S-1/A 1 ds1a.htm AMENDMENT NO. 3 TO FORM S-1 Amendment No. 3 to Form S-1
Table of Contents

As filed with the Securities and Exchange Commission on August 16, 2010

Registration No. 333-167271

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 3

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

NIELSEN HOLDINGS B.V.

(To be converted into Nielsen Holdings N.V.)

(Exact name of registrant as specified in its charter)

 

 

 

The Netherlands   7374   98-0662038

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

James W. Cuminale, Esq.

Nielsen Holdings B.V.

770 Broadway

New York, New York 10003

(646) 654-5000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

 

Joseph H. Kaufman, Esq.

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017-3954

(212) 455-2000

 

William M. Hartnett, Esq.

William J. Miller, Esq.

Douglas S. Horowitz, Esq.

Cahill Gordon & Reindel LLP

80 Pine Street

New York, New York 10005

(212) 701-3000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   x  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Proposed

Maximum Aggregate

Offering Price(1)(2)

 

Amount of

Registration Fee

Common Stock, par value €0.04 per share

  $2,012,500,000   $143,491(3)
 
 
(1) Includes shares to be sold upon exercise of the underwriters’ option. See “Underwriting.”
(2) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) $124,775 of which was previously paid.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated August 16, 2010

Preliminary Prospectus

             Shares

LOGO

Common Stock

 

 

We are selling              shares of our common stock. This is an initial public offering of our common stock. Prior to this offering, there has been no public market for our common stock. The initial public offering price is estimated to be between $             and $             per share. We have applied to have our common stock listed on the New York Stock Exchange under the symbol “NLSN.” We intend to use the anticipated net proceeds of this offering to repay certain of our existing indebtedness.

After the completion of this offering, the Sponsors (as defined herein) will continue to own a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the New York Stock Exchange. See “Principal Stockholders.”

 

 

 

     Per
Share
   Total

Initial public offering price

   $                 $             

Underwriting discount

   $      $  

Proceeds to us, before expenses

   $      $  

 

 

We have granted the underwriters an option for a period of 30 days to purchase up to              additional shares of common stock on the same terms and conditions set forth above to cover over-allotments, if any.

Investing in our common stock involves a high degree of risk. See “Risk Factors ” beginning on page 14.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

The underwriters expect to deliver the shares of common stock on                     , 2010.

 

 

 

J.P. Morgan

  Morgan Stanley

  Credit Suisse

   Deutsche Bank Securities       Goldman, Sachs & Co.   Citi  

BofA Merrill Lynch

William Blair & Company

  Guggenheim Securities

RBS

  Wells Fargo Securities

 

Blaylock Robert Van, LLC   HSBC   Loop Capital Markets
Mizuho Securities USA Inc.   Ramirez & Co., Inc.   The Williams Capital Group, L.P.

 

 

                    , 2010


Table of Contents

LOGO


Table of Contents

TABLE OF CONTENTS

 

     Page

Prospectus Summary

   1

Risk Factors

   14

Cautionary Statement Regarding Forward-Looking Statements

   28

Use of Proceeds

   29

Dividend Policy

   30

Capitalization

   31

Dilution

   33

Selected Financial and Other Data

   35

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   37

Business

   84

Market and Industry Data

   95

Management

   96

Executive Compensation

   105

Principal Stockholders

   128

Certain Relationships and Related Party Transactions

   133

Description of Indebtedness

   137

Description of Capital Stock

   143

Shares Eligible for Future Sale

   152

Taxation

   154

Underwriting

   161

Legal Matters

   168

Experts

   168

Where You Can Find More Information

   169

Index to Consolidated Financial Statements

   F-1

 

 

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are not making an offer to sell nor seeking offers to buy these securities in any jurisdiction where an offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

Nielsen® and our logo are registered trademarks of ours. This prospectus includes other registered and unregistered trademarks of ours. Other products, services and company names mentioned in this prospectus are the service marks/trademarks of their respective owners.

 

 

Until                     , 2010 (25 days after the date of this prospectus), all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

 

i


Table of Contents

PROSPECTUS SUMMARY

This summary highlights significant aspects of our business and this offering, but it is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the section entitled “Risk Factors” and our audited consolidated financial statements, unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results discussed in the forward-looking statements as a result of certain factors, including those set forth in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

The terms “Company,” “Nielsen,” “we,” “our” or “us,” as used herein, refer to Nielsen Holdings B.V. and its affiliates prior to the Conversion (as defined below) and to Nielsen Holdings N.V. and its affiliates upon and after the Conversion, including, in each case, The Nielsen Company B.V., unless otherwise stated or indicated by context. The term “Nielsen Holdings,” as used herein, refers to Nielsen Holdings B.V. prior to the Conversion and to Nielsen Holdings N.V. after the Conversion, in each case, without including any of its affiliates, unless otherwise stated or indicated by context. The term “affiliates” means our direct and indirect subsidiaries and partnerships and joint ventures in which such subsidiaries are partners.

We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our 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 and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with U.S. generally accepted accounting principles (“GAAP”) nor should such amounts be considered in isolation.

Our Company

We are a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. We deliver critical media and marketing information, analytics and industry expertise about what consumers watch (consumer interaction with television, online and mobile) and what consumers buy on a global and local basis. Our information, insights and solutions help our clients maintain and strengthen their market positions and identify opportunities for profitable growth. We have a presence in approximately 100 countries, including many developing and emerging markets, and hold leading market positions in many of our services and geographies. Based on the strength of the Nielsen brand, our scale and the breadth and depth of our solutions, we believe we are the global leader in measuring and analyzing consumer behavior in the segments in which we operate.

We help our clients enhance their interactions with consumers and make critical business decisions that we believe positively affect our clients’ sales. Our data and analytics solutions, which have been developed through substantial investment over many decades, are deeply embedded into our clients’ workflow as demonstrated by our long-term client relationships, multi-year contracts and high contract renewal rates. The average length of relationship with our top ten clients, which include The Coca-Cola Company, NBC Universal, Nestle S.A., News Corp., The Procter & Gamble Company and the Unilever Group, is more than 30 years. Typically, before the start of each year, nearly 70% of our annual revenue has been committed under contracts in our combined Watch and Buy segments.

We align our business into three reporting segments, the principal two of which are What Consumers Watch (media audience measurement and analytics) and What Consumers Buy (consumer purchasing measurement and

 

 

1


Table of Contents

analytics). Our Watch and Buy segments, which together generated 96% of our revenues in 2009, are built on an extensive foundation of proprietary data assets designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses. The information from our Watch and Buy segments, when brought together, can deliver powerful insights into the effectiveness of advertising by linking media consumption trends with consumer purchasing data to better understand how media exposure drives purchase behavior. We believe these integrated insights will better enable our clients to enhance the return on investment of their advertising and marketing spending.

David Calhoun was appointed as our Chief Executive Officer in August 2006 following the purchase of our Company by a consortium of private equity firms on May 24, 2006. Mr. Calhoun and the management team have focused on building an open, simple and integrated operating model that drives innovation, delivers greater value to our clients and enhances the scalability of our global platform. We have made significant investments in expanding and optimizing our product portfolio and extending our technology platform to strengthen our analytics, measurement science and client delivery capabilities. We have also improved our operating efficiencies by streamlining our organizational structure and processes throughout the Company.

As a result of the May 2006 acquisition, we incurred a significant amount of indebtedness and have a net tangible book deficit ($8.4 billion and $8.8 billion, respectively, as of June 30, 2010). We also have generated net losses since that time ($489 million, $589 million and $354 million for the years ended December 31, 2009, 2008 and 2007, respectively). As a result of the initiatives made since the acquisition, certain of our financial performance metrics have improved significantly between the year ended December 31, 2006 and the year ended December 31, 2009:

 

   

Revenues increased to $4.8 billion, generating a compound annual growth rate of 6.2% on an as reported basis and 5.7% on a constant currency basis;

 

   

Adjusted EBITDA increased to $1.3 billion, generating a compound annual growth rate of 14.3% on an as reported basis and 13.9% on a constant currency basis; and

 

   

Adjusted EBITDA as a percentage of revenue increased to 27.3% from 21.9%.

See note 7 to “—Summary Financial and Other Data” for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.

Our Segments

Our Watch segment provides viewership data and analytics primarily to the media and advertising industries across television, online and mobile screens. According to ZenithOptimedia, a leading global media services agency, in 2008, total global spending on advertising across television, online and mobile platforms was at least $236 billion. Our Watch data is used by our media clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content, and by our advertising clients to plan and optimize their spending. Within our Watch segment, our ratings are the primary metrics used to determine the value of programming and advertising in the U.S. total television advertising marketplace, which was approximately $77 billion in 2008 according to a report by Veronis Suhler Stevenson. In addition to the United States, we measure television viewing in 29 countries. We also measure markets that account for approximately 80% of global internet users and offer mobile measurement services in 10 countries, including the United States, where we are the market leader. Watch represented 34% of our total revenues in 2009.

Our Buy segment provides retail transactional measurement data, consumer behavior information and analytics primarily to businesses in the consumer packaged goods industry. According to Euromonitor International, global consumer spending in the product categories we measure was over $7.1 trillion in 2008. Our

 

 

2


Table of Contents

extensive database of retail and consumer information, combined with our advanced analytical capabilities, helps generate strategic insights that influence our clients’ key business decisions. We track billions of sales transactions per month in retail outlets in approximately 100 countries around the world and our data is used by our clients to measure their sales and market share. We are the only company offering such extensive global coverage for the collection, provision and analysis of this information for consumer packaged goods. Our Buy products and services also enable our clients to better manage their brands, uncover new sources of demand, launch and grow new products, analyze their sales, improve their marketing mix and establish more effective consumer relationships. Buy represented 62% of our total revenues in 2009.

Our Expositions segment operates one of the largest portfolios of business-to-business trade shows in the United States. Each year, we produce approximately 40 trade shows, which in 2009 connected approximately 270,000 buyers and sellers across 20 industries. Expositions represented 4% of our total revenue in 2009.

The Nielsen Opportunity

We believe companies, including our clients, require an increasing amount of data and analytics to set strategy and direct operations. This has resulted in a large market for business information and insight which we believe will continue to grow. Our clients are media, advertising and consumer packaged goods companies in the large and growing markets described above. We believe that significant economic, technological, demographic and competitive trends facing consumers and our clients will provide a competitive advantage to our business and enable us to capture a greater share of our significant market opportunity.

Developing markets present significant expansion opportunities. Brand marketers are focused on attracting new consumers in developing countries as a result of the fast-paced population growth of the middle class in these regions. In addition, the retail trade in these markets is quickly evolving from small, local formats toward larger, more modern formats with electronic points of sale, a similar evolution to what occurred in developed markets over the last several decades. We provide established measurement methodologies to help give consumer packaged goods companies, retailers and media companies an accurate understanding of local consumers to allow them to harness growing consumer buying power in fast growing markets like Brazil, Russia, India and China.

The media landscape is dynamic and changing. Consumers are rapidly changing their media consumption patterns. The growing availability of the internet, and the proliferation of new formats and channels such as mobile devices, social networks and other forms of user-generated media have led to an increasingly fragmented consumer base that is more difficult to measure and analyze. In addition, simultaneous usage of more than one screen is becoming a regular aspect of daily consumer media consumption. We have effectively measured and tracked media consumption through numerous cycles in the industry’s evolution—from broadcast to cable, from analog to digital, from offline to online and from live to time-shifted. We believe our distinct ability to provide metrics across television, online and mobile platforms helps our clients better understand, adapt to and profit from the continued transformation of the global media landscape.

Increasing amounts of consumer information are leading to new marketing approaches. The advent of the internet and other digital platforms has created rapid growth in consumer data that is expected to intensify as more entertainment and commerce are delivered across these platforms. As a result, companies are looking for real-time access to more granular levels of data to understand growth opportunities more quickly and more precisely. This presents a significant opportunity for us to work with companies to effectively manage, integrate and analyze large amounts of information and extract meaningful insights that allow marketers to generate profitable growth.

Consumers are more connected, informed and in control. Today, more than three-quarters of the world’s homes have access to television, there are more than 1.8 billion internet users around the globe, and there are

 

 

3


Table of Contents

two-thirds as many mobile phones in the world as people. Advances in technology have given consumers a greater level of control of when, where and how they consume information and interact with media and brands. They can compare products and prices instantaneously and have new avenues to learn about, engage with and purchase products and services. These shifts in behavior create significant complexities for our clients. Our broad portfolio of information and insights enables our clients to engage consumers with more impact and efficiency, influence consumer purchasing decisions and actively participate in and shape conversations about their brands.

Demographic shifts and changes in spending behavior are altering the consumer landscape. Consumer demographics and related trends are constantly evolving globally, leading to changes in consumer preferences and the relative size and buying power of major consumer groups. Shifts in population size, age, racial composition, family size and relative wealth are causing marketers to continuously re-evaluate and reprioritize their consumer marketing strategies. We track and interpret consumer demographics that help enable our clients to engage more effectively with their existing consumers as well as forge new relationships with emerging segments of the population.

Consumers are looking for greater value. Economic and social trends have spurred consumers to seek greater value in what they buy as exemplified by the rising demand for “private label” (store branded) products. For instance, in the United States, the absolute dollar share for private label consumer packaged goods increased more than $10 billion over the last two years. This increased focus on value is causing manufacturers, retailers and media companies to re-evaluate brand positioning, pricing and loyalty. We believe companies will increasingly look to our broad range of consumer purchasing insights and analytics to more precisely and effectively measure consumer behavior and target their products and marketing offers at the right place and at the right price.

Our Competitive Advantages

Our key competitive advantages include:

Global Scale and Brand. For nearly 90 years, we have advanced the practice of market research and media audience measurement to provide our clients with a better understanding of their consumer. We provide a breadth of information and insights about the consumer in approximately 100 countries. We believe our global footprint, neutrality, credibility and leading market positions will continue to contribute to our long-term growth and strong operating margins as the number and role of multinational companies expands. Our scale is supported by our global brand, which is defined by the original Nielsen code created by our founder, Arthur C. Nielsen, Sr.: impartiality, thoroughness, accuracy, integrity, economy, price, delivery and service.

Strong, Diversified Client Relationships. Many of the world’s largest brands rely on us as their information and analytics provider to create value for their business. We maintain long-standing relationships across multiple industries, including consumer packaged goods, broadcast and cable television, advertising, online media, telecommunications, retail and automotive. We have more than 20,000 clients across our Watch and Buy segments, with no single client accounting for more than 4% of our total 2009 revenues. In addition, due to our growing presence in developing markets, we have cultivated strong relationships with local market leaders that can benefit from our services as they expand globally. The depth of our client relationships provides a foundation for recurring revenues as well as a platform for growth.

Enhanced Data Assets and Measurement Science. Our extensive portfolio of transactional and consumer behavioral data across our Watch and Buy segments enables us to provide critical information to our clients. Much of the information we provide is not available from any other source and would be difficult and costly for another party to replicate. For decades, we have employed advanced measurement methodologies that yield statistically accurate information about consumer behavior while having due regard for their privacy. We believe that our expertise, established standards and increasingly granular and comprehensive data assets provide us with a distinct advantage as we deliver more precise insights to our clients.

 

 

4


Table of Contents

Innovation. We have consistently focused on innovation to deepen our capabilities, expand in new and emerging forms of measurement, enhance our analytical offerings and capitalize on industry trends. We are continuously developing advanced delivery technologies that allow us to maximize the full suite of our data assets for our clients as evidenced by our new delivery platform, Nielsen Answers, which brings a broad portfolio of our data and information to a single client desktop.

Scalable Operating Model. Our global presence and operating model allow us to scale our services and solutions rapidly and efficiently. We have a long track record of establishing leading products that can be quickly expanded across clients, markets and geographies. Our global operations and technology organization enables us to achieve faster, higher quality outcomes for clients in a cost-efficient manner. Our flexible architecture allows us to incorporate leading third-party technologies as well as data from external sources, and enables our clients to use our technology and solutions on their own technology platforms.

Our Growth Strategy

We believe we are well-positioned for growth worldwide and have a multi-faceted strategy that builds upon our brand, strong client relationships and integral role in measuring and analyzing the global consumer.

Continue to grow in developing markets

Developing markets comprised approximately 17% of our 2009 revenues and represent a significant long-term opportunity for us given the growth of the middle class and the rapid evolution and modernization of the retail trade in these regions. Currently, the middle class is growing by 70 million people globally each year, with Brazil, Russia, India and China expected to contribute approximately half of all global consumption growth in 2010. Key elements of our strategy include:

 

   

Continuing to grow our existing services in local markets while simultaneously introducing into developing markets new services drawn from our global portfolio;

 

   

Partnering with existing clients as they expand their businesses into developing and emerging markets and providing the high-quality measurement and insights to which they are accustomed; and

 

   

Building relationships with local companies that are expanding beyond their home markets by capitalizing on the global credibility and integrity of the Nielsen brand.

Continue to develop innovative products and services

We intend to continue developing our product and service portfolio to provide our clients with comprehensive and advanced solutions. Key elements of our strategy include:

 

   

Further developing our analytics offerings across all facets of our client base to provide a more comprehensive offering and help our clients think through their most important challenges;

 

   

Continuing to grow our leadership in measurement and insight services related to each individual screen (TV, online and mobile) and expanding our three screen measurement services to help our media clients more effectively reach their target audiences and better understand the value of their content; and

 

   

Expanding our Advertiser Solutions offering, which integrates our proprietary data and analytics from both the Watch and Buy segments, by developing powerful tools to help clients better understand the effectiveness of advertising spending on consumer purchasing behavior.

 

 

5


Table of Contents

Continue to attract new clients and expand existing relationships

We believe that substantial opportunities exist to both attract new clients and to increase our revenue from existing clients. Building on our deep knowledge and the embedded position of our Watch and Buy segments, we expect to sell new and innovative solutions to our new and existing clients, increasing our importance to their decision making processes.

Continue to pursue acquisitions to complement our leadership positions

We have increased our capabilities and expanded our geographic footprint through acquisitions in the areas of online and mobile measurement, social networking, advanced analytics and advertising effectiveness. Going forward, we will consider select acquisitions of complementary businesses that enhance our product and geographic portfolio and can benefit from our scale, scope and status as a global leader.

