1.30 |
|
|
| (0.21 | ) |
| ||||||||||||||||
Net income/(loss) attributable to Nielsen shareholders |
| $ | 1.60 |
|
| $ | (0.05 | ) |
| ||||||||||||||||
Net income/(loss) per share of common stock, diluted |
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income from continuing operations attributable to Nielsen shareholders |
|
| 0.29 |
|
|
| 0.16 |
|
| ||||||||||||||||
Net income/(loss) from discontinued operations attributable to Nielsen shareholders |
|
| 1.30 |
|
|
| (0.21 | ) |
| ||||||||||||||||
Net income/(loss) attributable to Nielsen shareholders |
| $ | 1.59 |
|
| $ | (0.05 | ) |
| ||||||||||||||||
Weighted-average shares of common stock outstanding, basic |
|
| 356,426,891 |
|
|
| 357,088,498 |
|
|
| 356,881,905 |
|
|
| 359,303,099 |
|
|
| 357,944,731 |
|
|
| 356,389,022 |
|
|
Dilutive shares of common stock |
|
| 1,265,224 |
|
|
| 3,486,309 |
|
|
| 1,391,915 |
|
|
| 3,686,397 |
|
|
| 2,244,591 |
|
|
| 1,272,358 |
|
|
Weighted-average shares of common stock outstanding, diluted |
|
| 357,692,115 |
|
|
| 360,574,807 |
|
|
| 358,273,820 |
|
|
| 362,989,496 |
|
|
| 360,189,322 |
|
|
| 357,661,380 |
|
|
Dividends declared per common share |
| $ | 0.34 |
|
| $ | 0.31 |
|
| $ | 0.99 |
|
| $ | 0.90 |
|
| $ | 0.06 |
|
| $ | 0.06 |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 3 -
Nielsen Holdings plc
Condensed Consolidated Statements of Comprehensive IncomeIncome/(Loss) (Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| |||||||||||||||
|
| September 30, |
|
| September 30, |
|
| March 31, |
|
| |||||||||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
|
| ||||||
Net income |
| $ | 150 |
|
| $ | 132 |
|
| $ | 356 |
|
| $ | 347 |
| |||||||||
Net income/(loss) |
| $ | 576 |
|
| $ | (13 | ) |
| ||||||||||||||||
Other comprehensive income/(loss), net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments (1) |
|
| 66 |
|
|
| (15 | ) |
|
| 224 |
|
|
| 35 |
|
|
| 228 |
|
|
| (104 | ) |
|
Changes in the fair value of cash flow hedges (2) |
|
| 2 |
|
|
| 4 |
|
|
| 3 |
|
|
| (6 | ) |
|
| 5 |
|
|
| (33 | ) |
|
Defined benefit pension plan adjustments (3) |
|
| 4 |
|
| — |
|
|
| 10 |
|
|
| 7 |
|
|
| 144 |
|
|
| 4 |
|
| |
Total other comprehensive income/(loss) |
|
| 72 |
|
|
| (11 | ) |
|
| 237 |
|
|
| 36 |
|
|
| 377 |
|
|
| (133 | ) |
|
Total comprehensive income |
|
| 222 |
|
|
| 121 |
|
|
| 593 |
|
|
| 383 |
| |||||||||
Less: comprehensive income attributable to noncontrolling interests |
|
| 4 |
|
|
| 1 |
|
|
| 13 |
|
|
| 2 |
| |||||||||
Total comprehensive income attributable to Nielsen stockholders |
| $ | 218 |
|
| $ | 120 |
|
| $ | 580 |
|
| $ | 381 |
| |||||||||
Total comprehensive income/(loss) |
|
| 953 |
|
|
| (146 | ) |
| ||||||||||||||||
Less: comprehensive income/(loss) attributable to noncontrolling interests |
|
| 1 |
|
|
| (3 | ) |
| ||||||||||||||||
Total comprehensive income/(loss) attributable to Nielsen shareholders |
| $ | 952 |
|
| $ | (143 | ) |
|
(1) | Net of tax of |
|
|
(2) | Net of tax of $(3) million and |
(3) | Net of tax of $(43) million and $(1) million for |
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 -
Nielsen Holdings plc
Condensed Consolidated Balance Sheets
|
| March 31, |
|
| December 31, |
| ||
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) |
| 2021 |
|
| 2020 |
| ||
|
| (Unaudited) |
|
|
|
|
| |
Assets: |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 1,197 |
|
| $ | 500 |
|
Trade and other receivables, net of allowances for doubtful accounts and sales returns of $22 and $23 as of March 31, 2021 and December 31, 2020, respectively |
|
| 504 |
|
|
| 465 |
|
Prepaid expenses and other current assets |
|
| 319 |
|
|
| 195 |
|
Current assets, discontinued operations |
|
| - |
|
|
| 1,064 |
|
Total current assets |
|
| 2,020 |
|
|
| 2,224 |
|
Non-current assets |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 249 |
|
|
| 270 |
|
Operating lease right-of-use asset |
|
| 154 |
|
|
| 161 |
|
Goodwill |
|
| 5,654 |
|
|
| 5,680 |
|
Other intangible assets, net |
|
| 3,594 |
|
|
| 3,663 |
|
Deferred tax assets |
|
| 48 |
|
|
| 53 |
|
Other non-current assets |
|
| 165 |
|
|
| 159 |
|
Non-current assets, discontinued operations |
|
| - |
|
|
| 1,925 |
|
Total assets |
| $ | 11,884 |
|
| $ | 14,135 |
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
| $ | 487 |
|
| $ | 499 |
|
Deferred revenues |
|
| 148 |
|
|
| 135 |
|
Income tax liabilities |
|
| 76 |
|
|
| 15 |
|
Current portion of long-term debt, finance lease obligations and short-term borrowings |
|
| 866 |
|
|
| 276 |
|
Current liabilities, discontinued operations |
|
| - |
|
|
| 989 |
|
Total current liabilities |
|
| 1,577 |
|
|
| 1,914 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Long-term debt and finance lease obligations |
|
| 5,886 |
|
|
| 6,684 |
|
Deferred tax liabilities |
|
| 687 |
|
|
| 888 |
|
Operating lease liabilities |
|
| 131 |
|
|
| 140 |
|
Other non-current liabilities |
|
| 433 |
|
|
| 429 |
|
Non-current liabilities, discontinued operations |
|
| - |
|
|
| 1,837 |
|
Total liabilities |
|
| 8,714 |
|
|
| 11,892 |
|
Commitments and contingencies (Note 13) |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
|
|
|
Common stock, €0.07 par value, 1,185,800,000 and 1,185,800,000 shares authorized; 358,530,521 and 357,678,263 shares issued and 358,497,131 and 357,644,935 shares outstanding at March 31, 2021 and December 31, 2020, respectively |
|
| 32 |
|
|
| 32 |
|
Additional paid-in capital |
|
| 4,314 |
|
|
| 4,340 |
|
Retained earnings/(accumulated deficit) |
|
| (643 | ) |
|
| (1,216 | ) |
Accumulated other comprehensive loss, net of income taxes |
|
| (726 | ) |
|
| (1,105 | ) |
Total shareholders’ equity |
|
| 2,977 |
|
|
| 2,051 |
|
Noncontrolling interests |
|
| 193 |
|
|
| 192 |
|
Total equity |
|
| 3,170 |
|
|
| 2,243 |
|
Total liabilities and equity |
| $ | 11,884 |
|
| $ | 14,135 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 -
Nielsen Holdings plc
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(IN MILLIONS) |
| 2021 |
|
| 2020 |
| ||
Operating Activities |
|
|
|
|
|
|
|
|
Net income from continuing operations |
| $ | 109 |
|
| $ | 60 |
|
Net loss from discontinued operations |
|
| (75 | ) |
|
| (73) |
|
Gain on disposal of Connect, net of tax, within discontinued operations |
|
| 542 |
|
|
| - |
|
Net income/(loss) |
|
| 576 |
|
|
| (13 | ) |
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
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Share-based compensation expense |
|
| 8 |
|
|
| 16 |
|
(Gain) on sale of discontinued operations, net of tax |
|
| (542 | ) |
|
| - |
|
Currency exchange rate differences on financial transactions and other (gains)/losses |
|
| 11 |
|
|
| 7 |
|
Equity in net income of affiliates, net of dividends received |
|
| (1 | ) |
|
| - |
|
Depreciation and amortization |
|
| 163 |
|
|
| 214 |
|
Changes in operating assets and liabilities, net of effect of businesses acquired and divested: |
|
|
|
|
|
|
|
|
Trade and other receivables, net |
|
| (57 | ) |
|
| (107 | ) |
Prepaid expenses and other assets |
|
| (71 | ) |
|
| (13 | ) |
Accounts payable and other current liabilities and deferred revenues |
|
| (147 | ) |
|
| (92 | ) |
Other non-current liabilities |
|
| (17 | ) |
|
| (20 | ) |
Interest payable |
|
| 31 |
|
|
| 44 |
|
Income taxes |
|
| 1 |
|
|
| (41 | ) |
Net cash used in operating activities |
|
| (45 | ) |
|
| (5 | ) |
Investing Activities |
|
|
|
|
|
|
|
|
Acquisition of subsidiaries and affiliates, net of cash acquired |
|
| - |
|
|
| (27 | ) |
Proceeds from the sale of subsidiaries and affiliates, net |
|
| 2,245 |
|
|
| - |
|
Additions to property, plant and equipment and other assets |
|
| (7 | ) |
|
| (4 | ) |
Additions to intangible assets |
|
| (82 | ) |
|
| (108 | ) |
Proceeds from the sale of property, plant and equipment and other assets |
|
| 3 |
|
|
| - |
|
Other investing activities |
|
| (1 | ) |
|
| (3 | ) |
Net cash provided by/(used in) investing activities |
|
| 2,158 |
|
|
| (142 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Net borrowings under revolving credit facility |
| - |
|
|
| 135 |
| |
Repayment of debt |
|
| (1,478 | ) |
|
| (14 | ) |
Cash dividends paid to shareholders |
|
| (21 | ) |
|
| (21 | ) |
Activity from share-based compensation plans |
|
| (7 | ) |
|
| (4 | ) |
Proceeds from employee stock purchase plan |
|
| - |
|
|
| 1 |
|
Finance leases |
|
| (14 | ) |
|
| (11 | ) |
Other financing activities |
|
| (3 | ) |
|
| (4 | ) |
Net cash (used in)/provided by financing activities |
|
| (1,523 | ) |
|
| 82 |
|
Effect of exchange-rate changes on cash and cash equivalents |
|
| (3 | ) |
|
| (30 | ) |
Net increase/(decrease) in cash and cash equivalents |
|
| 587 |
|
|
| (95 | ) |
Cash and cash equivalents at beginning of period |
|
| 610 |
|
|
| 454 |
|
Cash and cash equivalents at end of period |
| $ | 1,197 |
|
| $ | 359 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | (38 | ) |
| $ | (52 | ) |
Cash paid for interest, net of amounts capitalized |
| $ | (57 | ) |
| $ | (50 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 6 -
Nielsen Holdings plc
Condensed Consolidated Statements of Changes in Equity
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| Accumulated Other Comprehensive Income (Loss), Net |
|
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| |||||||||
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| Retained |
|
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| |
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| Additional |
|
| Earnings |
|
| Currency |
|
| Cash |
|
| Post |
|
| Total Nielsen |
|
|
|
|
|
|
|
|
| ||||||
|
| Common |
|
| Paid-in |
|
| (Accumulated) |
|
| Translation |
|
| Flow |
|
| Employment |
|
| Shareholders’ |
|
| Noncontrolling |
|
| Total |
| |||||||||
(IN MILLIONS) |
| Stock |
|
| Capital |
|
| (Deficit) |
|
| Adjustments |
|
| Hedges |
|
| Benefits |
|
| Equity |
|
| Interests |
|
| Equity |
| |||||||||
Balance, December 31, 2020 |
| $ | 32 |
|
| $ | 4,340 |
|
| $ | (1,216 | ) |
| $ | (821 | ) |
| $ | (39 | ) |
| $ | (245 | ) |
| $ | 2,051 |
|
| $ | 192 |
|
| $ | 2,243 |
|
Net income/(loss) |
|
| — |
|
|
| — |
|
|
| 573 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 573 |
|
|
| 3 |
|
|
| 576 |
|
Currency translation adjustments, net of tax of $(3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (2 | ) |
|
| (5 | ) |
Cash flow hedges, net of tax of $(3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
Unrealized gain on pension liability, net of tax of $(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 3 |
|
|
| — |
|
|
| 3 |
|
Other Comprehensive Income gain/(loss) on disposition, net of tax of $(42) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 233 |
|
|
| — |
|
|
| 141 |
|
|
| 374 |
|
|
| — |
|
|
| 374 |
|
Dividends to shareholders ($0.06 per share of common stock) |
|
| — |
|
|
| (21 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21 | ) |
|
| (3 | ) |
|
| (24 | ) |
Common stock activity from share-based compensation plans |
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Share-based compensation expense |
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| 7 |
|
Other |
|
| — |
|
|
| (8) |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8) |
|
|
| 3 |
|
|
| (5) |
|
Balance, March 31, 2021 |
| $ | 32 |
|
| $ | 4,314 |
|
| $ | (643 | ) |
| $ | (591 | ) |
| $ | (34 | ) |
| $ | (101 | ) |
| $ | 2,977 |
|
| $ | 193 |
|
| $ | 3,170 | 0 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 7 -
Condensed Consolidated Statements of Changes in Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Other Comprehensive Income (Loss), Net |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
| Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Currency |
|
| Cash |
|
| Post |
|
| Total Nielsen |
|
|
|
|
|
|
|
|
| ||||||
|
| Common |
|
| Paid-in |
|
| (Accumulated) |
|
| Translation |
|
| Flow |
|
| Employment |
|
| Shareholders’ |
|
| Noncontrolling |
|
| Total |
| |||||||||
(IN MILLIONS) |
| Stock |
|
| Capital |
|
| (Deficit) |
|
| Adjustments |
|
| Hedges |
|
| Benefits |
|
| Equity |
|
| Interests |
|
| Equity |
| |||||||||
Balance, December 31, 2019 |
| $ | 32 |
|
| $ | 4,378 |
|
| $ | (1,210 | ) |
| $ | (776 | ) |
| $ | (19 | ) |
| $ | (210 | ) |
| $ | 2,195 |
|
| $ | 193 |
|
| $ | 2,388 |
|
Net income/(loss) |
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| 5 |
|
|
| (13 | ) |
Currency translation adjustments, net of tax of $(3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (96 | ) |
|
| — |
|
|
| — |
|
|
| (96 | ) |
|
| (8 | ) |
|
| (104 | ) |
Cash flow hedges, net of tax of $12 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33 | ) |
|
| — |
|
|
| (33 | ) |
|
| — |
|
|
| (33 | ) |
Unrealized gain on pension liability, net of tax of $(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Employee stock purchase plan |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Dividends to shareholders ($0.06 per share of common stock) |
|
| — |
|
|
| (21 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21 | ) |
|
| (3 | ) |
|
| (24 | ) |
Common stock activity from share-based compensation plans |
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Share-based compensation expense |
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
|
| 16 |
|
Balance, March 31, 2020 |
| $ | 32 |
|
| $ | 4,370 |
|
| $ | (1,228 | ) |
| $ | (872 | ) |
| $ | (52 | ) |
| $ | (206 | ) |
| $ | 2,044 |
|
| $ | 187 |
|
| $ | 2,231 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 4 -
Nielsen Holdings plc
Condensed Consolidated Balance Sheets
|
| September 30, |
|
| December 31, |
| ||
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) |
| 2017 |
|
| 2016 |
| ||
|
| (Unaudited) |
|
|
|
|
| |
Assets: |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 662 |
|
| $ | 754 |
|
Trade and other receivables, net of allowances for doubtful accounts and sales returns of $24 and $25 as of September 30, 2017 and December 31, 2016, respectively |
|
| 1,282 |
|
|
| 1,171 |
|
Prepaid expenses and other current assets |
|
| 328 |
|
|
| 297 |
|
Total current assets |
|
| 2,272 |
|
|
| 2,222 |
|
Non-current assets |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 458 |
|
|
| 471 |
|
Goodwill |
|
| 8,352 |
|
|
| 7,845 |
|
Other intangible assets, net |
|
| 5,042 |
|
|
| 4,736 |
|
Deferred tax assets |
|
| 131 |
|
|
| 127 |
|
Other non-current assets |
|
| 330 |
|
|
| 329 |
|
Total assets |
| $ | 16,585 |
|
| $ | 15,730 |
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
| $ | 1,015 |
|
| $ | 1,012 |
|
Deferred revenues |
|
| 328 |
|
|
| 297 |
|
Income tax liabilities |
|
| 198 |
|
|
| 97 |
|
Current portion of long-term debt, capital lease obligations and short-term borrowings |
|
| 67 |
|
|
| 188 |
|
Total current liabilities |
|
| 1,608 |
|
|
| 1,594 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Long-term debt and capital lease obligations |
|
| 8,377 |
|
|
| 7,738 |
|
Deferred tax liabilities |
|
| 1,219 |
|
|
| 1,175 |
|
Other non-current liabilities |
|
| 921 |
|
|
| 930 |
|
Total liabilities |
|
| 12,125 |
|
|
| 11,437 |
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Nielsen stockholders’ equity |
|
|
|
|
|
|
|
|
Common stock, €0.07 par value, 1,185,800,000 and 1,185,800,000 shares authorized; 356,217,848 and 357,745,953 shares issued and 356,168,000 and 357,465,614 shares outstanding at September 30, 2017 and December 31, 2016, respectively |
|
| 32 |
|
|
| 32 |
|
Additional paid-in capital |
|
| 4,755 |
|
|
| 4,825 |
|
Retained earnings |
|
| 451 |
|
|
| 456 |
|
Accumulated other comprehensive loss, net of income taxes |
|
| (979 | ) |
|
| (1,211 | ) |
Total Nielsen stockholders’ equity |
|
| 4,259 |
|
|
| 4,102 |
|
Noncontrolling interests |
|
| 201 |
|
|
| 191 |
|
Total equity |
|
| 4,460 |
|
|
| 4,293 |
|
Total liabilities and equity |
| $ | 16,585 |
|
| $ | 15,730 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 5 -
Nielsen Holdings plc
Condensed Consolidated Statements of Cash Flows (Unaudited)
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
| ||
Operating Activities |
|
|
|
|
|
|
|
|
Net income |
| $ | 356 |
|
| $ | 347 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
| 35 |
|
|
| 37 |
|
Currency exchange rate differences on financial transactions and other (gains)/losses |
|
| (17 | ) |
|
| 4 |
|
Equity in net income of affiliates, net of dividends received |
|
| 2 |
|
|
| 2 |
|
Depreciation and amortization |
|
| 477 |
|
|
| 450 |
|
Changes in operating assets and liabilities, net of effect of businesses acquired and divested: |
|
|
|
|
|
|
|
|
Trade and other receivables, net |
|
| (15 | ) |
|
| 8 |
|
Prepaid expenses and other assets |
|
| (8 | ) |
|
| (22 | ) |
Accounts payable and other current liabilities and deferred revenues |
|
| (131 | ) |
|
| (219 | ) |
Other non-current liabilities |
|
| (9 | ) |
|
| (11 | ) |
Interest payable |
|
| 63 |
|
|
| 56 |
|
Income taxes |
|
| 51 |
|
|
| 101 |
|
Net cash provided by operating activities |
|
| 804 |
|
|
| 753 |
|
Investing Activities |
|
|
|
|
|
|
|
|
Acquisition of subsidiaries and affiliates, net of cash acquired |
|
| (595 | ) |
|
| (263 | ) |
Additions to property, plant and equipment and other assets |
|
| (55 | ) |
|
| (83 | ) |
Additions to intangible assets |
|
| (264 | ) |
|
| (241 | ) |
Proceeds from the sale of property, plant and equipment and other assets |
|
| 28 |
|
| — |
| |
Other investing activities |
|
| (2 | ) |
|
| (4 | ) |
Net cash used in investing activities |
|
| (888 | ) |
|
| (591 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
Net borrowings under revolving credit facility |
|
| — |
|
|
| 193 |
|
Proceeds from issuances of debt, net of issuance costs |
|
| 2,745 |
|
|
| 496 |
|
Repayment of debt |
|
| (2,289 | ) |
|
| (101 | ) |
Decrease in other short-term borrowings |
|
| (5 | ) |
| — |
| |
Cash dividends paid to stockholders |
|
| (353 | ) |
|
| (323 | ) |
Repurchase of common stock |
|
| (117 | ) |
|
| (394 | ) |
Proceeds from exercise of stock options |
|
| 21 |
|
|
| 72 |
|
Proceeds from employee stock purchase plan |
|
| 5 |
|
| — |
| |
Capital leases |
|
| (42 | ) |
|
| (26 | ) |
Other financing activities |
|
| (13 | ) |
|
| (7 | ) |
Net cash used in financing activities |
|
| (48 | ) |
|
| (90 | ) |
Effect of exchange-rate changes on cash and cash equivalents |
|
| 40 |
|
|
| 17 |
|
Net (decrease)/increase in cash and cash equivalents |
|
| (92 | ) |
|
| 89 |
|
Cash and cash equivalents at beginning of period |
|
| 754 |
|
|
| 357 |
|
Cash and cash equivalents at end of period |
| $ | 662 |
|
| $ | 446 |
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
| $ | (175 | ) |
| $ | (107 | ) |
Cash paid for interest, net of amounts capitalized |
| $ | (214 | ) |
| $ | (191 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
- 68 -
Nielsen Holdings plc
Notes to Condensed Consolidated Financial Statements
Note1. Background and Basis of Presentation
Background
Nielsen Holdings plc (“Nielsen” or the “Company”), together with its subsidiaries, is a leading global performance managementdata, measurement, and analytics company that provides clients with a comprehensiveholistic and objective understanding of consumersthe media industry. With offerings spanning audience measurement, audience outcomes and consumer behavior.content, Nielsen offers its clients and partners simple solutions to complex questions and optimizes the value of their investments and growth strategies. It is the only company that can offer de-duplicated cross-media audience measurement. Audience is Everything™ to Nielsen and its clients, and Nielsen is aligned into two reporting segments: what consumers buy (“Buy”)committed to ensuring that every voice counts.
Nielsen offers measurement and what consumers watch and listen to (“Watch”). Nielsen has a presenceanalytics services in more than 100nearly 60 countries, with its registered office located in Oxford, the United Kingdom and its headquarters located in New York, USA.United States.
On March 5, 2021, Nielsen completed the previously announced sale of the Company’s Global Connect business (such business, “Global Connect,” and the sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation (“Purchaser”), pursuant to the Stock Purchase Agreement, dated as of October 31, 2020 (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Purchaser acquired Global Connect by means of a sale of the equity interests of certain subsidiaries held by the Company, which operate Global Connect, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and a warrant to purchase equity interests in the company that, following the sale, owns Global Connect (the “Connect Warrant”). The Company received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments, and recorded a preliminary gain of $542 million, net of tax within discontinued operations. Proceeds from the sale were primarily utilized for debt repayment. See Note 15 –Discontinued Operations.
The results of operations of the Global Connect segment have been classified as discontinued operations for all periods presented. Subsequent to the closing of the Connect Transaction, the Company no longer consolidated the financial results of the Global Connect segment. Our continuing business operates as a single operating segment and a single reportable segment.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the Company’s financial position and the results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the U.S.United States (“U.S. GAAP”) applicable to interim periods. For a more complete discussion of significant accounting policies, commitments and contingencies and certain other information, refer to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2020. All amounts are presented in U.S. Dollars (“$”), except for share data or where expressly stated as being in other currencies, e.g., Euros (“€”). The condensed consolidated financial statements include the accounts of Nielsen and all subsidiaries and other controlled entities. The Company has evaluated events occurring subsequent to September 30, 2017March 31, 2021 for potential recognition or disclosure in the condensed consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided.
Earnings per Share
Basic net income per share is computed using the weighted-average number of shares 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 restricted stock units and deferredrestricted stock units.
The effect of 4,141,4272,781,930 and 472,4333,388,749 shares of common stock equivalentsunderlying outstanding equity awards under Nielsen’s stock compensation plans were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2017March 31, 2021 and 2016, respectively, as such shares would have been anti-dilutive.
The effect of 4,349,803 and 1,176,950 shares of common stock equivalents under stock compensation plans were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2017 and 2016,2020, respectively, as such shares would have been anti-dilutive.
Accounts Receivable
The Company extends non-interest bearing trade credit to its customers in the ordinary course of business. To minimize credit risk, ongoing credit evaluations of clients’ financial condition are performed. The allowance for doubtful accounts is made when collection of the full amounts is no longer probable by also incorporating reasonable and supportable forecasts (expected loss).
- 9 -
During the ninethree months ended September 30, 2017,March 31, 2021, Nielsen sold $67$10 million of accounts receivable to a third partyparties and recorded an immaterial loss on the sale to interest expense, net in the condensed consolidated statement of operations. As of September 30, 2017, $56March 31, 2021 and December 31, 2020, $10 million and $30 million of previously sold receivables, respectively, remained outstanding. The sale wassales were accounted for as a true sale,sales, without recourse. Nielsen maintains servicing responsibilities offor the receivables sold during the period, for which the related costs are not significant. The proceeds of $67$10 million from the salesales were reported as a component of the changes in trade and other receivables, net within operating activities in the condensed consolidated statement of cash flows.
- 7 -Discontinued Operations
We consider assets to be held for sale when management, having the authority through shareholder approval, commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, we record the carrying value of an asset at the lower of its carrying value or its estimated fair value, less costs to sell. In accordance with GAAP, assets held for sale are not depreciated or amortized.
If the disposal of the component of an entity (or group of components) represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, it meets the criteria for discontinued operations. The results of discontinued operations, as well as any gain or loss on the disposal transaction, are presented separately, net of tax, from the results of continuing operations for all periods presented. The expenses included in the results of discontinued operations are the direct operating expenses incurred by the discontinued segment that may be reasonably segregated from the costs of the ongoing operations of the Company. Certain corporate costs directly attributable to the discontinued operations and transaction costs directly related to the sale are also presented within net income/(loss) from discontinued operations, net of income taxes. The assets and liabilities have been accounted for as assets held for sale in our condensed consolidated balance sheets through the date of the sale. The operating results related to these lines of business have been included in discontinued operations in our condensed consolidated statements of operations. The condensed consolidated statement of cash flows presents combined cash flows from continuing operations with cash flows from discontinued operations within each cash flow statement category. See Note 15 – Discontinued Operations for further detail.
Note2. Summary of Recent Accounting Pronouncements
Intangibles- Goodwill
Income Taxes (Topic 740): Simplifying the Accounting for Income taxes
- 10 -
Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard amends and Otheraims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. Upon adoption, this new standard did not have a significant impact on Nielsen’s financial statements.
In January 2017,Reference Rate Reform-Facilitation of the FASBEffects of Reference Rate Reform on Financial Reporting
On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (“ASU”ASC 848”), “Intangibles—Goodwill: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and Other”exceptions for applying GAAP to simplifycontracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company has elected to apply the subsequent measurementhedge accounting expedients related to probability and the assessments of goodwill. The update requires only a single-step quantitative testeffectiveness for future LIBOR-indexed cash flows to identify and measure impairmentassume that the index upon which future hedged transactions will be based matches the index on the excesscorresponding derivatives. Application of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The update is effective for fiscal year 2021 and is to be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Nielsen elected to early adopt this ASU effective January 1, 2017. There was no impact onthese expedients preserves the Company’s condensed consolidated financial statements.
Other Income—Gains and Losses from the Derecognitionpresentation of Nonfinancial Assets
In February 2017, the FASB issued an ASU, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets”, which clarifies the scope and application of ASC 610-20 on the sale or transfer of nonfinancial assets and in substance nonfinancial assets to noncustomers, including partial sales. It requires the application of certain recognition and measurement principles in ASC 606 when derecognizing nonfinancial assets and in substance nonfinancial assets, and the counterparty is not a customer. This ASU is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017.derivatives consistent with past presentation. The Company is currently assessingcontinues to evaluate the impact of the adoption of this ASU will have on the Company’s condensed consolidated financial statements.
Retirement Benefits: Improving the Presentation of Net Periodic Pension Costguidance and Net Periodic Postretirement Benefit Cost
In March 2017, the FASB issued an ASU, “Compensation — Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, which will change the presentation of net periodic benefit cost related to employer sponsored defined benefit plans andmay apply other postretirement benefits. Service cost will be included within the same income statement line itemelections as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only service costs may be capitalized in assets. This ASU is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. The Company is currently assessing the impact of the adoption of this ASU will have on the Company’s condensed consolidated financial statements.
Compensation- Stock Compensation
In May 2017, the FASB issued an Accounting Standards Update (“ASU”), Compensation- Stock Compensation (Topic 718), “Scope of Modification Accounting”, which amends the scope of modification accounting for share-based payment arrangements. The standard provides guidance on the types ofapplicable as additional changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The new standard is effective for annual periods beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted. Nielsen does not expect the adoption of this ASU to have a material impact on the Company’s condensed consolidated financial statements.