Key Risks

An investment in our common stock involves substantial risks and uncertainties. Any of the factors set forth under “Risk Factors” may limit our ability to successfully execute our business strategy. Among these important risks are the following:

 

   

we may be unable to adapt to significant technological change which could adversely affect our business;

 

   

consolidation in the consumer packaged goods, media, entertainment, telecommunications and technology industries could put pressure on the pricing of our products and services, thereby leading to decreased earnings;

 

   

continued adverse market conditions, particularly in the consumer packaged goods, media, entertainment, telecommunications or technology industries in particular, could adversely impact our revenue; and

 

   

our substantial indebtedness could adversely affect our financial health and we and our subsidiaries may still be able to incur substantially more debt, which could further increase the risk associated with our substantial leverage.

 

 

Company Information

Nielsen Holdings B.V. is a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkeid), incorporated under the laws of the Netherlands on May 17, 2006. The Nielsen Company B.V. and its subsidiaries were purchased on May 24, 2006 through Nielsen Holdings (the “Acquisition”) by a consortium of private equity firms (AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co. and Thomas H. Lee Partners), who we collectively refer to in this prospectus as the “Original Sponsors.” Subsequently, Centerview Partners invested in the Company. Centerview Partners and the Original Sponsors are collectively referred to in this prospectus as the “Sponsors.” Investment funds associated with or designated by the Sponsors own shares of Nielsen Holdings indirectly through their holdings in Valcon Acquisition Holding (Luxembourg) S.à r.l., a private limited company incorporated under the laws of Luxembourg (“Luxco”). As of June 30, 2010, Luxco owned 433,194,313 shares (or approximately 95%) of our common stock. Upon the completion of this offering, it is anticipated Luxco will own approximately     % of our common stock. See “Principal Stockholders.” As a result, we will be a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange (the “NYSE”). See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock—We

 

 

6


Table of Contents

are a “controlled company” within the meaning of the NYSE rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.” Upon completion of this offering, we will pay a fee to the Sponsors in connection with the termination of certain advisory agreements. See “Certain Relationships and Related Party Transactions—Advisory Agreements.”

We are a holding company whose only material asset is 100% of the shares of Valcon Acquisition B.V., a Dutch private company with limited liability, which in turn is a holding company whose only material asset is 100% of the shares of The Nielsen Company B.V. We are owned and controlled by a group of investment funds associated with the Sponsors.

Prior to the completion of this offering, our stockholders will resolve (i) to convert Nielsen Holdings B.V. into a Dutch public company with limited liability (naamloze vennootschap) incorporated under the laws of the Netherlands, and change our name to Nielsen Holdings N.V. and (ii) to amend our articles of association. These actions are collectively referred to herein as the “Conversion.”

Our registered office is located at Diemerhof 2, 1112 XL Diemen, the Netherlands and it is registered at the Commercial Register for Amsterdam under file number 34248449. The phone number of Nielsen in the Netherlands is +31 20 398 8777. Our headquarters are located in New York, New York and the phone number is +1 (646) 654-5000. We maintain a website at www.nielsen.com where general information about our business is available. The information contained on, or accessible from, our website is not a part of this prospectus.

 

 

7


Table of Contents

The Offering

 

Common stock offered by us

             shares

 

Common stock to be outstanding after this offering

             shares (             shares if the underwriters exercise their option in full)

 

Use of Proceeds

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $1,661 million, assuming the shares are offered at $             per share, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus.

We intend to use the anticipated net proceeds as follows:

 

   

approximately $127 million of the net proceeds will be applied to repay approximately $127 million of senior secured term loans due 2013;

 

   

approximately $914 million of the net proceeds will be applied to redeem approximately $870 million in aggregate principal amount of our 10% Senior Notes due 2014;

 

   

approximately $195 million of the net proceeds will be applied to redeem approximately $163 million in aggregate principal amount (approximately $175 million face amount) of our 11.5% Senior Notes due 2016;

 

   

approximately $128 million of the net proceeds will be applied to redeem approximately $106 million in aggregate principal amount (approximately $115 million face amount) of our 11.625% Senior Notes due 2014;

 

   

approximately $194 million of the net proceeds will be applied to redeem approximately $186 million in aggregate principal amount of our 9% Senior Notes due 2014; and

 

   

approximately $103 million will be paid to the Sponsors as a fee in connection with the termination of certain advisory agreements in accordance with their terms, as described under “Certain Relationships and Related Party Transactions—Advisory Agreements.”

The redemptions of the 11.5% Senior Notes due 2016 and 11.625% Senior Notes due 2014 will be made pursuant to a provision of the applicable indenture that permits us to redeem up to 35% of the aggregate principal amount of such notes with the net cash proceeds of certain equity offerings. In each case, we will pay accrued and unpaid interest on the notes through the redemption date with cash generated from operations. To the extent that the underwriters exercise all or a portion of their option to purchase additional shares of our common stock, the net proceeds received will be used for further repayment of indebtedness in amounts and denominations to be determined at such time.

 

 

8


Table of Contents

Dividend policy

We do not intend to pay dividends on our common stock for the foreseeable future.

 

Risk Factors

You should carefully read and consider the information set forth under “Risk Factors” beginning on page 14 of this prospectus and all other information set forth in this prospectus before investing in our common stock.

 

Proposed NYSE ticker symbol

NLSN

Unless we indicate otherwise or the context otherwise requires, all information in this prospectus:

 

   

assumes (1) no exercise of the underwriters’ option to purchase additional shares of our common stock; and (2) an initial public offering price of $             per share, the midpoint of the initial public offering range indicated on the cover of this prospectus;

 

   

assumes the completion of the Conversion; and

 

   

does not reflect (1)              shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $             per share as of June 30, 2010, of which              were then exercisable; and (2)              shares of our common stock reserved for future grants under our 2006 Stock Acquisition and Option Plan for Key Employees (the “2006 Stock Acquisition and Option Plan”) and/or any new employee benefits plans that we may create prior to the completion of this offering.

 

 

9


Table of Contents

Summary Financial and Other Data

The following table sets forth our summary financial and other data as of the dates and for the periods indicated. The summary consolidated statement of operations and statement of cash flows data for the years ended December 31, 2009, 2008 and 2007 and summary consolidated balance sheet data as of December 31, 2009 have been derived from our audited consolidated financial statements and related notes appearing elsewhere in this prospectus.

The summary financial and other data as of June 30, 2010 and for the six months ended June 30, 2010 and 2009 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The unaudited financial data presented have been prepared on a basis consistent with our audited consolidated financial statements. In the opinion of management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods.

The results of operations for any period are not necessarily indicative of the results to be expected for any future period. The audited consolidated financial statements from which the historical financial information for the periods set forth below have been derived were prepared in accordance with GAAP. The summary financial and other data set forth below should be read in conjunction with, and are qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Financial and Other Data” and our audited consolidated financial statements, unaudited condensed consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.

 

     Six Months
Ended

June 30,
    Year Ended
December 31,
 

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

  2010     2009     2009     2008     2007  

Statement of Operations Data:

         

Revenues

  $ 2,466      $ 2,284      $ 4,808      $ 4,806      $ 4,458   
                                       

Cost of revenues, exclusive of depreciation and amortization shown separately below

    1,048        963        2,023        2,057        1,992   

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

    805        762        1,523        1,616        1,506   

Depreciation and amortization(1)

    277        266        557        499        451   

Impairment of goodwill and intangible assets(2)

    —          —          527        96        —     

Restructuring costs(3)

    22        9        62        118        133   
                                       

Operating income

  $ 314      $ 284      $ 116      $ 420      $ 376   
                                       

Interest expense, net

    (320 )       (311 )       (640     (684     (661

Other non-operating income/(expense), net(4)

    143        (13 )       (79     (7     (69
                                       

Income/(loss) from continuing operations before income taxes and equity in net (loss)/income of affiliates

    137        (40 )       (603     (271     (354

(Provision)/benefit for income taxes

    (12 )       25        197        (36     (12

Equity in net income/(loss) of affiliates

    —          8        (22     (7     2   
                                       

Income/(loss) from continuing operations

    125        (7 )       (428     (314     (364

(Loss)/income from discontinued operations, net of tax

    (8 )       —          (61     (275     10   
                                       

Net income/(loss)

    117        (7 )       (489     (589     (354

Net income attributable to noncontrolling interests

    1        1        2        —          —     
                                       

Net income/(loss) attributable to Nielsen stockholders

  $ 116      $ (8   $ (491   $ (589   $ (354
                                       

Income/(loss) from continuing operations per common share (diluted)

  $ 0.28      $ (0.02   $ (0.98   $ (0.87   $ (1.01

Net income/(loss) attributable to Nielsen stockholders per common share (diluted)

  $ 0.26      $ (0.02   $ (1.12   $ (1.63   $ (0.98

 

 

10


Table of Contents
      Six Months
Ended

June 30,
    Year Ended
December 31,
 

(IN MILLIONS)

   2010     2009    
2009
    2008     2007  

Statement of Cash Flows Data:

          

Net cash provided by operating activities

   $ 129      $ 151      $ 517      $ 317      $ 233   

Net cash used in investing activities

     (154     (143     (227     (591     (517

Net cash used in financing activities

     (97     (99     (271     367        9   

 

(IN MILLIONS)

   June 30,
2010
   December 31,
2009

Balance Sheet Data (at period end):

     

Cash and cash equivalents

   $ 371    $ 514

Goodwill and intangible assets(5)

     11,586      11,813

Total assets

     14,194      14,600

Total long-term debt and capital lease obligations, including current portions

     8,421      8,640

Total Nielsen stockholders’ equity

     2,796      2,798

 

      Six Months
Ended
June 30,
    Year Ended
December 31,
 

(IN MILLIONS)

   2010     2009     2009     2008     2007  

Other Financial Data:

          

Constant currency revenue growth(6)

     5.2     *        4.0     6.1     *   

Adjusted EBITDA(7)

   $ 638      $ 574      $ 1,312      $ 1,205      $ 1,081   

Capital expenditures

     (146     (132     (282     (370     (266

Cash paid for income taxes

     (64     (62     (139     (91     (99

 

(1) Depreciation and amortization expense included charges for the depreciation and amortization of acquired tangible and intangible assets of $116 million and $122 million for the six months ended June 30, 2010 and 2009, respectively, and $247 million, $245 million and $233 million for the years ended December 31, 2009, 2008 and 2007, respectively.

 

(2) Our results for the year ended December 31, 2009 included an aggregate goodwill impairment charge of $282 million and an aggregate customer-related intangible asset impairment charge of $245 million, which were recorded in the third quarter of 2009 relating to our Watch and Expositions segments. Our results for the year ended December 31, 2008 included a goodwill impairment charge of $96 million relating to our Watch segment. See Note 5 – Goodwill and Other Intangible Assets – to the audited consolidated financial statements included elsewhere in this prospectus for additional information.

 

(3) Represents costs incurred associated with major restructuring initiatives, including the Transformation Initiative and Other Productivity Initiatives discussed further in Note 8 – Restructuring Activities – to the audited consolidated financial statements included elsewhere in this prospectus.

 

(4)

Includes foreign currency exchange transaction gains of $146 million and $31 million for the six months ended June 30, 2010 and 2009, respectively, a loss of $2 million for the year ended December 31, 2009, a gain of $20 million for the year ended December 31, 2008 and a loss of $110 million for the year ended December 31, 2007. These gains and losses resulted primarily from the fluctuation in the value of the U.S. dollar against the Euro applied to certain of our Euro denominated senior secured term loans and debenture loans as well as fluctuations in certain currencies including the Euro and Canadian dollar associated with a portion of our intercompany loan portfolio. Also includes losses on derivative financial instruments, primarily comprised of interest and currency swap arrangements, of $12 million and $33 million for the six months ended June 30, 2010 and 2009, respectively, losses of $60 million and $15 million for the years ended December 31, 2009 and 2008, respectively, and gains of $40 million for the year ended December 31, 2007. In addition, includes other

 

 

11


Table of Contents
 

income, net of $9 million and other expense, net of $11 million for the six months ended June 30, 2010 and 2009, respectively, other expenses, net of $17 million and $12 million for the years ended December 31, 2009 and 2008, respectively, and other income, net of $1 million for the year ended December 31, 2007.

 

(5) Includes intangible assets subject to amortization of $2,704 million and $2,808 million as of June 30, 2010 and December 31, 2009, respectively.

 

(6) Constant currency revenue growth represents, for each period presented, the percentage growth in revenues from the prior year period removing the positive and negative impacts of changes in foreign currency exchange rates. No data has been presented for the six months ended June 30, 2009 or year ended December 31, 2007 as financial information for the comparable prior year period is not included herein. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

(7) We define Adjusted EBITDA as net income/(loss) attributable to Nielsen stockholders from our consolidated statements of operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, goodwill and intangible asset impairment charges, stock compensation expense and other non-operating items from our consolidated statements of operations as well as certain other items specifically described below.

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.

We believe that the presentation of Adjusted EBITDA provides useful information to management and 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. We also use Adjusted EBITDA to compare our results to those of our competitors and to consistently measure our performance from period to period.

Adjusted EBITDA should not be considered as an alternative to net income/(loss), operating income, 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.

 

 

12


Table of Contents

The below table presents a reconciliation from net income/(loss) attributable to Nielsen stockholders to Adjusted EBITDA for the periods presented elsewhere in this prospectus:

 

      Six Months
Ended
June 30,
    Year Ended
December 31,
 

(IN MILLIONS)

   2010     2009     2009     2008     2007  

Net income/(loss) attributable to Nielsen stockholders

   $ 116      $ (8   $ (491   $ (589   $ (354

Income attributable to noncontrolling interests

     1        1        2        —          —     
                                        

Net income/(loss)

     117        (7     (489     (589     (354

Loss/(gain) on discontinued operations, net

     8        —          61        275        (10

Equity in net loss/(income) of affiliates, net

     —          (8 )       22        7        (2

Provision/(benefit) for income taxes

     12        (25 )       (197     36        12   

Other non-operating (income)/expense, net

     (143     13        79        7        69   

Interest expense, net

     320        311        640        684        661   
                                        

Operating income

     314        284        116        420        376   

Specified transaction costs(a)

     —          —          —          —          37   

Restructuring costs

     22        9        62        118        133   

Impairment of goodwill and intangible assets

     —          —          527        96        —     

Depreciation and amortization

     277        266        557        499        451   

Stock compensation expense/(credits)

     9        (1 )       14        18        52   

Sponsor monitoring fees

     6        6        12        11        10   

Other items(b)

     10        10        24        43        22   
                                        

Adjusted EBITDA

   $ 638      $ 574      $ 1,312      $ 1,205      $ 1,081   
                                        

 

(a) For the year ended December 31, 2007, we recorded $37 million of charges associated with transaction costs, legal settlements and incremental expenses associated with compensation arrangements and recruiting costs for certain corporate executives.

 

(b) Other items include Transformation Initiative dual running costs of $2 million and $3 million for the six months ended June 30, 2010 and 2009, respectively, and $7 million, $15 million and $7 million for the years ended December 31, 2009, 2008 and 2007, respectively. Also includes consulting and other costs of $8 million and $7 million for the six months ended June 30, 2010 and 2009, respectively, and $17 million, $28 million and $15 million for the years ended December 31, 2009, 2008 and 2007, respectively, associated with information technology infrastructure transformation, fees associated with certain consulting arrangements and charges associated with a deferred compensation plan.

 

 

13


Table of Contents

RISK FACTORS

An investment in our common stock involves risk. You should carefully consider the following risks as well as the other information included in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before investing in our common stock. Any of the following risks could materially and adversely affect our business, financial condition or results of operations.

Risks Related to Our Business

We may be unable to adapt to significant technological change which could adversely affect our business.

We operate in businesses that require sophisticated data collection, processing systems, software and other technology. Some of the technologies supporting the industries we serve are changing rapidly. We will be required to adapt to changing technologies, either by developing and marketing new products and services or by enhancing our existing products and services, to meet client demand.

Moreover, the introduction of new products and services embodying new technologies and the emergence of new industry standards could render existing products and services obsolete. Our continued success will depend on our ability to adapt to changing technologies, manage and process ever-increasing amounts of data and information and improve the performance, features and reliability of our existing products and services in response to changing client and industry demands. We may experience difficulties that could delay or prevent the successful design, development, testing, introduction or marketing of our products and services. New products and services, or enhancements to existing products and services, may not adequately meet the requirements of current and prospective clients or achieve any degree of significant market acceptance.

Traditional methods of television viewing are changing as a result of fragmentation of channels and digital and other new television technologies, such as video-on-demand, digital video recorders and internet viewing. If we are unable to continue to successfully adapt our media measurement systems to new viewing habits, our business, financial position and results of operations could be adversely affected.

Consolidation in the consumer packaged goods, media, entertainment, telecommunications and technology industries could put pressure on the pricing of our products and services, thereby leading to decreased earnings.

Consolidation in the consumer packaged goods, media, entertainment, telecommunications and technology industries could reduce aggregate demand for our products and services in the future and could limit the amounts we earn for our products and services. When companies merge, the products and services they previously purchased separately are often purchased by the combined entity in the aggregate in a lesser quantity than before, leading to volume compression and loss of revenue. While we attempt to mitigate the revenue impact of any consolidation by expanding our range of products and services, there can be no assurance as to the degree to which we will be able to do so as industry consolidation continues, which could adversely affect our business, financial position and results of operations.

Client procurement strategies could put additional pressure on the pricing of our information products and services, thereby leading to decreased earnings.

Certain of our clients may continue to seek further price concessions from us. This puts pressure on the pricing of our information products and services, which could limit the amounts we earn. While we attempt to mitigate the revenue impact of any pricing pressure through effective negotiations and by providing services to individual businesses within particular groups, there can be no assurance as to the degree to which we will be able to do so, which could adversely affect our business, financial position and results of operations.

 

14


Table of Contents

Continued adverse market conditions, particularly in the consumer packaged goods, media, entertainment, telecommunications or technology industries in particular, could adversely impact our revenue.

As experienced in 2009, a number of adverse financial developments have impacted the U.S. and global financial markets. These developments include a significant economic deterioration both in the United States and globally, volatility and deterioration in the equity markets, and deterioration and tightening of liquidity in the credit markets. In addition, issues related to sovereign debt in Europe recently have negatively affected the global financial markets. The current economic environment has witnessed a significant reduction in consumer confidence and demand, impacting the demand for our customers’ products and services. Those reductions could adversely affect the ability of some of our customers to meet their current obligations to us and hinder their ability to incur new obligations until the economy and their businesses strengthen. The inability of our customers to pay us for our services and/or decisions by current or future customers to forego or defer purchases may adversely impact our business, financial condition, results of operations, profitability and cash flows and may continue to present risks for an extended period of time. We cannot predict the impact of economic slowdowns on our future financial performance.

We expect that revenues generated from our marketing information and television audience measurement services and related software and consulting services will continue to represent a substantial portion of our overall revenue for the foreseeable future. To the extent the businesses we service, especially our clients in the consumer packaged goods, media, entertainment, telecommunications and technology industries, are subject to the financial pressures of, for example, increased costs or reduced demand for their products, the demand for our services, or the prices our clients are willing to pay for those services, may decline.

Clients within our Watch segment derive a significant amount of their revenue from the sale or purchase of advertising. During challenging economic times, advertisers may reduce advertising expenditures and advertising agencies and other media may be less likely to purchase our media information services.

During challenging economic times, clients, typically advertisers, within our Buy segment may reduce their discretionary advertising expenditures and may be less likely to purchase our analytical services.

Our Expositions segment derives a significant amount of its revenues from business-to-business trade shows and events. As experienced in both 2008 and 2009, during challenging economic times exhibitors may cut back on attending our events which would have an adverse effect on our revenue.

We have suffered losses due to goodwill impairment charges and could do so again in the future.

Goodwill and indefinite-lived intangible assets are subject to annual review for impairment (or more frequently should indications of impairment arise). In addition, other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Economic volatility has negatively impacted our financial results and, as a direct result, we recorded goodwill impairment charges of $282 million and $96 million for the years ended December 31, 2009 and 2008 respectively (as well as $55 million and $336 million in 2009 and 2008, respectively, relating to discontinued operations) and $245 million of intangible asset impairment charges for the year ended December 31, 2009. Subsequent to the recognition of these impairment charges and as of June 30, 2010, we had goodwill and intangible assets of approximately $11.6 billion. Any further downward revisions in the fair value of our reporting units or our intangible assets could result in further impairment charges for goodwill and intangible assets that could materially affect our financial performance.

Our substantial indebtedness could adversely affect our financial health.

We have now and will continue to have a significant amount of indebtedness. As of June 30, 2010, we had total indebtedness of $8,421 million, excluding bank overdrafts. Furthermore, the interest payments on our indebtedness could reduce the availability of our cash flow.

 

15


Table of Contents

Our substantial indebtedness could have important consequences. For example, it could:

 

   

increase our vulnerability to the current general adverse economic and industry conditions;

 

   

require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, product development efforts and other general corporate purposes;

 

   

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

   

expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;

 

   

restrict us from making strategic acquisitions or causing us to make non-strategic divestitures;

 

   

limit our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes;

 

   

limit our ability to adjust to changing market conditions; and

 

   

place us at a competitive disadvantage compared to our competitors that have less debt.

In addition, the indentures governing our outstanding notes and our credit facilities contain financial and other restrictive covenants that will limit the ability of our operating subsidiaries to engage in activities that may be in our best interests in the long term. The failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further increase the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify.

To service our indebtedness, we will require a significant amount of cash as well as continued access to the capital markets. Our ability to generate cash and our access to the capital markets depend on many factors beyond our control.

Our ability to make payments on our indebtedness and to fund planned capital expenditures and product development efforts will depend on our ability to generate cash in the future and our ability to refinance our indebtedness. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We may not be able to generate sufficient cash flow from operations to pay our indebtedness or to fund our other liquidity needs. Our cash interest expense for the years ended December 31, 2009, 2008 and 2007 was $495 million, $494 million and $533 million, respectively, and $249 million and $231 million for the six-month periods ended June 30, 2010 and 2009, respectively. At June 30, 2010, we had $4,563 million of floating-rate debt under our 2006 Senior Secured Credit Facilities and our existing floating rate notes. A one percent increase in our floating rate indebtedness would increase annual interest expense by approximately $46 million. We may need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any of our indebtedness, including our senior secured credit facilities, on commercially reasonable terms or at all.

The success of our business depends on our ability to recruit sample participants to participate in our research samples.

Our business uses scanners and diaries to gather consumer data from sample households as well as Set Meters, People Meters, Active/Passive Meters and diaries to gather television audience measurement data from

 

16


Table of Contents

sample households. It is increasingly difficult and costly to obtain consent from households to participate in the surveys. In addition, it is increasingly difficult and costly to ensure that the selected sample of households mirrors the behaviors and characteristics of the entire population and covers all of the demographic segments requested by our clients. Additionally, as consumers adopt modes of telecommunication other than traditional telephone service, such as mobile, cable and internet calling, it may become more difficult for our services to reach and recruit participants for consumer purchasing and audience measurement services. If we are unsuccessful in our efforts to recruit appropriate participants and maintain adequate participation levels, our clients may lose confidence in our ratings services and we could lose the support of the relevant industry groups. If this were to happen, our consumer purchasing and audience measurement services may be materially and adversely affected.

Data protection laws may restrict our activities and increase our costs.

Various statutes and rules regulate conduct in areas such as privacy and data protection which may affect our collection, use, storage and transfer of personally identifiable information both abroad and in the United States. Compliance with these laws may require us to make certain investments or may dictate that we not offer certain types of products and services or only offer such services or products after making necessary modifications. Failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity, data being blocked from use and liability under contractual warranties. In addition, there is an increasing public concern regarding data and consumer protection issues, and the number of jurisdictions with data protection laws has been slowly increasing. There is also the possibility that the scope of existing privacy laws may be expanded. For example, several countries including the United States have regulations that restrict telemarketing to individuals who request to be included on a do-not-call list. Typically, these regulations target sales activity and do not apply to survey research. If the laws were extended to include survey research, our ability to recruit research participants could be adversely affected. These or future initiatives may adversely affect our ability to generate or assemble data or to develop or market current or future products or services, which could negatively impact our business.

If we are unable to protect our intellectual property rights, our business could be adversely affected.

The success of our business will depend, in part, on:

 

   

obtaining patent protection for our technology, products and services;

 

   

defending our patents, copyrights, trademarks, service marks and other intellectual property;

 

   

preserving our trade secrets and maintaining the security of our know-how and data; and

 

   

operating our business without infringing upon intellectual property rights held by third parties.

We rely on a combination of contractual provisions, confidentiality procedures and the patent, copyright, trademark and trade secret laws of the United States and other countries to protect our intellectual property. These legal measures afford only limited protection and may not provide sufficient protection to prevent the infringement, misuse or misappropriation of our intellectual property. Intellectual property law in several foreign jurisdictions is subject to considerable uncertainty. There can be no assurances that the protections we have available for our proprietary technology in the United States and other countries will be available to us in all of the places we sell our products and services. Any infringement or misappropriation of our technology can have a negative impact on our business. The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with meaningful protection or commercial advantage. The expiration of our patents may lead to increased competition. Although our employees, consultants, clients and collaborators enter into confidentiality agreements with us, our trade secrets, data and know-how could be subject to unauthorized use, misappropriation or unauthorized disclosure. The growing need for global data, along with increased competition and technological advances, puts increasing pressure on us to share our intellectual property for client applications with others, which could result in infringement. Competitors

 

17


Table of Contents

may gain access to our intellectual property and proprietary information. Our trademarks could be challenged, which could force us to rebrand our products or services, result in a loss of brand recognition and require us to devote resources to advertising and marketing new brands. Furthermore, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of our proprietary rights. Given the importance of our intellectual property, we will enforce our rights whenever it is necessary and prudent to do so. Any future litigation, regardless of the outcome, could result in substantial expense and diversion of time and attention of management, may not be resolved in our favor and could adversely affect our business.

If third parties claim that we infringe upon their intellectual property rights, our operating profits could be adversely affected.

We cannot be certain that we do not and will not infringe the intellectual property rights of others in operating our business. We may be subject to legal proceedings and claims in the ordinary course of our business, including claims that we have infringed third parties’ intellectual property rights. Any such claims of intellectual property infringement, even those without merit, could:

 

   

be expensive and time-consuming to defend;

 

   

result in our being required to pay possibly significant damages;

 

   

cause us to cease providing our products and services that incorporate the challenged intellectual property;

 

   

require us to redesign or rebrand our products or services;

 

   

divert management’s attention and resources; or

 

   

require us to enter into potentially costly royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property, although royalty or licensing agreements may not be available to us on acceptable terms or at all.

Any of the above could have a negative impact on our operating profits and harm our future prospects and financial condition.

We generate revenues throughout the world which are subject to exchange rate fluctuations, and our revenue and net income may suffer due to currency translations.

We operate globally, deriving approximately 47% of revenues for the year ended December 31, 2009 in currencies other than U.S. dollars. Our U.S. operations earn revenue and incur expenses primarily in U.S. dollars, while our European operations earn revenue and incur expenses primarily in Euros, which have recently been subject to significant volatility. Outside the United States and the European Union, we generate revenue and expenses predominantly in local currencies. Because of fluctuations (including possible devaluations) in currency exchange rates, we are subject to currency translation exposure on the profits of our operations, in addition to economic exposure. In certain instances, we may not be able to freely convert foreign currencies into U.S. dollars due to limitations placed on such conversions. Certain of the countries in which we operate, such as Venezuela, have currencies which are considered to be hyperinflationary. This risk could have a material adverse effect on our business, results of operations and financial condition.

Our international operations are exposed to risks which could impede growth in the future.

We continue to explore opportunities in major international markets around the world, including China, Russia, India and Brazil. International operations expose us to various additional risks, which could adversely affect our business, including:

 

   

costs of customizing services for clients outside of the United States;

 

18


Table of Contents
   

reduced protection for intellectual property rights in some countries;

 

   

the burdens of complying with a wide variety of foreign laws;

 

   

difficulties in managing international operations;

 

   

longer sales and payment cycles;

 

   

exposure to foreign currency exchange rate fluctuation;

 

   

exposure to local economic conditions;

 

   

exposure to local political conditions, including adverse tax policies, civil unrest and seizure of assets by a foreign government; and

 

   

the risks of an outbreak of war, the escalation of hostilities and acts of terrorism in the jurisdictions in which we operate.

In countries where there has not been a historical practice of using consumer packaged goods retail information or audience measurement information in the buying and selling of advertising time, it may be difficult for us to maintain subscribers.

Criticism of our audience measurement service by various industry groups and market segments could adversely affect our business.

Due to the high-profile nature of our services in the media, internet and entertainment information industries, we could become the target of criticism by various industry groups and market segments. We strive to be fair, transparent and impartial in the production of audience measurement services, and the quality of our U.S. ratings services are voluntarily reviewed and accredited by the Media Rating Council, a voluntary trade organization, whose members include many of our key client constituencies. However, criticism of our business by special interests, and by clients with competing and often conflicting demands on our measurement service, could result in government regulation. While we believe that government regulation is unnecessary, no assurance can be given that legislation will not be enacted in the future that would subject our business to regulation, which could adversely affect our business.

A loss of one of our largest clients could adversely impact our results of operations.

Our top ten clients accounted for approximately 23% of our total revenues for the year ended December 31, 2009. We cannot assure you that any of our clients will continue to use our services to the same extent, or at all, in the future. A loss of one or more of our largest clients, if not replaced by a new client or an increase in business from existing clients, would adversely affect our prospects, business, financial condition and results of operations.

We rely on third parties to provide certain data and services in connection with the provision of our current services.

We rely on third parties to provide certain data and services for use in connection with the provision of our current services. For example, our Buy segment enters into agreements with third parties (primarily retailers of fast-moving consumer goods) to obtain the raw data on retail product sales it processes and edits and from which it creates products and services. These suppliers of data may increase restrictions on our use of such data, fail to adhere to our quality control standards, increase the price they charge us for this data or refuse altogether to license the data to us. In addition, we may need to enter into agreements with third parties to assist with the marketing, technical and financial aspects of expanding our services for other types of media. In the event we are unable to use such third party data and services or if we are unable to enter into agreements with third parties, when necessary, our business and/or our potential growth could be adversely affected. In the event that such data and services are unavailable for our use or the cost of acquiring such data and services increases, our business could be adversely affected.

 

19


Table of Contents

We rely on a third party for the performance of a significant portion of our worldwide information technology and operations functions, various services and assistance in certain integration projects. A failure to provide these functions, services or assistance in a satisfactory manner could have an adverse effect on our business.

Pursuant to the terms of a ten year agreement, effective February 19, 2008, we are dependent upon Tata America International Corporation and Tata Consultancy Services Limited (collectively, “TCS”) for the performance of a significant portion of our information technology and operations functions worldwide, the provision of a broad suite of information technology and business process services, including general and process consulting, product engineering, program management, application development and maintenance, coding, data management, finance and accounting services and human resource services, as well as assistance in integrating and centralizing multiple systems, technologies and processes on a global scale. The success of our business depends in part on maintaining our relationships with TCS and their continuing ability to perform these functions and services in a timely and satisfactory manner. If we experience a loss or disruption in the provision of any of these functions or services, or they are not performed in a satisfactory manner, we may have difficulty in finding alternate providers on terms favorable to us, or at all, and our business could be adversely affected.

Long term disruptions in the mail, telecommunication infrastructure and/or air service could adversely affect our business.

Our business is dependent on the use of the mail, telecommunication infrastructure and air service. Long term disruptions in one or more of these services, which could be caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism could adversely affect our business, results of operations and financial condition.

Hardware and software failures, delays in the operation of our computer and communications systems or the failure to implement system enhancements may harm our business.

Our success depends on the efficient and uninterrupted operation of our computer and communications systems. A failure of our network or data gathering procedures could impede the processing of data, delivery of databases and services, client orders and day-to-day management of our business and could result in the corruption or loss of data. While many of our services have appropriate disaster recovery plans in place, we currently do not have full backup facilities everywhere in the world to provide redundant network capacity in the event of a system failure. Despite any precautions we may take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at our various computer facilities could result in interruptions in the flow of data to our servers and from our servers to our clients. In addition, any failure by our computer environment to provide our required data communications capacity could result in interruptions in our service. In the event of a delay in the delivery of data, we could be required to transfer our data collection operations to an alternative provider of server hosting services. Such a transfer could result in significant delays in our ability to deliver our products and services to our clients and could be costly to implement. Additionally, significant delays in the planned delivery of system enhancements and improvements, or inadequate performance of the systems once they are completed, could damage our reputation and harm our business. Finally, long-term disruptions in infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, civil unrest and/or acts of terrorism (particularly involving cities in which we have offices) could adversely affect our services. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.

The presence of our Global Technology and Information Center in Florida heightens our exposure to hurricanes and tropical storms, which could disrupt our business.

The technological data processing functions for certain of our U.S. operations are concentrated at our Global Technology and Information Center (“GTIC”) at a single location in Florida. Our geographic concentration in

 

20


Table of Contents

Florida heightens our exposure to a hurricane or tropical storm. These weather events could cause severe damage to our property and technology and could cause major disruptions to our operations. Although our GTIC was built in anticipation of severe weather events and we have insurance coverage, if we were to experience a catastrophic loss, we may exceed our policy limits and/or we may have difficulty obtaining similar insurance coverage in the future. As such, a hurricane or tropical storm could have an adverse effect on our business.

Our services involve the storage and transmission of proprietary information. If our security measures are breached and unauthorized access is obtained, our services may be perceived as not being secure and panelists and survey respondents may hold us liable for disclosure of personal data, and clients and venture partners may hold us liable or reduce their use of our services.

We store and transmit large volumes of proprietary information and data that contains personally identifiable information about individuals. Security breaches could expose us to a risk of loss of this information, litigation and possible liability and our reputation could be damaged. For example, hackers or individuals who attempt to breach our network security could, if successful, misappropriate proprietary information or cause interruptions in our services. If we experience any breaches of our network security or sabotage, we might be required to expend significant capital and resources to protect against or to alleviate problems. We may not be able to remedy any problems caused by hackers or saboteurs in a timely manner, or at all. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target and, as a result, we may be unable to anticipate these techniques or to implement adequate preventive measures. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose current and potential clients.

If we are unable to attract, retain and motivate employees, we may not be able to compete effectively and will not be able to expand our business.

Our success and ability to grow are dependent, in part, on our ability to hire, retain and motivate sufficient numbers of talented people, with the increasingly diverse skills needed to serve clients and expand our business, in many locations around the world. Competition for highly qualified, specialized technical and managerial, and particularly consulting personnel is intense. Recruiting, training and retention costs and benefits place significant demands on our resources. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have an adverse effect on us, including our ability to obtain and successfully complete important client engagements and thus maintain or increase our revenues.

Changes in tax laws may adversely affect our reported results.

Changes in tax laws, regulations, related interpretations and tax accounting standards in the United States, the Netherlands and other countries in which we operate may adversely affect our financial results. For example, recent legislative proposals to reform U.S. taxation of non-U.S. earnings could have a material adverse effect on our financial results by subjecting a significant portion of our non-U.S. earnings to incremental U.S. taxation and/or by delaying or permanently deferring certain deductions otherwise allowed in calculating our U.S. tax liabilities. In addition, governments are increasingly considering tax law changes as a means to cover budgetary shortfalls resulting from the current economic environment.

We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.

We are faced with a number of competitors in the markets in which we operate. Some of our competitors in each market may have substantially greater financial marketing and other resources than we do and may in the future engage in aggressive pricing action to compete with us. Although we believe we are currently able to compete effectively in each of the various markets in which we participate, we may not be able to do so in the

 

21


Table of Contents

future or be capable of maintaining or further increasing our current market share. Our failure to compete successfully in our various markets could adversely affect our business, financial condition, results of operations and cash flow.

We may be subject to antitrust litigation or government investigation in the future, which may result in an award of money damages or force us to change the way we do business.