Derivatives and Hedging
In August 2017, the FASB issued Accounting Standards Update (“ASU”) “Derivatives and Hedging-Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). The amendments expand an entity’s ability to apply hedge accounting for nonfinancial and financial risk components and allow for a simplified approach for fair value hedging of interest rate risk. ASU 2017-12 eliminates the need to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, the standard simplifies the hedge documentation and effectiveness assessment requirements under the previous guidance. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. Nielsen elected to early adopt this ASU during the third quarter 2017. See footnote 8 “Fair Value Measurement”, for the additional disclosures related to this ASU. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements.
- 8 -
Revenue Recognition
In May 2014, the FASB issued an Accounting Standards Update (“ASU”), “Revenue from Contracts with Customers”. The new revenue recognition standard provides a five step analysis of transactions to determine when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. In addition, the new standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This standard is effective for annual periods beginning after December 15, 2017.
In 2014, the Company established a cross-functional implementation team consisting of representatives from across all of its business segments. Management utilized a bottoms-up approach to analyze the impact of the standard on our contract portfolio by reviewing the current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to our revenue contracts. In addition, management identified, and are in the process of implementing appropriate changes to our business processes, systems and controls to support the recognition and disclosure under the new standard. Based on management’s preliminary assessment, it believes the most significant impact the adoption of the new standard will have on its condensed consolidated financial statements are the required financial statement disclosures. The Company is continuing to assess the impact this ASU will have on recent acquisitions as well as which transition method it will use to adopt this ASU.market occur.
Note3. Business AcquisitionsRevenue Recognition
GracenoteRevenue is measured based on the consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service to a customer, which generally occurs over time. Substantially all of the Company’s customer contracts are non-cancelable and non-refundable.
On February 1, 2017, Nielsen completedRevenue is primarily generated from television, radio, digital and mobile audience measurement services and analytics, which are used by the acquisitionCompany’s clients to establish the value of Gracenote, throughairtime and more effectively schedule and promote their programming and the purchaseCompany’s advertising clients to plan and optimize their spending. As the customer simultaneously receives and consumes the benefits provided by the Company’s performance, revenues for these services are recognized over the period during which the performance obligations are satisfied and control of 100% of Gracenote’s outstanding common stock for a total purchase price of $585 million. Nielsen acquired the data and technology that underpinsservice is transferred to the programming guides and personnel user experience for major video, music, audio and sports content. This acquisition expands Nielsen’s footprint with major clients including Gracenote’s global content database which spans across platforms including multichannel video programing distributors (MVPD’s), smart television, streaming music services, connected devices, media players and in-car infotainment systems.customer.
The acquisitionCompany enters into cooperation arrangements with certain customers, under which the customer provides Nielsen with its data in exchange for Nielsen’s services. Nielsen records these transactions at fair value, which is determined based on the fair value of Gracenote was accounted for usinggoods or services received, if reasonably estimable. If not reasonably estimable, 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. Effective February 1, 2017, the financial results of Gracenote were included within the Watch segment of Nielsen’s condensed consolidated financial statements. For the nine months ended September 30, 2017, the Company’s condensed consolidated statement of operations includes $148 million of revenues related to the Gracenote acquisition.
The purchase price was preliminarily allocated based uponCompany considers the fair value of the goods or services surrendered.
The table below sets forth the Company’s revenue disaggregated by major product offerings and timing of revenue recognition.
(IN MILLIONS) (UNAUDITED) |
| Three |
|
| Three |
| ||
|
|
|
|
|
|
|
|
|
Nielsen |
|
|
|
|
|
|
|
|
Audience Measurement |
| $ | 632 |
|
| $ | 615 |
|
Outcomes/Content |
|
| 231 |
|
|
| 227 |
|
Total |
| $ | 863 |
|
| $ | 842 |
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition |
|
|
|
|
|
|
|
|
Products transferred at a point in time |
| $ | 83 |
|
| $ | 70 |
|
Products and services transferred over time |
|
| 780 |
|
|
| 772 |
|
Total |
| $ | 863 |
|
| $ | 842 |
|
Contract Assets and Liabilities
Contract assets acquired and liabilities assumedrepresent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. While the Company’s rights to consideration are generally unconditional at the datetime its performance obligations are satisfied, under certain circumstances the related billing occurs in arrears, generally within one month of acquisition using available informationthe services being rendered.
- 11 -
At the inception of a contract, the Company generally expects the period between when it transfers its services to its customers and certain assumptions management believed reasonable. when the customer pays for such services will be one year or less.
Contract liabilities relate to advance consideration received or the right to consideration that is unconditional from customers for which revenue is recognized when the performance obligation is satisfied and control transferred to the customer.
The following table summarizesbelow sets forth the preliminary purchase price allocation:Company’s contract assets and contract liabilities from contracts with customers.
(IN MILLIONS) |
|
|
|
Identifiable assets acquired and liabilities assumed: |
|
|
|
Cash | $ | 11 |
|
Other current assets |
| 56 |
|
Property and equipment |
| 12 |
|
Goodwill |
| 314 |
|
Amortizable intangible assets |
| 341 |
|
Other long-term assets |
| 11 |
|
Deferred revenue |
| (22 | ) |
Other current liabilities |
| (21 | ) |
Deferred tax liabilities |
| (110 | ) |
Other long-term liabilities |
| (7 | ) |
Total | $ | 585 |
|
(IN MILLIONS) |
| March 31, 2021 |
|
| December 31, 2020 |
|
| |||
Contract assets |
| $ | 107 |
|
| $ | 94 |
|
|
|
Contract liabilities |
| $ | 148 |
|
| $ | 135 |
|
|
|
The increase in the contract assets balance during the period was primarily due to $101 million of revenue recognized that was not billed, in accordance with the terms of the contracts, as of March 31, 2021, offset by $88 million of contract assets included in the December 31, 2020 balance that were invoiced to our clients and therefore transferred to trade receivables.
The increase in the contract liability balance during the period is primarily due to $92 million of advance consideration received or the right to consideration that is unconditional from customers for which revenue was not recognized during the period, offset by $78 million of revenue recognized that was included in the December 31, 2020 contract liability balance.
Transaction Price Allocated to the Remaining Performance Obligations
As of March 31, 2021, approximately $3.9 billion of revenue is expected to be recognized from remaining performance obligations that are unsatisfied (or partially unsatisfied) for our services. This amount excludes variable consideration allocated to performance obligations related to sales and usage based royalties on licenses of intellectual property.
The Company expects to recognize revenue on approximately 78% of these remaining performance obligations through December 31, 2022, with the acquisition date,balance recognized thereafter.
Deferred Costs
Incremental direct costs incurred to build the fair valueinfrastructure to service new contracts are capitalized as a contract cost. As of March 31, 2021 and December 31, 2020, the balances of such capitalized costs were $6 million and $3 million, respectively. These costs are typically amortized through cost of revenues over the original contract period beginning when the infrastructure to service new clients is ready for its intended use. The amortization of these costs for each of the three months ended March 31, 2021 and March 31, 2020 was 0. There was 0 impairment loss recorded in any of the periods presented.
Expected Credit Losses
Nielsen is required to measure expected credit losses on trade accounts receivable approximated historical cost.receivable. Nielsen considered the asset’s contractual life, the risk of loss and reasonable and supportable forecasts of future economicconditions. The gross contractual receivableestimate of expected credit losses reflects the risk of loss, even if management believes no loss was $37 million,incurred as of which $1 million was deemed uncollectible. the measurement date.
The estimated fair values assigned to amortizable intangible assets, goodwillfollowing schedule represents the allowance for doubtful accounts rollforward incorporating expected credit losses as of March 31, 2021 and uncertain tax positions are provisional and subject to adjustment primarily based upon additional information the Company is in process of obtaining.2020, respectively.
(IN MILLIONS) |
| Balance |
| Charges to |
|
| Deductions |
|
| Effect of |
| Balance at | ||||||||
Allowance for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three months ended March 31, 2021 |
| $ | 11 |
|
| $ | 1 |
|
| $ | - |
|
| $ | - |
|
| $ | 12 | |
Year ended December 31, 2020 |
| $ | 8 |
|
| $ | 7 |
|
| $ | (4 | ) |
| $ | - |
|
| $ | 11 |
- 912 -
The provisional allocation of the purchase price to goodwill and identified intangible assets was $314 million and $341 million, respectively. All of the Gracenote related goodwill and intangible assets are attributable to Nielsen’s Watch segment. As of September 30, 2017, $23 million of goodwill is expected to be deductible for income tax purposes.
Intangible assets and their estimated useful lives consist of the following:Note4. Business Acquisitions
(IN MILLIONS) |
|
|
|
|
|
| ||
Description |
| Amount |
|
| Useful Life |
| ||
Customer-related intangibles |
| $ | 109 |
|
|
| 10 - 15 years |
|
Content database |
|
| 168 |
|
|
| 12 - 16 years |
|
Trade names and trademarks |
|
| 7 |
|
|
| 5 years |
|
Computer software |
|
| 57 |
|
|
| 7-8 years |
|
Total |
| $ | 341 |
|
|
|
|
|
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 Gracenote.
The Company incurred acquisition-related expenses of $6 million for the nine months ended September 30, 2017, which primarily consisted of transaction fees, legal, accounting and other professional services that are included in selling, general and administrative expense in the condensed consolidated statement of operations.
The following unaudited pro forma information presents the consolidated results of operations of the Company and Gracenote for the three and nine months ended September 30, 2017, as if the acquisition had occurred on January 1, 2016, with pro forma adjustments to give effect to amortization of intangible assets, an increase in interest expense from acquisition financing, and certain other adjustments:
|
|
| Three Months Ended September 30, |
|
| Nine months Ended September 30, |
| |||||||||
(IN MILLIONS) |
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
Revenues |
| $ | 1,641 |
|
| $ | 1,618 |
|
| $ | 4,829 |
|
| $ | 4,799 |
|
Income from continuing operations |
| $ | 150 |
|
| $ | 124 |
|
| $ | 356 |
|
| $ | 327 |
|
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 Gracenote been completed as of the beginning of the reporting period.
Other Acquisitions
For the ninethree months ended September 30, 2017, excluding Gracenote,March 31, 2021, Nielsen had 0 acquisitions.
For the three months ended March 31, 2020, Nielsen paid cash consideration of $28$2 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period2020 acquisitions occurred as of January 1, 2017, the impact on Nielsen’s consolidated results of operations would not have been material.
For the nine months ended September 30, 2016, Nielsen paid cash consideration of $263 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period acquisitions occurred as of January 1, 2016,2020, the impact on Nielsen’s consolidated results of operations would not have been material.
4.
Note5. Leases
All significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) and Nielsen recognizes lease expense for these leases as incurred over the lease term. ROU assets represent the Company’s right to use an underlying asset during the reasonably certain lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. Nielsen’s lease terms may include options to extend or terminate the lease when it is reasonably certain that Nielsen will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Nielsen uses the rate implicit in the lease for the discount rate when determining the present value of lease payments whenever that rate is readily determinable. If the rate is not readily determinable, Nielsen uses its incremental borrowing rate, which is updated periodically, based on the information available at commencement date.The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. Nielsen has lease agreements with lease and non-lease components, which are generally accounted for together.
Nielsen has operating and finance leases for real estate facilities, servers, computer hardware, and other equipment. Nielsen’s leases have remaining lease terms of 1 year to 30 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.
The components of lease expense were as follows:
|
|
|
|
| ||||
(in millions) |
|
|
Three Months Ended March 31, |
|
| |||
2021 | 2020 | |||||||
Lease cost |
|
|
|
|
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
| $ | 10 |
| $ | 11 |
|
|
Interest on lease liabilities |
|
| 1 |
|
| 2 |
|
|
Total finance lease cost |
|
| 11 |
|
| 13 |
|
|
Operating lease cost |
|
| 12 |
|
| 11 |
|
|
Total lease cost |
| $ | 23 |
| $ | 24 |
|
|
- 13 -
Supplemental balance sheet information related to leases was as follows:
(in millions, except lease term and discount rate) |
|
| March 31, 2021 | December 31, 2020 |
| |||
Operating leases |
|
|
|
|
|
|
| |
Operating lease right-of-use assets |
| $ | 154 |
| $ | 161 |
| |
|
|
|
|
|
|
|
| |
Other current liabilities |
|
| 55 |
|
| 50 |
| |
Operating lease liabilities |
|
| 131 |
|
| 140 |
| |
Total operating lease liabilities |
| $ | 186 |
| $ | 190 |
| |
|
|
|
|
|
|
|
| |
Finance leases |
|
|
|
|
|
|
| |
Property, plant and equipment, gross |
| $ | 304 |
| $ | 300 |
| |
Accumulated depreciation |
|
| (189 | ) |
| (175 | ) | |
Property, plant and equipment, net |
|
| 115 |
|
| 125 |
| |
|
|
|
|
|
|
|
| |
Other intangible assets, gross |
|
| 17 |
|
| 11 |
| |
Accumulated amortization |
|
| (15 | ) |
| (9 | ) | |
Other intangible assets, net |
|
| 2 |
|
| 2 |
| |
|
|
|
|
|
|
|
| |
Accounts payable and other current liabilities |
|
| 41 |
|
| 39 |
| |
Long-term debt and capital lease obligations |
|
| 53 |
|
| 59 |
| |
Total finance lease liabilities |
| $ | 94 |
| $ | 98 |
| |
|
|
|
|
|
|
|
| |
|
|
| Three Months Ended March 31, |
| ||||
Other information |
|
| 2021 |
|
| 2020 |
| |
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
| |
Operating cash flows from finance leases |
|
| (1 | ) |
| (2 | ) | |
Operating cash flows from operating leases |
|
| (13 | ) |
| (13 | ) | |
Financing cash flows from finance leases |
|
| (8 | ) |
| (6 | ) | |
Right-of-use assets obtained in exchange for new finance lease liabilities |
|
| 3 |
|
| 2 |
| |
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
| 11 |
|
| 10 |
| |
Weighted-average remaining lease term--finance leases |
|
| 3 years |
| 3 years |
| ||
Weighted-average remaining lease term--operating leases |
|
| 7 years |
| 6 years |
| ||
Weighted-average discount rate--finance leases |
|
| 5.30 | % |
| 5.98 | % | |
Weighted-average discount rate--operating leases |
|
| 3.30 | % |
| 4.31 | % |
Annual maturities of Nielsen’s lease liabilities are as follows:
(in millions) |
|
| Operating Leases |
|
| Finance Leases |
| |
For April 1, 2021 to December 31, 2021 |
| $ | 43 |
|
| $ | 33 |
|
2022 |
|
| 48 |
|
|
| 30 |
|
2023 |
|
| 35 |
|
|
| 25 |
|
2024 |
|
| 21 |
|
|
| 8 |
|
2025 |
|
| 12 |
|
|
| 1 |
|
2026 |
|
| 10 |
|
|
| - |
|
Thereafter |
|
| 47 |
|
|
| - |
|
Total lease payments |
|
| 216 |
|
|
| 97 |
|
Less imputed interest |
|
| (30 | ) |
|
| (3 | ) |
Total |
| S | 186 |
|
| $ | 94 |
|
Note6. Goodwill and Other Intangible Assets
Goodwill
- 14 -
The table below summarizes the changes in the carrying amount of goodwill by reportable segment for the ninereporting unit for the three months ended September 30, 2017.March 31, 2021.
(IN MILLIONS) |
| Buy |
|
| Watch |
|
| Total |
|
|
| Nielsen |
| |||||
Balance, December 31, 2016 |
| $ | 2,696 |
|
| $ | 5,149 |
|
| $ | 7,845 |
| ||||||
Balance, December 31, 2020 |
| $ | 5,680 |
|
| |||||||||||||
Acquisitions, divestitures and other adjustments |
|
| 2 |
|
|
| 326 |
|
|
| 328 |
|
|
| (16 | ) |
| |
Effect of foreign currency translation |
|
| 154 |
|
|
| 25 |
|
|
| 179 |
|
|
| (10 | ) |
| |
Balance, September 30, 2017 |
| $ | 2,852 |
|
| $ | 5,500 |
|
| $ | 8,352 |
| ||||||
Balance, March 31, 2021 |
| $ | 5,654 |
|
|
At September 30, 2017, $64March 31, 2021, $31 million of the goodwill is expected to be deductible for income tax purposes.
- 10 -Goodwill is tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. There were 0 indicators of impairment related to goodwill during the first quarter end March 31, 2021. Nielsen will continue to closely evaluate any indicators of future impairments related to goodwill.
Other Intangible Assets
|
| Gross Amounts |
|
| Accumulated Amortization |
|
| Gross Amounts |
|
| Accumulated Amortization |
| |||||||||||||||||||||
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| |||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||
Indefinite-lived intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Trade names and trademarks |
| $ | 1,921 |
|
| $ | 1,921 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,833 |
|
| $ | 1,833 |
|
| $ | — |
|
| $ | — |
| |
Amortized intangibles: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Trade names and trademarks |
|
| 147 |
|
|
| 140 |
|
|
| (98 | ) |
|
| (88 | ) |
|
| 128 |
|
|
| 128 |
|
|
| (111 | ) |
|
| (110 | ) | |
Customer-related intangibles |
|
| 3,161 |
|
|
| 3,035 |
|
|
| (1,427 | ) |
|
| (1,312 | ) |
|
| 2,563 |
|
|
| 2,564 |
|
|
| (1,608 | ) |
|
| (1,580 | ) | |
Covenants-not-to-compete |
|
| 39 |
|
|
| 39 |
|
|
| (37 | ) |
|
| (36 | ) |
|
| 26 |
|
|
| 26 |
|
|
| (26 | ) |
|
| (26 | ) | |
Content databases |
|
| 168 |
|
|
| — |
|
|
| (9 | ) |
|
| — |
|
|
| 168 |
|
|
| 168 |
|
|
| (57 | ) |
|
| (53 | ) | |
Computer software |
|
| 2,564 |
|
|
| 2,223 |
|
|
| (1,448 | ) |
|
| (1,258 | ) |
|
| 1,411 |
|
|
| 1,372 |
|
|
| (758 | ) |
|
| (692 | ) | |
Patents and other |
|
| 172 |
|
|
| 173 |
|
|
| (111 | ) |
|
| (101 | ) |
|
| 148 |
|
|
| 153 |
|
|
| (123 | ) |
|
| (120 | ) | |
Total |
| $ | 6,251 |
|
| $ | 5,610 |
|
| $ | (3,130 | ) |
| $ | (2,795 | ) |
| $ | 4,444 |
|
| $ | 4,411 |
|
| $ | (2,683 | ) |
| $ | (2,581 | ) |
- 15 - Other indefinite-lived intangible assets 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. Pursuant to the Connect Transaction, Nielsen granted Advent a license to brand its products and services with the Nielsen name and other trademarks for 20 years following the closing of the Connect Transaction. There was an indefinite-lived trade name historically recognized within the Connect segment. However, as this indefinite-lived trade name will be retained by Nielsen as part of the Connect Transaction, the trade name is included within continuing operations. During the first quarter of 2021, Nielsen concluded that there was a triggering event for an interim impairment assessment as a result of the change in unit of account of the indefinite-lived intangibles as a result of the sale of Global Connect. 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. The discount rates we used in our evaluation was 10.1%. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace. As a result of the interim assessment, Nielsen concluded that the estimated fair values exceeded their carrying values. As such there was 0 impairment. Nielsen will continue to closely evaluate and report on any indicators of future impairments. |
|
Amortization expense associated with the above intangible assets was $114$102 million and $107 million for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively. These amounts included amortization expense associated with computer software of $64$65 million and $59$69 million for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively.
Amortization expense associated withAt March 31, 2021, the above intangible assetsnet book value of purchased software and internally developed software was $341$14 million and $317$639 million, for the nine months ended September 30, 2017 and 2016, respectively. These amounts included amortization expense associated with computer software of $190 million and $172 million for the nine months ended September 30, 2017 and 2016, respectively.
5.
Note7. Changes in and Reclassification out of Accumulated Other Comprehensive LossIncome/(Loss) by Component
The table below summarizes the changes in accumulated other comprehensive loss,income/(loss), net of tax, by component for the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020.
| Foreign Currency |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Translation |
|
|
|
|
|
| Post Employment |
|
|
|
|
| ||||||
| Adjustments |
|
| Cash Flow Hedges |
|
| Benefits |
|
| Total |
| ||||||||
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance December 31, 2016 | $ | (856 | ) |
| $ | (1 | ) |
| $ | (354 | ) |
| $ | (1,211 | ) | ||||
Other comprehensive income before reclassifications |
| 224 |
|
|
| 1 |
|
|
| — |
|
|
| 225 |
| ||||
Amounts reclassified from accumulated other comprehensive loss |
| — |
|
|
| 2 |
|
|
| 10 |
|
|
| 12 |
| ||||
Net current period other comprehensive income |
| 224 |
|
|
| 3 |
|
|
| 10 |
|
|
| 237 |
| ||||
Net current period other comprehensive income attributable to noncontrolling interest |
| 5 |
|
|
| — |
|
|
| — |
|
|
| 5 |
| ||||
Net current period other comprehensive income attributable to Nielsen stockholders |
| 219 |
|
|
| 3 |
|
|
| 10 |
|
|
| 232 |
| ||||
Balance September 30, 2017 | $ | (637 | ) |
| $ | 2 |
|
| $ | (344 | ) |
| $ | (979 | ) |
|
| Currency |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Translation |
|
|
|
|
| Post-Employment |
|
|
|
|
| ||
|
| Adjustments |
| Cash Flow Hedges |
|
| Benefits |
|
| Total |
| ||||
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020 |
| $ | (821 | ) | $ | (39 | ) |
| $ | (245 | ) |
| $ | (1,105 | ) |
Other comprehensive income/(loss) before reclassifications |
|
| (5 | ) |
| 1 |
|
|
| — |
|
|
| (4 | ) |
Amounts reclassified from accumulated other comprehensive (income)/loss |
|
| 233 |
|
| 4 |
|
|
| 144 |
|
|
| 381 |
|
Net current period other comprehensive income/(loss) |
|
| 228 |
|
| 5 |
|
|
| 144 |
|
|
| 377 |
|
Net current period other comprehensive income/(loss) attributable to noncontrolling interest |
|
| (2 | ) |
| — |
|
|
| — |
|
|
| (2 | ) |
Net current period other comprehensive income/(loss) attributable to Nielsen shareholders |
|
| 230 |
|
| 5 |
|
|
| 144 |
|
|
| 379 |
|
Balance March 31, 2021 |
| $ | (591 | ) | $ | (34 | ) |
| $ | (101 | ) |
| $ | (726 | ) |
- 1116 -
|
| Currency |
|
|
|
|
|
|
|
|
|
|
|
| |
|
| Translation |
|
|
|
|
| Post-Employment |
|
|
|
|
| ||
|
| Adjustments |
| Cash Flow Hedges |
|
| Benefits |
|
| Total |
| ||||
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019 |
| $ | (776 | ) | $ | (19 | ) |
| $ | (210 | ) |
| $ | (1,005 | ) |
Other comprehensive income/(loss) before reclassifications |
|
| (104 | ) |
| (34 | ) |
|
| 1 |
|
|
| (137 | ) |
Amounts reclassified from accumulated other comprehensive (income)/loss |
|
| — |
|
| 1 |
|
|
| 3 |
|
|
| 4 |
|
Net current period other comprehensive income/(loss) |
|
| (104 | ) |
| (33 | ) |
|
| 4 |
|
|
| (133 | ) |
Net current period other comprehensive income/(loss) attributable to noncontrolling interest |
|
| (8 | ) |
| — |
|
|
| — |
|
|
| (8 | ) |
Net current period other comprehensive income/(loss) attributable to Nielsen shareholders |
|
| (96 | ) |
| (33 | ) |
|
| 4 |
|
|
| (125 | ) |
Balance March 31, 2020 |
| $ | (872 | ) | $ | (52 | ) |
| $ | (206 | ) |
| $ | (1,130 | ) |
| Foreign Currency |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Translation |
|
|
|
|
|
| Post Employment |
|
|
|
|
| ||||||
| Adjustments |
|
| Cash Flow Hedges |
|
| Benefits |
|
| Total |
| ||||||||
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance December 31, 2015 | $ | (767 | ) |
| $ | (3 | ) |
| $ | (289 | ) |
| $ | (1,059 | ) | ||||
Other comprehensive income/(loss) before reclassifications |
| 35 |
|
|
| (9 | ) |
|
| 1 |
|
|
| 27 |
| ||||
Amounts reclassified from accumulated other comprehensive loss |
| — |
|
|
| 3 |
|
|
| 6 |
|
|
| 9 |
| ||||
Net current period other comprehensive income/(loss) |
| 35 |
|
|
| (6 | ) |
|
| 7 |
|
|
| 36 |
| ||||
Net current period other comprehensive loss attributable to noncontrolling interest |
| (2 | ) |
|
| — |
|
|
| — |
|
|
| (2 | ) | ||||
Net current period other comprehensive income/(loss) attributable to Nielsen stockholders |
| 37 |
|
|
| (6 | ) |
|
| 7 |
|
|
| 38 |
| ||||
Balance September 30, 2016 | $ | (730 | ) |
| $ | (9 | ) |
| $ | (282 | ) |
| $ | (1,021 | ) |
The table below summarizes the reclassification of accumulated other comprehensive loss by component for the three months ended September 30, 2017March 31, 2021 and 2016,2020, respectively.
|
| Amount Reclassified from |
|
|
|
| Amount Reclassified from |
|
|
| ||||||||||
|
| Accumulated Other |
|
|
|
| Accumulated Other |
|
|
| ||||||||||
(IN MILLIONS) |
| Comprehensive Loss |
|
|
|
| Comprehensive Loss/(Income) |
|
|
| ||||||||||
Details about Accumulated |
|
|
|
|
|
|
|
|
| Affected Line Item in the |
|
|
|
|
|
|
|
|
| Affected Line Item in the |
Other Comprehensive |
| Three Months Ended |
|
| Three Months Ended |
|
| Condensed Consolidated |
| Three Months Ended |
|
| Three Months Ended |
|
| Condensed Consolidated | ||||
Income components |
| September 30, 2017 |
|
| September 30, 2016 |
|
| Statement of Operations |
| March 31, 2021 |
|
| March 31, 2020 |
|
| Statement of Operations | ||||
Currency Translation Adjustments |
|
|
|
|
|
|
|
|
|
| ||||||||||
Currency translation (gains)/losses on dispositions(2) |
| $ | 233 |
|
| $ | — |
|
| Net income/(loss) from discontinued operations | ||||||||||
|
|
| — |
|
|
| — |
|
| Net income/(loss) from discontinued operations | ||||||||||
|
| $ | 233 |
|
| $ | — |
|
| Total, net of tax | ||||||||||
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| $ | 2 |
|
| $ | 2 |
|
| Interest expense |
| $ | 6 |
|
| $ | 2 |
|
| Interest (income)/expense |
|
|
| 1 |
|
|
| 1 |
|
| Benefit for income taxes |
|
| (2 | ) |
|
| (1 | ) |
| (Benefit)/provision for income taxes |
|
| $ | 1 |
|
| $ | 1 |
|
| Total, net of tax |
| $ | 4 |
|
| $ | 1 |
|
| Total, net of tax |
Amortization of Post-Employment Benefits |
|
|
|
|
|
|
|
|
|
| ||||||||||
Actuarial loss |
| $ | 4 |
|
| $ | — |
|
| (a) | ||||||||||
Post-Employment Benefits |
|
|
|
|
|
|
|
|
|
| ||||||||||
Amortization of actuarial loss(1) |
| $ | 4 |
|
| $ | 4 |
|
|
| ||||||||||
|
|
| 1 |
|
|
| — |
|
| Benefit for income taxes |
|
| (1 | ) |
|
| (1 | ) |
| (Benefit)/provision for income taxes |
|
| $ | 3 |
|
| $ | — |
|
| Total, net of tax |
| $ | 3 |
|
| $ | 3 |
|
| Total, net of tax |
Unrealized (gains)/losses on pension liability on dispositions(2) |
| $ | 183 |
|
| $ | — |
|
| Net income/(loss) from discontinued operations | ||||||||||
|
|
| (42 | ) |
|
| — |
|
| Net income/(loss) from discontinued operations | ||||||||||
|
| $ | 141 |
|
| $ | — |
|
| Total, net of tax | ||||||||||
Total Post-Employment Benefits reclassified from accumulated other comprehensive (income)/loss |
| $ | 144 |
|
| $ | 3 |
|
|
| ||||||||||
Total reclassification for the period |
| $ | 4 |
|
| $ | 1 |
|
| Net of tax |
| $ | 381 |
|
| $ | 4 |
|
| Net of tax |
| (1) | This accumulated other comprehensive loss component is included in the computation of net periodic pension cost. |
The table below summarizes the reclassification of accumulated other comprehensive loss by component for the nine months ended September 30, 2017 and 2016, respectively.
|
| Amount Reclassified from |
|
|
| |||||
|
| Accumulated Other |
|
|
| |||||
(IN MILLIONS) |
| Comprehensive Loss |
|
|
| |||||
Details about Accumulated |
|
|
|
|
|
|
|
|
| Affected Line Item in the |
Other Comprehensive |
| Nine Months Ended |
|
| Nine Months Ended |
|
| Condensed Consolidated | ||
Income components |
| September 30, 2017 |
|
| September 30, 2016 |
|
| Statement of Operations | ||
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| $ | 4 |
|
| $ | 5 |
|
| Interest expense |
|
|
| 2 |
|
|
| 2 |
|
| Benefit for income taxes |
|
| $ | 2 |
|
| $ | 3 |
|
| Total, net of tax |
Amortization of Post-Employment Benefits |
|
|
|
|
|
|
|
|
|
|
Actuarial loss |
| $ | 13 |
|
| $ | 9 |
|
| (a) |
|
|
| 3 |
|
|
| 3 |
|
| Benefit for income taxes |
|
| $ | 10 |
|
| $ | 6 |
|
| Total, net of tax |
Total reclassification for the period |
| $ | 12 |
|
| $ | 9 |
|
| Net of tax |
|
| The sale of Global Connect resulted in a total reclassification from accumulated other comprehensive |
- 1217 -
Note8. Restructuring Activities
6. Productivity Initiatives
Restructuring Activitiescharges are primarily related to programs associated with Nielsen’s plans to reduce selling, general and administrative expenses as well as automation initiatives. These charges mostly represent severance costs related to employee separation packages. The amounts are calculated based on salary levels and past service periods.Severance costs are generally charged to earnings when planned employee terminations are approved.