In the past, certain of our business practices have been investigated by government antitrust or competition agencies, and we have on several occasions been sued by private parties for alleged violations of the antitrust and competition laws of various jurisdictions. Following some of these actions, we have changed certain of our business practices to reduce the likelihood of future litigation. Although each of these material prior legal actions have been resolved, there is a risk based upon the leading position of certain of our business operations that we could, in the future, be the target of investigations by government entities or actions by private parties challenging the legality of our business practices. Also, in markets where the retail trade is concentrated, regulatory authorities may perceive certain of our retail services as potential vehicles for collusive behavior by retailers or manufacturers. There can be no assurance that any such investigation or challenge will not result in an award of money damages, penalties or some form of order that might require a change in the way that we do business, any of which could adversely affect our revenue stream and/or profitability.

The use of joint ventures, over which we do not have full control, could prevent us from achieving our objectives.

We have conducted and will continue to conduct a number of business initiatives through joint ventures, some of which are or may be controlled by others. Our joint venture partners might have economic or business objectives that are inconsistent with our objectives. Our joint venture partners could go bankrupt, leaving us liable for their share of joint venture liabilities. Although we generally will seek to maintain sufficient control of any joint venture to permit our objectives to be achieved, we might not be able to take action without the approval of our joint venture partners. Also, our joint venture partners could take appropriate actions binding on the joint venture without our consent. In addition, the terms of our joint venture agreements may limit our business opportunities. Accordingly, the use of joint ventures could prevent us from achieving our intended objectives.

Risks Related to this Offering and Ownership of Our Common Stock

There is no existing market for our common stock and an active, liquid trading market may not develop.

Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the NYSE or otherwise or how active and liquid that market may become. If an active and liquid trading market does not develop, you may have difficulty selling any of our common stock that you purchase. The initial public offering price for the shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering. The market price of our common stock may decline below the initial offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all.

You will incur immediate and substantial dilution in the net tangible book value of the shares you purchase in this offering.

Prior investors have paid substantially less per share of our common stock than the price in this offering. The initial public offering price of our common stock is substantially higher than the net tangible book value per share of outstanding common stock prior to completion of the offering. Based on our net tangible book deficit as of June 30, 2010 and upon the issuance and sale of                      shares of common stock by us at an assumed initial public offering price of $             per share (the midpoint of the initial public offering price range indicated on the cover of this prospectus), if you purchase our common stock in this offering, you will pay more for your

 

22


Table of Contents

shares than the amounts paid by our existing stockholders for their shares and you will suffer immediate dilution of approximately $             per share in net tangible book value. We also have a large number of outstanding stock options to purchase common stock with exercise prices that are below the estimated initial public offering price of our common stock. To the extent that these options are exercised, you will experience further dilution.

Our stock price may change significantly following the offering, and you could lose all or part of your investment as a result.

The trading price of our common stock is likely to be highly volatile and could fluctuate due to a number of factors such as those listed in “—Risks Related to Our Business” and the following, some of which are beyond our control:

 

   

quarterly variations in our results of operations;

 

   

results of operations that vary from the expectations of securities analysts and investors;

 

   

results of operations that vary from those of our competitors;

 

   

changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

 

   

announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;

 

   

announcements by third parties of significant claims or proceedings against us;

 

   

future sales and anticipated future sales of our common stock; and

 

   

general domestic and international economic conditions.

Furthermore, the stock market has experienced extreme volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

Certain stockholders’ shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly.

After the completion of this offering, we will have              million shares of common stock outstanding (             million shares if the underwriters exercise their option to purchase additional shares in full). This number includes              million shares sold in this offering, which may be resold immediately in the public market.

We, our directors and executive officers and certain holders of our outstanding common stock and options to purchase our common stock, including the Sponsors, have agreed not to offer or sell, dispose of or hedge, directly or indirectly, any common stock without the permission of J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated for a period of 180 days from the date of this prospectus, subject to certain exceptions and automatic extension in certain circumstances. In addition, pursuant to the shareholders’ agreement, we will grant to the Sponsors the right to cause us, in certain instances, at our expense, to file registration statements under the Securities Act covering resales of our common stock held by them. These shares will represent approximately             % of our outstanding common stock after this offering, or             % if the underwriters exercise their option to purchase additional shares in full. These shares also may be sold pursuant to Rule 144 under the Securities Act, depending on their holding period and subject to restrictions in the

 

23


Table of Contents

case of shares held by persons deemed to be our affiliates. As restrictions on resale end or if these stockholders exercise their registration rights, the market price of our stock could decline if the holders of restricted shares sell them or are perceived by the market as intending to sell them. See “Certain Relationships and Related Party Transactions—Shareholders’ Agreement.”

As of                     , 2010,                     shares of our common stock were outstanding,                      shares were issuable upon the exercise of outstanding vested stock options under our stock incentive plans,                      shares were subject to outstanding unvested stock options and restricted stock grants under our stock incentive plans, and                      shares were reserved for future grant under our 2006 Stock Acquisition and Option Plan and/or any new employee benefits plans that we may create prior to this offering. Shares acquired upon the exercise of vested options under our stock incentive plan will first become eligible for resale                      days after the date of this prospectus. Sales of a substantial number of shares of our common stock following the vesting of outstanding stock options could cause the market price of our common stock to decline.

The availability of shares for sale in the future could reduce the market price of our common stock.

In the future, we may issue securities to raise cash for acquisitions. We may also acquire interests in other companies by using a combination of cash and our common stock or just our common stock. We may also issue securities convertible into our common stock. Any of these events may dilute your ownership interest in our company and have an adverse effect on the price of our common stock.

In addition, sales of a substantial amount of our common stock in the public market, or the perception that these sales may occur, could reduce the market price of our common stock. This could also impair our ability to raise additional capital through the sale of our securities.

Because we do not currently intend to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We currently intend to retain future earnings, if any, for future operation, expansion and debt repayment and do not intend to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future to the holders of our common stock will be made at the discretion of our board of directors, and the recommendation of the board will depend on, among other things, our results of operations, financial condition, cash requirements, contractual and legal restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our senior secured credit facilities and the indentures governing our notes. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it. Any dividend actually declared and paid may also be subject to a Dutch withholding tax, currently at a rate of 15 percent.

The Sponsors will continue to have significant influence over us after this offering, including control over decisions that require the approval of stockholders. This interest may conflict with yours and such influence could limit your ability to influence the outcome of key transactions, including a change of control.

We are controlled, and after this offering is completed will continue to be controlled, by the Sponsors. The Sponsors will indirectly own through their investment in Valcon Acquisition Holding (Luxembourg) S.à r.l. approximately             % of our common stock (or             % if the underwriters exercise their option to purchase additional shares in full) after the completion of this offering. In addition, prior to the completion of this offering, representatives of the Sponsors will have been appointed to our board of directors such that they occupy a majority of the seats on our board of directors. As a result, the Sponsors will have control over the board and thus our decisions to enter into any corporate transaction and the ability to prevent any transaction that requires stockholder approval regardless of whether others believe that the transaction is in our best interests. So long as

 

24


Table of Contents

the Sponsors continue to indirectly hold a majority of our outstanding common stock, they will have the ability to control the vote in any election of directors. See “Certain Relationships and Related Party Transactions” and “Principal Stockholders.”

The Sponsors are also in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. The Sponsors may also pursue acquisition opportunities that are complementary to our business and, as a result, those acquisition opportunities may not be available to us. So long as the Sponsors, or other funds controlled by or associated with the Sponsors, continue to indirectly own a significant amount of our outstanding common stock, even if such amount is less than 50%, the Sponsors will continue to be able to strongly influence or effectively control our decisions. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

We are a “controlled company” within the meaning of the NYSE rules and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

After completion of this offering, the Sponsors will continue to control a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

   

the requirement that a majority of the board of directors consist of independent directors;

 

   

the requirement that we have a nomination/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

   

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement for an annual performance evaluation of the nomination/corporate governance and compensation committees.

Following this offering, we intend to utilize each of these exemptions. As a result, we will not have a majority of independent directors, our nomination and corporate governance committee and compensation committee will not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

United States civil liabilities may not be enforceable against us.

We are incorporated under the laws of the Netherlands and substantial portions of our assets are located outside of the United States. As a result, it may be difficult for investors to effect service of process within the United States upon us or such other persons residing outside the United States, or to enforce outside the United States judgments obtained against such persons in U.S. courts in any action, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. federal securities laws.

There is no treaty between the United States and the Netherlands for the mutual recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be enforceable in the

 

25


Table of Contents

Netherlands unless the underlying claim is re-litigated before a Dutch court. Under current practice however, a Dutch court will generally grant the same judgment without a review of the merits of the underlying claim if (i) that judgment resulted from legal proceedings compatible with Dutch notions of due process, (ii) that judgment does not contravene public policy of the Netherlands and (iii) the jurisdiction of the United States federal or state court has been based on internationally accepted principles of private international law.

Based on the foregoing, it may not be possible for U.S. investors to enforce against us any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.

Dutch courts may refuse to enforce contracts governed by foreign law or which require performance in a foreign jurisdiction if such other laws do not comply with certain mandatory rules under Dutch law. Under the rules of Dutch private international law (and those of the EC Regulation on the Law Applicable to Contractual Obligations (Rome I) of June 17, 2008, or the “Rome I Regulation”), in applying the laws of another jurisdiction, the Dutch courts may (i) give effect to certain mandatory rules under Dutch law irrespective of the law otherwise applicable thereto, (ii) give effect to certain mandatory rules of the law of the country where any of the obligations arising out of an agreement have to be or have been performed, insofar as those rules render the performance of the agreement unlawful and (iii) refuse the application of a term or condition of an agreement or a rule of foreign law applicable thereto under the Rome I Regulation, if that application is manifestly incompatible with Dutch public policy. Furthermore, Dutch courts, when considering the manner of performance and the steps to be taken in the event of defective performance in respect of an agreement, will consider the law of the country in which performance takes place. In addition, there is doubt as to whether a Dutch court would impose civil liability on us in an original action predicated solely upon the U.S. federal securities or other laws brought in a court of competent jurisdiction in the Netherlands against us.

After the Conversion, we will be a Dutch public company with limited liability, which may grant different rights to our stockholders than the rights granted to stockholders of companies organized in the United States.

The rights of our stockholders may be different from the rights of stockholders governed by the laws of U.S. jurisdictions. After the Conversion, we will be a Dutch public company with limited liability (naamloze vennootschap). Our corporate affairs are governed by our articles of association and by the laws governing companies incorporated in the Netherlands. The rights of stockholders and the responsibilities of members of our board of directors may be different from the rights and obligations of stockholders in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of directors is required by Dutch law to consider the interests of our company, its stockholders, its employees and other stakeholders, in all cases with due observation of the principles of reasonableness and fairness. It is possible that some of these parties will have interests that are different from, or in addition to, your interests as a stockholder. See “Description of Capital Stock—Corporate Governance.”

In addition, the rights of holders of common stock are governed by Dutch law and our articles of association and differ from the rights of stockholders under U.S. law. Although stockholders will have the right to approve mergers and consolidations, Dutch law does not grant appraisal rights to the company’s stockholders who wish to challenge the consideration to be paid upon a merger or consolidation of the company. Also, generally only a company can bring a civil action against a third party against whom such company alleges wrongdoing, including the directors and officers of such company. A stockholder will have an individual right of action against such a third party only if the tortious act also constitutes a tortious act directly against such stockholder. The Dutch Civil Code provides for the possibility to initiate such actions collectively. A foundation or an association whose objective is to protect the rights of a group of persons having similar interests may institute a collective action. The collective action cannot result in an order for payment of monetary damages but may result in a declaratory judgment. The foundation or association and the defendant are permitted to reach (often on the basis of such declaratory judgment) a settlement which provides for monetary compensation for damages. The Dutch Enterprise Chamber may declare the settlement agreement binding upon all the injured parties with an opt-out

 

26


Table of Contents

choice for an individual injured party. An individual injured party, within the period set by the Dutch Enterprise Chamber, may also individually institute a civil claim for damages if such injured party is not bound by a collective agreement. See “Description of Capital Stock”.

The non-executive directors supervise the executive directors and our general affairs and provide general advice to the executive directors. Each director owes a duty to the company to properly perform the duties assigned to him and to act in the corporate interest of the company. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as stockholders, creditors, employees, customers and suppliers. Any board resolution regarding a significant change in the identity or character of the company requires stockholders’ approval.

The provisions of Dutch corporate law and our articles of association have the effect of concentrating control over certain corporate decisions and transactions in the hands of our board. As a result, holders of our shares may have more difficulty in protecting their interests in the face of actions by members of the board of directors than if we were incorporated in the United States.

Our articles of association and Dutch corporate law contain provisions that may discourage a takeover attempt.

Provisions contained in our articles of association and the laws of the Netherlands could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders. Provisions of our articles of association impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions.

For example, our shares and rights to subscribe for our shares may only be issued pursuant to (i) a resolution of the general meeting of stockholders at the proposal of the board of directors or (ii) a resolution of the board of directors, if by a resolution of the general meeting the board of directors has been authorized thereto for a specific period not exceeding five years. Following the Conversion, the board of directors will be empowered for a period of five years to issue cumulative preferred shares and shares of common stock.

Further, our amended articles of association will empower our board of directors to restrict or exclude pre-emptive rights on shares for a period of five years. Accordingly, an issue of new shares to a third party may make it more difficult for others to obtain control over the general meeting of stockholders.

Dutch insolvency laws to which we are subject may not be as favorable to you as U.S. or other insolvency laws.

As a company incorporated under the laws of the Netherlands with its registered offices in the Netherlands, subject to applicable EU insolvency regulations, any insolvency proceedings in relation to us may be based on Dutch insolvency law. Dutch insolvency proceedings differ significantly from insolvency proceedings in the United States and may make it more difficult for stockholders to recover the amount they may normally expect to recover in a liquidation or bankruptcy proceeding in the United States.

 

27


Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” within the meaning of the federal securities laws, including certain of the statements under “Prospectus Summary,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, that could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to:

 

   

the timing and scope of technological advances;

 

   

consolidation in our customers’ industries may reduce the aggregate demand for our services;

 

   

customer procurement strategies that could put additional pricing pressure on us;

 

   

general economic conditions, including the effects of the current economic environment on advertising spending levels, the costs of, and demand for, consumer packaged goods, media, entertainment and technology products and any interest rate or exchange rate fluctuations;

 

   

our substantial indebtedness;

 

   

certain covenants in our debt documents and our ability to comply with such covenants;

 

   

regulatory review by governmental agencies that oversee information gathering and changes in data protection laws;

 

   

the ability to maintain the confidentiality of our proprietary information gathering processes and intellectual property;

 

   

intellectual property infringement claims by third parties;

 

   

risks to which our international operations are exposed, including local political and economic conditions, the effects of foreign currency fluctuations and the ability to comply with local laws;

 

   

criticism of our audience measurement services;

 

   

the ability to attract and retain customers and key personnel;

 

   

the effect of disruptions to our information processing systems;

 

   

the effect of disruptions in the mail, telecommunication infrastructure and/or air services;

 

   

the impact of tax planning initiatives and resolution of audits of prior tax years;

 

   

future litigation or government investigations;

 

   

the possibility that the Sponsors’ interests will conflict with ours or yours;

 

   

the impact of competitive products;

 

   

the financial statement impact of changes in generally accepted accounting principles; and

 

   

the ability to successfully integrate our company in accordance with our strategy and success of our joint ventures.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this prospectus may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

28


Table of Contents

USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of                          shares of our common stock in this offering, after deducting underwriters’ discounts and commissions and estimated expenses payable by us, will be approximately $1,661 million (or $             million if the underwriters exercise the option to purchase additional shares in full). This estimate assumes an initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus. A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) the net proceeds to us from this offering by $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

We intend to use the anticipated net proceeds as follows:

 

   

approximately $127 million of the net proceeds will be applied to repay approximately $127 million of senior secured term loans due 2013;

 

   

approximately $914 million of the net proceeds will be applied to redeem approximately $870 million in aggregate principal amount of our 10% Senior Notes due 2014;

 

   

approximately $195 million of the net proceeds will be applied to redeem approximately $163 million in aggregate principal amount (approximately $175 million face amount) of our 11.5% Senior Notes due 2016;

 

   

approximately $128 million of the net proceeds will be applied to redeem approximately $106 million in aggregate principal amount (approximately $115 million face amount) of our 11.625% Senior Notes due 2014;

 

   

approximately $194 million of the net proceeds will be applied to redeem approximately $186 million in aggregate principal amount of our 9% Senior Notes due 2014; and

 

   

approximately $103 million will be paid to the Sponsors as a fee in connection with the termination of certain advisory agreements in accordance with their terms, as described under “Certain Relationships and Related Party Transactions—Advisory Agreements.”

The redemptions of the 11.5% Senior Notes due 2016 and 11.625% Senior Notes due 2014 will be made pursuant to a provision of the applicable indenture that permits us to redeem up to 35% of the aggregate principal amount of such notes with the net cash proceeds of certain equity offerings. In each case, we will pay accrued and unpaid interest on the notes through the redemption date with cash generated from operations. To the extent that the underwriters exercise all or a portion of their option to purchase additional shares of our common stock, the net proceeds received will be used for further repayment of indebtedness in amounts and denominations to be determined at such time. A portion of the debt that will be repaid is held by the Sponsors and their affiliates as well as affiliates of the underwriters in this offering.

As of June 30, 2010, there was outstanding:

 

   

$2,900 million and €309 million aggregate principal amount of senior secured term loans due 2013, which had a weighted average interest rate of 2.36% as of June 30, 2010 and mature on August 9, 2013;

 

   

$869 million aggregate principal amount of 10% Senior Notes due 2014, which bear interest at a rate of 10% per annum and mature on August 1, 2014;

 

   

$465 million aggregate principal amount ($500 million face amount) of 11.5% Senior Notes due 2014, which bear interest at a rate of 11.5% per annum and mature on May 1, 2016;

 

   

$304 million aggregate principal amount ($330 million face amount) of 11.625% Senior Notes due 2014, which bear interest at a rate of 11.625% per annum and mature on February 1, 2014;

 

   

€150 million aggregate principal amount of 9% Senior Notes due 2014, which bear interest at a rate of 9% per annum and mature on August 1, 2014

On August 12, 2010, the maturity of approximately $1.5 billion in principal amount of the senior secured term loans due 2013 was extended as described under “Description of Indebtedness—2006 Senior Secured Credit Facilities.”

 

29


Table of Contents

DIVIDEND POLICY

Following completion of the offering, we do not intend to pay any cash dividends on our common stock for the foreseeable future and instead may retain earnings, if any, for future operation and expansion and debt repayment. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. Furthermore, a determination by the board of directors to distribute dividends must be approved by our stockholders. In addition, our ability to pay dividends is limited by covenants in our senior secured credit facilities and in the indentures governing our notes. See “Description of Indebtedness” and Note 10 to our audited consolidated financial statements for restrictions on our ability to pay dividends.

 

30


Table of Contents

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2010:

 

   

on an actual basis; and

 

   

on an as adjusted basis to give effect to the issuance of common stock in this offering, the application of proceeds from the offering as described in “Use of Proceeds” and the extension of the maturity of approximately $1.5 billion aggregate principal amount of senior secured term loans due 2013 to 2016 as described under “Description of Indebtedness—2006 Senior Secured Credit Facilities” as if each had occurred on June 30, 2010.

You should read this table in conjunction with “Prospectus Summary—Summary Financial and Other Data,” “Use of Proceeds,” “Selected Financial and Other Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto, included elsewhere in this prospectus.

 

     June 30, 2010
(IN MILLIONS)     
     Actual     As Adjusted

Cash and cash equivalents

   $ 371      $             
              

Long-term obligations:

    

Senior secured term loans due 2013(1)

   $ 3,283      $             

Senior secured term loans due 2016(2)

     1,218     

8 1/2 % Senior secured term loan due 2017

     500     

Revolving credit facility(3)

     —       

11 5/8 % Senior Notes due 2014(4)

     304     

10% Senior Notes due 2014(5)

     869     

9% Senior Notes due 2014(6)

     186     

12 1/2 % Senior Subordinated Discount Notes due 2016(7)

     940     

11 1/8 % Senior Discount Notes due 2016(8)

     378     

11 1/2 % Senior Notes due 2016(9)

     465     

Euro Medium Term Notes(10)

     145     

Other long-term debt

     5     

Capital lease obligations

     128     
              

Total long-term debt and capital lease obligations, including current portion(11)

     8,421     
              

Nielsen stockholders’ equity:

    

Common stock, €0.04 par value, 1,250,000,000 shares authorized, 443,078,009 shares issued and 442,192,538 shares outstanding; pro forma 2,000,000,000 shares authorized,              issued and              shares outstanding

     22     

Cumulative preferred stock, Series PA, €0.04 par value, none authorized; pro forma 100,000,000 shares authorized, none issued and outstanding

     —       

Cumulative preferred stock, Series PB, €0.04 par value, none authorized; pro forma 100,000,000 shares authorized, none issued and outstanding

     —       

Additional paid-in capital

     4,578     

Accumulated deficit

     (1,623 )  

Accumulated other comprehensive loss, net of income taxes

     (181  
              

Total Nielsen stockholders’ equity

     2,796     
              

Total capitalization

   $ 11,217      $             
              

 

(1) Actual is comprised of two tranches of $2,900 million and €309 million.
(2) Actual is comprised of two tranches of $1,000 million and €176 million.
(3) Our revolving credit facility provides for availability of $688 million. As of June 30, 2010, we had no borrowings outstanding under our revolving credit facility, not including $19 million of outstanding letters of credit and bank guarantees.

 

31


Table of Contents
(4) $330 million face amount.
(5) $870 million face amount.
(6) Denominated in Euros and had a face amount of €150 million.
(7) $1,070 million face amount.
(8) Debt is denominated in Euros and had a face amount of €343 million.
(9) $500 million face amount.
(10) Of the debt issued pursuant to our Euro Medium Term Note program, €80 million is denominated in Euros, of which €50 million is based on a variable rate of 3-month EURIBOR and the remaining €30 million carries a fixed rate of 6.75%. The remaining portion is denominated in Japanese yen, with an aggregate outstanding principal amount of ¥4,000 million based on a fixed rate of 2.50%.
(11) Excludes bank overdrafts in the amount of $18 million.

The table set forth above is based on the number of shares of our common stock outstanding as of June 30, 2010. This table does not reflect:

 

   

             shares of our common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $             per share as of June 30, 2010, of which             were then exercisable; and

 

   

             shares of our common stock reserved for future grants under our 2006 Stock Acquisition and Option Plan and/or any new employee benefits plans that we may create prior to the completion of this offering.

 

32


Table of Contents

DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value or deficiency per share of our common stock after this offering. Dilution results from the fact that the initial public offering price per share of common stock is substantially in excess of the net tangible book value or deficiency per share of our common stock attributable to the existing stockholders for our presently outstanding shares of common stock. We calculate net tangible book value or deficiency per share of our common stock by dividing the net tangible book value or deficiency (total consolidated tangible assets less total consolidated liabilities) by the number of outstanding shares of our common stock.

Our net tangible book deficit as of June 30, 2010 was $(8,781) million, or $(19.86) per share of our common stock, based on 442,192,538 shares of our common stock outstanding. Dilution is determined by subtracting pro forma net tangible book value or deficiency per share of our common stock after giving effect to this offering from the assumed initial public offering price per share of our common stock.

Without taking into account any other changes in such net tangible book value or deficiency after June 30, 2010, after giving effect to the sale of              shares of our common stock in this offering assuming an initial public offering price of $             per share, less the underwriting discounts and commissions and the estimated offering expenses payable by us, our pro forma as adjusted net tangible book or deficit at June 30, 2010 would have been $            , or $             per share. This represents an immediate increase in net tangible book value (or decrease in net tangible book deficit) of $             per share of our common stock to the existing stockholders and an immediate dilution in net tangible book or deficit of $             per share of our common stock, to investors purchasing shares of our common stock in this offering. The following table illustrates such per share of our common stock dilution:

 

Assumed initial public offering price per share of our common stock

   $             

Net tangible book deficit per share of our common stock as of June 30, 2010

  

Pro forma net tangible book deficit per share of our common stock after giving effect to this offering

  

Amount of dilution per share of our common stock to new investors in this offering

  

If the underwriters exercise their underwriters’ option in full, the adjusted net tangible book value or deficiency per share of our common stock after giving effect to the offering would be $             per share of our common stock. This represents an increase in adjusted net tangible book value (or decrease in net tangible book deficit) of $             per share of our common stock to existing stockholders and dilution of $             per share of our common stock to new investors.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share of our common stock would increase (decrease) our net tangible book value (or decrease in net tangible book deficit) after giving to the offering by $             million, or by $             per share of our common stock, assuming no change to the number of shares of our common stock offered by us as set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and estimated expenses payable by us.

The following table summarizes, on a pro forma basis as of June 30, 2010, the total number of shares of our common stock purchased from us, the total cash consideration paid to us and the average price per share of our common stock paid by purchasers of such shares and by new investors purchasing shares of our common stock in this offering.

 

     Shares of our
Common Stock
Purchased
    Total Consideration     Average Price Per
Share of our
Common Stock
     Number    Percent     Amount    Percent    

Prior purchasers

             $                        $             

New investors

             $                        $             

Total

             $                        $             

 

33


Table of Contents

If the underwriters were to fully exercise the underwriters’ option to purchase                          additional shares of our common stock, the percentage of shares of our common stock held by existing stockholders who are directors, officers or affiliated person would be         %, and the percentage of shares of shares of our common stock held by new investors would be         %.

To the extent that we grant options to our employees in the future, and those options are exercised or other issuances of shares of our common stock are made, there will be further dilution to new investors.

 

34


Table of Contents

SELECTED FINANCIAL AND OTHER DATA

The following table sets forth selected historical consolidated financial data of Nielsen Holdings as of the dates and for the periods indicated. The successor selected consolidated statement of operations data for the years ended December 31, 2009, 2008 and 2007 and selected consolidated balance sheet data as of December 31, 2009 and 2008 have been derived from our audited consolidated financial statements and related notes appearing elsewhere in this prospectus. The successor selected consolidated statement of operations data for the period from May 24, 2006 to December 31, 2006 and selected consolidated balance sheet data as of December 31, 2007 and 2006 have been derived from our unaudited condensed consolidated financial statements which are not included in this prospectus. The predecessor selected consolidated statement of operations data for the period from January 1, 2006 to May 23, 2006 and the year ended December 31, 2005 and selected consolidated balance sheet data as of December 31, 2005 have been derived from our predecessor’s audited consolidated financial statements which are not included in this prospectus.

The selected financial and other data as of June 30, 2010 and for the six months ended June 30, 2010 and 2009 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The selected unaudited financial data presented have been prepared on a basis consistent with our audited consolidated financial statements. In the opinion of management, such unaudited financial data reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results for those periods.

The results of operations for any period are not necessarily indicative of the results to be expected for any future period. The audited consolidated financial statements from which the historical financial information for the periods set forth below have been derived were prepared in accordance with GAAP. The selected historical consolidated financial data set forth below should be read in conjunction with, and are qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes thereto appearing elsewhere in this prospectus.

 

    Successor          Predecessor

(IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)

  Six
Months
Ended
June 30,
2010(1)
  Six
Months
Ended
June 30,
2009(2)
    Year Ended
December 31,
2009(3)
    Year Ended
December 31,
2008(4)
    Year Ended
December 31,
2007(5)
    May 24-
December 31,
2006(6)
         January 1-
May 23,
2006
    Year Ended
December 31
2005(7)

Statement of Operations Data:

                   

Revenues

  $ 2,466   $ 2,284      $ 4,808      $ 4,806      $ 4,458      $ 2,405          $ 1,513      $ 3,789

Operating income

    314     284        116        420        376        86            39        314

Income/(loss) from continuing operations

    125     (7     (428     (314     (364     (293         (24     139

Income/(loss) from continuing operations per common share (basic and diluted)

    0.28     (0.02     (0.98     (0.87     (1.01     (0.84         (0.10     0.51

Cash dividends declared per common share

    —       —          —          —          —          —              —          0.15

 

     Successor        Predecessor
     June  30,
2010
   December 31,        December 31,
2005

(IN MILLIONS)

      2009    2008    2007    2006       

Balance Sheet Data:

                    

Total assets

   $ 14,194    $ 14,600    $ 15,091    $ 16,135    $ 15,979       $ 10,663

Long-term debt including capital leases

     8,421      8,640      9,320      8,896      8,520         2,637

 

(1) Income for the six months ended June 30, 2010 included $322 million of interest expense and $22 million in restructuring costs.

 

35


Table of Contents
(2) Income for the six months ended June 30, 2009 included $315 million of interest expense and $9 million in restructuring costs.

 

(3) The loss in the year ended December 31, 2009 included $647 million of interest expense, a goodwill and intangible asset impairment charge of $527 million and $62 million in restructuring costs.

 

(4) The loss in the year ended December 31, 2008 included $701 million of interest expense, a goodwill impairment charge of $96 million and $118 million in restructuring costs.

 

(5) The loss in the year ended December 31, 2007 included $691 million of interest expense, $110 million in foreign currency exchange transaction losses and $133 million in restructuring costs.

 

(6) The loss in the period May 24, 2006 to December 31, 2006 included $395 million of interest expense, $90 million relating to the deferred revenue purchase price adjustment, $43 million in foreign currency exchange transaction losses and $65 million in restructuring costs.

 

(7) The 2005 income from continuing operations included $55 million in costs from the settlement of the antitrust agreement with Information Resources, Inc., a $36 million payment of failed deal costs to IMS Health and a $102 million loss from the early extinguishment of debt.

 

36


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our results of operations and financial condition with “Prospectus Summary—Summary Financial and Other Data,” “Selected Financial and Other Data” and the audited consolidated financial statements, unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements.

Background and Executive Summary

On May 17, 2006, Nielsen Holdings, formerly known as Valcon Acquisition Holding B.V., was formed by investment funds associated with the Original Sponsors as a subsidiary of Valcon Acquisition Holding (Luxembourg) S.à r.l. (“Luxco”). On May 24, 2006, The Nielsen Company B.V. (“TNC B.V.”) (formerly VNU Group B.V. and VNU N.V.) was acquired through a tender offer to stockholders by Valcon Acquisition B.V. (“Valcon”), a wholly owned subsidiary of the Company (herein referred to as the “Acquisition”). Valcon’s cumulative purchases totaled 99.4% of TNC B.V.’s outstanding common stock as of December 31, 2007. In May 2008, Valcon acquired the remaining TNC B.V. common stock through a statutory squeeze-out procedure pursuant to Dutch legal and regulatory requirements and therefore currently holds 100% of TNC B.V.’s outstanding common stock. As part of the Acquisition, Valcon also acquired all of the 7% preference shares of TNC B.V. Valcon also acquired 100% of TNC B.V.’s preferred B shares which were subsequently canceled in 2006. TNC B.V.’s common and preferred shares were delisted from the NYSE Euronext on July 11, 2006. The registered office of Nielsen Holdings is located in Diemen, the Netherlands, with its headquarters located in New York.

Nielsen Holdings, together with its subsidiaries, is a global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. We deliver critical media and marketing information, analytics and industry expertise about what consumers watch (consumer interaction with television, online and mobile) and what consumers buy on a global and local basis. Our information, insights and solutions help our clients maintain and strengthen their market positions and identify opportunities for profitable growth. We have a presence in approximately 100 countries, including many developing and emerging markets, and hold leading market positions in many of our services and geographies.

We believe that important measures of our results of operations include revenue, operating income and adjusted operating income (defined below). Our long-term financial objectives include consistent revenue growth and expanding operating margins. Accordingly, we are focused on geographic market and service offering expansion to drive revenue growth and improving operating efficiencies including effective resource utilization, information technology leverage and overhead cost management.

Our business strategy is built upon a model that has traditionally yielded consistent revenue performance. Typically, before the start of each year, nearly 70% of our annual revenue has been committed under contracts in our combined Watch and Buy segments, which provides us with a high degree of stability to our revenue and allows us to effectively manage our profitability and cash flows. We continue to look for growth opportunities through global expansion, specifically within developing markets, as well as through the expansion of our insights services and measurement services across what we refer to as the three screens: television, online and mobile.

Our transformation and other productivity initiatives, which were implemented following the Acquisition, are focused on a combination of improving operating leverage through targeted cost-reduction programs, business process improvements, portfolio restructuring actions (e.g. the exit of our Publications businesses) while at the same time investing in key programs to enhance future growth opportunities.

 

37


Table of Contents

Achieving our business objectives requires us to manage a number of key risk areas. Our growth objective of geographic market and service expansion requires us to maintain the consistency and integrity of our information and underlying processes on a global scale, and to invest effectively our capital in technology and infrastructure to keep pace with our clients’ demands and our competitors. Our operating footprint across approximately 100 countries requires disciplined global and local resource management of internal and third party providers to ensure success. In addition, our high level of indebtedness requires active management of our debt profile, with a focus on underlying maturities, interest rate risk, liquidity and operating cash flows.

Business Segment Overview

We align our business into three reporting segments: Watch (media audience measurement and analytics), Buy (consumer purchasing measurement and analytics) and Expositions. Our Watch and Buy segments, which together generated substantially all of our revenues in 2009, are built on a foundation of proprietary data assets that are designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses.

Our Watch segment provides viewership data and analytics primarily to the media and advertising industries across television, online and mobile screens. 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. We are a leader in providing measurement services across the three screens.

Our Buy segment provides Information services, which includes our core tracking and scan data (primarily transactional measurement data and consumer behavior information) and Insights services (primarily comprised of our analytical solutions) to businesses in the consumer packaged goods industry. Our services also enable our clients to better manage their brands, uncover new sources of demand, launch and grow new products, analyze their sales, improve their marketing mix and establish more effective consumer relationships. Our data is used by our clients to measure their market share, tracking billions of sales transactions per month in retail outlets around the world. Our extensive database of retail and consumer information, combined with our advanced analytical capabilities, helps generate strategic insights that influence our clients’ key business decisions. Within our Buy segment, we have two primary geographic groups, developed and developing markets. Developed markets primarily include the United States, Canada, Western Europe, Japan and Australia while developing markets include Latin America, Eastern Europe, Russia, China, India and Southeast Asia.

Our Expositions segment operates one of the largest portfolios of business-to-business trade shows in the United States. Each year, we produce approximately 40 trade shows, which in 2009 connected approximately 270,000 buyers and sellers across 20 industries.

Certain corporate costs, other than those described above, including those related to selling, finance, legal, human resources, and information technology systems, are considered operating costs and are allocated to our segments based on either the actual amount of costs incurred or on a basis consistent with the operations of the underlying segment.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations is based on our audited consolidated financial statements and unaudited condensed consolidated financial statements, each of which have been prepared in accordance with GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. The most significant of these estimates relate to: revenue recognition; business combinations including purchase price allocations; accruals for pension costs and

 

38


Table of Contents

other post-retirement benefits; accounting for income taxes; and valuation of long-lived assets including goodwill and indefinite-lived intangible assets, computer software and share-based compensation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the valuation of assets and liabilities that are not readily apparent from other sources. We evaluate these estimates on an ongoing basis. Actual results could vary from these estimates under different assumptions or conditions. For a summary of the significant accounting policies, including critical accounting policies discussed below, see Note 1 to the audited consolidated financial statements “Description of Business, Basis of Presentation and Significant Accounting Policies,” included elsewhere in this prospectus.

Revenue Recognition

We recognize our revenues when persuasive evidence of an arrangement exists, services have been rendered or information has been delivered, the fee is fixed or determinable and the collectibility of the related revenue is reasonably assured.

A significant portion of our revenue is generated from information (primarily retail measurement and consumer panel services) and measurement (primarily from television, internet and mobile audiences) services. We generally recognize revenue from the sale of our services based upon fair value as the services are performed, which is usually ratably over the term of the contract(s). Invoiced amounts are recorded as deferred revenue until earned. Substantially all of our customer contracts are non-cancellable and non-refundable.

Our revenue arrangements may include multiple deliverables and in these arrangements, the individual deliverables within a contract are separated and recognized upon delivery based upon their fair values relative to the total contract value, to the extent that the fair values are readily determinable and the deliverables have stand-alone value to the customer. In certain cases, software is included as part of these arrangements to allow our customers to supplementally view delivered information and is provided for the term of the arrangement and is not significant to the marketing effort and is not sold separately. Accordingly, software provided to our customers is considered to be incidental to the arrangements and is not recognized as a separate element.