A summary of the changes in the liabilities for restructuring activities is provided below:
|
| Total |
| |||||
(IN MILLIONS) |
| Initiatives |
|
| Total Initiatives |
| ||
Balance at December 31, 2016 |
| $ | 73 |
| ||||
Balance at December 31, 2020 |
| $ | 14 |
| ||||
Charges |
|
| 48 |
|
|
| - |
|
Payments |
|
| (72 | ) |
|
| (7 | ) |
Effect of foreign currency translation and reclassification adjustments |
|
| 3 |
| ||||
Balance at September 30, 2017 |
| $ | 52 |
| ||||
Balance at March 31, 2021 |
| $ | 7 |
|
Nielsen recorded $7 million0 and $48$3 million in restructuring charges primarily relating to the productivity initiatives referenced above for the three and nine months ended September 30, 2017, respectively, primarily relating to severance costs.March 31, 2021 and 2020, respectively.
Nielsen recorded $29 million and $73 million in restructuring charges for the three and nine months ended September 30, 2016, respectively, primarily relating to severance and contract termination costs.
Of the $52The $7 million in remaining liabilities for restructuring actions $42 millionat March 31, 2021, is expected to be paid within one year and is classified as a current liability within the condensed consolidated balance sheet as of September 30, 2017.March 31, 2021.
7.
Note9. 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.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. |
- 18 -
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.
- 13 -
In addition, the Company records changes in the fair value of equity investments with readily determinable fair values in net income rather than in accumulated other comprehensive income/(loss). Investments that do not have readily determinable fair values are recognized at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adjustments related to the observable price changes will also be recognized in net income.
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 September 30, 2017March 31, 2021 and December 31, 2016:2020:
|
| September 30, |
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
|
|
|
|
|
|
|
|
|
|
|
| |||
(IN MILLIONS) |
| 2017 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| 2021 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets for deferred compensation (1) |
| $ | 32 |
|
|
| 32 |
|
| — |
|
| — |
|
| 23 |
|
|
| 23 |
|
|
| — |
|
|
| — |
| |
Investment in mutual funds (2) |
|
| 2 |
|
|
| 2 |
|
| — |
|
| — |
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| — |
| |
Interest rate swap arrangements (3) |
|
| 7 |
|
|
| — |
|
| 7 |
|
| — | |||||||||||||||||
Warrant(3) |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| 5 |
| ||||||||||||||
Interest rate swap arrangements (4) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||
Total |
| $ | 41 |
|
| $ | 34 |
|
| $ | 7 |
|
| — |
| $ | 30 |
|
| $ | 25 |
|
| $ | — |
|
|
| 5 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap arrangements (3) |
| $ | 3 |
|
| — |
|
| $ | 3 |
|
| — | |||||||||||||||||
Deferred compensation liabilities (4) |
|
| 32 |
|
|
| 32 |
|
| — |
|
| — | |||||||||||||||||
Interest rate swap arrangements (4) |
| $ | 44 |
|
|
| — |
|
| $ | 44 |
|
|
| — |
| ||||||||||||||
Deferred compensation liabilities (5) |
|
| 23 |
|
|
| 23 |
|
|
| — |
|
|
| — |
| ||||||||||||||
Total |
| $ | 35 |
|
| $ | 32 |
|
| $ | 3 |
|
| — |
| $ | 67 |
|
| $ | 23 |
|
| $ | 44 |
|
|
| — |
|
zz
|
| December 31, |
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| 2016 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| 2020 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets for deferred compensation (1) |
| $ | 32 |
|
|
| 32 |
|
| — |
|
| — |
|
| 24 |
|
|
| 24 |
|
|
| — |
|
|
| — |
| |
Investment in mutual funds (2) |
|
| 2 |
|
|
| 2 |
|
| — |
|
| — |
|
| 2 |
|
|
| 2 |
|
|
| — |
|
|
| — |
| |
Interest rate swap arrangements (3) |
|
| 3 |
|
|
| — |
|
| 3 |
|
|
| |||||||||||||||||
Interest rate swap arrangements (4) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||
Total |
| $ | 37 |
|
| $ | 34 |
|
| 3 |
|
| — |
| $ | 26 |
|
| $ | 26 |
|
|
| — |
|
|
| — |
| |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap arrangements (3) |
| $ | 5 |
|
| — |
|
| $ | 5 |
|
| — | |||||||||||||||||
Deferred compensation liabilities (4) |
|
| 32 |
|
|
| 32 |
|
| — |
|
| — | |||||||||||||||||
Interest rate swap arrangements (4) |
| $ | 52 |
|
|
| — |
|
| $ | 52 |
|
|
| — |
| ||||||||||||||
Deferred compensation liabilities (5) |
|
| 24 |
|
|
| 24 |
|
|
| — |
|
|
| — |
| ||||||||||||||
Total |
| $ | 37 |
|
| $ | 32 |
|
| $ | 5 |
|
| — |
| $ | 76 |
|
| $ | 24 |
|
| $ | 52 |
|
|
| — |
|
| 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 |
(2) | Investments in mutual funds are money-market accounts held with the intention of funding certain specific retirement plans. |
(3) | The estimated fair value of the Connect Warrant issued March 5, 2021, of $5 million which was part of the proceeds related to the sale was included in the net gain on sale of the Global Connect segment. The Connect Warrant is marked-to-market each reporting period with the subsequent change in fair value recorded to other income/(expense), net in the condensed consolidated statement of operations. The Connect Warrant is reported within other non-current assets within the condensed consolidated balance sheet. The fair value of the Connect Warrant asset is estimated using a Black-Scholes option-pricing model. |
(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. |
- 19 -
| 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 |
Derivative Financial Instruments
Nielsen primarily uses interest rate swap derivative instruments 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).
- 14 -
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 8 -10 – 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 wherepursuant to which the Company could be declared in default on its derivative obligations 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.lenders. At September 30, 2017,March 31, 2021, Nielsen had no material exposure to potential economic losses due to counterparty credit default risk or cross-default risk on its derivative financial instruments.
Foreign Currency Exchange Risk
DuringFor the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, Nielsen recorded an insignificant net loss and a net loss of zero and $3 million, respectively, associated with foreign currency derivative financial instruments within foreign currency exchange transactions gains/(losses),losses, net in ourits condensed consolidated statements of operations. As of September 30, 2017March 31, 2021 and December 31, 20162020, the notional amount of the outstanding foreign currency derivative financial instruments were $79$29 million and $77$68 million, respectively.
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.transaction.
In February 2017, the Company entered into $250 million in aggregate notional amount of a three-year forward interest rate swap agreement with a starting date of July 10, 2017. This agreement fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 1.73%. This derivative has been designated as an interest rate cash flow hedge.
In March 2017, the Company entered into $250 million in aggregate notional amount of a five-year forward interest rate swap agreement with a starting date of July 10, 2017. This agreement fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 2.00%. This derivative has been designated as an interest rate cash flow hedge.
In April 2017, the Company entered into $250 million in aggregate notional amount of a three-year forward interest rate swap agreement with a starting date of July 10, 2017. This agreement fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 1.63%. This derivative has been designated as an interest rate cash flow hedge.
In July 2017, the Company entered into $250 million in aggregate notional amount of a three-year forward interest rate swap agreement with a starting date of October 10, 2017. This agreement fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 1.66%. This derivative has been designated as an interest rate cash flow hedge.
In August 2017, the Company entered into $250 million in aggregate notional amount of a four-year forward interest rate swap agreement with a starting date of October 10, 2017. This agreement fixes the LIBOR-related portion of interest rates of a corresponding amount of the Company’s variable-rate debt at an average rate of 1.60%. This derivative has been designated as an interest rate cash flow hedge.
- 15 -
As of September 30, 2017, March 31, 2021, the Company had the following U.S. Dollar term loan floating-to-fixed rate outstanding interest rate swaps designated as hedges utilized in the management of its interest rate risk: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 |
|
| May 2018 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 150,000,000 |
|
| April 2019 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 250,000,000 |
|
| June 2019 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 150,000,000 |
|
| July 2019 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 250,000,000 |
|
| July 2020 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 250,000,000 |
|
| July 2020 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 250,000,000 |
|
| October 2020 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 250,000,000 |
|
| October 2021 |
| US Dollar |
US Dollar term loan floating-to-fixed rate swaps | $ | 250,000,000 |
|
| July 2022 |
| US Dollar |
|
| Notional Amount |
|
| Maturity Date |
|
|
|
|
|
|
|
|
|
|
| $ | 250,000,000 |
|
| October 2021 |
|
|
| $ | 250,000,000 |
|
| July 2022 |
|
|
| $ | 150,000,000 |
|
| April 2023 |
|
|
- 20 -
|
| Notional Amount |
|
| Maturity Date |
|
|
| $ | 250,000,000 |
|
| May 2023 |
|
|
| $ | 250,000,000 |
|
| June 2023 |
|
|
| $ | 150,000,000 |
|
| July 2023 |
|
|
The effect of cash flow hedge accounting on the condensed consolidated statement of operations for the three and nine months ended September 30, 2017March 31, 2021 and 2016:2020 respectively is as follows:
|
| Interest Expense | ||||||||||||
|
| Three Months Ended |
| Nine Months Ended | ||||||||||
|
| September 30, |
| September 30, | ||||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
| 2017 |
|
| 2016 | ||||
Interest expense- (Location in the condensed consolidated statement of operations in which the effects of cash flow hedges are recorded) |
| $ | 95 |
|
| $ | 85 |
| $ | 277 |
|
| $ | 247 |
Amount of loss reclassified from accumulated other comprehensive income into income, net of tax |
| $ | 1 |
|
| $ | 1 |
| $ | 2 |
|
| $ | 3 |
Amount of loss reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring, net of tax |
| $ | — |
|
| $ | — |
| $ | — |
|
| $ | — |
|
| Interest Expense |
|
| |||||
|
| Three Months Ended March 31, |
|
| |||||
(IN MILLIONS) |
| 2021 |
|
| 2020 |
|
| ||
Interest expense (Location in the consolidated statement of operations in which the effects of cash flow hedges are recorded) |
| $ | 80 |
|
| $ | 83 |
|
|
Amount of gain/(loss) reclassified from accumulated other comprehensive income into income, net of tax |
| $ | (4 | ) |
| $ | (1 | ) |
|
Amount of loss reclassified from accumulated other comprehensive income into income as a result that a forecasted transaction is no longer probable of occurring, net of tax |
| $ | — |
|
| $ | — |
|
|
Nielsen expects to recognize approximately $3$24 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.
Fair Values of Derivative Instruments in the Consolidated Balance Sheets
The fair values of the Company’s derivative instruments as of September 30, 2017March 31, 2021 and December 31, 20162020 were as follows:
|
| September 30, 2017 |
| December 31, 2016 |
|
|
| March 31, 2021 |
| December 31, 2020 |
| ||||||||||||||||||||||||||||||||||
Derivatives Designated as Hedging Instruments |
|
|
|
| Accounts Payable |
|
|
|
| Accounts Payable |
|
| Other |
| |||||||||||||||||||||||||||||||
|
| Other Non- Current |
|
| and Other Current | Other Non-Current |
|
| Other Non-Current |
| and Other Current |
|
| Non-Current |
| ||||||||||||||||||||||||||||||
Derivatives Designated as Hedging |
| Prepaid Expense |
|
| Other |
| Other |
| Prepaid Expense |
| Other |
|
| Other |
| ||||||||||||||||||||||||||||||
Instruments |
| and Other Current |
|
| Current |
| Non-Current |
| and Other Current |
| Current |
|
| Non-Current |
| ||||||||||||||||||||||||||||||
(IN MILLIONS) |
| Assets |
|
| Liabilities | Liabilities |
|
| Assets |
| Liabilities |
|
| Liabilities |
|
| Assets |
|
| Liabilities |
|
| Liabilities |
| Assets |
| Liabilities |
|
| Liabilities |
| ||||||||||||||
Interest rate swaps |
| $ | 7 |
|
|
| $ | 1 | $ | 2 |
| $ | 3 |
| $ | 1 |
|
| $ | 4 |
|
| $ | — |
|
|
| $ | 4 |
| $ | 40 |
| $ | — |
| $ | 4 |
|
| $ | 48 |
|
- 16 -
Derivatives in Cash Flow Hedging Relationships
The pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended September 30, 2017March 31, 2021 and 20162020 was as follows:
|
|
|
|
|
|
| Amount of Loss |
| ||||||||||
|
| Amount of Gain |
|
|
|
| Reclassified from AOCI |
| ||||||||||
|
| Recognized in OCI |
|
| Location of Loss |
| into Income |
| ||||||||||
|
| (Effective Portion) |
|
| Reclassified from AOCI |
| (Effective Portion) |
| ||||||||||
Derivatives in Cash Flow |
| Three Months Ended |
|
| into Income (Effective |
| Three Months Ended |
| ||||||||||
Hedging Relationships |
| September 30, |
|
| Portion) |
| September 30, |
| ||||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
|
|
|
| 2017 |
|
| 2016 |
| ||||
Interest rate swaps |
| $ | 3 |
|
| $ | 4 |
|
| Interest expense |
| $ | 2 |
|
| $ | 2 |
|
The pre-tax effect of derivative instruments in cash flow hedging relationships for the nine months ended September 30, 2017 and 2016 was as follows:
|
|
|
|
|
|
| Amount of Loss |
|
|
|
|
|
|
|
| Amount of (Gain)/Loss |
| |||||||||||||||||||||||||
|
| Amount of (Gain)/Loss |
|
|
|
| Reclassified from AOCI |
|
| Amount of (Gain)/Loss |
|
|
|
|
| Reclassified from AOCI |
| |||||||||||||||||||||||||
|
| Recognized in OCI |
|
| Location of Loss |
| into Income |
|
| Recognized in OCI |
|
| Location of (Gain)/ Loss |
|
| into Income |
| |||||||||||||||||||||||||
|
| (Effective Portion) |
|
| Reclassified from AOCI |
| (Effective Portion) |
|
| (Effective Portion) |
|
| Reclassified from AOCI |
|
| (Effective Portion) |
| |||||||||||||||||||||||||
Derivatives in Cash Flow |
| Nine months Ended |
|
| into Income (Effective |
| Nine months Ended |
|
| Three Months Ended |
|
| into Income (Effective |
|
| Three Months Ended |
| |||||||||||||||||||||||||
Hedging Relationships |
| September 30, |
|
| Portion) |
| September 30, |
|
| March 31, |
|
| Portion) |
|
| March 31, |
| |||||||||||||||||||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
|
|
|
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
|
|
|
|
| 2021 |
|
| 2020 |
| |||||||||||||
Interest rate swaps |
| $ | (2 | ) |
| $ | 11 |
|
| Interest expense |
| $ | 4 |
|
| $ | 5 |
|
| $ | (1 | ) |
| $ | 47 |
|
| Interest expense |
|
| $ | 6 |
|
| $ | 2 |
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The Company is required, on a nonrecurring basis, to adjust the carrying value or provide valuation allowances 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.recognized.
The Company did not measure any material non-financial assets or liabilities at fair value during the ninethree months ended September 30, 2017.March 31, 2021.
- 1721 -
8.Note10. Long-term Debt and Other Financing Arrangements
Unless otherwise stated, interest rates are as of September 30, 2017.March 31, 2021.
Annual maturities of Nielsen’s long-term debt are as follows:
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||||||||||
|
| Weighted |
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
|
| ||
|
| Interest |
|
| Carrying |
|
| Fair |
|
| Interest |
|
| Carrying |
|
| Fair |
| ||||||
(IN MILLIONS) |
| Rate |
|
| Amount |
|
| Value |
|
| Rate |
|
| Amount |
|
| Value |
| ||||||
$2,080 million Senior secured term loan (LIBOR based variable rate of 3.24%) due 2019 |
|
|
|
|
| $ | 1,391 |
|
|
| 1,398 |
|
|
|
|
|
| $ | 1,768 |
|
|
| 1,785 |
|
$1,900 million Senior secured term loan (LIBOR based variable rate of 3.15%) due 2023 |
|
|
|
|
| — |
|
| — |
|
|
|
|
|
|
| 1,892 |
|
|
| 1,922 |
| ||
$2,250 million Senior secured term loan (LIBOR based variable rate of 3.24%) due 2023 |
|
|
|
|
|
| 2,237 |
|
|
| 2,247 |
|
|
|
|
|
| — |
|
| — |
| ||
€380 million Senior secured term loan (Euro LIBOR based variable rate of 2.10%) due 2021 |
|
|
|
|
|
| 445 |
|
|
| 449 |
|
|
|
|
|
|
| 399 |
|
|
| 402 |
|
Total senior secured credit facilities (with weighted-average interest rate) |
|
| 3.21 | % |
|
| 4,073 |
|
|
| 4,094 |
|
|
| 2.95 | % |
|
| 4,059 |
|
|
| 4,109 |
|
$800 million 4.50% senior debenture loan due 2020 |
|
|
|
|
|
| 795 |
|
|
| 809 |
|
|
|
|
|
|
| 794 |
|
|
| 813 |
|
$625 million 5.50% senior debenture loan due 2021 |
|
|
|
|
|
| 619 |
|
|
| 643 |
|
|
|
|
|
|
| 618 |
|
|
| 649 |
|
$2,300 million 5.00% senior debenture loan due 2022 |
|
|
|
|
|
| 2,288 |
|
|
| 2,382 |
|
|
|
|
|
|
| 2,285 |
|
|
| 2,340 |
|
$500 million 5.00% senior debenture loan due 2025 |
|
|
|
|
|
| 495 |
|
|
| 520 |
|
|
|
|
|
| — |
|
| — |
| ||
Total debenture loans (with weighted-average interest rate) |
|
| 5.22 | % |
|
| 4,197 |
|
|
| 4,354 |
|
|
| 5.22 | % |
|
| 3,697 |
|
|
| 3,802 |
|
Other loans |
|
|
|
|
|
| 1 |
|
|
| 1 |
|
|
|
|
|
|
| 7 |
|
|
| 7 |
|
Total long-term debt |
|
| 4.24 | % |
|
| 8,271 |
|
|
| 8,449 |
|
|
| 4.04 | % |
|
| 7,763 |
|
|
| 7,918 |
|
Capital lease and other financing obligations |
|
|
|
|
|
| 173 |
|
|
|
|
|
|
|
|
|
|
| 158 |
|
|
|
|
|
Bank overdrafts |
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
| 5 |
|
|
|
|
|
Total debt and other financing arrangements |
|
|
|
|
|
| 8,444 |
|
|
|
|
|
|
|
|
|
|
| 7,926 |
|
|
|
|
|
Less: Current portion of long-term debt, capital lease and other financing obligations and other short-term borrowings |
|
|
|
|
|
| 67 |
|
|
|
|
|
|
|
|
|
|
| 188 |
|
|
|
|
|
Non-current portion of long-term debt and capital lease and other financing obligations |
|
|
|
|
| $ | 8,377 |
|
|
|
|
|
|
|
|
|
| $ | 7,738 |
|
|
|
|
|
|
| March 31, 2021 |
|
| December 31, 2020 | ||||||||||||||||||
|
| Weighted |
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
| ||
|
| Interest |
|
| Carrying |
|
| Fair |
|
| Interest |
|
| Carrying |
|
| Fair | ||||||
(IN MILLIONS) |
| Rate |
|
| Amount |
|
| Value |
|
| Rate |
|
| Amount |
|
| Value | ||||||
$1,125 million Senior secured term loan (LIBOR based variable rate of 1.85%) due 2023 |
|
|
|
|
| $ | 741 |
|
| $ | 741 |
|
|
|
|
|
| $ | 754 |
|
| $ | 752 |
$2,303 million Senior secured term loan (LIBOR based variable rate of 2.10%) due 2023 |
|
|
|
|
|
| 1,599 |
|
|
| 1,599 |
|
|
|
|
|
|
| 1,603 |
|
|
| 1,602 |
€545 million Senior secured term loan (Euro LIBOR based variable rate of 2.50%) due 2023 |
|
|
|
|
|
| 239 |
|
|
| 238 |
|
|
|
|
|
|
| 251 |
|
|
| 250 |
€660 million Senior secured term loan (Euro LIBOR based variable rate of 3.75%) due 2025 |
|
|
|
|
|
| 611 |
|
|
| 623 |
|
|
|
|
|
| 639 |
|
| 654 | ||
$550 million Senior secured term loan (LIBOR based variable rate of 4.75%) due 2025 |
|
|
|
|
|
| 421 |
|
|
| 431 |
|
|
|
|
|
| 419 |
|
| 434 | ||
$850 million Senior secured revolving credit facility (Euro LIBOR or LIBOR based variable rate) due 2023 |
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
| — |
|
| — | ||
Total senior secured credit facilities (with weighted-average interest rate) |
|
| 2.95 | % |
|
| 3,611 |
|
|
| 3,632 |
|
|
| 3.01 | % |
|
| 3,666 |
|
|
| 3,692 |
$425 million 5.500% senior debenture loan due 2021 |
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| 150 |
|
|
| 151 |
$825 million 5.000% senior debenture loan due 2022 |
|
|
|
|
|
| 824 |
|
|
| 826 |
|
|
|
|
|
|
| 824 |
|
|
| 828 |
$500 million 5.000% senior debenture loan due 2025 |
|
|
|
|
|
| 498 |
|
|
| 511 |
|
|
|
|
|
|
| 498 |
|
|
| 514 |
$1,000 million 5.625% senior debenture loan due 2028 |
|
|
|
|
|
| 986 |
|
|
| 1,049 |
|
|
|
|
|
|
| 985 |
|
|
| 1,088 |
$750 million 5.875% senior debenture loan due 2030 |
|
|
|
|
|
| 739 |
|
|
| 811 |
|
|
|
|
|
|
| 739 |
|
|
| 846 |
Total debenture loans (with weighted-average interest rate) |
|
| 5.68 | % |
|
| 3,047 |
|
|
| 3,197 |
|
|
| 5.69 | % |
|
| 3,196 |
|
|
| 3,427 |
Other loans |
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
|
| — |
Total long-term debt |
|
| 4.20 | % |
|
| 6,658 |
|
|
| 6,829 |
|
|
| 4.26 | % |
|
| 6,862 |
|
|
| 7,119 |
Finance lease and other financing obligations |
|
|
|
|
|
| 94 |
|
|
|
|
|
|
|
|
|
|
| 98 |
|
|
|
|
Total debt and other financing arrangements |
|
|
|
|
|
| 6,752 |
|
|
|
|
|
|
|
|
|
|
| 6,960 |
|
|
|
|
Less: Current portion of long-term debt, finance lease and other financing obligations and other short-term borrowings |
|
|
|
|
|
| 866 |
|
|
|
|
|
|
|
|
|
|
| 276 |
|
|
|
|
Non-current portion of long-term debt and finance lease and other financing obligations |
|
|
|
|
| $ | 5,886 |
|
|
|
|
|
|
|
|
|
| $ | 6,684 |
|
|
|
|
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.
On October 31, 2020, Nielsen entered into the Stock Purchase Agreement to sell its Global Connect business to affiliates of Purchaser, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and the Connect Warrant. The Connect Transaction was approved by the requisite vote of Nielsen’s shareholders. The Connect Transaction closed on March 5, 2021. The Company received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments. Proceeds from the sale were primarily utilized for debt repayment.
On March 16, 2021, Nielsen completed the partial prepayment of $1.0 billion of the senior secured term loans due 2023 and $0.3 billion of the Senior secured term loans due 2025. The partial prepayment resulted in aggregate principal amounts of 2023 and 2025 senior secured term loans remaining outstanding of approximately $2.6 billion and $1 billion, respectively. Nielsen redeemed $150 million outstanding aggregate principal amount of its 5.500% senior notes due 2021 effective March 21, 2021 and redeemed $825 million of outstanding aggregate principal amount of the 5.000% senior notes due 2022 effective April 10 2021, in each case at a redemption price equal to 100% of the principal amount of such notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.
Nielsen wrote-off certain previously deferred financing fees of $7.5 million associated with the redemptions during the period ended March 31, 2021, which was included within net income/(loss) from discontinued operations, net of tax.
- 22 -
The redemption of the 2022 Notes will result in a pre-tax charge of $1 million in the second quarter of 2021.
Annual maturities of Nielsen’s long-term debt are as follows:
(IN MILLIONS) |
|
|
|
|
For October 1, 2017 to December 31, 2017 |
| $ | 3 |
|
2018 |
|
| 28 |
|
2019 |
|
| 1,401 |
|
2020 |
|
| 818 |
|
2021 |
|
| 1,071 |
|
2022 |
|
| 2,325 |
|
Thereafter |
|
| 2,625 |
|
|
| $ | 8,271 |
|
(IN MILLIONS) |
|
|
|
|
For April 1, 2021 to December 31, 2021 |
| $ | 824 |
|
2022 |
|
| — |
|
2023 |
|
| 2,580 |
|
2024 |
|
| — |
|
2025 |
|
| 1,529 |
|
2026 |
|
| — |
|
Thereafter |
|
| 1,725 |
|
|
| $ | 6,658 |
|
In January 2017, Nielsen issued $500 million aggregate principal amount of 5.00% Senior Notes due 2025 at par, with cash proceeds of approximately $495 million, net of fees and expenses.
In April 2017, Nielsen entered into a third amendment to Nielsen’s Fourth Amended and Restated Credit Agreement (as amended prior to April 2017, the “Existing Credit Agreement,” and as amended in April 2017 by the third amendment, the “Amended Credit Agreement”), providing for a new class of Class B-4 Term Loans in an aggregate principal amount of $2,250,000,000, the proceeds of which were used to replace or refinance the entire outstanding principal of existing Class B-3 Term Loans and a portion of existing Class A Term Loans.
- 18 -
The Class B-4 Term Loans will mature in full on October 4, 2023, and are required to be repaid in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of the Class B-4 Term Loans, with the balance payable on October 4, 2023. The Class B-4 Term Loans bear interest equal to, at the election of Nielsen (i) a base rate or LIBOR rate, plus (ii) an applicable margin, which is equal to 2.00% (in the case of LIBOR loans) or 1.00% (in the case of base rate loans).
The Amended Credit Agreement contains the same affirmative and negative covenants as those of the Existing Credit Agreement.
9. Stockholders’Note11. Shareholders’ Equity
Common stock activity is as follows:
|
|
|
| |
|
|
|
| |
Actual number of shares of common stock outstanding |
|
|
|
|
Beginning of period |
|
|
|
|
Shares of common stock issued through compensation plans |
|
|
|
|
Employee benefit trust activity |
|
|
| |
| ( | ) | ||
End of period |
|
|
|
|
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 belowfollowing table summarizesrepresents the cash dividends declared on Nielsen’s common stock during 2016by the Board and paid to shareholders for years ended December 31, 2020 and the ninethree months ended September 30, 2017.March 31, 2021, respectively.