A discussion of our revenue recognition policies, by segment, follows:

Watch

Revenue from our Watch segment is primarily generated from television, internet and mobile measurement services and is recognized on a straight-line basis over the contract period, as the service is delivered to the customer.

Buy

Revenue from our Buy segment, primarily from retail measurement services and consumer panel services, is recognized on a straight-line basis over the period during which the services are performed and information is delivered to the customer.

We provide insights and solutions to customers through analytical studies that are recognized into revenue as value is delivered to the customer. The pattern of revenue recognition for these contracts varies depending on the terms of the individual contracts, and may be recognized proportionally or deferred until the end of the contract term and recognized when the information has been delivered to the customer.

Expositions

Revenue and certain costs within our Expositions segment are recognized upon completion of each event.

 

39


Table of Contents

Share-Based Compensation

Expense Recognition

We measure the cost of all share-based payments, including stock options, at fair value on the grant date and recognize such costs within the Consolidated Statements of Operations; however, no expense is recognized for stock options that do not ultimately vest. We recognize expense associated with stock options that vest upon a single date using the straight-line method. For those that vest over time, an accelerated graded vesting is used. We recorded $9 million of expense and $1 million of net credits for the six months ended June 30, 2010 and 2009, respectively. We also recorded $14 million, $18 million and $52 million of expense associated with share-based compensation for the years ended December 31, 2009, 2008 and 2007, respectively. The aggregate fair value of all outstanding vested and unvested options was $67 million and $66 million, respectively, as of June 30, 2010.

Fair Value Measurement and Valuation Methodologies

Share-based compensation expense is primarily based on the estimated grant date fair value using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date requires considerable judgment, including the consideration of factors such as estimating the expected term of stock options, expected volatility of our stock, and the number of stock-based awards expected to be forfeited due to future terminations. Some of the critical assumptions used in estimating the grant date fair value are presented in the table below:

 

     Year Ended December 31,  
     2009     2008     2007  

Expected life (years)

   3.42 - 4.08      2.93 - 3.02      3.42 - 4.31   

Risk-free interest rate

   1.70 - 2.07   2.77   3.17 - 4.77

Expected dividend yield

   0   0   0

Expected volatility

   54.00 - 62.00   39.00   46.50 - 56.10

Weighted average volatility

   57.77   39.00   55.03

In addition, for stock-based awards where vesting is dependent upon achieving certain operating performance goals, we estimate the likelihood of achieving the performance goals. Differences between actual results and these estimates could have a material effect on our financial results. We consider several factors in estimating the expected life of our options granted, including the expected lives used by a peer group of companies and the historical option exercise behavior of our employees, which we believe are representative of future behavior. Expected volatility is based primarily on a combination of the estimates of implied volatility of the Company’s peer-group and the Company’s historical volatility adjusted for its leverage. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.

 

Stock Option Grant Period

   Number of Options
Granted
   Weighted-Average
Exercise Price
   Weighted-Average
Grant Date Fair
Value per Share
   Weighted-Average
Grant Date Fair
Value per Option

Three months ended June 30, 2009

   908,700    $ 11.38    $ 10.00    $ 4.08

Three months ended September 30, 2009

   99,000      11.38      10.00      4.08

Three months ended December 31, 2009

   767,188      11.42      10.00      4.24

Three months ended March 31, 2010

   1,539,348      11.67      11.50      4.98

Three months ended June 30, 2010

   203,435      12.14      11.56      5.53

 

40


Table of Contents

Our board of directors sets the exercise price of stock options with the intention that the price per share is not less than the estimated fair market value of our common stock on the date of grant. Our board has taken into consideration numerous objective and subjective factors to determine the fair market value of our common stock on each grant date in order to be able to set exercise prices. Such factors included, but were not limited to, (i) valuations using the methodologies described below, (ii) our operating and financial performance and (iii) the impact of global economic factors on market values.

Since our common stock is not publicly traded, we conduct common stock valuation analyses on a semi-annual basis (as of June 30th and December 31st for each annual period) as well as on an interim basis considering the significance of individual grants. We consider numerous objective and subjective factors in valuing our common stock at each valuation date in accordance with the guidance in the American Institute of Certified Public Accountants Practice Aid Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or Practice Aid. These objective and subjective factors included, but were not limited to:

 

   

arm’s-length sales of our common stock in privately negotiated transactions;

 

   

valuations of our common stock;

 

   

our stage of development and financial position; and

 

   

our future financial projections.

Our common stock valuations performed from the Acquisition through the date of this prospectus were determined by taking a weighted-average value calculated under two different valuation approaches, the income approach and market approach.

The Income Approach quantifies the future cash flows that management expects to achieve consistent with our annual business plan and forecasting process. These future cash flows are discounted to their net present values using a rate corresponding to an estimated weighted-average cost of capital. The discount rate reflects the risks inherent in the cash flows and the market rates of return available from alternative investments of similar type and quality as of the valuation date. Our weighted average cost of capital (“WACC”) is calculated by weighting the required returns on interest-bearing debt and common equity capital in proportion to their estimated percentages in our capital structure as well as the capital structure of comparable publicly-traded companies. Our WACC assumptions utilized in the valuations performed during the period from April 1, 2009 through June 30, 2010 ranged from 9.6% to 9.8%.

The Market Approach considers the fair value of an asset based on the price at which comparable assets have been purchased under similar circumstances. The transactions are usually based on recent sale prices of similar assets based on an arm’s length transaction. Most commonly, the market approach relies on published transactions, based on a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA), which is consistent with the primary profitability metric underlying our annual business plan and forecasting process. The EBITDA multiples were determined based on acquisition and/or trading multiples of a peer group of companies that are periodically reviewed by management for consistency with our business strategy, the businesses and markets in which we operate and our competitive landscape. The EBITDA multiples ranged from 8.5x to 10.0x in the valuations performed during the period from April 1, 2009 through June 30, 2010.

While we believe both of these two approaches provide reliable estimates of fair value, we apply a heavier weighting to the income approach as we believe this valuation method provides a more reasonable estimate of fair value given the market approach may reflect greater volatility based on the trading multiples of a peer group in an unstable or illiquid market. We have not applied a discounting factor to the resulting fair values obtained by averaging the values calculated under the income approach and the market for the lack of marketability of the common stock for being a private company.

During the periods discussed above, we performed valuations of our common stock in December 2008, June 2009, December 2009, March 2010, April 2010 and June 2010. As a standard part of its approval process for

 

41


Table of Contents

each of these valuations, our board of directors reviewed our current and projected financial performance, including the consideration of various scenarios of such performance and their corresponding impact on our common stock valuation. As part of our board’s assessment of our operating performance it considered general economic conditions. Additionally, our board reviewed the peer group of companies and their performance relative to our business strategy. Finally, on each valuation date, our board considered the volatility in the equity markets generally.

Business Combinations

We account for our business acquisitions under the purchase method of accounting. The total cost of acquisitions is allocated to the underlying net assets, based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires significant judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other indefinite-lived intangible assets are stated at historical cost less accumulated impairment losses, if any.

Goodwill and other indefinite-lived intangible assets, consisting of certain trade names and trademarks, are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. We have designated October 1st as the date in which the annual assessment is performed as this timing corresponds with the development of our formal budget and business plan review. We review the recoverability of its goodwill by comparing the estimated fair values of reporting units with their respective carrying amounts. We established, and continue to evaluate, our reporting units based on our internal reporting structure and generally define such reporting units at our operating segment level or one level below. Similar to the approach we take in valuing our common stock, 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 a market-based approach.

A discounted cash flow analysis requires the use of various assumptions, including expectations of future cash flows, growth rates, discount rates and tax rates in developing the present value of future cash flow projections. Many of the factors used in assessing fair value are outside of the control of management, and these assumptions and estimates can change in future periods. Changes in assumptions or estimates could materially affect the determination of the fair value of a reporting unit, and therefore could affect the amount of potential impairment. The following assumptions are significant to our discounted cash flow analysis:

 

   

Business projections—the assumptions of expected future cash flows and growth rates are based on assumptions about the level of business activity in the marketplace as well as applicable cost levels that drive our budget and business plans. The budget and business plans are updated at least annually and are frequently reviewed by management and our board of directors. Actual results of operations, cash flows and other factors will likely differ from the estimates used in our valuation, and it is possible that differences and changes could be material. A deterioration in profitability, adverse market conditions and a slower or weaker economic recovery than currently estimated by management could have a significant impact on the estimated fair value of our reporting units and could result in an impairment charge in the future.

 

   

Long-term growth rates—the assumed long-term growth rate representing the expected rate at which a reporting unit’s earnings stream, beyond that of the budget and business plan period, is projected to grow. These rates are used to calculate the terminal value, or value at the end of the future earnings stream, of our reporting units, and are added to the cash flows projected for the budget and business plan period. The long-term growth rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit such as the maturity of the underlying services. The long-term growth rates we used for our reporting units were between 2% and 4%.

 

42


Table of Contents
   

Discount rates—the reporting unit’s combined future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital that is likely to be used by market participants. The weighted-average cost of capital is our estimate of the overall after-tax rate of return required by equity and debt holders of a business enterprise. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. The discount rates we used for our reporting units were between 9% and 14%.

These estimates and assumptions vary between each reporting unit depending on the facts and circumstances specific to that unit. We believe that the estimates and assumptions we made are reasonable, but they are susceptible to change from period to period.

We also use a market-based approach in estimating the fair value of our reporting units. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings as well as recent comparable transactions.

To validate the reasonableness of the reporting unit fair values, we reconcile the aggregate fair values of our reporting units to our enterprise market capitalization. Enterprise market capitalization includes, among other factors, the estimated fair value of our common stock and the appropriate redemption values of our debt.

The following table summarizes the results of the eight reporting units that were subject to the October 1, 2009 annual impairment testing and the related goodwill value associated with the reporting units for (a) fair values exceeding carrying values by less than 10%, (b) fair values exceeding carrying values between 10% and 20% and (c) fair values exceeding carrying values by more than 20%.

 

Fair value exceeds

carrying value by:

   Number of
reporting
units
   Reporting
units
goodwill
(in millions)

Less than 10%(1)

   3    $ 668

10% to 20%

   2      3,095

Greater than 20%

   3      3,280
           

Totals

   8    $ 7,043
         

 

(1) These reporting units were impaired during the third quarter of 2009 and therefore fair value approximated carrying value as of our October 1, 2009 annual impairment test.

As of our October 1, 2009 testing date, we had $7,043 million of goodwill on our balance sheet and as discussed further below (See “—Impairment of Goodwill and Intangibles”), our results from continuing operations for the year ended December 31, 2009 includes an aggregate goodwill impairment charge of $282 million, which was recorded in the third quarter of 2009. We also recorded a goodwill impairment charge of $55 million in the third quarter of 2009 relating to our Publications operating segment, which has been accounted for as a discontinued operation. Our October 1, 2009 annual impairment testing indicated that the fair values of the reporting units exceeded the carrying values, thereby resulting in no further impairment.

We also perform sensitivity analyses on our assumptions, primarily around both long-term growth rate and discount rate assumptions. Our sensitivity analyses include several combinations of reasonably possible scenarios with regard to these assumptions. However, we consistently test a one percent movement in both our long-term growth rate and discount rate assumptions. When applying these sensitivity analyses, we noted this would result in one of our reporting units, with goodwill of $365 million as of our October 1, 2009 testing date, moving to the “less than 10%” classification and therefore $1,033 million, or approximately 15% of our total goodwill balance would be within this classification. However, since the effects of applying our sensitivity analyses based upon reasonably possible adverse changes in assumptions still resulted in fair values of our reporting units in excess of underlying carrying values, we concluded an impairment did not exist as of October 1, 2009 and it was not reasonably likely that an impairment would occur in the next twelve months from that date.

 

43


Table of Contents

Our operating results for the year ended December 31, 2008 include a goodwill impairment charge of $96 million. We also recorded a goodwill impairment charge of $336 million for the year ended December 31, 2008 relating to our Publications operating segment, which has been accounted for as a discontinued operation. The tests for 2007 confirmed that the fair value of our reporting units and indefinite lived intangible assets exceeded their respective carrying amounts and that no impairment was required.

The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of trade names and trademarks are determined using a “relief from royalty” discounted cash flow valuation methodology. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace.

Pension Costs

We provide a number of retirement benefits to our employees, including defined benefit pension plans and post retirement medical plans. Pension costs, in respect of defined benefit pension plans, primarily represent the increase in the actuarial present value of the obligation for pension benefits based on employee service during the year and the interest on this obligation in respect of employee service in previous years, net of the expected return on plan assets. Differences between this expected return and the actual return on these plan assets and actuarial changes are not recognized in the statement of operations, unless the accumulated differences and changes exceed a certain threshold. The excess is amortized and charged to the statement of operations over, at the maximum, the average remaining term of employee service. We recognize obligations for contributions to defined contribution pension plans as expenses in the statement of operations as they are incurred.

The determination of benefit obligations and expenses is based on actuarial models. In order to measure benefit costs and obligations using these models, critical assumptions are made with regard to the discount rate, the expected return on plan assets and the assumed rate of compensation increases. We provide retiree medical benefits to a limited number of participants in the United States. and have ceased to provide retiree health care benefits to certain of our Dutch retirees. Therefore, retiree medical care cost trend rates are not a significant driver of our post retirement costs. Management reviews these critical assumptions at least annually. Other assumptions involve demographic factors such as turnover, retirement and mortality rates. Management reviews these assumptions periodically and updates them as necessary.

The discount rate is the rate at which the benefit obligations could be effectively settled. For our U.S. plans, the discount rate is based on a bond portfolio that includes only long-term bonds with an Aa rating, or equivalent, from a major rating agency. We believe the timing and amount of cash flows related to the bonds in this portfolio is expected to match the estimated payment benefit streams of our U.S. plans. For the Dutch and other non-U.S. plans, the discount rate is set by reference to market yields on high-quality corporate bonds.

To determine the expected long-term rate of return on pension plan assets, we consider, for each country, the structure of the asset portfolio and the expected rates of return for each of the components. For our U.S. plans, a 50 basis point decrease in the expected return on assets would increase pension expense on our principal plans by approximately $1 million per year. A similar 50 basis point decrease in the expected return on assets would increase pension expense on our principal Dutch plans by approximately $3 million per year. We assumed that the weighted averages of long-term returns on our pension plans were 6.4%, 6.4 % and 6.1% for the years ended December 31, 2009, 2008 and 2007, respectively. The actual return on plan assets will vary year to year from this assumption. Although the actual return on plan assets will vary from year to year, we believe it is appropriate to use long-term expected forecasts in selecting our expected return on plan assets. As such, there can be no assurance that our actual return on plan assets will approximate the long-term expected forecasts.

 

44


Table of Contents

Income Taxes

We have a presence in approximately 100 countries. Over the past five years, we completed many material acquisitions and divestitures, which have generated complex tax issues requiring management to use its judgment to make various tax determinations. We try to organize the affairs of our subsidiaries in a tax efficient manner, taking into consideration the jurisdictions in which we operate. Due to outstanding indemnification agreements, the tax payable on select disposals made in recent years has not been finally determined. Although we are confident that tax returns have been appropriately prepared and filed, there is risk that additional tax may be assessed on certain transactions or that the deductibility of certain expenditures may be disallowed for tax purposes. Our policy is to estimate tax risk to the best of our ability and provide accordingly for those risks and take positions in which a high degree of confidence exists that the tax treatment will be accepted by the tax authorities. The policy with respect to deferred taxation is to provide in full for temporary differences using the liability method.

Deferred tax assets and deferred tax liabilities are computed by assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The carrying value of deferred tax assets is adjusted by a valuation allowance to the extent that these deferred tax assets are not considered to be realized on a more likely than not basis. Realization of deferred tax assets is based, in part, on our judgment and is dependent upon our ability to generate future taxable income in jurisdictions where such assets have arisen. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount expected to be realized in the future. In assessing the adequacy of our valuation allowances, we consider various factors including reversal of deferred tax liabilities, future taxable income and potential tax planning strategies.

Long-Lived Assets

We are required to assess whether the value of our long-lived assets, including our buildings, improvements, technical and other equipment, and amortizable intangible assets have been impaired whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. We do not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. Recoverability of assets that are held and used is measured by comparing the sum of the future undiscounted cash flows expected to be derived from an asset (or a group of assets) to their carrying value. If the carrying value of the asset (or the group of assets) exceeds the sum of the future undiscounted cash flows, impairment is considered to exist. If impairment is considered to exist based on undiscounted cash flows, the impairment charge is measured using an estimation of the assets’ fair value, typically using a discounted cash flow method. The identification of impairment indicators, the estimation of future cash flows and the determination of fair values for assets (or groups of assets) requires us to make significant judgments concerning the identification and validation of impairment indicators, expected cash flows and applicable discount rates. These estimates are subject to revision as market conditions and our assessments change. Our operating results for the year ended December 31, 2009 include an aggregate customer-related intangible asset impairment charge of $245 million.

We capitalize software development costs with respect to major internal use software initiatives or enhancements. The costs are capitalized from the time that the preliminary project stage is completed, and we consider it probable that the software will be used to perform the function intended until the time the software is placed in service for its intended use. Once the software is placed in service, the capitalized costs are generally amortized over periods of three to six years. If events or changes in circumstances indicate that the carrying value of software may not be recovered, a recoverability analysis is performed based on estimated undiscounted cash flows to be generated from the software in the future. If the analysis indicates that the carrying value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. These estimates are subject to revision as market conditions and as our assessments change.

 

45


Table of Contents

Factors Affecting Nielsen’s Financial Results

Divestitures

During the six months ended June 30, 2010, we received net cash proceeds of $25 million associated with business divestitures, including the sale of our box-office tracking operation as well as the remaining properties within the Publications operating segment discussed further below.

During the year ended December 31, 2009, we received $84 million in net proceeds associated with business divestitures, primarily associated with the sale of our media properties within the Publications operating segment. The impact of the remaining divestitures on our consolidated results of operations was not material.

During the year ended December 31, 2008, we received $23 million in net proceeds primarily associated with two divestitures within our Expositions segment and the final settlement of the sale of our Directories segment to World Directories Acquisition Corp (“World Directories”). The impact of these divestitures on our consolidated statement of operations was not material for all periods presented.

On October 30, 2007, we completed the sale of our 50% share in VNU Exhibitions Europe to Jaarbeurs (Holding) B.V. for cash consideration of $51 million.

Discontinued Operations

Nielsen Publications

In December 2009, we substantially completed the planned exit of our Publications operating segment through the sale of our media properties, including The Hollywood Reporter and Billboard, to e5 Global Media LLC. Our unaudited condensed and audited consolidated financial statements reflect the Publications operating segment as a discontinued operation. The sale resulted in a loss of approximately $14 million, net of taxes of $3 million. The net loss included $10 million of liabilities for certain obligations associated with transition services that were contractually retained by Nielsen. During the six months ended June 30, 2010, we completed the exit of the remaining properties and recorded a net loss on sale of $3 million associated with these divestitures.

Business Media Europe

On February 8, 2007, we completed the sale of a significant portion of our Business Media Europe unit (“BME”) to 3i, a European private equity and venture capital firm for $414 million in cash. During the year ended December 31, 2007, we recorded a gain on sale of discontinued operations of $17 million, primarily related to BME’s previously recognized currency translation adjustments from the date of the Acquisition to the date of sale, and a pension curtailment gain. No other material gain was recognized on the sale because the sales price approximated the carrying value. Our unaudited condensed and audited consolidated financial statements reflect BME as discontinued operations. A portion of the proceeds from the sale of BME was used to pay down our debt under our 2006 Senior Secured Credit Facilities.

See Note 4 to the consolidated and condensed consolidated financial statements, “Business Divestitures,” included elsewhere in this prospectus.

Acquisitions and Investments in Affiliates

For the six months ended June 30, 2010, we paid cash consideration of $38 million associated with both current period and previously executed acquisitions, net of cash acquired. In conjunction with these acquisitions, we recorded deferred consideration of $19 million, which is payable through 2013. Had the current period acquisitions occurred as of January 1, 2010, the impact on our consolidated results of operations would not have been material.

 

46


Table of Contents

For the six months ended June 30, 2009, we paid cash consideration of $43 million associated with both current period and previously executed acquisitions and investments in affiliates, net of cash acquired. Had these acquisitions occurred as of January 1, 2009, the impact on our consolidated results of operations would not have been material.

For the year ended December 31, 2009, we paid cash consideration of $50 million associated with both current period and previously executed acquisitions and investments in affiliates, net of cash acquired. In conjunction with these acquisitions, we recorded deferred consideration of $25 million, of which $22 million was attributable to a March 2009 acquisition, which in March 2010, was agreed to be settled by a cash payment of $11 million in April 2010 and the issuance of $11 million in equity, substantially all of which is payable through March 2012 and non-cash consideration of $7 million. Had the current period acquisitions occurred as of January 1, 2009, the impact on our consolidated results of operations would not have been material.

On December 19, 2008, we completed the purchase of the remaining 50% interest in AGB Nielsen Media Research (“AGBNMR”), a leading international television audience media measurement business, from WPP Group plc (“WPP”). With our full ownership of AGBNMR, we expect to be able to better leverage our global media product portfolio. In exchange for the remaining 50% interest in AGBNMR, we transferred business assets and ownership interests with an aggregate fair value of $72 million. No material gain or loss was recorded on the business assets and ownerships transferred.

On May 15, 2008, we completed the acquisition of IAG Research, Inc. (“IAG”), for $223 million (including non-cash consideration of $1 million), which was net of $12 million of cash acquired. The acquisition expands our television and internet analytics services through IAG’s measurement of consumer engagement with television programs, national commercials and product placements.

For the year ended December 31, 2008, we paid cash consideration of $39 million associated with other acquisitions and investments in affiliates, net of cash acquired. In conjunction with these acquisitions, and as of December 31, 2008, we recorded deferred consideration of $12 million, which was subsequently paid in January 2009. Had the AGBNMR, IAG and other acquisitions occurred as of January 1, 2008, the impact on our consolidated results of operations would not have been material.

For the year ended December 31, 2007, we completed several acquisitions with an aggregate consideration, net of cash acquired, of $837 million. The most significant acquisitions were the purchase of the remaining minority interest of Nielsen BuzzMetrics ($47 million) on June 4, 2007, the purchase of the remaining minority interest of Nielsen//NetRatings ($330 million, including $33 million to settle all outstanding share-based awards) on June 22, 2007 and the acquisition of Telephia, Inc. (“Telephia”) on August 9, 2007, for approximately $449 million including non-cash consideration of $6 million. Had these acquisitions occurred as of January 1, 2007, the impact on our consolidated results of operations would not have been material. Prior to these acquisitions, both Nielsen//NetRatings and Nielsen BuzzMetrics were consolidated subsidiaries of Nielsen up to the ownership interest.

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.

 

     Six months
ended
June 30, 2010
    Six months
ended
June 30, 2009
    Year ended
December 31,
2009
    Year ended
December 31,
2008
    Year ended
December 31,
2007
 

U.S. Dollar

   53   56   53   53   55

Euro

   14   13   16   16   15

Other Currencies

   33   31   31   31   30
                              

Total

   100   100   100   100   100

 

47


Table of Contents

As a result, fluctuations in the value of foreign currencies relative to the U.S. dollar impact our operating results. Impacts associated with fluctuations in foreign currency are discussed in more detail under “—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; revenues, expenses and cash flows are translated using average rates of exchange. The average U.S. dollar to Euro exchange rate was $1.33 to €1.00 for both six-month periods ended June 30, 2010 and 2009. The average U.S. dollar to Euro exchange rate was $1.39 to €1.00, $1.47 to €1.00, and $1.37 to €1.00 for the years ended December 31, 2009, 2008 and 2007, 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 have operations in both our Watch and Buy segments in Venezuela and our functional currency for these operations is the Venezuelan bolivares fuertes. Venezuela’s currency was considered hyperinflationary as of January 1, 2010 and further, in January 2010, Venezuela’s currency was devalued and a new currency exchange rate system was announced. We have evaluated the new exchange rate system and have concluded that our local currency transactions will be denominated in U.S. dollars until Venezuela’s currency is deemed to be non hyperinflationary. We recorded a charge of $7 million associated with the currency devaluation in January 2010 in our foreign exchange transaction gains, net line item. In June 2010, a further revision to the currency exchange rate system was made. The impact of the hyperinflationary accounting was not material to our consolidated results of operations for the six months ended June 30, 2010.

We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation is a non-GAAP financial measure, which excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our 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 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.

 

48


Table of Contents

Results of Operations—Six Months Ended June 30, 2010 compared to Six Months Ended June 30, 2009

The following table sets forth, for the periods indicated, the amounts included in our Condensed Consolidated Statements of Operations:

 

     Six Months Ended
June 30,
 

(IN MILLIONS)

   2010     2009  

Revenues

   $ 2,466      $ 2,284   
                

Cost of revenues, exclusive of depreciation and amortization shown separately below

     1,048        963   

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     805        762   

Depreciation and amortization

     277        266   

Restructuring costs

     22        9   
                

Operating income

     314        284   
                

Interest income

     2        4   

Interest expense

     (322     (315

Loss on derivative instruments

     (12     (33

Foreign currency exchange transaction gains, net

     146        31   

Other income/(expense), net

     9        (11
                

Income/(loss) from continuing operations before income taxes and equity in net income of affiliates

     137        (40

(Provision)/benefit for income taxes

     (12     25   

Equity in net income of affiliates

     —         8   
                

Income/(loss) from continuing operations

     125        (7

Loss from discontinued operations, net of tax

     (8     —    
                

Net income/(loss)

     117        (7

Income attributable to noncontrolling interests

     1        1   
                

Net income/(loss) attributable to The Nielsen Company B.V.

   $ 116      $ (8
                

Consolidated Results for the Six Months Ended June 30, 2010 compared to the Six Months Ended June 30, 2009

When comparing our results for the six months ended June 30, 2010 with results for the six months ended June 30, 2009, the following should be noted:

Items affecting Operating Income for the six months ended June 30, 2010

 

   

We incurred $22 million of restructuring expense.

Items affecting Operating Income for the six months ended June 30, 2009

 

   

We incurred $9 million of restructuring expense.

Revenues

Our revenues increased 8.0% to $2,466 million for the six months ended June 30, 2010 from $2,284 million for the six months ended June 30, 2009, or 5.2% on a constant currency basis, excluding a 2.8% favorable impact of changes in foreign currency exchange rates. These increases were driven by an 11.1% increase within our Buy segment (7.4% on a constant currency basis) and a 5.1% increase within our Watch segment (3.5% on a constant currency basis), offset in part by a 13.4% decline in our Expositions segment (13.7% on a constant currency basis).

 

49


Table of Contents

Cost of Revenues, Exclusive of Depreciation and Amortization

Cost of revenues increased 8.8% to $1,048 million for the six months ended June 30, 2010 from $963 million for the six months ended June 30, 2009, or 6.4% on a constant currency basis, excluding a 2.4% unfavorable impact of changes in foreign currency exchange rates. These increases were driven by an 11.9% increase within our Buy segment (8.9% on a constant currency basis) due to the continued expansion of our Insights services globally as well as a 4.5% increase within our Watch segment (2.9% on a constant currency basis) due to volume related growth in global television measurement.

Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization

Selling, general and administrative (“SG&A”) expenses increased 5.8% to $805 million for the six months ended June 30, 2010 from $762 million for the six months ended June 30, 2009, or 2.8% on a constant currency basis, excluding a 3.0% unfavorable impact of changes in foreign currency exchange rates. These increases were driven by an 8.3% increase within our Buy segment (4.6% on a constant currency basis) due to the expansion of our Insights services globally as well as an 8.4% increase within our Watch segment (5.8% on a constant currency basis) due to increased spending on three-screen measurement initiatives and a $3 million increase in share-based compensation expense. These increases were partially offset by a 43.9% decline in our Expositions segment (43.0% on a constant currency basis) due to the impact of cost savings initiatives.

Depreciation and Amortization

Depreciation and amortization expense was $277 million for the six months ended June 30, 2010 as compared to $266 million for the six months ended June 30, 2009 driven by higher capital expenditures for software and infrastructure development.

Restructuring Costs

Transformation Initiative

In December 2006, we announced our intention to expand in-process cost efficiency programs to all areas of our operations worldwide. We further announced strategic changes as part of a major corporate transformation (“Transformation Initiative”). The Transformation Initiative was designed to make us a more successful and efficient enterprise by streamlining and centralizing certain corporate, operational and information technology functions, leveraging global procurement, consolidating real estate and expanding the outsourcing or off-shoring of certain other operational production processes. The Transformation Initiative, which continued through 2009, has been completed, but payments will continue through 2010.

We recorded net credits of $4 million for the six months ended June 30, 2010 associated with adjustments to previously established liabilities for employee severance. We incurred $9 million in restructuring charges, primarily relating to severance costs, for the six months ended June 30, 2009.

Other Productivity Initiatives

In December 2009, we commenced certain specific restructuring actions attributable to defined cost reduction programs, primarily in Europe and North America, directed towards achieving increased productivity in future periods. We recorded $26 million in restructuring charges associated with these initiatives during the six months ended June 30, 2010. Of these amounts, approximately $6 million related to property lease termination charges with the remainder relating to severance charges associated with employee terminations.

See Note 6 to our condensed consolidated financial statements, “Restructuring Activities” for additional information regarding our restructuring programs.

 

50


Table of Contents

Operating Income

Operating income increased 10.6% to $314 million for the six months ended June 30, 2010 from $284 million for the six months ended June 30, 2009, or 6.4% on a constant currency basis, excluding a 4.2% favorable impact of changes in foreign currency exchange rates. Excluding “Items affecting Operating Income,” specifically noted above, our adjusted operating income increased 14.3% (9.7% on a constant currency basis). Adjusted operating income within our Buy segment increased 23.4% (16.7% on a constant currency basis) due to the revenue performance mentioned above as well as cost savings effects of the Transformation Initiative and other productivity and cost savings initiatives. Adjusted operating income growth of $16 million within our Expositions segment, due to lower costs, was substantially offset by higher corporate costs due to increases in certain product investments and global infrastructure costs. Adjusted operating income within our Watch segment increased 1.7% (flat on a constant currency basis) as the revenue growth mentioned above was substantially offset by higher spending on three-screen measurement initiatives and $11 million in higher depreciation and amortization.

Interest Expense

Interest expense was $322 million for the six months ended June 30, 2010 compared to $315 million for the six months ended June 30, 2009, as increases in interest costs on new debentures were only partially offset by lower interest costs on senior secured term loans and related derivative instruments.

Loss on Derivative Instruments

The loss on derivative instruments was $12 million for the six months ended June 30, 2010 compared to a loss of $33 million for the six months ended June 30, 2009. The reduction in losses resulted from movements in the Euro relative to the U.S. Dollar associated with a foreign currency swap derivative instrument, which was terminated in March 2009 as well as the maturity of $1.5 billion in notional amount of interest rate swaps between November 2009 and March 2010 for which hedge accounting was discontinued in February 2009.

Foreign Currency Exchange Transaction Gains, Net

Foreign currency exchange transaction gains, net, represent the net gain or loss on revaluation of external debt, intercompany loans and other receivables and payables. Fluctuations in the value of foreign currencies relative to the U.S. Dollar have a significant effect on our operating results, particularly the Euro. The average U.S. Dollar to Euro exchange rate was $1.33 to €1.00 for both six month periods ended June 30, 2010 and 2009.

Foreign currency exchange resulted in a $146 million gain for the six months ended June 30, 2010 compared to a $31 million gain for the six months ended June 30, 2009. The gains resulted primarily from the fluctuation in the value of the U.S. Dollar against the Euro applied to certain of our Euro denominated senior secured term loans and debenture loans as well as fluctuations in certain currencies including the Euro and Canadian dollar associated with a portion of our intercompany loan portfolio.

Other Income/(Expense), Net

Other income of $9 million for the six months ended June 30, 2010 resulted from gains attributable to business divestitures. Other expense, net of $11 million for the six months ended June 30, 2009 primarily includes net charges of approximately $19 million associated with the purchase and cancellation of GBP 250 million 5.625% EMTN debenture notes and the write-off of deferred debt issuance costs associated with the modification of our senior secured credit facility offset by net gains of associated with certain divestitures.

 

51


Table of Contents

Income/(Loss) from Continuing Operations Before Income Taxes and Equity in Net Income of Affiliates

Income from continuing operations before income taxes and equity in net income of affiliates was $137 million for the six months ended June 30, 2010 compared to a loss of $40 million for the six months ended June 30, 2009. The fluctuation in results primarily reflects increased operating performance as well as increased foreign exchange transaction gains.

Income Taxes

The effective tax rates for the six months ended June 30, 2010 and 2009 were 9% expense and 63% (benefit) respectively. The effective tax rate for the six months ended June 30, 2010 is lower than the statutory expense rate primarily due to the favorable effect of certain foreign currency exchange gains and financing activities. The effective tax benefit rate for the six months ended June 30, 2009 is higher than the statutory rate primarily due to the favorable effect of certain foreign currency exchange gains, the impact of the tax rate differences in other jurisdictions where we file tax returns and the change in unrecognized income tax benefits, partially offset by the change in interest on liabilities for unrecognized income tax benefits.

Equity in Net Income of Affiliates

Equity in net income of affiliates was zero for the six months ended June 30, 2010 compared to $8 million for the six months ended June 30, 2009 as a result of lower income attributable to our Scarborough joint venture as well as increased expenses attributable to certain recently formed joint venture arrangements.

Discontinued Operations

For the six months ended June 30, 2010, loss from discontinued operations, net of tax was $8 million compared to zero for the six months ended June 30, 2009. Discontinued operations primarily relate to our Publications operating segment and the loss for the six months ended June 30, 2010 reflects the cessation of operations during 2010 and includes a first quarter 2010 net loss on sale of $3 million associated with these divestitures.

Business Segment Results for the Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009

Revenues

The table below sets forth our segment revenue performance data for the six months ended June 30, 2010 compared to the six months ended June 30, 2009, both on an as-reported and constant currency basis.

 

(IN MILLIONS)

   Six months
ended
June 30, 2010
   Six months
ended
June 30, 2009
   % Variance
2010 vs. 2009
Reported
    Six months
ended
June 30,  2009

Constant
Currency 
   % Variance
2010 vs. 2009
Constant Currency
 

Revenues by segment

             

Watch

   $ 837    $ 796    5.1   $ 809    3.5

Buy

     1,542      1,387    11.1     1,435    7.4

Expositions

     87      101    (13.4 )%      101    (13.7 )% 
                                 

Total

   $ 2,466    $ 2,284    8.0   $ 2,345    5.2
                                 

Watch Segment Revenues

Revenues increased 5.1% to $837 million for the six months ended June 30, 2010 from $796 million for the six months ended June 30, 2009, or 3.5% on a constant currency basis. These increases were driven by 3.6% growth in North American television measurement as revenue increased from existing customers for existing

 

52


Table of Contents

products as well as increased revenue from new customers and 9.2% growth in Online and Mobile as a result of increases in both new and existing customer discretionary spending. These increases were partially offset by a 6.5% decline in international television measurement attributable to planned market closures.

Buy Segment Revenues

Revenues increased 11.1% to $1,542 million for the six months ended June 30, 2010 from $1,387 million for the six months ended June 30, 2009, or 7.4% on a constant currency basis, driven by a 21.6% increase in Developing markets (13.9% on a constant currency basis) and a 7.3% increase in Developed markets (4.9% on a constant currency basis), as our customers continue to expand geographically and increase their spending on analytical services.

Revenues from Information services increased 7.7% to $1,103 million for the six months ended June 30, 2010 from $1,025 million for the six months ended June 30, 2009, or 3.7% on a constant currency basis, excluding a 4.0% favorable impact of changes in foreign currency exchange rates. These increases were driven by 19.4% growth in Developing Markets (11.5% on a constant currency basis) as a result of continued expansion of both our retail measurement and consumer panel services to both new and existing customers and new markets. Revenue from Developed Markets increased 3.4% (relatively flat on a constant currency basis) as growth in retail measurement services in Western Europe and North America, primarily to existing customers, was offset by the impact of the divestiture of our box office scanning business.