Declaration Date |
| Record Date |
| Payment Date |
| Dividend Per Share |
| |
February 18, 2016 |
| March 3, 2016 |
| March 17, 2016 |
| $ | 0.28 |
|
April 19, 2016 |
| June 2, 2016 |
| June 16, 2016 |
| $ | 0.31 |
|
July 21, 2016 |
| August 25, 2016 |
| September 8, 2016 |
| $ | 0.31 |
|
October 20, 2016 |
| November 22, 2016 |
| December 6, 2016 |
| $ | 0.31 |
|
February 16, 2017 |
| March 2, 2017 |
| March 16, 2017 |
| $ | 0.31 |
|
April 24, 2017 |
| June 2, 2017 |
| June 16, 2017 |
| $ | 0.34 |
|
July 20, 2017 |
| August 24, 2017 |
| September 7, 2017 |
| $ | 0.34 |
|
Declaration Date |
| Record Date |
| Payment Date |
| Dividend Per Share |
| |
February 20, 2020 |
| March 5, 2020 |
| March 19, 2020 |
| $ | 0.06 |
|
April 16, 2020 |
| June 4, 2020 |
| June 18, 2020 |
| $ | 0.06 |
|
July 16, 2020 |
| August 20, 2020 |
| September 3, 2020 |
| $ | 0.06 |
|
October 27, 2020 |
| November 19, 2020 |
| December 3, 2020 |
| $ | 0.06 |
|
February 4, 2021 |
| March 4, 2021 |
| March 18, 2021 |
| $ | 0.06 |
|
On October 19, 2017,April 22, 2021, the Company’s Board of Directors declared a cash dividend of $0.34$0.06 per share on ourthe Company’s common stock. The dividend is payable on December 5, 2017June 17, 2021 to stockholdersshareholders of record at the close of business on November 21, 2017.June 3, 2021.
The dividend policy and the payment of future cash dividends are subject to the discretion of the Company’s Board of Directors.Board.
Nielsen’s Board approved a share repurchase program, as included in the below table, for up to $2 billion in the aggregate of our outstanding common stock. The primary purposespurpose of the program areis to return value to shareholders and to mitigate dilution associated with ourNielsen’s equity compensation plans.
Board Approval |
| Share Repurchase Authorization ($ in millions) | |
July 25, 2013 |
| $ | 500 |
October 23, 2014 |
| $ | 1,000 |
December 11, 2015 |
| $ | 500 |
Total Share Repurchase Authorization |
| $ | 2,000 |
- 23 -
Repurchases under these plansthis program will be made in accordance with applicable securities laws from time to time in the open market or otherwiseand depending on ourNielsen’s evaluation of market conditions and other factors. This program has been executed within the limitations of the authority granted Nielsen on August 6, 2015, which was extended by the authority approved by Nielsen’s shareholders.shareholders at its annual general meeting held on May 12, 2020. Nielsen has requested approval from its shareholders at its annual general meeting to be held on May 25, 2021 to renew this authority for a period of one year.
As of September 30, 2017,March 31, 2021, there have been 36,588,112were 39,426,521 shares of ourthe Company’s common stock purchased at an average price of $45.88$44.95 per share (total consideration of approximately $1,679$1,772 million) under this program. There were 0 share repurchases for the three months ended March 31, 2021.
- 19 -
The activity for the nine months ended September 30, 2017 consisted of open market share repurchases and is summarized in the following table:
|
|
|
|
|
|
|
|
|
| Total Number of |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Shares Purchased as |
|
| Dollar Value of Shares |
| ||
|
| Total Number |
|
| Average |
|
| Part of Publicly |
|
| that may yet be |
| ||||
|
| of Shares |
|
| Price Paid |
|
| Announced Plans |
|
| Purchased under the |
| ||||
Period |
| Purchased |
|
| per Share |
|
| or Programs |
|
| Plans or Programs |
| ||||
As of December 31, 2016 |
|
| 33,837,526 |
|
| $ | 46.16 |
|
|
| 33,837,526 |
|
| $ | 437,970,016 |
|
2017 Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1- 31 |
| — |
|
| $ | — |
|
| — |
|
| $ | 437,970,016 |
| ||
February 1- 28 |
|
| 564,623 |
|
| $ | 45.30 |
|
|
| 564,623 |
|
| $ | 412,392,848 |
|
March 1- 31 |
|
| 365,228 |
|
| $ | 45.15 |
|
|
| 365,228 |
|
| $ | 395,903,537 |
|
April 1-30 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 395,903,537 |
|
May 1-31 |
|
| 1,020,212 |
|
| $ | 40.65 |
|
|
| 1,020,212 |
|
| $ | 354,426,944 |
|
June 1-30 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 354,426,944 |
|
July 1-31 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 354,426,944 |
|
August 1-31 |
|
| 698,062 |
|
| $ | 41.77 |
|
|
| 698,062 |
|
| $ | 325,268,111 |
|
September 1-30 |
|
| 102,461 |
|
| $ | 39.25 |
|
|
| 102,461 |
|
| $ | 321,246,116 |
|
Total |
|
| 36,588,112 |
|
| $ | 45.88 |
|
|
| 36,588,112 |
|
|
|
|
|
10.Note 12. Income Taxes
The effective tax raterates before discrete tax items for each of the three months ended September 30, 2017March 31, 2021 and 2016 was 38%2020 were 26% ($44 million tax expense) and 15% ($13 million tax expense), respectively. The tax rate for the three months ended September 30, 2017March 31, 2021 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company files tax returns, and the effect of global licensing activities and foreign distributions,partially offset by the favorable impactreversal of valuation allowance related to certain financing activities.loss carryforwards. The tax rate for the three months ended September 30, 2016March 31, 2020 was higherlower than the statutory rate as a result of the reversal of valuation allowance related to certain loss carryforwards offset by the impact of tax rate differences in other jurisdictions where the Company files tax returns, andreturns. For the effect of global licensing activities and foreign distributions, offset by the favorable impact of certain financing activities.
The effective tax rates for the ninethree months ended September 30, 2017 and 2016 were 39% and 37%, respectively. TheMarch 31, 2021, the total tax rate for the nine months ended September 30, 2017expense was higher than the statutory rate as a result of$60 million which includes the impact of tax rate differenceschanges and other discrete items recognized in other jurisdictions where the Company filesfirst quarter. For the three months ended March 31, 2020, the total tax returns, and the effect of global licensing activities and foreign distributions, offset by the favorableexpense was $25 million, which includes impact of certain financing activitiesthe CARES Act and other discrete items recognized in the impact of share-based compensation excess tax benefit. The tax rate for the nine months ended September 30, 2016 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company files tax returns, and the effect of global licensing activities and foreign distributions, offset by the favorable impact of certain financing activities, the impact of share-based compensation excess tax benefit, and release of certain tax contingencies.first quarter.
The estimated liability for unrecognized income tax benefits as of December 31, 2017 is $436 million and2020 was $432 million as of December 31, 2016.$128 million. If the Company’s tax positions are favorably sustained by the taxing authorities, the reversal of the underlying liabilities 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. and in many state and foreign jurisdictions. With few exceptions the Company is no longer subject to U.S. Federal income tax examination for 20062015 and prior periods. In addition, the Company has subsidiaries in various states, provinces and countries that are currently under audit for years ranging from 19982013 through 2015.2020.
To date, the Company is not aware of any material adjustments not already accrued related to any of the current Federal, state or foreign audits under examination.
- 20 -
11.Note13. Commitments and Contingencies
Legal Proceedings and Contingencies
In August 2018, a putative shareholder class action lawsuit was filed in the Southern District of New York, naming as defendants Nielsen, former Chief Executive Officer Dwight Mitchell Barns, and former Chief Financial Officer Jamere Jackson. Another lawsuit, which alleged similar facts but also named other Nielsen officers, was filed in the Northern District of Illinois in September 2018 and transferred to the Southern District of New York in December 2018. The actions were consolidated on April 22, 2019, and the Public Employees’ Retirement System of Mississippi was appointed lead plaintiff for the putative class. The operative complaint was filed on September 27, 2019, and asserts violations of certain provisions of the Securities Exchange Act of 1934, as amended, based on allegedly false and materially misleading statements relating to the outlook of Nielsen’s Buy segment (now “Global Connect,” which was sold in the first quarter of 2021), Nielsen’s preparedness for changes in global data privacy laws and Nielsen’s reliance on third-party data. Nielsen moved to dismiss the operative complaint on November 26, 2019. On January 4, 2021, certain of the allegations against Nielsen and its officers were dismissed, while others were sustained. Discovery is in its early stages and is ongoing. In addition, in January 2019, a shareholder derivative lawsuit was filed in New York Supreme Court against a number of Nielsen’s current and former officers and directors. The derivative lawsuit alleges that the named officers and directors breached their fiduciary duties to the Company in connection with factual assertions substantially similar to those in the putative class action complaint. The derivative lawsuit further alleges that certain officers and directors engaged in trading Nielsen stock based on material, nonpublic information. By agreement dated June 26, 2019, the derivative lawsuit was stayed pending resolution of Nielsen’s motion to dismiss the aforementioned securities litigation. Nielsen anticipates an amended complaint will be filed this month. Nielsen intends to defend these lawsuits vigorously. Based on currently available information, Nielsen believes that the Company has meritorious defenses to these actions and that their resolution is not likely to have a material adverse effect on Nielsen’s business, financial position, or results of operations.
As previously disclosed in the Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 1, 2021, five lawsuits were filed relating to the Proposed Connect Transaction in federal and state courts, including one
- 24 -
purported class action lawsuit, by purported Nielsen shareholders against Nielsen and the members of our Board of Directors (collectively, the “Actions”). The Actions generally alleged that the proxy statement filed by Nielsen in connection with the Transaction misrepresented and/or omitted certain purportedly material information and asserted violations of Sections 14(a) and 20(a) of the Exchange Act and the rules promulgated thereunder or negligent and fraudulent misrepresentation and concealment in violation of New York common law and breach of duty of disclosure under the laws of England and Wales. The alleged material misstatements and omissions related to, among other topics, certain forecasted financial information for the Global Connect business prepared by Nielsen’s management, the opinion of J.P. Morgan Securities LLC (“J.P. Morgan”), Nielsen’s financial advisor, in connection with the Proposed Connect Transaction, the interests of Nielsen’s directors and officers in the Transaction and certain background events that occurred in connection with the Proposed Connect Transaction. The plaintiffs in each of the Actions sought, among other things, an injunction against the consummation of the Transaction or, in the alternative, rescission damages, as well as an award of costs and expenses (including attorneys’ and experts’ fees and expenses). On February 1, 2021, Nielsen filed a Current Report on Form 8-K with the SEC voluntarily making supplemental disclosures related to the Proposed Connect Transaction. In light of the supplemental disclosures, the plaintiffs in the Actions agreed to dismiss their claims with prejudice as to the named plaintiffs only and without prejudice to all other members of the putative class. All the Actions have been voluntarily dismissed.
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 not 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.
Subsequent Event
Outsourced Services Agreements
In October 2017, Nielsen amended and restatedNote14. Segments
As discussed in its entirety, its Amended and Restated Master Services Agreement, dated as of October 1, 2007 with Tata America International Corporation and Tata Consultancy Services Limited (jointly, “TCS”) (as amended prior to“Note 15 Discontinued Operations”, the Second Amendment and Restatement, the “Prior Agreement”) by entering into a Second Amended and Restated Master Services Agreement (the “Agreement”), dated as of October 1, 2017 and effective as of January 1, 2017 (the “Effective Date”), with TCS. The term of the AgreementGlobal Connect segment has been extended for an additional five years, soclassified as to expire on December 31, 2025, with three one-year renewal options granted to Nielsen. Nielsen has committed to purchase services from TCS from the Effective Date through the remaining term of the Agreement (the “Minimum Commitment”) in the amount of $2.25 billion, including a commitment to purchase at least $320 million in services per year from 2017 through 2020, $186 million in services per year from 2021 through 2024, and $139.5 million in services in 2025 (in each of the foregoing cases, the “Annual Commitment”). In connectiondiscontinued operations beginning with the entry into the Agreement, the parties have agreed to terminate the separate Global Infrastructure Services Agreement between them asfirst quarter of the Effective Date2021. The Company evaluated segment reporting in accordance with ASC 280 “Segment Reporting” and include the services provided thereunder in one or more Statements of Work (“SOWs”) arising under the Agreement. TCS’s charges under such SOWs will continue to be credited against the Minimum Commitment and the Annual Commitment. TCS will globally provide Nielsen 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. As Nielsen orders specific services under the Agreement, the parties will execute 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 Nielsenbeginning with the right to terminatefirst quarter of 2021, the Agreement or SOWs,Company concluded that it operates as applicable.
12. Segments
The Company aligns itsa single 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 (“Buy”), consisting principally of market research informationsegment and analytical services; and what consumers watch (“Watch”),a single reportable segment consisting principally of television, radio, online and mobile audience and advertising measurement and corresponding analytics.
Corporate consists principally Nielsen aligns its operating segment in order to conform to management’s internal reporting structure. Nielsen operates as a complete unit - from the conception of unallocated items such as certain facilitiesa product, through the collection of the data, into the technology and infrastructure costs as well as intersegment eliminations. 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 allocatedoperations, all the way 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 respectdata being sold and delivered to the operationsclient. The reporting structure of each ofNielsen is and has historically been centralized under one Chief Operating Decision Maker (“CODM”), who evaluates Nielsen’s business segments is set forth below based on the nature of the services offered and geographic areas of operations.operating financial results to assess its performance.
- 21 -
Business Segment Information
(IN MILLIONS) |
| Buy |
|
| Watch |
|
| Corporate |
|
| Total |
| |||||
Three Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Revenues |
| $ | 803 |
|
| $ | 838 |
|
| $ | — |
|
| $ | 1,641 |
| |
Depreciation and amortization |
| $ | 53 |
|
| $ | 106 |
|
| $ | 1 |
|
| $ | 160 |
| |
Restructuring charges |
| $ | 4 |
|
| $ | 2 |
|
| $ | 1 |
|
| $ | 7 |
| |
Stock-based compensation expense |
| $ | 3 |
|
| $ | 2 |
|
| $ | 3 |
|
| $ | 8 |
| |
Other items(1) |
| $ | — |
|
| $ | — |
|
| $ | 10 |
|
| $ | 10 |
| |
Operating income/(loss) |
| $ | 85 |
|
| $ | 280 |
|
| $ | (28 | ) |
| $ | 337 |
| |
Business segment income/(loss)(2) |
| $ | 145 |
|
| $ | 390 |
|
| $ | (13 | ) |
| $ | 522 |
| |
Total assets as of September 30, 2017 |
| $ | 6,925 |
|
| $ | 9,706 |
|
| $ | (46 | ) |
| $ | 16,585 |
|
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Revenues |
| $ | 809 |
|
| $ | 761 |
|
| $ | — |
|
| $ | 1,570 |
| |
Depreciation and amortization |
| $ | 53 |
|
| $ | 97 |
|
| $ | 1 |
|
| $ | 151 |
| |
Restructuring charges |
| $ | 15 |
|
| $ | 2 |
|
| $ | 12 |
|
| $ | 29 |
| |
Stock-based compensation expense |
| $ | 3 |
|
| $ | 2 |
|
| $ | 6 |
|
| $ | 11 |
| |
Other items(1) |
| $ | — |
|
| $ | — |
|
| $ | 11 |
|
| $ | 11 |
| |
Operating income/(loss) |
| $ | 79 |
|
| $ | 259 |
|
| $ | (42 | ) |
| $ | 296 |
| |
Business segment income/(loss)(2) |
| $ | 150 |
|
| $ | 360 |
|
| $ | (12 | ) |
| $ | 498 |
| |
Total assets as of December 31, 2016 |
| $ | 6,697 |
|
| $ | 8,905 |
|
| $ | 128 |
|
| $ | 15,730 |
|
(IN MILLIONS) |
|
Three Months Ended March 31,
|
| |||||||
|
|
| 2021 |
|
|
| 2020 |
|
|
|
Revenues |
| $ | 863 |
|
| $ | 842 |
|
|
|
Operating income |
|
| 253 |
|
|
| 177 |
|
|
|
Depreciation and amortization |
|
| 127 |
|
|
| 136 |
|
|
|
Restructuring charges |
|
| — |
|
|
| 3 |
|
|
|
Share-based compensation expense |
|
| 7 |
|
|
| 10 |
|
|
|
Dis-synergy costs(1) |
|
| — |
|
|
| (17 | ) |
|
|
Other items(2) |
|
| 1 |
|
|
| 17 |
|
|
|
Business segment income(3) |
| $ | 388 |
|
| $ | 326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets: |
|
|
|
|
|
|
|
|
|
|
Total assets as of March 31, 2021 |
| $ | 11,884 |
|
|
|
|
|
|
|
Total assets as of December 31, 2020 |
| $ | 11,146 |
|
|
|
|
|
|
|
(IN MILLIONS) |
| Buy |
|
| Watch |
|
| Corporate |
|
| Total |
| ||||
Nine months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 2,383 |
|
| $ | 2,428 |
|
| $ | — |
|
| $ | 4,811 |
|
Depreciation and amortization |
| $ | 156 |
|
| $ | 318 |
|
| $ | 3 |
|
| $ | 477 |
|
Restructuring charges |
| $ | 31 |
|
| $ | 9 |
|
| $ | 8 |
|
| $ | 48 |
|
Stock-based compensation expense |
| $ | 10 |
|
| $ | 9 |
|
| $ | 16 |
|
| $ | 35 |
|
Other items (1) |
| $ | — |
|
| $ | — |
|
| $ | 28 |
|
| $ | 28 |
|
Operating income/(loss) |
| $ | 219 |
|
| $ | 734 |
|
| $ | (85 | ) |
| $ | 868 |
|
Business segment income/(loss) (2) |
| $ | 416 |
|
| $ | 1,070 |
|
| $ | (30 | ) |
| $ | 1,456 |
|
- 25 -
(IN MILLIONS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 2,454 |
|
| $ | 2,199 |
|
| $ | — |
|
| $ | 4,653 |
|
Depreciation and amortization |
| $ | 158 |
|
| $ | 289 |
|
| $ | 3 |
|
| $ | 450 |
|
Restructuring charges |
| $ | 42 |
|
| $ | 7 |
|
| $ | 24 |
|
| $ | 73 |
|
Stock-based compensation expense |
| $ | 12 |
|
| $ | 7 |
|
| $ | 18 |
|
| $ | 37 |
|
Other items (1) |
| $ | 2 |
|
| $ | 2 |
|
| $ | 24 |
|
| $ | 28 |
|
Operating income/(loss) |
| $ | 216 |
|
| $ | 684 |
|
| $ | (98 | ) |
| $ | 802 |
|
Business segment income/(loss) (2) |
| $ | 430 |
|
| $ | 989 |
|
| $ | (29 | ) |
| $ | 1,390 |
|
|
| Costs to stand-up Nielsen as a standalone company including incremental real estate, IT/infrastructure, Transition Services Agreements and |
(2) | Other items primarily consist of business optimization costs and transaction related costs for the three |
| (3) | The |
- 22 -
13. Guarantor Financial Information
The following supplemental financial information is being provided for purposes of compliance with reporting covenants contained in certain debt obligations of Nielsen and its subsidiaries. The financial information sets forth for Nielsen, its subsidiaries that have issued certain debt securities (the “Issuers”) and its guarantor and non-guarantor subsidiaries, the consolidating balance sheet as of September 30, 2017 and December 31, 2016 and consolidating statements of operations and cash flows for the periods ended September 30, 2017 and 2016. During the three months ended September 30, 2017, the Company restructured certain legal entities and therefore the Company adjusted prior periods to reflect the current year structure.
The issued debt securities are jointly and severally guaranteed on a full and unconditional basis by Nielsen and subject to certain exceptions, each of the direct and indirect 100% owned subsidiaries of Nielsen, in each case to the extent that such entities provide a guarantee under the senior secured credit facilities. The issuers are also 100% owned indirect subsidiaries of Nielsen: Nielsen Finance LLC and Nielsen Finance Co. for certain series of debt obligations, and The Nielsen Company (Luxembourg) S.ar.l., for the other series of debt obligations. Each issuer is a guarantor of the debt obligations not issued by it.
Nielsen is a holding company and does not have any material assets or operations other than ownership of the capital stock of its direct and indirect subsidiaries. All of Nielsen’s operations are conducted through its subsidiaries, and, therefore, Nielsen is expected to continue to be dependent upon the cash flows of its subsidiaries to meet its obligations. The senior secured credit facilities contain certain limitations on the ability of Nielsen to receive the cash flows of its subsidiaries.
While all subsidiary guarantees of the issued debt securities are full and unconditional, these guarantees contain customary release provisions including when (i) the subsidiary is sold or sells all of its assets, (ii) the subsidiary is declared “unrestricted” for covenant purposes, (iii) the subsidiary’s guarantee under the senior secured credit facilities is released and (iv) the requirements for discharge of the indenture have been satisfied.
- 23 -
Nielsen Holdings plc
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
For the three months ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
|
|
|
| |
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Guarantor |
|
| Elimination |
|
| Consolidated |
|
|
|
| ||||||
Revenues |
| $ | — |
|
| $ | — |
|
| $ | 899 |
|
| $ | 742 |
|
| $ | — |
|
| $ | 1,641 |
|
|
|
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| — |
|
|
| — |
|
|
| 356 |
|
|
| 336 |
|
|
| — |
|
|
| 692 |
|
|
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 1 |
|
|
| — |
|
|
| 197 |
|
|
| 247 |
|
|
| — |
|
|
| 445 |
|
|
|
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| 126 |
|
|
| 34 |
|
|
| — |
|
|
| 160 |
|
|
|
|
Restructuring charges |
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 4 |
|
|
| — |
|
|
| 7 |
|
|
|
|
Operating (loss)/income |
|
| (1 | ) |
|
| — |
|
|
| 217 |
|
|
| 121 |
|
|
| — |
|
|
| 337 |
|
|
|
|
Interest income |
|
| — |
|
|
| 238 |
|
|
| 10 |
|
|
| — |
|
|
| (247 | ) |
|
| 1 |
|
|
|
|
Interest expense |
|
| — |
|
|
| (90 | ) |
|
| (241 | ) |
|
| (11 | ) |
|
| 247 |
|
|
| (95 | ) |
|
|
|
Other income/(expense), net |
|
| — |
|
|
| — |
|
|
| 90 |
|
|
| (91 | ) |
|
| — |
|
|
| (1 | ) |
|
|
|
(Loss)/income from continuing operations before income taxes and equity in net income of subsidiaries |
|
| (1 | ) |
|
| 148 |
|
|
| 76 |
|
|
| 19 |
|
|
| — |
|
|
| 242 |
|
|
|
|
Provision for income taxes |
|
| — |
|
|
| (52 | ) |
|
| (37 | ) |
|
| (3 | ) |
|
| — |
|
|
| (92 | ) |
|
|
|
Equity in net income of subsidiaries |
|
| 147 |
|
|
| 61 |
|
|
| 108 |
|
|
| — |
|
|
| (316 | ) |
|
| — |
|
|
|
|
Net income |
|
| 146 |
|
|
| 157 |
|
|
| 147 |
|
|
| 16 |
|
|
| (316 | ) |
|
| 150 |
|
|
|
|
Less net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
|
|
|
Net income attributable to controlling interest |
|
| 146 |
|
|
| 157 |
|
|
| 147 |
|
|
| 12 |
|
|
| (316 | ) |
|
| 146 |
|
|
|
|
Total other comprehensive income/(loss) |
|
| 72 |
|
|
| (6 | ) |
|
| 72 |
|
|
| 69 |
|
|
| (135 | ) |
|
| 72 |
|
|
|
|
Total comprehensive income |
|
| 218 |
|
|
| 151 |
|
|
| 219 |
|
|
| 85 |
|
|
| (451 | ) |
|
| 222 |
|
|
|
|
Comprehensive income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
|
|
|
Total comprehensive income attributable to controlling interest |
| $ | 218 |
|
| $ | 151 |
|
| $ | 219 |
|
| $ | 81 |
|
| $ | (451 | ) |
| $ | 218 |
|
|
|
|
- 24 -
Nielsen Holdings plc
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
For the three months ended September 30, 2016
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Non- |
|
| Elimination |
|
| Consolidated |
| ||||||
Revenues |
| $ | — |
|
| $ | — |
|
| $ | 884 |
|
| $ | 686 |
|
| $ | — |
|
| $ | 1,570 |
|
Cost of revenues, exclusive of depreciation |
|
| — |
|
|
| — |
|
|
| 322 |
|
|
| 320 |
|
|
| — |
|
|
| 642 |
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 1 |
|
|
| — |
|
|
| 228 |
|
|
| 223 |
|
|
| — |
|
|
| 452 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| 123 |
|
|
| 28 |
|
|
| — |
|
|
| 151 |
|
Restructuring charges |
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| 7 |
|
|
| — |
|
|
| 29 |
|
Operating (loss)/income |
|
| (1 | ) |
|
| — |
|
|
| 189 |
|
|
| 108 |
|
|
| — |
|
|
| 296 |
|
Interest income |
|
| — |
|
|
| 221 |
|
|
| 10 |
|
|
| 2 |
|
|
| (232 | ) |
|
| 1 |
|
Interest expense |
|
| (1 | ) |
|
| (79 | ) |
|
| (227 | ) |
|
| (10 | ) |
|
| 232 |
|
|
| (85 | ) |
Foreign currency exchange transaction gains, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Other income/(expense), net |
|
| — |
|
|
| — |
|
|
| 73 |
|
|
| (73 | ) |
|
| — |
|
|
| — |
|
(Loss)/income from continuing operations before income taxes and equity in net income of subsidiaries |
|
| (2 | ) |
|
| 142 |
|
|
| 45 |
|
|
| 29 |
|
|
| — |
|
|
| 214 |
|
Provision for income taxes |
|
| — |
|
|
| (50 | ) |
|
| (19 | ) |
|
| (13 | ) |
|
| — |
|
|
| (82 | ) |
Equity in net income of subsidiaries |
|
| 132 |
|
|
| 68 |
|
|
| 106 |
|
|
| — |
|
|
| (306 | ) |
|
| — |
|
Net income |
|
| 130 |
|
|
| 160 |
|
|
| 132 |
|
|
| 16 |
|
|
| (306 | ) |
|
| 132 |
|
Less net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Net income attributable to controlling interest |
|
| 130 |
|
|
| 160 |
|
|
| 132 |
|
|
| 14 |
|
|
| (306 | ) |
|
| 130 |
|
Total other comprehensive (loss)/income |
|
| (10 | ) |
|
| 2 |
|
|
| (10 | ) |
|
| (6 | ) |
|
| 13 |
|
|
| (11 | ) |
Total other comprehensive loss attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Total other comprehensive (loss)/income attributable to controlling interests |
|
| (10 | ) |
|
| 2 |
|
|
| (10 | ) |
|
| (5 | ) |
|
| 13 |
|
|
| (10 | ) |
Total comprehensive income |
|
| 120 |
|
|
| 162 |
|
|
| 122 |
|
|
| 10 |
|
|
| (293 | ) |
|
| 121 |
|
Comprehensive income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 1 |
|
Total comprehensive income attributable to controlling interest |
| $ | 120 |
|
| $ | 162 |
|
| $ | 122 |
|
| $ | 9 |
|
| $ | (293 | ) |
| $ | 120 |
|
- 25 -
Nielsen Holdings plc
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
For the nine months ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Guarantor |
|
| Elimination |
|
|
|
| Consolidated |
|
|
|
| ||||||
Revenues |
| $ | — |
|
| $ | — |
|
| $ | 2,658 |
|
| $ | 2,153 |
|
| $ | — |
|
|
|
| $ | 4,811 |
|
|
|
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| — |
|
|
| — |
|
|
| 1,052 |
|
|
| 979 |
|
|
| — |
|
|
|
|
| 2,031 |
|
|
|
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 3 |
|
|
| — |
|
|
| 686 |
|
|
| 698 |
|
|
| — |
|
|
|
|
| 1,387 |
|
|
|
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| 384 |
|
|
| 93 |
|
|
| — |
|
|
|
|
| 477 |
|
|
|
|
Restructuring charges |
|
| — |
|
|
| — |
|
|
| 21 |
|
|
| 27 |
|
|
| — |
|
|
|
|
| 48 |
|
|
|
|
Operating (loss)/income |
|
| (3 | ) |
|
| — |
|
|
| 515 |
|
|
| 356 |
|
|
| — |
|
|
|
|
| 868 |
|
|
|
|
Interest income |
|
| 1 |
|
|
| 682 |
|
|
| 27 |
|
|
| 3 |
|
|
| (710 | ) |
|
|
|
| 3 |
|
|
|
|
Interest expense |
|
| — |
|
|
| (263 | ) |
|
| (694 | ) |
|
| (30 | ) |
|
| 710 |
|
|
|
|
| (277 | ) |
|
|
|
Foreign currency exchange transaction losses, net |
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| (6 | ) |
|
| — |
|
|
|
|
| (9 | ) |
|
|
|
Other (expense)/income, net |
|
| — |
|
|
| (2 | ) |
|
| 68 |
|
|
| (69 | ) |
|
| — |
|
|
|
|
| (3 | ) |
|
|
|
(Loss)/income from continuing operations before income taxes and equity in net income/(loss) of subsidiaries and affiliates |
|
| (2 | ) |
|
| 417 |
|
|
| (87 | ) |
|
| 254 |
|
|
| — |
|
|
|
|
| 582 |
|
|
|
|
(Provision)/benefit for income taxes |
|
| — |
|
|
| (146 | ) |
|
| 20 |
|
|
| (100 | ) |
|
| — |
|
|
|
|
| (226 | ) |
|
|
|
Equity in net income of subsidiaries |
|
| 350 |
|
|
| 149 |
|
|
| 418 |
|
|
| — |
|
|
| (917 | ) |
|
|
|
| — |
|
|
|
|
Equity in net (loss)/income of affiliates |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 1 |
|
|
| — |
|
|
|
|
| — |
|
|
|
|
Net income |
|
| 348 |
|
|
| 420 |
|
|
| 350 |
|
|
| 155 |
|
|
| (917 | ) |
|
|
|
| 356 |
|
|
|
|
Less net income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
|
|
| 8 |
|
|
|
|
Net income attributable to controlling interest |
|
| 348 |
|
|
| 420 |
|
|
| 350 |
|
|
| 147 |
|
|
| (917 | ) |
|
|
|
| 348 |
|
|
|
|
Total other comprehensive income/(loss) |
|
| 232 |
|
|
| (24 | ) |
|
| 232 |
|
|
| 245 |
|
|
| (448 | ) |
|
|
|
| 237 |
|
|
|
|
Total other comprehensive income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
|
|
| 5 |
|
|
|
|
Total other comprehensive income/(loss) attributable to controlling interests |
|
| 232 |
|
|
| (24 | ) |
|
| 232 |
|
|
| 240 |
|
|
| (448 | ) |
|
|
|
| 232 |
|
|
|
|
Total comprehensive income |
|
| 580 |
|
|
| 396 |
|
|
| 582 |
|
|
| 400 |
|
|
| (1,365 | ) |
|
|
|
| 593 |
|
|
|
|
Comprehensive income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13 |
|
|
| — |
|
|
|
|
| 13 |
|
|
|
|
Total comprehensive income attributable to controlling interest |
| $ | 580 |
|
| $ | 396 |
|
| $ | 582 |
|
| $ | 387 |
|
| $ | (1,365 | ) |
|
|
| $ | 580 |
|
|
|
|
- 26 -
Note15. Discontinued Operations
On October 31, 2020, Nielsen Holdings plcentered into the Stock Purchase Agreement to sell its Global Connect business to affiliates of Purchaser, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and the Connect Warrant. On February 11, 2021, Nielsen held a special meeting of Nielsen’s shareholders. At the special meeting, the Connect Transaction was submitted to a vote of the shareholders through the solicitation of proxies. Approval of the Connect Transaction required the affirmative vote of the holders of a majority of ordinary shares present (online or by proxy) at the special meeting. The Connect Transaction was approved by the requisite vote of Nielsen’s shareholders. Beginning in the first quarter of 2021, the Global Connect segment met the criteria set forth in ASC 205 – 20 “Presentation of Financial Statements – Discontinued Operations,” and has been presented on a discontinued operations basis for all periods presented. Given the Global Connect segment represented a separate segment and approximately 50% of our consolidated revenues, we considered this to be a strategic shift.
Condensed Consolidated Statement
The Connect Transaction closed on March 5, 2021. The Company received net proceeds of Comprehensive Income (Unaudited)$2.4 billion on March 5, 2021, subject to final closing adjustments, and recorded an estimated gain of $542 million, net of tax within discontinued operations. Proceeds from the sale were primarily utilized for debt repayment.
For
On March 16, 2021, Nielsen completed the ninepartial prepayment of $1.0 billion of the senior secured term loans due 2023 and $0.3 billion of the senior secured term loans due 2025. The partial prepayment resulted in aggregate principal amount of 2023 and 2025 senior secured term loans remaining outstanding of approximately $2.6 billion and $1 billion, respectively. Nielsen redeemed $150 million outstanding aggregate principal amount of its 5.500% senior notes due 2021 effective March 21 2021 and redeemed $825 million of outstanding aggregate principal amount of the 5.000% senior notes due 2022 effective April 10 2021, in each case at a redemption price equal to 100% of the principal amount of such notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.
In connection with the Connect Transaction, Nielsen and Global Connect entered into a Transition Services Agreement for services that primarily relate to technology functions such as infrastructure and cybersecurity, which will run for up to two years following the closing, with an option to extend the term by six months ended September 30, 2016per service. In addition, Nielsen and Global Connect entered into a Master Services Agreement pursuant to which each party granted the other reciprocal licenses to certain data used by Global Connect and Nielsen, respectively, as well as certain corresponding services related to such data at agreed rates for up to five years following the closing.
The following table summarizes the major classes of line items constituting net income from discontinued operations, net of tax:
(IN MILLIONS) |
| Parent |
|
| Issuer |
|
| Guarantor |
|
| Non- |
|
| Elimination |
|
| Consolidated |
| ||||||
Revenues |
| $ | — |
|
| $ | — |
|
| $ | 2,668 |
|
| $ | 1,985 |
|
| $ | — |
|
| $ | 4,653 |
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| — |
|
|
| — |
|
|
| 985 |
|
|
| 952 |
|
|
| — |
|
|
| 1,937 |
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown |
|
| 3 |
|
|
| — |
|
|
| 735 |
|
|
| 653 |
|
|
| — |
|
|
| 1,391 |
|
Depreciation and amortization |
|
| — |
|
|
| — |
|
|
| 364 |
|
|
| 86 |
|
|
| — |
|
|
| 450 |
|
Restructuring charges |
|
| — |
|
|
| — |
|
|
| 40 |
|
|
| 33 |
|
|
| — |
|
|
| 73 |
|
Operating (loss)/income |
|
| (3 | ) |
|
| — |
|
|
| 544 |
|
|
| 261 |
|
|
| — |
|
|
| 802 |
|
Interest income |
|
| — |
|
|
| 653 |
|
|
| 29 |
|
|
| 4 |
|
|
| (683 | ) |
|
| 3 |
|
Interest expense |
|
| (3 | ) |
|
| (230 | ) |
|
| (668 | ) |
|
| (29 | ) |
|
| 683 |
|
|
| (247 | ) |
Foreign currency exchange transaction losses, net |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (2 | ) |
|
| — |
|
|
| (3 | ) |
Other (expense)/income, net |
|
| — |
|
|
| (1 | ) |
|
| 95 |
|
|
| (94 | ) |
|
| — |
|
|
| — |
|
(Loss)/income from continuing operations before income taxes and equity in net income/(loss) of subsidiaries and affiliates |
|
| (6 | ) |
|
| 422 |
|
|
| (1 | ) |
|
| 140 |
|
|
| — |
|
|
| 555 |
|
(Provision)/benefit for income taxes |
|
| — |
|
|
| (148 | ) |
|
| 7 |
|
|
| (67 | ) |
|
| — |
|
|
| (208 | ) |
Equity in net income of subsidiaries |
|
| 349 |
|
|
| 150 |
|
|
| 344 |
|
|
| — |
|
|
| (843 | ) |
|
| — |
|
Equity in net (loss)/income of affiliates |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| 1 |
|
|
| — |
|
|
| — |
|
Net income |
|
| 343 |
|
|
| 424 |
|
|
| 349 |
|
|
| 74 |
|
|
| (843 | ) |
|
| 347 |
|
Less net income attributable to noncontrolling |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 4 |
|
Net income attributable to controlling interest |
|
| 343 |
|
|
| 424 |
|
|
| 349 |
|
|
| 70 |
|
|
| (843 | ) |
|
| 343 |
|
Total other comprehensive income/(loss) |
|
| 38 |
|
|
| (12 | ) |
|
| 38 |
|
|
| 37 |
|
|
| (65 | ) |
|
| 36 |
|
Total other comprehensive loss attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Total other comprehensive income/(loss) attributable to controlling interests |
|
| 38 |
|
|
| (12 | ) |
|
| 38 |
|
|
| 39 |
|
|
| (65 | ) |
|
| 38 |
|
Total comprehensive income |
|
| 381 |
|
|
| 412 |
|
|
| 387 |
|
|
| 111 |
|
|
| (908 | ) |
|
| 383 |
|
Comprehensive income attributable to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| 2 |
|
Total comprehensive income attributable to controlling interests |
| $ | 381 |
|
| $ | 412 |
|
| $ | 387 |
|
| $ | 109 |
|
| $ | (908 | ) |
| $ | 381 |
|
|
| Three Months Ended | Three Months Ended |
| ||||||||||
|
| March 31, | March 31, |
| ||||||||||
(IN MILLIONS) |
| 2021 |
|
| 2020 |
| ||||||||
Operations |
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 452 |
|
| $ | 717 |
| ||||||
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| 264 |
|
|
| 397 |
| ||||||
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 229 |
|
|
| 313 |
| ||||||
Depreciation and amortization |
|
| 36 |
|
|
| 78 |
| ||||||
Restructuring charges |
|
| 6 |
|
|
| 8 |
| ||||||
Operating income/(loss) |
|
| (83 | ) |
|
| (79 | ) | ||||||
Other income and expenses(1) |
|
| (13 | ) |
|
| (8 | ) | ||||||
Income/(loss) from discontinued operations before income taxes |
|
| (96 | ) |
|
| (87 | ) | ||||||
Benefit/(provision) for income taxes |
|
| 21 |
|
|
| 14 |
| ||||||
Net income/(loss) from discontinued operations |
| $ | (75 | ) |
| $ | (73 | ) | ||||||
Disposal |
|
| ||||||||||||
Gain on disposal before income taxes |
| $ | 379 |
|
| $ | - |
| ||||||
Benefit/(provision) for income taxes |
|
| 163 |
|
|
| - |
| ||||||
Gain on disposal, net of taxes |
|
| 542 |
|
|
| - |
| ||||||
Net income/(loss) from discontinued operations |
|
| 467 |
|
|
| (73 | ) | ||||||
Net income/(loss) from discontinued operations attributable to noncontrolling interests |
|
| - |
|
|
| 1 |
| ||||||
Net income/(loss) from discontinued operations attributable to Nielsen shareholders |
| $ | 467 |
|
| $ | (74 | ) |
- 27 -
Nielsen Holdings plc(1)The Company’s Sixth Amended and Restated Credit Agreement entered into in July 2020 and the Credit Agreement entered into in June2020, as amended by Amendment No. 1 thereto in July 2020,required $1.3 billion of senior secured term loans to be repaid pursuant to the debt covenants which were triggered as a result of the Connect Transaction. As such, the Company elected to allocate interest expense to discontinued operations of $8 million and $10 for the three months ended March 31, 2021 and 2020, respectively.
Condensed Consolidated Balance Sheet (Unaudited)
September 30, 2017The Company has incurred $162 million in separation costs related to the sale of Global Connect, of which $37 and $35 are reflected in the Company’s condensed consolidated statement of operations as discontinued operations for the three months ended March 31, 2021 and 2020, respectively. These costs are comprised primarily of professional fees (e.g., legal, banking and accounting), as well as other items that are incremental and one-time in nature that are related to the sale of Global Connect.
The following table summarizes the major classes of assets and liabilities of discontinued operations at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
|
| |
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Guarantor |
|
| Elimination |
|
| Consolidated |
| ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 1 |
|
| $ | 19 |
|
| $ | 73 |
|
| $ | 569 |
|
| $ | — |
|
| $ | 662 |
|
Trade and other receivables, net |
|
| 1 |
|
|
| — |
|
|
| 516 |
|
|
| 765 |
|
| $ | — |
|
|
| 1,282 |
|
Prepaid expenses and other current assets |
|
| — |
|
|
| — |
|
|
| 193 |
|
|
| 135 |
|
| $ | — |
|
|
| 328 |
|
Intercompany receivables |
|
| 2 |
|
|
| 1,146 |
|
|
| 322 |
|
|
| 123 |
|
|
| (1,593 | ) |
|
| — |
|
Total current assets |
|
| 4 |
|
|
| 1,165 |
|
|
| 1,104 |
|
|
| 1,592 |
|
|
| (1,593 | ) |
|
| 2,272 |
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Property, plant and equipment, net |
|
| — |
|
|
| — |
|
|
| 296 |
|
|
| 162 |
|
|
| — |
|
|
| 458 |
|
Goodwill |
|
| — |
|
|
| — |
|
|
| 6,022 |
|
|
| 2,330 |
|
|
| — |
|
|
| 8,352 |
|
Other intangible assets, net |
|
| — |
|
|
| — |
|
|
| 4,513 |
|
|
| 529 |
|
|
| — |
|
|
| 5,042 |
|
Deferred tax assets |
|
| 2 |
|
|
| 20 |
|
|
| — |
|
|
| 109 |
|
|
| — |
|
|
| 131 |
|
Other non-current assets |
|
| — |
|
|
| 7 |
|
|
| 241 |
|
|
| 82 |
|
|
| — |
|
|
| 330 |
|
Equity investment in subsidiaries |
|
| 4,230 |
|
|
| 1,222 |
|
|
| 4,190 |
|
|
| — |
|
|
| (9,642 | ) |
|
| — |
|
Intercompany loans |
|
| 25 |
|
|
| 8,608 |
|
|
| 1,829 |
|
|
| 140 |
|
|
| (10,602 | ) |
|
| — |
|
Total assets |
| $ | 4,261 |
|
| $ | 11,022 |
|
| $ | 18,195 |
|
| $ | 4,944 |
|
| $ | (21,837 | ) |
| $ | 16,585 |
|
Liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
| $ | — |
|
| $ | 101 |
|
| $ | 422 |
|
| $ | 492 |
|
| $ | — |
|
| $ | 1,015 |
|
Deferred revenues |
|
| — |
|
|
| — |
|
|
| 204 |
|
|
| 124 |
|
| $ | — |
|
|
| 328 |
|
Income tax liabilities |
|
| — |
|
|
| 2 |
|
|
| 47 |
|
|
| 149 |
|
| $ | — |
|
|
| 198 |
|
Current portion of long-term debt, capital lease obligations and short-term borrowings |
|
| — |
|
|
| 22 |
|
|
| 40 |
|
|
| 5 |
|
| $ | — |
|
|
| 67 |
|
Intercompany payables |
|
| — |
|
|
| — |
|
|
| 1,300 |
|
|
| 293 |
|
|
| (1,593 | ) |
|
| — |
|
Total current liabilities |
|
| — |
|
|
| 125 |
|
|
| 2,013 |
|
|
| 1,063 |
|
|
| (1,593 | ) |
|
| 1,608 |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
Long-term debt and capital lease obligations |
|
| — |
|
|
| 8,247 |
|
|
| 113 |
|
|
| 17 |
|
|
| — |
|
|
| 8,377 |
|
Deferred tax liabilities |
|
| — |
|
|
| 71 |
|
|
| 1,063 |
|
|
| 85 |
|
|
| — |
|
|
| 1,219 |
|
Intercompany loans |
|
| — |
|
|
| 62 |
|
|
| 10,173 |
|
|
| 367 |
|
|
| (10,602 | ) |
|
| — |
|
Other non-current liabilities |
|
| 2 |
|
|
| 2 |
|
|
| 603 |
|
|
| 314 |
|
|
| — |
|
|
| 921 |
|
Total liabilities |
|
| 2 |
|
|
| 8,507 |
|
|
| 13,965 |
|
|
| 1,846 |
|
|
| (12,195 | ) |
|
| 12,125 |
|
Total stockholders’ equity |
|
| 4,259 |
|
|
| 2,515 |
|
|
| 4,230 |
|
|
| 2,897 |
|
|
| (9,642 | ) |
|
| 4,259 |
|
Noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 201 |
|
|
| — |
|
|
| 201 |
|
Total equity |
|
| 4,259 |
|
|
| 2,515 |
|
|
| 4,230 |
|
|
| 3,098 |
|
|
| (9,642 | ) |
|
| 4,460 |
|
Total liabilities and equity |
| $ | 4,261 |
|
| $ | 11,022 |
|
| $ | 18,195 |
|
| $ | 4,944 |
|
| $ | (21,837 | ) |
| $ | 16,585 |
|
December 31, | ||||||
(IN MILLIONS) | 2020 | |||||
Assets: | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 110 | ||||
Trade and other receivables, net of allowances for doubtful accounts and sales returns | 689 | |||||
Prepaid expenses and other current assets | 265 | |||||
Total current assets of discontinued operations | 1,064 | |||||
Non-current assets | ||||||
Property, plant and equipment, net | 177 | |||||
Operating lease right-of-use asset | 217 | |||||
Goodwill | 360 | |||||
Other intangible assets, net | 807 | |||||
Deferred tax assets | 228 | |||||
Other non-current assets | 136 | |||||
Total assets of discontinued operations | $ | 2,989 | ||||
Liabilities: | ||||||
Current liabilities | ||||||
Accounts payable and other current liabilities | $ | 710 | ||||
Deferred revenues | 235 | |||||
Income tax liabilities | 27 | |||||
Current portion of long-term debt, finance lease obligations and short-term borrowings | 17 | |||||
Total current liabilities of discontinued operations | 989 | |||||
Non-current liabilities | ||||||
Long-term debt and finance lease obligations | 1,330 | |||||
Deferred tax liabilities | 65 | |||||
Operating lease liabilities | 218 | |||||
Other non-current liabilities | 224 | |||||
Total liabilities of discontinued operations | $ | 2,826 |
As of March 31, 2021, the condensed consolidated balance sheet included $60 million of an estimated receivable from Purchaser within prepaid expenses and other current assets as well as $49 million within accounts payable and other current liabilities and $27 million within other non-current liabilities for estimated liabilities to affiliates of Purchaser and incurred separation costs. These represent estimated receivables from and payables to affiliates of Purchaser under tax indemnification arrangements for certain liabilities to various taxing authorities that will be settled in future periods as well as separation costs incurred related to the sale of Global Connect.
The following table provides operating and investing cash flows for Nielsen’s discontinued operations (in millions):
- 28 -
|
|
| March 31, |
|
|
| March 31, |
|
(IN MILLIONS) |
|
| 2021 |
|
|
| 2020 |
|
|
|
| (Unaudited) |
|
|
| (Unaudited) |
|
Net cash flows provided by/(used in) operating activities |
| $ | (213 | ) |
| $ | (126 | ) |
Net cash flows provided by/(used in) investing activities |
|
| (26 | ) |
|
| (68 | ) |
Nielsen Holdings plc
Condensed Consolidated Balance Sheet
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
|
|
|
| |
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Guarantor |
|
| Elimination |
|
| Consolidated | ||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 5 |
|
| $ | 1 |
|
| $ | 219 |
|
| $ | 529 |
|
| $ | — |
|
| $ | 754 |
Trade and other receivables, net |
|
| 2 |
|
|
| — |
|
|
| 478 |
|
|
| 691 |
|
|
| — |
|
|
| 1,171 |
Prepaid expenses and other current assets |
|
| — |
|
|
| — |
|
|
| 185 |
|
|
| 112 |
|
|
| — |
|
|
| 297 |
Intercompany receivables |
|
| — |
|
|
| 862 |
|
|
| 312 |
|
|
| 167 |
|
|
| (1,341 | ) |
|
| — |
Total current assets |
|
| 7 |
|
|
| 863 |
|
|
| 1,194 |
|
|
| 1,499 |
|
|
| (1,341 | ) |
|
| 2,222 |
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| — |
|
|
| — |
|
|
| 307 |
|
|
| 164 |
|
|
| — |
|
|
| 471 |
Goodwill |
|
| — |
|
|
| — |
|
|
| 5,728 |
|
|
| 2,117 |
|
|
| — |
|
|
| 7,845 |
Other intangible assets, net |
|
| — |
|
|
| — |
|
|
| 4,248 |
|
|
| 488 |
|
|
| — |
|
|
| 4,736 |
Deferred tax assets |
|
| 2 |
|
|
| — |
|
|
| (1 | ) |
|
| 126 |
|
|
| — |
|
|
| 127 |
Other non-current assets |
|
| — |
|
|
| 3 |
|
|
| 245 |
|
|
| 81 |
|
|
| — |
|
|
| 329 |
Equity investment in subsidiaries |
|
| 4,117 |
|
|
| 1,079 |
|
|
| 4,222 |
|
|
| — |
|
|
| (9,418 | ) |
|
| — |
Intercompany loans |
|
| 25 |
|
|
| 11,533 |
|
|
| 3,332 |
|
|
| 150 |
|
|
| (15,040 | ) |
|
| — |
Total assets |
| $ | 4,151 |
|
| $ | 13,478 |
|
| $ | 19,275 |
|
| $ | 4,625 |
|
| $ | (25,799 | ) |
| $ | 15,730 |
Liabilities and equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
| $ | — |
|
| $ | 52 |
|
| $ | 479 |
|
| $ | 481 |
|
| $ | — |
|
| $ | 1,012 |
Deferred revenues |
|
| — |
|
|
| — |
|
|
| 172 |
|
|
| 125 |
|
|
| — |
|
|
| 297 |
Income tax liabilities |
|
| — |
|
|
| 2 |
|
|
| 36 |
|
|
| 59 |
|
|
| — |
|
|
| 97 |
Current portion of long-term debt, capital lease obligations and short-term borrowings |
|
| — |
|
|
| 145 |
|
|
| 35 |
|
|
| 8 |
|
|
| — |
|
|
| 188 |
Intercompany payables |
|
| 47 |
|
|
| 2 |
|
|
| 988 |
|
|
| 304 |
|
|
| (1,341 | ) |
|
| — |
Total current liabilities |
|
| 47 |
|
|
| 201 |
|
|
| 1,710 |
|
|
| 977 |
|
|
| (1,341 | ) |
|
| 1,594 |
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt and capital lease obligations |
|
| — |
|
|
| 7,611 |
|
|
| 106 |
|
|
| 21 |
|
|
| — |
|
|
| 7,738 |
Deferred tax liabilities |
|
| — |
|
|
| 71 |
|
|
| 1,027 |
|
|
| 77 |
|
|
| — |
|
|
| 1,175 |
Intercompany loans |
|
| — |
|
|
| 2,985 |
|
|
| 11,708 |
|
|
| 347 |
|
|
| (15,040 | ) |
|
| — |
Other non-current liabilities |
|
| 2 |
|
|
| 4 |
|
|
| 609 |
|
|
| 315 |
|
|
| — |
|
|
| 930 |
Total liabilities |
|
| 49 |
|
|
| 10,872 |
|
|
| 15,160 |
|
|
| 1,737 |
|
|
| (16,381 | ) |
|
| 11,437 |
Total stockholders’ equity |
|
| 4,102 |
|
|
| 2,606 |
|
|
| 4,117 |
|
|
| 2,695 |
|
|
| (9,418 | ) |
|
| 4,102 |
Noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (2 | ) |
|
| 193 |
|
|
| — |
|
|
| 191 |
Total equity |
|
| 4,102 |
|
|
| 2,606 |
|
|
| 4,115 |
|
|
| 2,888 |
|
|
| (9,418 | ) |
|
| 4,293 |
Total liabilities and equity |
| $ | 4,151 |
|
| $ | 13,478 |
|
| $ | 19,275 |
|
| $ | 4,625 |
|
| $ | (25,799 | ) |
| $ | 15,730 |
- 29 -
Nielsen Holdings plc
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the nine months ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non- |
|
|
|
|
| |
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Guarantor |
|
| Consolidated |
| |||||
Net cash (used in)/provided by operating activities |
| $ | (48 | ) |
| $ | 193 |
|
| $ | 424 |
|
| $ | 235 |
|
| $ | 804 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of subsidiaries and affiliates, net of cash |
|
| — |
|
|
| — |
|
|
| (573 | ) |
|
| (22 | ) |
|
| (595 | ) |
Additions to property, plant and equipment and other assets |
|
| — |
|
|
| — |
|
|
| (29 | ) |
|
| (26 | ) |
|
| (55 | ) |
Additions to intangible assets |
|
| — |
|
|
| — |
|
|
| (218 | ) |
|
| (46 | ) |
|
| (264 | ) |
Proceeds from the sale of property, plant and equipment and other assets |
|
| — |
|
|
| — |
|
|
| 28 |
|
|
| — |
|
|
| 28 |
|
Other investing activities |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
|
| (2 | ) |
Net cash used in investing activities |
|
| — |
|
|
| — |
|
|
| (793 | ) |
|
| (95 | ) |
|
| (888 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of debt |
|
| — |
|
|
| (2,288 | ) |
|
| — |
|
|
| (1 | ) |
|
| (2,289 | ) |
Proceeds from the issuance of debt, net of issuance costs |
|
| — |
|
|
| 2,745 |
|
|
| — |
|
|
| — |
|
|
| 2,745 |
|
Decrease in other short-term borrowings |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5 | ) |
|
| (5 | ) |
Cash dividends paid to stockholders |
|
| (353 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (353 | ) |
Repurchase of common stock |
|
| (117 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (117 | ) |
Activity under stock plans |
|
| 28 |
|
|
| — |
|
|
| (7 | ) |
|
| — |
|
|
| 21 |
|
Proceeds from employee stock purchase plan |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
Capital leases |
|
| — |
|
|
| — |
|
|
| (40 | ) |
|
| (2 | ) |
|
| (42 | ) |
Settlement of intercompany and other financing activities |
|
| 481 |
|
|
| (632 | ) |
|
| 273 |
|
|
| (135 | ) |
|
| (13 | ) |
Net cash provided by/(used in) financing activities |
|
| 44 |
|
|
| (175 | ) |
|
| 226 |
|
|
| (143 | ) |
|
| (48 | ) |
Effect of exchange-rate changes on cash and cash |
|
| — |
|
|
| — |
|
|
| (3 | ) |
|
| 43 |
|
|
| 40 |
|
Net decrease in cash and cash equivalents |
|
| (4 | ) |
|
| 18 |
|
|
| (146 | ) |
|
| 40 |
|
|
| (92 | ) |
Cash and cash equivalents at beginning of period |
|
| 5 |
|
|
| 1 |
|
|
| 219 |
|
|
| 529 |
|
|
| 754 |
|
Cash and cash equivalents at end of period |
| $ | 1 |
|
| $ | 19 |
|
| $ | 73 |
|
| $ | 569 |
|
| $ | 662 |
|
- 30 -
Nielsen Holdings plc
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the nine months ended September 30, 2016
(IN MILLIONS) |
| Parent |
|
| Issuers |
|
| Guarantor |
|
| Non- |
|
| Consolidated |
| |||||
Net cash (used in)/provided by operating activities |
| $ | (4 | ) |
| $ | 170 |
|
| $ | 412 |
|
| $ | 175 |
|
| $ | 753 |
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of subsidiaries and affiliates, |
|
| — |
|
|
| — |
|
|
| (239 | ) |
|
| (24 | ) |
|
| (263 | ) |
Additions to property, plant and equipment and |
|
| — |
|
|
| — |
|
|
| (41 | ) |
|
| (42 | ) |
|
| (83 | ) |
Additions to intangible assets |
|
| — |
|
|
| — |
|
|
| (205 | ) |
|
| (36 | ) |
|
| (241 | ) |
Other investing activities |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (3 | ) |
|
| (4 | ) |
Net cash used in investing activities |
|
| — |
|
|
| — |
|
|
| (486 | ) |
|
| (105 | ) |
|
| (591 | ) |
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under revolving credit |
|
| — |
|
|
| — |
|
|
| 193 |
|
|
| — |
|
|
| 193 |
|
Repayments of debt |
|
| — |
|
|
| (101 | ) |
|
| — |
|
|
| — |
|
|
| (101 | ) |
Proceeds from the issuance of debt, net of issuance costs |
|
|
|
|
|
| 496 |
|
|
|
|
|
|
|
|
|
|
| 496 |
|
Cash dividends paid to stockholders |
|
| (323 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (323 | ) |
Repurchase of common stock |
|
| (394 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (394 | ) |
Activity under stock plans |
|
| 91 |
|
|
| — |
|
|
| (19 | ) |
|
| — |
|
|
| 72 |
|
Settlement of intercompany and other financing activities |
|
| 622 |
|
|
| (547 | ) |
|
| (82 | ) |
|
| (26 | ) |
|
| (33 | ) |
Net cash (used in)/provided by financing activities |
|
| (4 | ) |
|
| (152 | ) |
|
| 92 |
|
|
| (26 | ) |
|
| (90 | ) |
Effect of exchange-rate changes on cash |
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 15 |
|
|
| 17 |
|
Net (decrease)/increase in cash and cash equivalents |
|
| (8 | ) |
|
| 18 |
|
|
| 20 |
|
|
| 59 |
|
|
| 89 |
|
Cash and cash equivalents at beginning of period |
|
| 1 |
|
|
| — |
|
|
| 7 |
|
|
| 349 |
|
|
| 357 |
|
Cash and cash equivalents at end of |
| $ | (7 | ) |
| $ | 18 |
|
| $ | 27 |
|
| $ | 408 |
|
| $ | 446 |
|
- 31 -
Introduction
The following discussion and analysis supplements management’s discussion and analysis of Nielsen Holdings plc (“the Company” or “Nielsen”) for the year ended December 31, 20162020 as contained in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on February 17, 2017,25, 2021, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the accompanying Condensed Consolidated Financial Statements and related notes thereto. Further, this report may contain materialincludes information that includescould constitute forward-looking statements withinmade pursuant to the meaningsafe harbor provision of the Private Securities Litigation Reform Act of 1995 that reflect, when made, Nielsen’s current views with respect to current events1995. These statements may be identified by words such as “will,” “intend,” “expect,” “anticipate,” “should,” “could,” and financial performance. 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-lookingsimilar expressions. These statements are subject to many risks and uncertainties, and factorsactual results and events could differ materially from what presently is expected. Factors leading thereto may include, without limitation, the risks related to the COVID-19 pandemic on the global economy and financial markets, the uncertainties relating to the impact of the COVID-19 pandemic on Nielsen’s operationsbusiness, the final calculation of the gain on the sale with respect to our Global Connect business, which is currently pending finalization of various estimates, the failure of our new business strategy in accomplishing our objectives, conditions in the markets Nielsen is engaged in, behavior of customers, suppliers and competitors, technological developments, as well as legal and regulatory rules affecting Nielsen’s business environment that may cause actual results to be materially different from any future results, express or implied, by such forward-looking statements, including but not limited to, thoseand other specific risk factors set forth in this Item 2 and Part II, Item 1A, if any, and those noted in our 20162020 Annual Report on Form 10-K under “Risk Factors.” Forward-looking statements speak only as of the date of this report or as of the date they were made. We disclaim any intention to update the current expectations or forward-looking statements contained in this report except as required by law. Unless required or indicated by context or otherwise stated, references to “we”, “us”, and “our” refer to Nielsen and each of its consolidated subsidiaries..
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 and our Twitter account at http://twitter.com/nielsen.
Background and Executive Summary
We are a leading global performance management company. Thedata, measurement, and analytics company that provides to clients a comprehensiveholistic and objective understanding of what consumers buythe media industry. With offerings spanning audience measurement, audience outcomes and what they watch and how those choices intersect. We deliver critical media and marketing information, analytics and manufacturer and retailer expertise about what and where consumers buy (referred to herein as “Buy”) and what consumers read, watch and listen to (consumer interaction across the television, radio, online and mobile viewing and listening platforms referred to herein as “Watch”) on a local and global basis. Our information, insights and solutions helpcontent, we offer our clients maintain and strengthenpartners simple solutions to complex questions and optimizes the value of their market positionsinvestments and identify opportunities for profitable growth.growth strategies. We have a presenceare the only company that can offer de-duplicated cross-media audience measurement. Audience is Everything™ to us and our clients, and we are committed to ensuring that every voice counts. We offer measurement and analytics services in more than 100 countries, including many emerging markets, and hold leading market positions in many of our services and geographies.nearly 60 countries.
We believe that important measures of our results of operations include revenue, operating incomeincome/(loss) 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 improvingimprove 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%more than 80% of our annual revenue has been committed under contracts, in our combined Buy and Watch segments, which provides us with a highgreater degree of stability tofor our revenue and allows us to more effectively manage our profitability and cash flows. We continue to look for growth opportunities through global expansion, specifically within emerging markets, as well as through the cross-platform expansion of our measurementanalytical services and analyticsmeasurement services.
Our restructuring
Sale of our Global Connect Business
On March 5, 2021, we completed the previously announced sale of our Global Connect business (such business, “Global Connect,” and other productivity initiativesthe sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation (“Purchaser”), pursuant to the Stock Purchase Agreement, dated as of October 31, 2020 (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Purchaser acquired Global Connect by means of a sale of the equity interests of certain subsidiaries held by us, which operate Global Connect, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and a warrant to purchase equity interests in the company that, following the sale, owns Global Connect (the “Connect Warrant”)The Company received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments, and recorded a preliminary gain of $542 million, net of tax within discontinued operations. Proceeds from the sale were primarily utilized for debt repayment.
The gain on the sale of our Global Connect business is preliminary and is pending the final closing adjustments. Since this amount has been determined based on preliminary estimates and prior to the final closing adjustments, the final gain on the sale transaction may differ materially from the preliminary amount presented herein. Any change from the preliminary amount currently presented would be reflected as a revision in a future quarterly period.
- 30 -
The results of operations of the Global Connect segment have been focused onclassified as discontinued operations for all periods presented. As such, the results of the Global Connect segment have been excluded from both continuing operations and segment results for all periods presented. Subsequent to the closing of the Connect Transaction, the Company no longer consolidated the financial results of the Global Connect segment. Our continuing business operates as a combination of improvingsingle operating leverage through targeted cost-reduction programs, business process improvementsunit and portfolio restructuring actions, while at the same time investing in key programs to enhance future growth opportunities.a single reportable segment.
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. Core to managing these key risk areas is our commitment to data privacy and security as it drives our ability to deliver quality insights for our clients in line with evolving regulatory requirements and governing standards across all the geographies and industries in which we operate.Our operating footprint across approximately 100nearly 60 countries requires disciplined global and local resource management of internal and third partythird-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.
COVID-19
We have taken a variety of measures, as described in Part I—Item 1A—Risk Factors and Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K, which had a significant impact on our operations and performance of fiscal year 2020 and continue to have a significant impact on our operations and performance in fiscal year 2021. Please also refer to those Items for further discussion regarding the potential future impacts of COVID-19 and related economic conditions on us.
Critical Accounting Policies
Our accounting policies are set forth in Note 1 to Consolidated Financial Statements contained in the Company’s 2020 Annual Report on Form 10-K. We include herein certain updates to those policies.
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 review the recoverability of our goodwill by comparing the estimated fair values of reporting units with their respective carrying amounts.
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.
- 31 -
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. 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 unit 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 unit, and are added to the cash flows projected for the budget and business plan period. The long-term growth rate for our 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. |
• | 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 our reporting unit is influenced by general market conditions as well as factors specific to the reporting 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 unit. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings, next year’s revenue and earnings as well as recent comparable transactions.
To validate the reasonableness of the reporting unit fair value, we reconcile the aggregate fair value of our reporting unit 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. 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, including 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 carrying value for our reporting unit. 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.
There were no indicators of impairment related to goodwill during the first quarter end March 31, 2021. Nielsen will continue to closely evaluate any indicators of future impairments related to goodwill.
- 32 -
Business Segment OverviewOther indefinite-lived intangible assets 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. Pursuant to the Connect Transaction, we granted Advent a license to brand its products and services with the Nielsen name and other trademarks for 20 years following the closing of the Connect Transaction. There was an indefinite-lived trade name historically recognized within the Connect segment. However, as this indefinite-lived trade name will be retained by us as part of the Connect Transaction, the trade name is included within continuing operations. During the first quarter of 2021, we concluded that there was a triggering event for an interim impairment assessment as a result of the change in unit of account of the indefinite-lived intangibles as a result of the sale of Global Connect. 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. The discount rates we used in our evaluation was 10.1%. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace. As a result of the interim assessment, we concluded that the estimated fair values exceeded their carrying values. As such there was no impairment. We will continue to closely evaluate and report on any indicators of future impairments.
Discontinued Operations
We align our business into two reporting segments, Buy (consumer purchasing measurementconsider assets to be held for sale when management, having the authority through shareholder approval, commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and analytics)other actions required to complete the sale have been initiated, the sale of the asset is expected to be completed within one year and Watch (media audience measurement and analytics). Our Buy and Watch segmentsit is unlikely that significant changes will be made to the plan. Upon designation as held for sale, we record the carrying value of the assets at the lower of its carrying value or its estimated fair value, less costs to sell. In accordance with GAAP, assets held for sale are builtnot depreciated or amortized.
If the disposal of the component of an entity (or group of components) represents a strategic shift that has (or will have) a major effect on an extensive foundationentity’s operations and financial results, it meets the criteria for discontinued operations. The results of proprietary data assets designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses and manage their performance. The information from our Buy and Watch segments, when brought together, can deliver powerful insights into the effectiveness of branding, advertising and consumer choice by linking media consumption trends with consumer purchasing data to better understand behavior and better manage supply and demanddiscontinued operations, as well as media spend, supply chain issues, and much more. We believe these integrated insights better enable our clients to enhanceany gain or loss on the return on both long-term and short-term investments.
Our Buy segment provides measurement services, which include our core tracking and scan data (primarily transactional measurement data and consumer behavior information), and analytical services to businessesdisposal transaction, are presented separately, net of tax, from the results of continuing operations for all periods presented. The expenses included in the consumer packaged goods industry. Our services also enable our clients to better manage their brands, uncover new sourcesresults of demand, launch and grow new products, analyze their sales, improve their marketing mix and establish more effective consumer relationships. Our data is useddiscontinued operations are the direct operating expenses incurred by our clients to measure their market share, tracking billionsthe discontinued segment that may be reasonably segregated from the costs of sales transactions per month in retail outlets around the world. Our extensive databaseongoing operations 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 emerging markets. Developed markets primarily include the United States, Canada, Western Europe, Japan, Australia and South Korea while emerging 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.
Company. Certain corporate costs including thosedirectly attributable to the discontinued operations and transaction costs directly related to selling, finance, legal, human resources,the sale are also presented within net income/(loss) from discontinued operations, net of income taxes. The assets and information technology systems, are considered operating costs and are allocated toliabilities have been accounted for as assets held for sale in our segments based on eithercondensed consolidated balance sheets through the actual amount of costs incurred or on a basis consistent with the operationsdate of the underlying segment.sale. The operating results related to these lines of business have been included in discontinued operations in our condensed consolidated statements of operations. The condensed consolidated statement of cash flows presents combined cash flows from continuing operations with cash flows from discontinued operations within each cash flow statement category. See Note 15 – Discontinued Operations for further detail.
Factors Affecting Our Financial Results
Acquisitions and Investments in Affiliates
On February 1, 2017, we completed the acquisition of Gracenote, through the purchase of 100% of Gracenote’s outstanding common stock for a total purchase price of $585 million. We acquired the data and technology that underpins the programming guides and personnel user experience for major video, music, audio and sports content. This acquisition expands our footprint with major clients including Gracenote’s global content database which spans across platforms including multichannel video programing distributors (MVPD’s), smart television, streaming music services, connected devices, media players and in-car infotainment systems.
The acquisition of Gracenote 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. Effective February 1, 2017, the financial results of Gracenote were included within the Watch segment of our condensed consolidated financial statements. For the nine months ended September, 30, 2017, our condensed consolidated statement of operations includes $148 million of revenues related to the Gracenote acquisition.
- 33 -
The purchase price was preliminarily allocated based upon the fair value of the assets acquired and liabilities assumed at the date of acquisition using available information and certain assumptions management believed reasonable. The following table summarizes the preliminary purchase price allocation:
(IN MILLIONS) |
|
|
|
Identifiable assets acquired and liabilities assumed: |
|
|
|
Cash | $ | 11 |
|
Other current assets |
| 56 |
|
Property and equipment |
| 12 |
|
Goodwill |
| 314 |
|
Amortizable intangible assets |
| 341 |
|
Other long-term assets |
| 11 |
|
Deferred revenue |
| (22 | ) |
Other current liabilities |
| (21 | ) |
Deferred tax liabilities |
| (110 | ) |
Other long-term liabilities |
| (7 | ) |
Total | $ | 585 |
|
As of the acquisition date, the fair value of accounts receivable approximated historical cost. The gross contractual receivable was $37 million, of which $1 million was deemed uncollectible. The estimated fair values assigned to amortizable intangible assets, goodwill and uncertain tax positions are provisional and subject to adjustment primarily based upon additional information we are in the process of obtaining.
The provisional allocation of the purchase price to goodwill and identified intangible assets was $314 million and $341 million, respectively. All of the Gracenote related goodwill and intangible assets are attributable to our Watch segment. As of September 30, 2017, $23 million of goodwill is expected to be deductible for income tax purposes.
Intangible assets and their estimated useful lives consist of the following:
(IN MILLIONS) |
|
|
|
|
|
| ||
Description |
| Amount |
|
| Useful Life |
| ||
Customer-related intangibles |
| $ | 109 |
|
|
| 10 - 15 years |
|
Content database |
|
| 168 |
|
|
| 12 - 16 years |
|
Trade names and trademarks |
|
| 7 |
|
|
| 5 years |
|
Computer software |
|
| 57 |
|
|
| 7-8 years |
|
Total |
| $ | 341 |
|
|
|
|
|
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 Gracenote.
We incurred acquisition-related expenses of $6 million for the nine months ended September 30, 2017, which primarily consisted of transaction fees, legal, accounting and other professional services that are included in selling, general and administrative expenses in the condensed consolidated statement of operations.
The following unaudited pro forma information presents the consolidated results of operations of us and Gracenote for the three and nine months ended September 30, 2017, as if the acquisition had occurred on January 1, 2016, with pro forma adjustments to give effect to amortization of intangible assets, an increase in interest expense from acquisition financing, and certain other adjustments:
|
|
| Three Months Ended September 30, |
|
| Nine months Ended September 30, |
| |||||||||
(IN MILLIONS) |
|
| 2017 |
|
|
| 2016 |
|
|
| 2017 |
|
|
| 2016 |
|
Revenues |
| $ | 1,641 |
|
| $ | 1,618 |
|
| $ | 4,829 |
|
| $ | 4,799 |
|
Income from continuing operations |
| $ | 150 |
|
| $ | 124 |
|
| $ | 356 |
|
| $ | 327 |
|
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 Gracenote been completed as of the beginning of the reporting period.
- 34 -
Acquisitions
For the ninethree months ended September 30, 2017, excluding Gracenote,March 31, 2021, we had no acquisitions.
For the three months ended March 31, 2020, we paid cash consideration of $28$2 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period2020 acquisitions occurred as of January 1, 2017,2020, the impact on our consolidated results of operations would not have been material.
For the nine months ended September 30, 2016, we paid cash consideration of $252 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these current period acquisitions occurred as of January 1, 2016, the impact on our consolidated results of operations would not have been material.- 33 -
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.
| Nine months Ended |
|
| Three Months Ended March 31, |
| ||||||||||
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
U.S. Dollar |
| 59 | % |
|
| 60 | % |
|
| 84 | % |
|
| 85 | % |
Euro |
| 10 | % |
|
| 10 | % |
|
| 5 | % |
|
| 4 | % |
Other Currencies |
| 31 | % |
|
| 30 | % |
|
| 11 | % |
|
| 11 | % |
Total |
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
As a result, fluctuations
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 3.—3—Quantitative and Qualitative Disclosures about Market Risk.” In countries with currencies other than the U.S. dollar, assets and liabilities are translated into U.S. dollars using end-of-period exchange rates;rates, while revenues, expenses and cash flows are translated using average rates of exchange. The average U.S. dollar to Euro exchange rate was $1.11$1.21 to €1.00 and $1.12$1.10 to €1.00 for the ninethree months ended September 30, 2017March 31, 2021 and 2016,2020, respectively. Constant currency growth rates used in the following discussion of results of operations eliminate the impact of year-over-year foreign currency fluctuations.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, which excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, facilitatesthereby facilitating period-to-period comparisons of our business performance and is consistent with how we evaluate ourmanagement evaluates the Company’s performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period foreign currency exchange rates and comparing these adjusted amounts to our current period reported results. This calculation may differ from similarly-titled measures used by others. In addition,others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP nor should such amounts be considered in isolation.
Accounts Receivable
We extend non-interest bearing trade credit to our customers in the ordinary course of business. To minimize credit risk, ongoing credit evaluations of clients’ financial condition are performed. Effective January 1, 2020, we adopted ASU, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments”. Prior to the adoption, an estimate of the allowance for doubtful accounts was made when collection of the full amount was no longer probable (incurred loss) or returns were expected. Subsequent to the adoption, as noted in “Summary of Recent Accounting Pronouncements” below, the allowance for doubtful accounts is made when collection of the full amounts is no longer probable by also incorporating reasonable and supportable forecasts (expected loss).
The uncertainty regarding the length of impacts related to the COVID-19 pandemic and speed of recovery may impact our level of reserves in future periods. We continue to monitor assess the impacts related to our different clients and will base our reasonable forecasts on the latest information available.
- 34 -
During the ninethree months ended September 30, 2017,March 31, 2021, we sold $67$10 million of accounts receivable to a third partyparties and recorded an immaterial loss on the sale to interest expense, net in the condensed consolidated statement of operations. As of September 30, 2017, $56March 31, 2021 and December 31, 2020, $10 million and $30 million of previously sold receivables, respectively, remained outstanding. The sale wassales were accounted for as a true sale,sales, without recourse. We maintain servicing responsibilities offor the receivables sold during the period, for which the related costs are not significant. The proceeds of $67$10 million from the salesales were reported as a component of the changes in trade and other receivables, net within operating activities in the condensed consolidated statement of cash flows.
- 35 -
Results of Operations – Three Months Ended September 30, 2017March 31, 2021 Compared to the Three Months Ended September 30, 2016March 31, 2020
The following table sets forth, for the periods indicated, the amounts included in our Condensed Consolidated Statements of Operations:
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Revenues |
| $ | 1,641 |
|
| $ | 1,570 |
|
| $ | 863 |
|
| $ | 842 |
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| 692 |
|
|
| 642 |
|
|
| 277 |
|
|
| 324 |
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 445 |
|
|
| 452 |
|
|
| 206 |
|
|
| 202 |
|
Depreciation and amortization |
|
| 160 |
|
|
| 151 |
|
|
| 127 |
|
|
| 136 |
|
Restructuring charges |
|
| 7 |
|
|
| 29 |
|
|
| - |
|
|
| 3 |
|
Operating income |
|
| 337 |
|
|
| 296 |
|
|
| 253 |
|
|
| 177 |
|
Interest income |
|
| 1 |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
Interest expense |
|
| (95 | ) |
|
| (85 | ) |
|
| (80 | ) |
|
| (83 | ) |
Foreign currency exchange transaction gains, net |
|
| — |
|
|
| 2 |
| ||||||||
Foreign currency exchange transaction losses, net |
|
| (4 | ) |
|
| (9 | ) | ||||||||
Other expense, net |
|
| (1 | ) |
|
| — |
|
|
| - |
|
|
| (1 | ) |
Income from continuing operations before income taxes |
|
| 242 |
|
|
| 214 |
|
|
| 169 |
|
|
| 85 |
|
Provision for income taxes |
|
| (92 | ) |
|
| (82 | ) |
|
| (60 | ) |
|
| (25 | ) |
Net income |
|
| 150 |
|
|
| 132 |
|
|
| 109 |
|
|
| 60 |
|
Discontinued operations, net of taxes |
|
| 467 |
|
|
| (73 | ) | ||||||||
Net income/(loss) |
|
| 576 |
|
|
| (13 | ) | ||||||||
Net income attributable to noncontrolling interests |
|
| 4 |
|
|
| 2 |
|
|
| 3 |
|
|
| 5 |
|
Net income attributable to Nielsen stockholders |
| $ | 146 |
|
| $ | 130 |
| ||||||||
Net income/(loss) attributable to Nielsen shareholders |
| $ | 573 |
|
| $ | (18 | ) |
Net IncomeIncome/(Loss) to Adjusted EBITDA Reconciliation
We define Adjusted EBITDA as net income or loss from continuing operations of our consolidated statements of operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, stock-basedimpairment of goodwill and other long-lived assets, share-based compensation expense and other non-operating items from our consolidated statements of operations, as well as certain other items consideredthat arise outside the ordinary course of our continuing operations specifically described below.
Restructuring charges: We exclude restructuring expenses, which primarily include employee severance, office consolidation and contract termination charges, from our Adjusted EBITDA to allow more accurate comparisons of the financial results to historical operations and forward-looking guidance. By excluding these expenses from our non-GAAP measures, we are better able to evaluate our ability to utilize our existing assets and estimate the long-term value these assets will generate for us. Furthermore, we believe that the adjustments of these items more closely correlate with the sustainability of our operating performance.
Stock-basedImpairment of goodwill and other long-lived assets: We exclude the impact of charges related to the impairment of goodwill and other long-lived assets. We believe that the exclusion of these impairments, which are non-cash, allows for meaningful comparisons of operating results to peer companies. We believe that this increases period-to-period comparability and is useful to evaluate the performance of the total company.
Share-based compensation expense: We exclude the impact of costs relating to stock-basedshare-based compensation. Due to the subjective assumptions and a variety of award types, we believe that the exclusion of stock-basedshare-based compensation expense, which is typically non-cash, allows for more meaningful comparisons of our operating results to peer companies. Stock-basedShare-based compensation expense can vary significantly based on the timing, size and nature of awards granted.
- 35 -
Other non-operating income/(expense), net: We exclude foreign currency exchange transaction gains and losses, primarily related to intercompany financing arrangements, as well as other non-operating income and expense items, such as gains and losses recorded on business combinations or dispositions, sales of investments, net incomeincome/(loss) attributable to noncontrolling interests and early redemption payments made in connection with debt refinancing. We believe that the adjustments of these items more closely correlate with the sustainability of our operating performance.
Other items: To measure operating performance, we exclude certain expenses and gains that arise outside the ordinary course of our continuing operations. Such costs primarily include legal settlements, acquisition-relatedacquisition related expenses, business optimization costs and other transactionaltransaction costs. We believe the exclusion of such amounts allows management and the users of the financial statements to better understand our financial results.
Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
- 36 -
Adjusted EBITDA margin is Adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.
We use Adjusted EBITDA to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition to Adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance.
Adjusted EBITDA should not be considered as an alternative to net income or loss, operating income,income/(loss), cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies and may, therefore, have limitations as a comparative analytical tool.
- 36 -
The below table presents a reconciliation from net income to Adjusted EBITDA for the three months ended September 30, 2017March 31, 2021 and 2016:2020:
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
|
| 2021 |
|
| 2020 |
| ||||
Net income attributable to Nielsen stockholders |
| $ | 146 |
|
| $ | 130 |
| ||||||||
Net income from continuing operations |
| $ | 109 |
|
| $ | 60 |
| ||||||||
Less: Net income attributable to noncontrolling interests |
|
| 3 |
|
|
| 4 |
| ||||||||
Net income from continuing operations attributable to Nielsen shareholders |
|
| 106 |
|
|
| 56 |
| ||||||||
Interest expense, net |
|
| 94 |
|
|
| 84 |
|
|
| 80 |
|
|
| 82 |
|
Provision for income taxes |
|
| 92 |
|
|
| 82 |
|
|
| 60 |
|
|
| 25 |
|
Depreciation and amortization |
|
| 160 |
|
|
| 151 |
|
|
| 127 |
|
|
| 136 |
|
EBITDA |
|
| 492 |
|
|
| 447 |
|
|
| 373 |
|
|
| 299 |
|
Other non-operating expense, net |
|
| 5 |
|
|
| — |
|
|
| 7 |
|
|
| 14 |
|
Restructuring charges |
|
| 7 |
|
|
| 29 |
|
|
| - |
|
|
| 3 |
|
Stock-based compensation expense |
|
| 8 |
|
|
| 11 |
| ||||||||
Other items(a) |
|
| 10 |
|
|
| 11 |
| ||||||||
Share-based compensation expense |
|
| 7 |
|
|
| 10 |
| ||||||||
Dis-synergy costs(1) |
|
| - |
|
|
| (17 | ) | ||||||||
Other items(2) |
|
| 1 |
|
|
| 17 |
| ||||||||
Adjusted EBITDA |
| $ | 522 |
|
| $ | 498 |
|
| $ | 388 |
|
| $ | 326 |
|
|
(1) |
|
(2) | For the three months ended |
Consolidated Results for the Three Months Ended September 30, 2017March 31, 2021 Compared to the Three Months Ended September 30, 2016March 31, 2020
Revenues
Revenues increased 4.5%2.5% to $1,641$863 million for the three months ended September 30, 2017March 31, 2021 from $1,570$842 million for the three months ended September 30, 2016,March 31, 2020, or an increase of 3.6%1.3% on a constant currency basis, excluding a 0.9% favorable impact of changes in foreign currency exchange rates. Excluding the Gracenote acquisition, revenues increased 0.8% or a decrease of 0.1% on a constant currency basis. Revenues within our Buy segment decreased 0.7% (2.1% on a constant currency basis). Revenues within our Watch segment increased 10.1% (9.7% on a constant currency basis). Revenues within our Watch segment excluding the Gracenote acquisition increased 2.4% (2.0% on a constant currency basis). Refer to the “Business Segment Results for the Three Months Ended September 30, 2017March 31, 2021 Compared to the Three Months Ended September 30, 2016”March 31, 2020” section for further discussion of our revenue performance.
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues increased 7.8%decreased 14.5% to $692$277 million for the three months ended September 30, 2017March 31, 2021 from $642$324 million for the three months ended September 30, 2016,March 31, 2020, or an increasea decrease of 6.8%15.3% on a constant currency basis, excluding a 1.0% unfavorable impact of changes in foreign currency exchange rates.
Costs within our Buy segment increased 3.0%, or 1.6% on a constant currency basis. Excluding a 1.4% unfavorable impact of changes in foreign currency exchange rates, the increase in cost of revenues for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016 was due to continued global investments in our services partially offset by the sale of the Claritas business in December 2016.
- 37 -
Costs within our Watch segment increased 14.7% on a reported and constant currency basis. Cost of revenues increaseddecreased primarily due to the impact of temporary actions taken in response to the Gracenote acquisitionCOVID-19 pandemic and higher spending on product portfolio managementthe impact of our optimization plan and other productivity initiatives including our digital and Marketing Effectiveness product offerings..
Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
Selling, general and administrative expenses decreased 1.5%increased 2.0% to $445$206 million for the three months ended September 30, 2017March 31, 2021 from $452$202 million for the three months ended September 30, 2016,March 31, 2020, or a decrease of 2.4% on a constant currency basis, excluding a 0.9% unfavorable impact of changes in foreign currency exchange rates.
Costs within our Buy segment decreased 4.3%, or 5.3%0.5% on a constant currency basis. Excluding a 1.0% unfavorable impact of changesThe decrease in foreign currency exchange rates, selling, general and administrative expenses decreased due to dispositions as we continue to execute our portfolio pruning initiatives.
Costs within our Watch segment increased 5.3%, or 4.5% on a constant currency basis. Excluding a 0.8% unfavorable impact of changes in foreign currency exchange rates, selling, general and administrative expenses increased primarily due tocosts from the impact of temporary actions taken in response to the Gracenote acquisition. COVID-19 pandemic, the impact of our optimization plan and other productivity initiatives, were partially offset by our continued investments in our products and services.
Depreciation and Amortization
Depreciation and amortization expense was $160$127 million for the three months ended September 30, 2017March 31, 2021 as compared to $151$136 million for the three months ended September 30, 2016.March 31, 2020. This increasedecrease was primarily due to higher depreciationcertain assets becoming fully amortized and amortization expense associated with tangible and intangible assets acquired as part oflower capital expenditures during the Gracenote acquisition on February 1, 2017.period.
Depreciation and amortization expense associated with tangible and intangible assets acquired in business combinations increaseddecreased to $54$40 million for the three months ended September 30, 2017March 31, 2021 from $53$41 million for the three months ended September 30, 2016.March 31, 2020.
- 37 -
Restructuring Charges
We recorded $7 million and $29zero restructuring charges for the three months ended March 31, 2021. We recorded $3 million in restructuring charges relatingprimarily related to employee severance costs associated with productivity initiatives our plans to reduce selling, general and administrative expenses for the three months ended September 30, 2017 and 2016, respectively.March 31, 2020.
Operating IncomeIncome/(loss)
Operating income for the three months ended September 30, 2017March 31, 2021 was $337$253 million as compared to $296$177 million for the three months ended September 30, 2016. Operating income withinMarch 31, 2020. Refer to the “Business Segment Results for the Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020” section for further discussion of our Buy segmentoperating income.
Interest Expense
Interest expense was $85$80 million for the three months ended September 30, 2017March 31, 2021, as compared to $79$83 million for the three months ended September 30, 2016. Operating income within our Watch segmentMarch 31, 2020. This decrease was $280 million for the three months ended September 30, 2017 as compared to $259 million for the three months ended September 30, 2016. Corporate operating expenses were $28 million for the three months ended September 30, 2017 as compared to $42 million for the three months ended September 30, 2016.
Interest Expense
Interest expense was $95 million for the three months ended September 30, 2017 as compared to $85 million for the three months ended September 30, 2016. This increase is primarily due to higher average debt balances including the incurrence of an additional $500 million 5.00% Senior Notes in January 2017 and higher lower USD LIBOR senior secured term loan interest rates.rates without hedged position as well as lower senior secured term loan balances and debenture loan balances for the three months ended March 31, 2021.
Foreign Currency Exchange Transaction Losses,Gains/(Losses), Net
Foreign currency exchange transaction losses, net, primarily represent the net gain or loss on revaluation of external debt, intercompany loans and other receivables and payables denominated in currencies other than the respective entity’s functional currency. Fluctuations in the value of foreign currencies relative to the U.S. Dollar, primarily the Euro, have a significant effect on our operating results, primarily the Euro.results. The average U.S. Dollar to Euro exchange rate was $1.18$1.21 to €1.00 for the three months ended September 30, 2017March 31, 2021, as compared to $1.12$1.10 to €1.00 for the three months ended September 30, 2016.March 31, 2020.
We realized net foreign currency exchange transaction gainslosses of $2$4 million and $9 million for the three months ended September 30, 2016,March 31, 2021 and 2020, respectively, resulting primarily from the fluctuations in certain foreign currencies associated with intercompany transactions and a gaintransactions.
Other Income/(Expense), Net
Other expense, net was immaterial for the three months ended March 31, 2021.
Other expense, net of $2$1 million fromfor the revaluation of our U.S. denominated debt held in EURO functional currency entities, partially offset by a loss of $4 million associated with foreign currency derivative financial instruments.
- 38 -
three months ended March 31, 2020, was primarily related to certain non-service related pension transactions.
Income Taxes
The effective tax raterates before discrete tax items for each of the three months ended September 30, 2017March 31, 2021 and 2016 was 38%2020 were 26% ($44 million tax expense) and 15% ($13 million tax expense), respectively. The tax rate for the three months ended September 30, 2017March 31, 2021 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company fileswe file tax returns, and the effect of global licensing activities and foreign distributions,partially offset by the favorable impactreversal of valuation allowance related to certain financing activities.loss carryforwards. The tax rate for the three months ended September 30, 2016March 31, 2020 was higherlower than the statutory rate as a result of the reversal of valuation allowance related to certain loss carryforwards offset by the impact of tax rate differences in other jurisdictions where we file tax returns. For the Company filesthree months ended March 31, 2021, the total tax returns, andexpense was $60 million which includes the effect of global licensing activities and foreign distributions, offset by the favorable impact of certain financing activities.tax rate changes and other discrete items recognized in the first quarter. For the three months ended March 31, 2020, the total tax expense was $25 million which includes impact of the CARES Act and other discrete items recognized in the first quarter.
The estimated liability for unrecognized tax benefits as of December 31, 2017 is $436 million and2020 was $432 million as of December 31, 2016.$128 million. If our tax positions are favorably sustained by the taxing authorities, the reversal of the underlying liabilities would reduce our effective tax rate in future periods.
Adjusted EBITDA
Adjusted EBITDA increased 4.8%19.0% to $522$388 million for the three months ended September 30, 2017March 31, 2021 from $498$326 million for the three months ended September 30, 2016,March 31, 2020, or 4.0%an increase of 18.3% on a constant currency basis, excluding a 0.8% favorable impact of changes in foreign currency exchange rates.basis. See “Results of Operations – Three Months Ended September 30, 2017March 31, 2021 Compared to the Three Months Ended September 30, 2016”March 31, 2020” for the reconciliation of net incomeincome/(loss) to Adjusted EBITDA.
- 38 -
Business Segment Results for the Three Months Ended September 30, 2017March 31, 2021 Compared to the Three Months Ended September 30, 2016March 31, 2020
Revenues
The table below sets forth our segment revenue performance data for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016,March 31, 2020, both on an as-reported and constant currency basis.
(IN MILLIONS) |
| Three Months Ended |
|
| Three Months Ended |
|
| % Variance |
|
| Three Months Ended |
|
| % Variance Currency |
| |||||
Emerging Markets |
| $ | 297 |
|
| $ | 267 |
|
|
| 11.2 | % |
| $ | 268 |
|
|
| 10.8 | % |
Developed Markets |
|
| 491 |
|
|
| 509 |
|
|
| (3.5 | )% |
|
| 519 |
|
|
| (5.4 | )% |
Core Buy |
|
| 788 |
|
|
| 776 |
|
|
| 1.5 | % |
|
| 787 |
|
|
| 0.1 | % |
Corporate |
|
| 15 |
|
|
| 33 |
|
|
| (54.5 | )% |
|
| 33 |
|
|
| (54.5 | )% |
Buy Segment |
| $ | 803 |
|
| $ | 809 |
|
|
| (0.7 | )% |
| $ | 820 |
|
|
| (2.1 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing Effectiveness |
| $ | 89 |
|
| $ | 75 |
|
|
| 18.7 | % |
| $ | 77 |
|
|
| 15.6 | % |
Audio |
|
| 127 |
|
|
| 137 |
|
|
| (7.3 | )% |
|
| 137 |
|
|
| (7.3 | )% |
Audience Measurement (Video and Text) |
|
| 580 |
|
|
| 496 |
|
|
| 16.9 | % |
|
| 498 |
|
|
| 16.5 | % |
Core Watch |
|
| 796 |
|
|
| 708 |
|
|
| 12.4 | % |
|
| 712 |
|
|
| 11.8 | % |
Corporate/Other Watch |
|
| 42 |
|
|
| 53 |
|
|
| (20.8 | )% |
|
| 52 |
|
|
| (19.2 | )% |
Watch Segment |
| $ | 838 |
|
| $ | 761 |
|
|
| 10.1 | % |
| $ | 764 |
|
|
| 9.7 | % |
Total Core (Buy/Watch) |
|
| 1,584 |
|
|
| 1,484 |
|
|
| 6.7 | % |
|
| 1,499 |
|
|
| 5.7 | % |
Total |
| $ | 1,641 |
|
| $ | 1,570 |
|
|
| 4.5 | % |
| $ | 1,584 |
|
|
| 3.6 | % |
(IN MILLIONS) |
| Three Months Ended |
|
| Three Months Ended |
|
| % Variance |
|
| Three Months Ended |
|
| % Variance Currency |
| |||||
Audience Measurement |
| $ | 632 |
|
|
| 615 |
|
|
| 2.8 | % |
|
| 620 |
|
|
| 1.9 | % |
Outcomes / Content |
|
| 231 |
|
|
| 227 |
|
|
| 1.8 | % |
|
| 232 |
|
|
| (0.4 | )% |
Total |
| $ | 863 |
|
| $ | 842 |
|
|
| 2.5 | % |
| $ | 852 |
|
|
| 1.3 | % |
Buy Segment Revenues
Revenues decreased 0.7%increased 2.5% to $803$863 million for the three months ended September 30, 2017March 31, 2021 from $809$842 million for the three months ended September 30, 2016,March 31, 2020 or 2.1%an increase of 1.3% on a constant currency basis, excluding a 1.4% favorable impact of changes in foreign currency exchange rates.
Revenues from emerging markets increased 11.2% to $297 million, or 10.8% on a constant currency basis. Excluding a 0.4% favorable impact of changes in foreign currency exchange rates, revenue growth was driven by our global footprint, coverage expansion and broad product offerings which continue to position us well with both local and multinational clients. For the three months ended September 30, 2017, these investments drove double-digit growth in India and Eastern Europe along with high single-digit growth in South East Asia and China.
- 39 -
Revenues from developed markets decreased 3.5% to $491 million, or 5.4% on a constant currency basis. Excluding a 1.9% favorable impact of changes in foreign currency exchange rates, revenues decreased as a result of softness in the U.S. market.
Revenues from Corporate Buy decreased 54.5% to $15 million on a reported and constant currency basis due to the sale of the Claritas business in December 2016. Corporate includes slow growth and non-core services that are part of portfolio pruning initiatives.
Watch Segment Revenues
Revenues increased 10.1% to $838 million for the three months ended September 30, 2017 from $761 million for the three months ended September 30, 2016, or 9.7% on a constant currency basis. Excluding the Gracenote acquisition, revenues increased 2.4% (2.0% on a constant currency basis). Excluding a 0.4% favorable impact of changes in foreign currency exchange rates, revenueRevenue growth was primarily driven by growth in Audience Measurement, of Video and Text, which increased 16.9% (16.5%2.8%, or an increase of 1.9% on a constant currency basis). Excluding the Gracenote acquisition, Audience Measurement of Videobasis, with overall solid growth, most notably in digital measurement and Textwith local pressures subsiding. Outcomes / Content revenues increased 5.0% (4.6%1.8%, or a decrease of 0.4% on a constant currency basis) due to our ongoing investmentsbasis, driven in part by improving trends in short-cycle revenues and continued client adoptionsolid growth in Content, more than offset by the impact of our Total Audience Measurement initiative. Audio revenues decreased 7.3% on a reported and constant currency basis for the quarter primarily due to timing of deliverables. Our Marketing Effectiveness revenue grew 18.7% (15.6% on a constant currency basis), dueexits related to the continued strengthoptimization plan we announced in audience-based solutions that help advertisers and publishers measure the return on investment in media spend and investments in our product portfolio. Corporate/Other Watch revenues decreased by 20.8% (19.2% on a constant currency basis) due to our continued exit of non-core media analytics products. Our Core Watch revenue grew 12.4%, or 11.8% on a constant currency basis. Excluding the Gracenote acquisition, our Core Watch revenue grew 4.1% (3.5% on a constant currency basis).July 2020.
Business Segment Profitability
We do not allocate items below operating income/(loss) to our business segments and therefore the tables below set forth a reconciliation of operating income/(loss) at the business segment level for the three months ended September 30, 2017 and 2016, adjusting for certain items affecting operating income/(loss), such as restructuring charges, depreciation and amortization, stock-based compensation expense and certain other items described below resulting in a presentation of our non-GAAP business segment profitability. Non-GAAP business segment profitability provides useful supplemental information to management and investors regarding financial and business trends related to our results of operations. When this non-GAAP financial information is viewed with our GAAP financial information, investors are provided with a meaningful understanding of our ongoing operating performance. It is important to note that the non-GAAP business segment profitability corresponds in total to our consolidated Adjusted EBITDA described within our consolidated results of operations above, which our chief operating decision making group and other members of management use to measure our performance from period to period both at the consolidated level as well as within our operating segments, to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. These non-GAAP measures should not be considered as an alternative to net income/(loss), operating income/(loss), cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
THREE MONTHS ENDED SEPTEMBER 30, |
| Operating |
|
| Restructuring |
|
| Depreciation and |
|
| Stock-Based |
|
| Other Items (1) |
|
| Non-GAAP |
| ||||||
Buy |
| $ | 85 |
|
| $ | 4 |
|
| $ | 53 |
|
| $ | 3 |
|
| $ | — |
|
| $ | 145 |
|
Watch |
|
| 280 |
|
|
| 2 |
|
|
| 106 |
|
|
| 2 |
|
|
| — |
|
|
| 390 |
|
Corporate and Eliminations |
|
| (28 | ) |
|
| 1 |
|
|
| 1 |
|
|
| 3 |
|
|
| 10 |
|
|
| (13 | ) |
Total Nielsen |
| $ | 337 |
|
| $ | 7 |
|
| $ | 160 |
|
| $ | 8 |
|
| $ | 10 |
|
| $ | 522 |
|
THREE MONTHS ENDED SEPTEMBER 30, |
| Operating |
|
| Restructuring |
|
| Depreciation and |
|
| Stock-Based |
|
| Other Items (1) |
|
| Non-GAAP |
| ||||||
Buy |
| $ | 79 |
|
| $ | 15 |
|
| $ | 53 |
|
| $ | 3 |
|
| $ | — |
|
| $ | 150 |
|
Watch |
|
| 259 |
|
|
| 2 |
|
|
| 97 |
|
|
| 2 |
|
|
| — |
|
|
| 360 |
|
Corporate and Eliminations |
|
| (42 | ) |
|
| 12 |
|
|
| 1 |
|
|
| 6 |
|
|
| 11 |
|
|
| (12 | ) |
Total Nielsen |
| $ | 296 |
|
| $ | 29 |
|
| $ | 151 |
|
| $ | 11 |
|
| $ | 11 |
|
| $ | 498 |
|
|
|
- 40 -
(IN MILLIONS) |
| Three |
|
| Three |
|
| % Variance |
|
| Three |
|
| % Variance |
| |||||
Non-GAAP Business Segment Income/(Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy |
| $ | 145 |
|
| $ | 150 |
|
|
| (3.3 | )% |
| $ | 153 |
|
|
| (5.2 | )% |
Watch |
|
| 390 |
|
|
| 360 |
|
|
| 8.3 | % |
|
| 362 |
|
|
| 7.7 | % |
Corporate and Eliminations |
|
| (13 | ) |
|
| (12 | ) |
|
| NM |
|
|
| (13 | ) |
|
| NM |
|
Total Nielsen |
| $ | 522 |
|
| $ | 498 |
|
|
| 4.8 | % |
| $ | 502 |
|
|
| 4.0 | % |
Buy Segment Profitability
Operating income was $85 million for the three months ended September 30, 2017 as compared to $79 million for the three months ended September 30, 2016. The increase was driven primarily by a decrease in restructuring charges for the three months ended September 30, 2017 partially offset by the revenue performance discussed above. Non-GAAP business segment income decreased 5.2% on a constant currency basis.
Watch Segment Profitability
Operating income was $280 million for the three months ended September 30, 2017 as compared to $259 million for the three months ended September 30, 2016. The increase was driven primarily by the revenue performance discussed above partially offset by an increase in depreciation and amortization expense for the three months ended September 30, 2017. Non-GAAP business segment income increased 7.7% on a constant currency basis.
Corporate Expenses and Eliminations
Operating expenses were $28 million for the three months ended September 30, 2017 as compared to $42 million for the three months ended September 30, 2016, due primarily to lower restructuring charges and stock-based compensation expense for the three months ended September 30, 2017.
Results of Operations – Nine months Ended September 30, 2017 Compared to the Nine months Ended September 30, 2016
The following table sets forth, for the periods indicated, the amounts included in our Condensed Consolidated Statements of Operations:
|
| Nine months Ended |
| |||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
| ||
Revenues |
| $ | 4,811 |
|
| $ | 4,653 |
|
Cost of revenues, exclusive of depreciation and amortization shown separately below |
|
| 2,031 |
|
|
| 1,937 |
|
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below |
|
| 1,387 |
|
|
| 1,391 |
|
Depreciation and amortization |
|
| 477 |
|
|
| 450 |
|
Restructuring charges |
|
| 48 |
|
|
| 73 |
|
Operating income |
|
| 868 |
|
|
| 802 |
|
Interest income |
|
| 3 |
|
|
| 3 |
|
Interest expense |
|
| (277 | ) |
|
| (247 | ) |
Foreign currency exchange transaction losses, net |
|
| (9 | ) |
|
| (3 | ) |
Other expense, net |
|
| (3 | ) |
|
| — |
|
Income from continuing operations before income taxes |
|
| 582 |
|
|
| 555 |
|
Provision for income taxes |
|
| (226 | ) |
|
| (208 | ) |
Net income |
|
| 356 |
|
|
| 347 |
|
Net income attributable to noncontrolling interests |
|
| 8 |
|
|
| 4 |
|
Net income attributable to Nielsen stockholders |
| $ | 348 |
|
| $ | 343 |
|
- 41 -
Net Income to Adjusted EBITDA Reconciliation
The below table presents a reconciliation from net income to Adjusted EBITDA for the nine months ended September 30, 2017 and 2016:
|
| Nine months Ended |
| |||||
(IN MILLIONS) |
| 2017 |
|
| 2016 |
| ||
Net income attributable to Nielsen stockholders |
| $ | 348 |
|
| $ | 343 |
|
Interest expense, net |
|
| 274 |
|
|
| 244 |
|
Provision for income taxes |
|
| 226 |
|
|
| 208 |
|
Depreciation and amortization |
|
| 477 |
|
|
| 450 |
|
EBITDA |
|
| 1,325 |
|
|
| 1,245 |
|
Other non-operating expense, net |
|
| 20 |
|
|
| 7 |
|
Restructuring charges |
|
| 48 |
|
|
| 73 |
|
Stock-based compensation expense |
|
| 35 |
|
|
| 37 |
|
Other items(a) |
|
| 28 |
|
|
| 28 |
|
Adjusted EBITDA |
| $ | 1,456 |
|
| $ | 1,390 |
|
|
|
Consolidated Results for the Nine months Ended September 30, 2017 Compared to the Nine months Ended September 30, 2016
Revenues
Revenues increased 3.4% to $4,811 million for the nine months ended September 30, 2017 from $4,653 million for the nine months ended September 30, 2016, or an increase of 3.6% on a constant currency basis, excluding a 0.2% unfavorable impact of changes in foreign currency exchange rates. Excluding the Gracenote acquisition, revenues increased 0.2% (0.5% on a constant currency basis). Revenues within our Buy segment decreased 2.9% (2.6% on a constant currency basis). Revenues within our Watch segment increased 10.4% (10.6% on a constant currency basis). Revenues within our Watch segment excluding the Gracenote acquisition increased 3.7% (3.8% on a constant currency basis). Refer to the “Business Segment Results for the Nine months Ended September 30, 2017 Compared to the Nine months Ended September 30, 2016” section for further discussion of our revenue performance.
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues increased 4.9% to $2,031 million for the nine months ended September 30, 2017 from $1,937 million for the nine months ended September 30, 2016, or an increase of 5.2% on a constant currency basis, excluding a 0.3% favorable impact of changes in foreign currency exchange rates.
Costs within our Buy segment decreased 0.5%, or 0.2% on a constant currency basis. Excluding a 0.3% favorable impact of changes in foreign currency exchange rates, cost of revenues decreased primarily due to the sale of the Claritas business in December 2016 partially offset by the continued global investment in our services.
Costs within our Watch segment increased 10.5%, or 10.8% on a constant currency basis. Excluding a 0.3% favorable impact of changes in foreign currency exchange rates, cost of revenues increased primarily due to the impact of the Gracenote acquisition and higher spending on product portfolio management initiatives, including our digital and Marketing Effectiveness product offerings.
Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
Selling, general and administrative expenses decreased 0.3% to $1,387 million for the nine months ended September 30, 2017 from $1,391 million for the nine months ended September 30, 2016, or an increase of 0.3% on a constant currency basis, excluding a 0.6% favorable impact of changes in foreign currency exchange rates.
Costs within our Buy segment decreased 5.9%, or 5.2% on a constant currency basis. Excluding a 0.7% favorable impact of changes in foreign currency exchange rates, selling, general and administrative expenses decreased due to productivity initiatives and dispositions as we continue to execute our portfolio pruning initiatives.
- 42 -
Costs within our Watch segment increased 15.2%, or 15.5% on a constant currency basis. Excluding a 0.3% favorable impact of changes in foreign currency exchange rates, selling, general and administrative expenses increased primarily due to the impact of the Gracenote acquisition and investments in product development initiatives.
Depreciation and Amortization
Depreciation and amortization expense was $477 million for the nine months ended September 30, 2017 as compared to $450 million for the nine months ended September 30, 2016. This increase was primarily due to higher depreciation and amortization expense associated with tangible and intangible assets acquired as part of the Gracenote acquisition on February 1, 2017.
Depreciation and amortization expense associated with tangible and intangible assets acquired in business combinations increased to $164 million for the nine months ended September 30, 2017 from $158 million for the nine months ended September 30, 2016.
Restructuring Charges
We recorded $48 million in restructuring charges relating to employee severance associated with productivity initiatives for the nine months ended September 30, 2017.
We recorded $73 million in restructuring charges relating to employee severance associated with productivity initiatives and contract termination costs for the nine months ended September 30, 2016.
Operating Income
Operating income for the nine months ended September 30, 2017 was $868 million as compared to $802 million for the nine months ended September 30, 2016. Operating income within our Buy segment was $219 million for the nine months ended September 30, 2017 as compared to $216 million for the nine months ended September 30, 2016. Operating income within our Watch segment was $734 million for the nine months ended September 30, 2017 as compared to $684 million for the nine months ended September 30, 2016. Corporate operating expenses were $85 million for the nine months ended September 30, 2017 as compared to $98 million for the nine months ended September 30, 2016.
Interest Expense
Interest expense was $277 million for the nine months ended September 30, 2017 as compared to $247 million for the nine months ended September 30, 2016. This increase is primarily due to higher average debt balances including the incurrence of an additional $500 million 5.00% Senior Notes in January 2017 and higher USD LIBOR senior secured term loan interest rates.
Foreign Currency Exchange Transaction Losses, Net
Foreign currency exchange transaction losses, net, primarily represent the net gain or loss on revaluation of external debt, intercompany loans and other receivables and payables denominated in currencies other than the respective entity’s functional currency. Fluctuations in the value of foreign currencies relative to the U.S. Dollar have a significant effect on our operating results, primarily the Euro. The average U.S. Dollar to Euro exchange rate was $1.11 to €1.00 for the nine months ended September 30, 2017 as compared to $1.12 to €1.00 for the nine months ended September 30, 2016.
We realized net foreign currency transaction losses of $9 million for the nine months ended September 30, 2017, resulting primarily from the fluctuations in certain foreign currencies associated with intercompany transactions.
We realized net foreign currency transaction losses of $3 million for the nine months ended September 30, 2016, resulting primarily from the loss of $3 million associated with foreign currency derivative financial instruments.
Income Taxes
The effective tax rates for the nine months ended September 30, 2017 and 2016 were 39% and 37%, respectively. The tax rate for the nine months ended September 30, 2017 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company files tax returns, and the effect of global licensing activities and foreign distributions, offset by the favorable impact of certain financing activities and the impact of share-based compensation excess tax benefit. The tax rate for the nine months ended September 30, 2016 was higher than the statutory rate as a result of the impact of tax rate differences in other jurisdictions where the Company files tax returns, and the effect of global licensing activities and foreign distributions, offset by the favorable impact of certain financing activities, the impact of share-based compensation excess tax benefit, and release of certain tax contingencies.
- 43 -
Adjusted EBITDA
Adjusted EBITDA increased 4.7% to $1,456 million for the nine months ended September 30, 2017 from $1,390 million for the nine months ended September 30, 2016, or 4.5% on a constant currency basis, excluding a 0.2% favorable impact of changes in foreign currency exchange rates. See “Results of Operations – Nine months Ended September 30, 2017 Compared to the Nine months Ended September 30, 2016” for the reconciliation of net income to Adjusted EBITDA.
Business Segment Results for the Nine months Ended September 30, 2017 Compared to the Nine months Ended September 30, 2016
Revenues
The table below sets forth our segment revenue performance data for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, both on an as-reported and constant currency basis.
(IN MILLIONS) |
| Nine months Ended |
|
| Nine months Ended |
|
| % Variance |
|
| Nine months Ended |
|
| % Variance Currency |
| |||||
Emerging Markets |
| $ | 860 |
|
| $ | 780 |
|
|
| 10.3 | % |
| $ | 780 |
|
|
| 10.3 | % |
Developed Markets |
|
| 1,472 |
|
|
| 1,551 |
|
|
| (5.1 | )% |
|
| 1,543 |
|
|
| (4.6 | )% |
Core Buy |
|
| 2,332 |
|
|
| 2,331 |
|
|
| (0.0 | )% |
|
| 2,323 |
|
|
| 0.4 | % |
Corporate |
|
| 51 |
|
|
| 123 |
|
|
| (58.5 | )% |
|
| 123 |
|
|
| (58.5 | )% |
Buy Segment |
| $ | 2,383 |
|
| $ | 2,454 |
|
|
| (2.9 | )% |
| $ | 2,446 |
|
|
| (2.6 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing Effectiveness |
| $ | 237 |
|
| $ | 204 |
|
|
| 16.2 | % |
| $ | 204 |
|
|
| 16.2 | % |
Audio |
|
| 370 |
|
|
| 380 |
|
|
| (2.6 | )% |
|
| 380 |
|
|
| (2.6 | )% |
Audience Measurement (Video and Text) |
|
| 1,682 |
|
|
| 1,459 |
|
|
| 15.3 | % |
|
| 1,459 |
|
|
| 15.3 | % |
Core Watch |
|
| 2,289 |
|
|
| 2,043 |
|
|
| 12.0 | % |
|
| 2,043 |
|
|
| 12.0 | % |
Corporate/Other Watch |
|
| 139 |
|
|
| 156 |
|
|
| (10.9 | )% |
|
| 153 |
|
|
| (9.2 | )% |
Watch Segment |
| $ | 2,428 |
|
| $ | 2,199 |
|
|
| 10.4 | % |
| $ | 2,196 |
|
|
| 10.6 | % |
Total Core (Buy/Watch) |
|
| 4,621 |
|
|
| 4,374 |
|
|
| 5.6 | % |
|
| 4,366 |
|
|
| 5.8 | % |
Total |
| $ | 4,811 |
|
| $ | 4,653 |
|
|
| 3.4 | % |
| $ | 4,642 |
|
|
| 3.6 | % |
Buy Segment Revenues
Revenues decreased 2.9% to $2,383 million for the nine months ended September 30, 2017 from $2,454 million for the nine months ended September 30, 2016, or 2.6% on a constant currency basis, excluding a 0.3% unfavorable impact of changes in foreign currency exchange rates.
Revenues from emerging markets increased 10.3% to $860 million on a reported and constant currency basis. Revenue growth was driven by our global footprint, coverage expansion and broad product offerings which continue to position us well with both local and multinational clients. For the nine months ended September 30, 2017, these investments drove double-digit growth in South East Asia, Latin America, India and Eastern Europe along with high single-digit growth in China.
Revenues from developed markets decreased 5.1% to $1,472 million, or 4.6% on a constant currency basis. Excluding a 0.5% unfavorable impact of changes in foreign currency exchange rates, revenues decreased as a result of softness in the U.S. partially offset by growth in our European developed markets.
Revenues from Corporate Buy decreased 58.5% to $51 million on a reported and constant currency basis primarily due to the sale of the Claritas business in December 2016. Corporate includes slow growth and non-core services that are part of portfolio pruning initiatives.
- 44 -
Watch Segment Revenues
Revenues increased 10.4% to $2,428 million for the nine months ended September 30, 2017 from $2,199 million for the nine months ended September 30, 2016 or an increase of 10.6% on a constant currency basis. Excluding the Gracenote acquisition, revenues increased 3.7% (3.8% on a constant currency basis). Excluding a 0.1% unfavorable impact of changes in foreign currency exchange rates, revenue growth was primarily driven by growth in Audience Measurement of Video and Text, which increased 15.3% on a reported and constant currency basis. Excluding the Gracenote acquisition, Audience Measurement of Video and Text revenues increased 5.1% on a reported and constant currency basis due to our ongoing investments and continued client adoption of our Total Audience Measurement initiative. Audio revenues were decreased 2.6% on a reported and constant currency basis for the period primarily due to timing of deliverables. Our Marketing Effectiveness revenue grew 16.2% on a reported and constant currency basis, due to the continued strength in audience-based solutions that help advertisers and publishers measure the return on investment in media spend and investments in our product portfolio. Corporate/Other Watch revenues decreased by 10.9% (9.2% on a constant currency basis) due to our continued exit of non-core media analytics products. Our Core Watch revenue grew 12.0% on a reported and constant currency basis. Excluding the Gracenote acquisition, our Core Watch revenue grew 4.8% on a reported and constant currency basis.
Business Segment Profitability
We do not allocate items below operating income/(loss) to our business segment and therefore the tables below set forth a reconciliation of operating income/(loss) at the business segment level for the three months ended March 31, 2021 and 2020, adjusting for certain items affecting operating income/(loss), such as restructuring charges, depreciation and amortization, impairment of goodwill and other long-lived assets, share-based compensation expense and certain other items described below resulting in a presentation of our non-GAAP business segment profitability. Non-GAAP business segment profitability provides useful supplemental information to management and investors regarding financial and business trends related to our results of operations. When this non-GAAP financial information is viewed with our GAAP financial information, investors are provided with a meaningful understanding of our ongoing operating performance. It is important to note that the non-GAAP business segment profitability corresponds in total to our consolidated Adjusted EBITDA described within our consolidated results of operations above, which our chief operating decision maker and other members of management use to measure our performance from period to period to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. These non-GAAP measures should not be considered as an alternative to net income/(loss), operating income/(loss), cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. These non-GAAP measures may differ from similarly-titled measures used by others and have important limitations as analytical tools. Accordingly, they should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
NINE MONTHS ENDED SEPTEMBER 30, |
| Operating |
|
| Restructuring |
|
| Depreciation and |
|
| Stock-Based |
|
| Other Items(1) |
|
| Non-GAAP |
| ||||||
Buy |
| $ | 219 |
|
| $ | 31 |
|
| $ | 156 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 416 |
|
Watch |
|
| 734 |
|
|
| 9 |
|
|
| 318 |
|
|
| 9 |
|
|
| — |
|
|
| 1,070 |
|
Corporate and Eliminations |
|
| (85 | ) |
|
| 8 |
|
|
| 3 |
|
|
| 16 |
|
|
| 28 |
|
|
| (30 | ) |
Total Nielsen |
| $ | 868 |
|
| $ | 48 |
|
| $ | 477 |
|
| $ | 35 |
|
| $ | 28 |
|
| $ | 1,456 |
|
(IN MILLIONS) |
|
Three Months Ended March 31, |
|
| |||||
|
|
| 2021 |
|
|
| 2020 |
|
|
Operating income |
| $ | 253 |
|
| $ | 177 |
|
|
Depreciation and amortization |
|
| 127 |
|
|
| 136 |
|
|
Restructuring charges |
|
| — |
|
|
| 3 |
|
|
Share-based compensation expense |
|
| 7 |
|
|
| 10 |
|
|
Dis-synergy costs(1) |
|
| — |
|
|
| (17 | ) |
|
Other items(2) |
|
| 1 |
|
|
| 17 |
|
|
Non-GAAP Business segment income |
| $ | 388 |
|
| $ | 326 |
|
|
NINE MONTHS ENDED SEPTEMBER 30, |
| Operating |
|
| Restructuring |
|
| Depreciation and |
|
| Stock-Based |
|
| Other Items(1) |
|
| Non-GAAP |
| ||||||
Buy |
| $ | 216 |
|
| $ | 42 |
|
| $ | 158 |
|
| $ | 12 |
|
| $ | 2 |
|
| $ | 430 |
|
Watch |
|
| 684 |
|
|
| 7 |
|
|
| 289 |
|
|
| 7 |
|
|
| 2 |
|
|
| 989 |
|
Corporate and Eliminations |
|
| (98 | ) |
|
| 24 |
|
|
| 3 |
|
|
| 18 |
|
|
| 24 |
|
|
| (29 | ) |
Total Nielsen |
| $ | 802 |
|
| $ | 73 |
|
| $ | 450 |
|
| $ | 37 |
|
| $ | 28 |
|
| $ | 1,390 |
|
|
| Costs to stand-up Nielsen as a standalone company including incremental real estate, IT/infrastructure, Transition Services Agreements and |
- 39 -
(2) | For the |
(IN MILLIONS) |
| Nine |
|
| Nine |
|
| % Variance |
|
| Nine |
|
| % Variance |
|
| Three |
|
| Three |
|
| % Variance |
|
| Three |
|
| % Variance |
| ||||||||||
Non-GAAP Business Segment Income/(Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buy |
| $ | 416 |
|
| $ | 430 |
|
|
| (3.3 | )% |
| $ | 434 |
|
|
| (4.1 | )% | ||||||||||||||||||||
Watch |
|
| 1,070 |
|
|
| 989 |
|
|
| 8.2 | % |
|
| 989 |
|
|
| 8.2 | % | ||||||||||||||||||||
Corporate and Eliminations |
|
| (30 | ) |
|
| (29 | ) |
|
| NM |
|
|
| (30 | ) |
|
| NM |
| ||||||||||||||||||||
Total Nielsen |
| $ | 1,456 |
|
| $ | 1,390 |
|
|
| 4.7 | % |
| $ | 1,393 |
|
|
| 4.5 | % |
| $ | 388 |
|
| $ | 326 |
|
|
| 19.0 | % |
| $ | 328 |
|
|
| 18.3 | % |
Buy SegmentNielsen Profitability
Operating income was $219$253 million for the ninethree months ended September 30, 2017March 31, 2021 as compared to $216$177 million for the ninethree months ended September 30, 2016March 31, 2020. The increase was primarily due to the revenue performance discussed above, temporary actions taken in response to the COVID-19 pandemic, the benefit of permanent cost actions from the optimization plan as well as lower restructuring charges, depreciation and amortization expense stock-based compensation expense, transaction related costs and business optimization costs partially offset byfor the revenue performance mentioned above.three months ended March 31, 2021. Non-GAAP business segment income decreased 4.1%increased 18.3% on a constant currency basis.
- 45 -Discontinued Operations
Watch Segment ProfitabilityThe Connect Transaction closed on March 5, 2021. The Company received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments, and recorded a preliminary gain of $542 million, net of tax within discontinued operations. Proceeds from the sale were primarily utilized for debt repayment. The results of operations of the Global Connect segment have been classified as discontinued operations for all periods presented.
Operating income
Net income/(loss) from discontinued operations from Global Connect for the three months ended March 31, 2021 was $734$467 million as compared to $(73) million for the ninethree months ended September 30, 2017 as compared to $684 million for the nine months ended September 30, 2016.March 31, 2020. The increase was driven primarily by the revenue performance discussed above, partially offset by higher depreciation and amortization expense. Non-GAAP business segment income increased 8.2% on a constant currency basis.
Corporate Expenses and Eliminations
Operating expenses were $85 million for the nine months ended September 30, 2017 as compared to $98 million for the nine months ended September 30, 2016is primarily due to lower restructuring charges for the ninepreliminary gain on sale of $542 million recorded during the three months ended September 30, 2017.March 31, 2021. See Note 15 - Discontinued Operations for further detail.
Liquidity and Capital Resources
Overview
Consolidated Cash flows from operations provided a source of funds of $804were $(45) million duringfor the ninethree months ended September 30, 2017March 31, 2021 (including Global Connect through the Transaction close date), as compared to $753$(5) million for the ninethree months ended September 30, 2016, an increaseMarch 31, 2020, a decrease of $51 million. This increase was$40 million, primarily due to theworking capital timing, of vendor higher separation related cash costs and clienthigher interest payments, partially offset by higherthe Adjusted EBITDA performance discussed above, lower employee annual incentive payments and lower income tax and interest payments. payments.
We provide for additional liquidity through several sources including maintaining an adequate cash balance, access to global funding sources and a committed revolving credit facility. The following table provides a summary of the major sources of liquidity as of and for the ninethree months ended September 30, 2017March 31, 2021 and 2016:2020:
(IN MILLIONS) |
| Nine |
|
| Nine |
|
| Three |
|
| Three |
| ||||
Net cash from operating activities |
| $ | 804 |
|
| $ | 753 |
|
| $ | (45 | ) |
| $ | (5 | ) |
Cash and cash equivalents |
| $ | 662 |
|
| $ | 446 |
|
| $ | 1,197 |
|
| $ | 359 |
|
Availability under revolving credit facility |
| $ | 564 |
|
| $ | 212 |
| ||||||||
Availability under Revolving credit facility |
| $ | 837 |
|
| $ | 698 |
|
Of the $662$1,197 million in cash and cash equivalents, approximately $550$236 million was held in jurisdictions outside the U.S.United States and as a result, there may be tax consequences if such amounts were moved out of these jurisdictions or repatriated to the U.S.United States. We regularly review the amount of cash and cash equivalents held outside of the U.S.United States 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.
- 40 -
The below table illustrates our weighted average interest rate and cash paid for interest over the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020.
|
| Nine |
|
| Nine |
|
| Three |
|
| Three |
| ||||
Weighted average interest rate |
|
| 4.24 | % |
|
| 4.02 | % |
|
| 4.20 | % |
|
| 4.09 | % |
Cash paid for interest, net of amounts capitalized (in millions) |
| $ | 214 |
|
| $ | 191 |
|
| $ | 57 |
|
| $ | 50 |
|
In January 2017, we issued $500 million aggregate principal amount of 5.0% Senior Notes due 2025 at par, with cash proceeds of approximately $495 million, net of fees and expenses.
In April 2017, we entered into a third amendment to our Fourth Amended and Restated Credit Agreement (as amended prior to April 2017, the “Existing Credit Agreement,” and as amended in April 2017 by the third amendment, the “Amended Credit Agreement”), providing for a new class of Class B-4 Term Loans in an aggregate principal amount of $2,250,000,000, the proceeds of which were used to replace or refinance the entire outstanding principal of existing Class B-3 Term Loans and a portion of existing Class A Term Loans.
The Class B-4 Term Loans will mature in full on October 4, 2023, and are required to be repaid in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of the Class B-4 Term Loans, with the balance payable on October 4, 2023. The Class B-4 Term Loans bear interest equal to, at the election of us (i) a base rate or LIBOR rate, plus (ii) an applicable margin, which is equal to 2.00% (in the case of LIBOR loans) or 1(ii).00% (in the case of base rate loans).
- 46 -
The Amended Credit Agreement contains the same affirmative and negative covenants as those of the Existing Credit Agreement.
Our contractual obligations, commitments and debt service requirements over the next several years are significant. We believe we will have available resources to meet both our short-term and long-term liquidity requirements, including our senior secured debt service. We expect the cash flow from our operations, combined with existing cash and amounts available under the revolving credit facility, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, restructuring obligations, dividend payments and capital spending over the next year. In addition, we may, from time to time, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly issued debt securities) in privately negotiated or open market transactions, by tender offer or otherwise.
On October 31, 2020, we entered into the Stock Purchase Agreement to sell our Global Connect business to affiliates of Purchaser, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and the Connect Warrant. The Connect Transaction was approved by the requisite vote of our shareholders. The Connect Transaction closed on March 5, 2021. We received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments. Proceeds from the sale were primarily utilized for debt repayment.
On March 16, 2021, we completed the partial prepayment of $1.0 billion of the senior secured term loans due 2023 and $0.3 billion of the senior secured term loans due 2025. The partial prepayment resulted in aggregate principal amounts of 2023 and 2025 senior secured term loans remaining outstanding of approximately $2.6 billion and $1 billion, respectively. We redeemed $150 million outstanding aggregate principal amount of its 5.500% senior notes due 2021 effective March 21, 2021 and called for redemption of $825 million of outstanding aggregate principal amount of the 5.000% senior notes due 2022 effective April 10 2021, in each case at a redemption price equal to 100% of the principal amount of such notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.
Financial Debt Covenants Attributable to TNCThe Nielsen Company B.V.
TheNielsen’s Credit Agreement date June 4, 2020, as amended on July 21, 2020 as well as Sixth Amended and Restated Credit Agreement, date July 21, 2020 (the “Amended Credit Agreement”) (together the “Secured Credit Agreements”) contains a financial covenant consisting of a maximum leverage ratio applicable to our indirect wholly-owned subsidiary, Nielsen Holding and Finance B.V. and its restricted subsidiaries. The leverage ratio requires that we not permit the ratio of total net debt (as defined in the AmendedSecured Credit Agreement)Agreements) at the end of any calendar quarter to CovenantConsolidated EBITDA (as defined in the AmendedSecured Credit Agreement)Agreements) for the four quarters then ended to exceed a specified threshold. The maximum permitted ratio is 5.50 to 1.00.
Failure to comply with this financial covenant would result in an event of default under our AmendedSecured Credit AgreementAgreements unless waived by our senior credit lenders. An event of default under our AmendedSecured Credit AgreementAgreements can result in the acceleration of our indebtedness under the facilities, which in turn would result in an event of default and possible acceleration of indebtedness under the agreements governing our debt securities as well. As our failure to comply with the financial covenant described above cancould cause us to go into default under the agreements governing our indebtedness, management believes that our AmendedSecured Credit AgreementAgreements and this covenant are material to us. As of September 30, 2017,March 31, 2021, we were in full compliance with the financial covenant described above.
Supplemental Consolidating Information
Pursuant to Regulation S-X Rule 13-01, which simplifies certain disclosure requirements for guarantors and issuers of guaranteed securities, we are no longer required to provide condensed consolidating financial statements for us and our subsidiaries, including the guarantors and non-guarantors under our credit agreement and the indentures governing our senior notes. Nielsen Holding and Finance B.V., the parent covenant party under our credit agreement and the indentures governing our senior notes, and its restricted subsidiaries together comprise substantially all of our assets, liabilities and operations, and there are no material differences between the consolidating information related to us, on the one hand, andNielsen Holding and Finance and its restricted subsidiaries on a standalone basis, on the other hand.
- 41 -
Revolving Credit Facility
The Amended Credit Agreement contains a senior secured revolving credit facility with aggregate revolving credit commitments of $575$850 million and a final maturity of April 2019July 2023 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.
The senior secured revolving credit facility is provided under the Amended Credit Agreement and so contains covenants and restrictions as noted above with respect to the Amended Credit Agreement. Obligations under the revolving credit facility are guaranteed by the same entities that guarantee obligations under the Amended Credit Agreement.
As of September 30, 2017March 31, 2021 and 2016,2020, we had zero and $357$135 million borrowings outstanding and had outstanding letters of credit of $11$13 million and $6$17 million, respectively. As of September 30, 2017,March 31, 2021, we had $564$837 million available for borrowing under the senior secured revolving credit facility.
Dividends and Share Repurchase Program
On January 31, 2013,We continue to drive shareholder value through our quarterly cash dividend policy, which was adopted by our Board of Directors adopted a cash dividend policy to pay quarterly(“Board”) in 2013. Under this plan we have paid $21 million in cash dividends on our outstanding common stock.for each of the years ended March 31, 2021 and 2020. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will be subject to the board’sBoard’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. The below table summarizes the dividends declared on our common stock during 20162020 and the ninethree months ended September 30, 2017.March 31, 2021.
| Declaration Date |
|
| Record Date |
|
| Payment Date |
|
| Dividend Per Share |
| ||||
|
| February 18, 2016 |
|
|
| March 3, 2016 |
|
|
| March 17, 2016 |
|
| $ | 0.28 |
|
|
| April 19, 2016 |
|
|
| June 2, 2016 |
|
|
| June 16, 2016 |
|
| $ | 0.31 |
|
|
| July 21, 2016 |
|
|
| August 25, 2016 |
|
|
| September 8, 2016 |
|
| $ | 0.31 |
|
|
| October 20, 2016 |
|
|
| November 22, 2016 |
|
|
| December 6, 2016 |
|
| $ | 0.31 |
|
|
| February 16, 2017 |
|
|
| March 2, 2017 |
|
|
| March 16, 2017 |
|
| $ | 0.31 |
|
|
| April 24, 2017 |
|
|
| June 2, 2017 |
|
|
| June 16, 2017 |
|
| $ | 0.34 |
|
|
| July 20, 2017 |
|
|
| August 24, 2017 |
|
|
| September 7, 2017 |
|
| $ | 0.34 |
|
Declaration Date |
| Record Date |
| Payment Date |
| Dividend Per Share |
| |
February 20, 2020 |
| March 5, 2020 |
| March 19, 2020 |
| $ | 0.06 |
|
April 16, 2020 |
| June 4, 2020 |
| June 18, 2020 |
| $ | 0.06 |
|
July 16, 2020 |
| August 20, 2020 |
| September 3, 2020 |
| $ | 0.06 |
|
October 27, 2020 |
| November 19, 2020 |
| December 3, 2020 |
| $ | 0.06 |
|
February 4, 2021 |
| March 4, 2021 |
| March 18, 2021 |
| $ | 0.06 |
|
- 47 -
On October 19, 2017,April 22, 2021, our Board declared a cash dividend of $0.34$0.06 per share ofon our common stock. The dividend is payable on December 5, 2017June 17, 2021 to stockholdersshareholders of record at the close of business on November 21, 2017.June 3, 2021.
The dividend policy and the payment of future cash dividends are subject to the discretion of the Board.
Our Board of Directors approved a share repurchase program, as included in the below table, for up to $2 billion of our outstanding common stock. The primary purposespurpose of the program areis to return value to shareholders and to mitigate dilution associated with our equity compensation plans.
Board Approval |
| Share Repurchase Authorization ($ in millions) | |
July 25, 2013 |
| $ | 500 |
October 23, 2014 |
| $ | 1,000 |
December 11, 2015 |
| $ | 500 |
Total Share Repurchase Authorization |
| $ | 2,000 |
Repurchases under these plansthis program will be made in accordance with applicable securities laws from time to time in the open market or otherwiseand depending on our evaluation of market conditions and other factors. This program has been executed within the limitations of the authority granted us on August 6, 2015, which was extended by the authority approved by our shareholders.shareholders at our annual general meeting held on May 12, 2020. We have requested approval from our shareholders at our annual general meeting to be held on May 25, 2021 to renew this authority for a period of one year.
As of September 30, 2017,March 31, 2021, there have been 36,588,112were 39,426,521 shares of our common stock purchased at an average price of $45.88$44.95 per share (total consideration of approximately $1,679$1,772 million) under this program.
The activity There were no share repurchases for the ninethree months ended September 30, 2017 consisted of open market share repurchases and is summarized in the following table:March 31, 2021.
- 42 -
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 |
| ||||
As of December 31, 2016 |
|
| 33,837,526 |
|
| $ | 46.16 |
|
|
| 33,837,526 |
|
| $ | 437,970,016 |
|
2016 Activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1- 31 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 437,970,016 |
|
February 1- 28 |
|
| 564,623 |
|
| $ | 45.30 |
|
|
| 564,623 |
|
| $ | 412,392,848 |
|
March 1- 31 |
|
| 365,228 |
|
| $ | 45.15 |
|
|
| 365,228 |
|
| $ | 395,903,537 |
|
April 1-30 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 395,903,537 |
|
May 1-31 |
|
| 1,020,212 |
|
| $ | 40.65 |
|
|
| 1,020,212 |
|
| $ | 354,426,944 |
|
June 1-30 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 354,426,944 |
|
July 1-31 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 354,426,944 |
|
August 1-31 |
|
| 698,062 |
|
| $ | 41.77 |
|
|
| 698,062 |
|
| $ | 325,268,111 |
|
September 1-30 |
|
| 102,461 |
|
| $ | 39.25 |
|
|
| 102,461 |
|
| $ | 321,246,116 |
|
Total |
|
| 36,588,112 |
|
| $ | 45.88 |
|
|
| 36,588,112 |
|
|
|
|
|
Consolidated Cash Flows
Operating activities.Net cash provided byused in operating activities was $804$45 million for the ninethree months ended September 30, 2017,March 31, 2021, as compared to $753$5 million used in operating activities for the ninethree months ended September 30, 2016.March 31, 2020. This increase in net cash used in operating activities was primarily due to theworking capital timing, of vendor higher separation related cash costs and clienthigher interest payments, partially offset by higherthe Adjusted EBITDA performance discussed above, lower employee annual incentive payments and lower income tax and interest payments.payments. Our key collections performance measure, days billing outstanding, (DBO), increaseddecreased by 1 daytwo days as compared to the same period last year.
Investing activities. Net cash provided by investing activities was $2,158 million for the three months ended March 31, 2021, as compared to net cash used in investing activities was $888of $142 million for the ninethree months ended September 30, 2017, as compared to $591 million for the nine months ended September 30, 2016.March 31, 2020. The primary driverdrivers for the increase was higher acquisition paymentswere the proceeds from the sale of our Global Connect business during the ninethree months ended September 30, 2017 as compared to the same period for 2016. March 31, 2021. See Note 15– Discontinued Operations.
- 48 -
Financing activities. Net cash used in financing activities was $48$1,523 million for the ninethree months ended September 30, 2017March 31, 2021 as compared to $90net cash provided by financing activities of $82 million for the ninethree months ended September 30, 2016. March 31, 2020. The decreaseincrease in net cash used in financing activities was primarily due lower share repurchasing, as described into the “Dividends partial repayment of our Senior secured term loans and Share Repurchase Program”our Senior notesduring the three months ended March 31, 2021 as compared to the same period of 2016, partially offset by lower net borrowings offor 2020. See Note 10– Long-Term Debt and other Financing Arrangements.
The operating, investing and financing activities above include Global Connect through the revolving credit facility and higher dividends payments during the nine months ended September 30, 2017 as compared to the same period of 2016.Transaction close date.
Consolidated Capital Expenditures
Investments in property, plant, equipment, software and other assets totaled $319$89 million for the ninethree months ended September 30, 2017March 31, 2021 (including Global Connect through the Transaction close date) as compared to $324$112 million for the ninethree months ended September 30, 2016. In addition, we received $28 million of proceeds fromMarch 31, 2020. The decrease in capital expenditures for the three months ended March 31, 2021, was primarily due to timing and the sale of certain property, plant and equipment and other assets during the nine months ended September 30, 2017.Global Connect.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.
Summary of Recent Accounting Pronouncements
Intangibles- Goodwill
Income Taxes (Topic 740): Simplifying the Accounting for Income taxes
Effective January 1, 2021, we adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard which amends and Otheraims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. Upon adoption, this new standard did not have a significant impact on our financial statements.
In January 2017,Reference Rate Reform-Facilitation of the FASBEffects of Reference Rate Reform on Financial Reporting
On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (“ASU”ASC 848”), “Intangibles—Goodwill: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and Other”exceptions for applying GAAP to simplifycontracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company has elected to apply the subsequent measurementhedge accounting expedients related to probability and the assessments of goodwill. The update requires only a single-step quantitative testeffectiveness for future LIBOR-indexed cash flows to identify and measure impairmentassume that the index upon which future hedged transactions will be based matches the index on the excesscorresponding derivatives. Application of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entitythese expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to determine if a quantitative impairment test is necessary. The update is effective for fiscal year 2021 and is to be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We elected to early adopt this ASU effective January 1, 2017. There was no impact on our condensed consolidated financial statements.
Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets
In February 2017, the FASB issued an ASU, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets”, which clarifies the scope and application of ASC 610-20 on the sale or transfer of nonfinancial assets and in substance nonfinancial assets to noncustomers, including partial sales. It requires the application of certain recognition and measurement principles in ASC 606 when derecognizing nonfinancial assets and in substance nonfinancial assets, and the counterparty is not a customer. This ASU is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. We are currently assessingevaluate the impact of the adoption of this ASU will have on our condensed consolidated financial statements.guidance and may apply other elections as applicable as additional changes in the market occur.
Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
In March 2017, the FASB issued an ASU, Compensation —Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which will change the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only service costs may be capitalized in assets. This ASU is effective for fiscal years (and interim reporting periods within those years) beginning after December 15, 2017. We are currently assessing the impact of the adoption of this ASU will have on our condensed consolidated financial statements.
Compensation- Stock Compensation
In May 2017, the FASB issued an Accounting Standards Update (“ASU”), Compensation- Stock Compensation (Topic 718), “Scope of Modification Accounting”, which amends the scope of modification accounting for share-based payment arrangements. The standard provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The new standard is effective for annual periods beginning after December 15, 2017 and interim periods within those years. Early adoption is permitted. We do not expect the adoption of this ASU to have a material impact on our condensed consolidated financial statements.
- 49 -
Derivatives and Hedging
In August 2017, the FASB issued Accounting Standards Update (“ASU”) “Derivatives and Hedging- Targeted Improvements to Accounting for Hedging Activities)” (“ASU 2017-12”). The amendments expand an entity’s ability to apply hedge accounting for nonfinancial and financial risk components and allow for a simplified approach for fair value hedging of interest rate risk. ASU 2017-12 eliminates the need to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, the standard simplifies the hedge documentation and effectiveness assessment requirements under the previous guidance. The amendments of this ASU are effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We elected to early adopt this ASU during the third quarter 2017. See footnote 8 “Fair Value Measurement”, for the additional disclosures related to this ASU. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.
Revenue Recognition
In May 2014, the FASB issued an Accounting Standards Update (“ASU”), “Revenue from Contracts with Customers”. The new revenue recognition standard provides a five step analysis of transactions to determine when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. In addition, the new standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This standard is effective for annual periods beginning after December 15, 2017.
In 2014, we established a cross-functional implementation team consisting of representatives from across all of its business segments. Management utilized a bottoms-up approach to analyze the impact of the standard on our contract portfolio by reviewing the current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to our revenue contracts. In addition, management identified, and are in the process of implementing appropriate changes to our business processes, systems and controls to support the recognition and disclosure under the new standard. Based on management’s preliminary assessment, it believes the most significant impact the adoption of the new standard will have on its condensed consolidated financial statements are the required financial statement disclosures. We are continuing to assess the impact this ASU will have on recent acquisitions as well as which transition method we will use to adopt this ASU.
Commitments and Contingencies
Legal Proceedings and Contingencies
We are subject to litigation
For information about our legal proceedings, see Note 13– Commitments 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, we 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 our future results of operations or cash flows in a particular period.Contingencies.
- 43 -
Other Contractual Obligations
Our other contractual obligations include capital lease obligations (including interest portion), facility leases, leases of certain computer and other equipment, agreements to purchase data and telecommunication services and the payment of principal and interest on debt and pension fund obligations.
Subsequent Event
Outsourced Services Agreements
In October 2017, we amended and restated in its entirety, our Amended and Restated Master Services Agreement, dated as of October 1, 2007 with Tata America International Corporation and Tata Consultancy Services Limited (jointly, “TCS”) (as amended prior to the Second Amendment and Restatement, the “Prior Agreement”) by entering into a Second Amended and Restated Master Services Agreement (the “Agreement”), dated as of October 1, 2017 and effective as of January 1, 2017 (the “Effective Date”), with TCS. The term of the Agreement has been extended for an additional five years, so as to expire on December 31, 2025, with three one-year renewal options granted us. We have committed to purchase services from TCS from the Effective Date through the remaining term of the Agreement (the “Minimum Commitment”) in the amount of $2.25 billion, including a commitment to purchase at least $320 million in services per year from 2017 through 2020, $186 million in services per year from 2021 through 2024, and $139.5 million in services in 2025 (in each of the foregoing cases, the “Annual Commitment”). In connection with the entry into the Agreement, the parties have agreed to terminate the separate Global Infrastructure Services Agreement between them as of the
- 50 -
Effective Date and include the services provided thereunder in one or more Statements of Work (“SOWs”) arising under the Agreement. TCS’s charges under such SOWs will continue to be credited against the Minimum Commitment and the Annual Commitment. TCS will globally provide us 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. As we order specific services under the Agreement, the parties will execute 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 us with the right to terminate the Agreement or SOWs, as applicable.
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 for speculative purposes.
Foreign Currency Exchange Risk
We operate globally and predominantly generate revenuerevenues and expenses in local currencies. Approximately 41%16% of our revenues and 43%21% of our operating costs were generated in currencies other than the U.S. Dollar for the ninethree months ended September 30, 2017.March 31, 2021. 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. Typically, a one cent change in the U.S. Dollar/Euro exchange rate, holding all other currencies constant, will impact revenues by approximately $6$1 million annually, with an immaterial impact on our profitability.
DuringFor the nine monthsquarters ended September 30, 2017March 31, 2021 and 2016,2020, we recorded an insignificant net loss and a net loss of zero and $3 million, respectively, associated with foreign currency derivative financial instruments within foreign currency exchange transactions losses, net in our condensed consolidated statements of operations. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the notional amountamounts of outstanding foreign currency derivative financial instruments were $79$29 million and $77$68 million, respectively.
The table below details the percentage of revenues and expenses by currency for the ninethree months ended September 30, 2017:March 31, 2021:
| U.S. Dollar |
|
|
| Euro |
|
|
| Other Currencies |
|
| U.S. Dollar |
|
|
| Euro |
|
|
| Other Currencies |
| |
Revenues | 59 | % |
|
| 10 | % |
|
| 31 | % |
| 84 | % |
|
| 5 | % |
|
| 11 | % | |
Operating costs | 57 | % |
|
| 10 | % |
|
| 33 | % |
| 79 | % |
|
| 6 | % |
|
| 15 | % |
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. At September 30, 2017,March 31, 2021, we had $4,073$3,611 million in carrying value of floating-rate debt under our senior secured credit facilities of which $1,550$1,300 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 $25$23 million ($4136 million without giving effect to any of our interest rate swaps).
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.
Equity Price Risk
We are not exposed to material equity price risk.
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(a) | Evaluation of Disclosure Controls and Procedures |
The Company maintains disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) 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 Exchange Act, is recorded, processed, summarized and
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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 recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2017March 31, 2021 (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.
(b) | 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 period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PARTPART II. OTHER INFORMATION
We are subject to litigation For information about our legal proceedings, see Note 13– Commitments 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, we do expect that the ultimate disposition of these matters will not have a material adverse effect on our 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 our future results of operations or cash flows in a particular period.Contingencies.
There have been no material changes to our Risk Factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Unregistered Sales of Equity Securities
There were no unregistered sales of our common stock forduring the ninethree months ended September 30, 2017.March 31, 2021.
Issuer Purchases of Equity Securities by the Issuer
There were no share repurchases during the three months ended March 31, 2021.
Our Board approved a share repurchase program for up to $2 billion of our outstanding common stock on the dates indicated under Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Dividends and Share Repurchase Program.
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) |
|
| Dollar Value of Shares that may yet be Purchased under the Plans or Programs |
| ||||
July 1-31 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 354,426,944 |
|
August 1-31 |
|
| 698,062 |
|
| $ | 41.77 |
|
|
| 698,062 |
|
| $ | 325,268,111 |
|
September 1-30 |
|
| 102,461 |
|
|
| 39.25 |
|
|
| 102,461 |
|
| $ | 321,246,116 |
|
Total |
|
| 800,523 |
|
| $ | 41.45 |
|
|
| 800,523 |
|
|
|
|
|
|
|
Not applicable.
Not applicable.
None.Not applicable
Item 6. | Exhibits |
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The agreements and other documents filed as exhibits to this quarterly report on Form 10-Q 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 INDEX
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32.1* |
| |
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101* |
| The following financial information from Nielsen Holdings plc’s Quarterly Report on Form 10-Q for the quarter ended |
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|
104* | Cover Page Interactive Data File (embedded within the Inline XBRL and included in Exhibit 101) |
* | Filed or furnished herewith |
† | Management contract or compensatory |
The agreements and other documents filed as exhibits to this report 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 us 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.
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Pursuant to the requirements 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.
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| Nielsen Holdings plc (Registrant) |
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Date: |
| /s/ |
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Senior Vice President and Corporate Controller (Duly Authorized Officer and Principal Accounting |
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