Revenues from Insights services increased 20.9% to $439 million for the six months ended June 30, 2010 from $362 million for the six months ended June 30, 2009, or 17.9% on a constant currency basis, excluding a 3.0% favorable impact of changes in foreign currency exchange rates. These increases were driven by strong growth in both Developed and Developing Markets due to increases in customer discretionary spending on new product forecasting and other analytical services, which can be cyclical in nature.

Expositions Segment Revenues

Revenues declined 13.4% to $87 million for the six months ended June 30, 2010 from $101 million for the six months ended June 30, 2009, or 13.7% on a constant currency basis, primarily as a result of declines in exhibitor attendance.

 

53


Table of Contents

Operating Income/(Loss)

The table below sets forth comparative supplemental operating income data for the six months ended June 30, 2010 and 2009, both on an as reported and adjusted basis, adjusting for those items affecting operating income/(loss), as described above within the Consolidated Results commentary.

 

SIX MONTHS ENDED JUNE 30, 2010

   Reported
Operating
Income/(Loss)
    Restructuring
Charges
   Non-GAAP
Adjusted
Operating
Income/(Loss)
 

Operating Income/(Loss)

       

Watch

   $ 156      $ 5    $ 161   

Buy

     180        8      188   

Expositions

     26        —        26   

Corporate and Eliminations

     (48     9      (39
                       

Total Nielsen

   $ 314      $ 22    $ 336   
                       

SIX MONTHS ENDED JUNE 30, 2009

   Reported
Operating
Income/(Loss)
    Restructuring
Charges
   Non-GAAP
Adjusted
Operating
Income/(Loss)
 

Operating Income/(Loss)

       

Watch

   $ 153      $ 5    $ 158   

Buy

     150        2      152   

Expositions

     10        1      11   

Corporate and Eliminations

     (29     1      (28
                       

Total Nielsen

   $ 284      $ 9    $ 293   
                       

 

(IN MILLIONS)

   Six months
ended
June 30, 2010
    Six months
ended
June 30, 2009
    % Variance
2010 vs. 2009
Reported
    Six months
ended
June 30, 2009

Constant
Currency 
    % Variance
2010 vs. 2009
Constant Currency
 

Non-GAAP Adjusted Operating Income/(Loss) by Segment

          

Watch

   $ 161      $ 158      1.7   $ 161      0.2

Buy

     188        152      23.4     161      16.7

Expositions

     26        11      NM        11      NM   

Corporate and Eliminations

     (39     (28   (46.2 )%      (27   (47.3 )% 
                                    

Total

   $ 336      $ 293      14.3   $ 306      9.7
                                    

Watch. Operating income of $156 million was flat for the six months ended June 30, 2010 as compared to $153 million for the six months ended June 30, 2009 as the revenue performance discussed above was substantially offset by increases in costs associated with three-screen measurement initiatives as well as an $11 million increase in depreciation and amortization associated with technology infrastructure initiatives and Local People Meters. Adjusted operating income for the six months ended June 30, 2010 was flat on a constant currency basis compared to the six months ended June 30, 2009.

Buy. Operating income increased 19.4% to $180 million for the six months ended June 30, 2010 as compared to $150 million for the six months ended June 30, 2009 due to the impact of changes in foreign currency exchange rates, strong revenue performance in Insights services as well as cost savings effects of the Transformation Initiative and other productivity initiatives, offset by an increase in restructuring charges. Adjusted operating income for the six months ended June 30, 2010 was $188 million compared to adjusted operating income of $152 million for the six months ended June 30, 2009, an increase of 16.7% on a constant currency basis.

 

54


Table of Contents

Expositions. Operating income was $26 million for the six months ended June 30, 2010 as compared to $10 million for the six months ended June 30, 2009 due to the impact of cost savings effects of the Transformation Initiative and other productivity initiatives.

Corporate and Eliminations. Operating loss was $48 million for the six months ended June 30, 2010 as compared to an operating loss of $29 million for the six months ended June 30, 2009 due to increases in certain product investments and global infrastructure costs as well as higher restructuring charges. Adjusted operating loss for the six months ended June 30, 2010 was $39 million compared to adjusted operating loss of $28 million for the six months ended June 30, 2009.

Results of Operations—(Years Ended December 31, 2009, 2008 and 2007)

The following table sets forth, for the periods indicated, the amounts included in our Consolidated Statements of Operations:

 

     Year Ended
December 31,
 

(IN MILLIONS)

   2009     2008     2007  

Revenues

   $ 4,808      $ 4,806      $ 4,458   
                        

Cost of revenues, exclusive of depreciation and amortization shown separately below

     2,023        2,057        1,992   

Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below

     1,523        1,616        1,506   

Depreciation and amortization

     557        499        451   

Impairment of goodwill and intangible assets

     527        96        —     

Restructuring costs

     62        118        133   
                        

Operating income

     116        420        376   
                        

Interest income

     7        17        30   

Interest expense

     (647     (701     (691

(Loss)/gain on derivative instruments

     (60     (15     40   

Foreign currency exchange transaction (losses)/gains, net

     (2     20        (110

Other (expense)/income, net

     (17     (12     1   
                        

Loss from continuing operations before income taxes and equity in net (loss)/income of affiliates

     (603     (271     (354

Benefit/(provision) for income taxes

     197        (36     (12

Equity in net (loss)/income of affiliates

     (22     (7     2   
                        

Loss from continuing operations

     (428     (314     (364

(Loss)/income from discontinued operations, net of tax

     (61     (275     10   
                        

Net loss

     (489     (589     (354

Net income attributable to noncontrolling interests

     2        —          —     
                        

Net loss attributable to Nielsen Holdings

   $ (491   $ (589   $ (354
                        

Consolidated Results for the year ended December 31, 2009 versus the year ended December 31, 2008

When comparing our results for the year ended December 31, 2009 with results for the year ended December 31, 2008, the following should be noted:

Items affecting Operating Income for the year ended December 31, 2009

 

   

We incurred $527 million of non-cash goodwill and intangible impairment charges.

 

   

We incurred $62 million of restructuring expense.

 

55


Table of Contents

Items affecting Operating Income for the year ended December 31, 2008

 

   

We incurred a $96 million of non-cash goodwill impairment charge.

 

   

We incurred $118 million of restructuring expense.

Revenues

Our revenues were flat at $4,808 million for the year ended December 31, 2009 compared to $4,806 million for the year ended December 31, 2008, an increase of 4.0% on a constant currency basis, which excludes the unfavorable impact of changes in foreign currency exchange rates. Our revenue performance included a 10.5% increase within our Watch segment (11.5% on a constant currency basis), a 2.9% decrease within our Buy segment (a 2.7% increase on a constant currency basis) and a 25.1% decline in our Expositions segment (24.6% on a constant currency basis).

Cost of Revenues, Exclusive of Depreciation and Amortization

Cost of revenues decreased 1.6% to $2,023 million for the year ended December 31, 2009 from $2,057 million for the year ended December 31, 2008, an increase of 2.6% on a constant currency basis, which excludes a 4.2% favorable impact of changes in foreign currency exchange rates. The change in cost of revenues was driven by a 4.0% increase from the impact of acquisitions and divestitures within both our Watch and Buy segments (4.2% increase on a constant currency basis) offset by cost savings due to the effects of the Transformation Initiative (see discussion below under “—Restructuring Costs—Transformation Initiative”) and other productivity initiatives. Cost of revenues within our Expositions segment decreased 30.6% (29.8% on a constant currency basis) due to lower variable exhibition costs.

Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization

SG&A expenses decreased 5.7% to $1,523 million for the year ended December 31, 2009 from $1,616 million for the year ended December 31, 2008, a decrease of 1.5% on a constant currency basis excluding a 4.2% favorable impact of changes in foreign currency exchange rates. SG&A expenses declined 44.6% and 14.9% (44.9% and 14.6% on a constant currency basis) in Corporate and our Expositions segments, respectively, which was slightly offset by a 3.5% increase (3.7% on a constant currency basis) due to the impact of acquisitions and divestitures in both our Watch and Buy segments.

Depreciation and Amortization

Depreciation and amortization increased to $557 million for the year ended December 31, 2009 from $499 million for the year ended December 31, 2008, driven by increased amortization due to the impact of acquisitions and divestitures and higher depreciation related to increased capital investment on projects to enhance our technology platform and global infrastructure.

Impairment of Goodwill and Intangible Assets

During 2009, we recorded a non-cash goodwill impairment charge of $282 million and a non-cash intangible asset impairment charge of $245 million. These charges related to both our Watch and Expositions segments. A deferred tax benefit of $103 million was recognized during the period as a result of these impairment charges. We recorded a $96 million non-cash goodwill impairment charge relating to a reporting unit within our Watch segment in 2008. A deferred tax benefit of $7 million was recognized during the period as a result of this impairment charge.

 

56


Table of Contents

Restructuring Costs

Transformation Initiative

The Transformation Initiative was completed during 2009; however, the payments will continue through 2010.

We incurred $33 million in restructuring charges primarily relating to severance costs for the year ended December 31, 2009. We recorded $118 million in restructuring charges for the year ended December 31, 2008. The charges included severance costs as well as $24 million of contractual termination costs and asset write-offs.

Other Productivity Initiatives

In December 2009, we commenced certain specific restructuring actions attributable to defined cost-reduction programs, primarily in Europe and North America, directed towards achieving increased productivity in future periods. We recorded $29 million in restructuring charges associated with these initiatives during the fourth quarter of 2009. The charges included severance costs of $22 million as well as $7 million of contractual termination costs and asset write-offs.

See Note 8 to our audited consolidated financial statements, “Restructuring Activities,” included elsewhere in this prospectus, for additional information regarding our restructuring programs.

Operating Income

Operating income for the year ended December 31, 2009 decreased to $116 million, from $420 million for the year ended December 31, 2008. Excluding “Items affecting Operating Income,” specifically noted above, our adjusted operating income increased 11.1%, or 14.8% on a constant currency basis, excluding a 3.7% unfavorable impact of changes in foreign currency exchange rates. Adjusted operating income within our Watch segment increased by 20.6% (20.9% on a constant currency basis) as a result of the 11.5% constant currency revenue growth mentioned above, the impact of the Transformation Initiative and other productivity initiatives, as well as the impact of acquisitions and divestitures. Adjusted operating income within our Buy segment increased 2.6% (7.6% on a constant currency basis) primarily driven by the impact of the Transformation Initiative and other productivity initiatives as well as the 2.7% constant currency revenue growth mentioned above. Adjusted operating income within our Expositions segment decreased by 54.8% (53.7% on a constant currency basis) primarily as result of lower exposition revenues. Adjusted operating expenses within Corporate declined 36.2% as a result of cost reductions from the impact of the Transformation Initiative as well as decreased spending on certain product initiatives.

Interest Income and Expense

Interest income was $7 million for the year ended December 31, 2009 compared to $17 million for the year ended December 31, 2008. Interest expense was $647 million for the year ended December 31, 2009 compared to $701 million for the year ended December 31, 2008. The decrease was driven primarily by the termination and subsequent capitalization of the term loan with Luxco and the impact of interest allocations to discontinued operations, slightly offset by higher interest expense on our debenture loan portfolio as a result of new debt issuances in 2009.

Loss on Derivative Instruments

The loss on derivative instruments was $60 million for the year ended December 31, 2009 compared to a loss of $15 million for the year ended December 31, 2008. The increased loss resulted primarily from the change in fair value of certain of our interest rate swaps for which hedge accounting was discontinued in February 2009 as well as losses attributable to movements in the Euro relative to the U.S. dollar associated with a foreign currency swap derivative instrument, which was terminated in March 2009.

 

57


Table of Contents

Foreign Currency Exchange Transaction (Losses)/Gains, Net

Foreign currency exchange transaction gains, net, represent the net gain or loss on revaluation of external debt, intercompany loans and other receivables and payables. Fluctuations in the value of foreign currencies relative to the U.S. dollar have a significant effect on our operating results, particularly the Euro. The average U.S. dollar to Euro exchange rate was $1.39 to €1.00 and $1.47 to €1.00 for the year ended December 31, 2009 and the year ended December 31, 2008, respectively.

Foreign currency exchange resulted in a $2 million loss for the year ended December 31, 2009 compared to a $20 million gain recorded in the year ended December 31, 2008 primarily as a result of the fluctuation in the value of the U.S. dollar against the Euro applied to certain of our Euro denominated senior secured term loans and debenture loans as well as a portion of our intercompany loan portfolio.

Other Expense, Net

Other expense, net was $17 million for the year ended December 31, 2009 versus $12 million for the year ended December 31, 2008. The 2009 amount primarily includes net charges of approximately $15 million associated with the purchase and cancellation of GBP 250 million 5.625% EMTN debenture notes and the write-off of deferred debt issuance costs associated with the modification of our 2006 Senior Secured Credit Facilities offset in part by net gains primarily associated with certain divestitures, including the sale of our Brazilian operations within our Expositions segment.

Loss from Continuing Operations Before Income Taxes and Equity in Net Loss of Affiliates

For the year ended December 31, 2009, loss from continuing operations before income taxes, and equity in net loss of affiliates was $603 million compared to a $271 million loss for the year ended December 31, 2008. The current period compared with the prior period results primarily reflects impairment of goodwill and intangible assets offset in part by lower restructuring expenses, lower interest costs and increased operating performance, primarily driven by cost reduction programs.

Equity in Net Loss of Affiliates

For the year ended December 31, 2009, equity in net loss of affiliates was $22 million compared to $7 million for the year ended December 31, 2008 primarily driven by an after-tax non-cash impairment charge of $26 million (net of a tax adjustment of $18 million) associated with our non-controlling ownership interest in Scarborough in the third quarter of 2009.

Income Taxes

The effective tax rates for the years ended December 31, 2009 and 2008 were a benefit of 32.7% and an expense of 13.3%, respectively. The effective tax rate for the year ended December 31, 2009 was higher than the Dutch statutory rate primarily due to state and foreign withholding and income taxes and the impact of the tax rate differences in other jurisdictions where we file tax returns, which is partially offset by impairments of goodwill and intangible assets, which had a tax basis significantly lower than the underlying book basis and therefore a lower tax benefit.

The effective tax rate for the year ended December 31, 2008 was lower than the Dutch statutory rate primarily due to the impairment of goodwill, which had a tax basis significantly lower than the book basis and therefore a lower tax benefit, tax on distribution from foreign subsidiaries, change in estimates related to global uncertain tax positions, state and foreign withholding and income taxes, change in estimates for other tax positions and certain non-deductible charges, which were partially offset by the impact of the tax rate differences in other jurisdictions where we file tax returns.

 

58


Table of Contents

At December 31, 2009 and December 31, 2008, we had gross uncertain tax positions of $129 million and $187 million, respectively. We also have accrued interest and penalties associated with these uncertain tax positions as of December 31, 2009 and December 31, 2008 of $23 million, and $22 million, respectively. Estimated interest and penalties related to the underpayment of income taxes is classified as a component of our benefit/(provision) for income taxes. It is reasonably possible that a reduction in a range of $9 million to $38 million of uncertain tax positions may occur within the next 12 months as a result of projected resolutions of worldwide tax disputes.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where statutory rates are lower and earnings being higher than anticipated in countries where statutory rates are higher, by changes in the valuation of our deferred tax assets, or by changes in tax laws, regulations, accounting principles, or interpretations thereof.

Discontinued Operations

For the year ended December 31, 2009, loss from discontinued operations, net of tax of $31 million, was $61 million compared to a $275 million loss for the year ended December 31, 2008. Discontinued operations primarily relate to our Publications operating segment and the loss for the year ended December 31, 2009 includes a net loss on the sale of our media properties within the Publications operating segment, including The Hollywood Reporter and Billboard, to e5 Global Media LLC, of $14 million, net of tax of $3 million. Additionally, losses for both 2009 and 2008 include goodwill impairment charges associated with our Publications operating segment of $55 million and $336 million, respectively. The loss for the year ended December 31, 2008 is partially offset by a gain of $19 million relating to the settlement of tax contingencies associated with the sale of our Directories segment to World Directories.

Consolidated Results for the year ended December 31, 2008 versus the year ended December 31, 2007

When comparing our results for the year ended December 31, 2008 with results for the year ended December 31, 2007, the following should be noted:

Items affecting Operating Income for the year ended December 31, 2008

 

   

We incurred a $96 million non-cash goodwill impairment charge.

 

   

We incurred $118 million of restructuring expense.

Items affecting Operating Income for the year ended December 31, 2007

 

   

We incurred $133 million of restructuring expense.

 

   

We incurred approximately $37 million in transaction costs, legal settlements and incremental expenses associated with compensation agreements and recruiting costs for certain corporate executives.

Revenues

Our revenues increased 7.8% to $4,806 million for the year ended December 31, 2008 from $4,458 million for the year ended December 31, 2007, or 6.1% on a constant currency basis, excluding a 1.7% favorable impact of changes in foreign currency exchange rates. These increases were driven by a 10.5% increase within our Watch segment (10.4% on a constant currency basis) and a 7.5% increase within our Buy segment (5.0% on a constant currency basis), partially offset by a 3.4% decline in Expositions (3.9% on a constant currency basis).

Cost of Revenues, Exclusive of Depreciation and Amortization

Cost of revenues increased 3.1% to $2,057 million for the year ended December 31, 2008 from $1,992 million for the year ended December 31, 2007, or 1.2% on a constant currency basis, excluding a 1.9%

 

59


Table of Contents

unfavorable impact of changes in foreign currency exchange rates. These increases were driven by a 1.2% increase due to the impact of acquisitions, which were partly offset by productivity savings following actions implemented under the Transformation Initiative in both our Watch and Buy segments and a 4.5% decline in costs within our Expositions segment (5.3% on a constant currency basis).

Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization

SG&A expenses increased 7.1% to $1,616 million for the year ended December 31, 2008 versus $1,506 million for the year ended December 31, 2007, or 5.3% on a constant currency basis, excluding a 1.8% unfavorable impact of changes in foreign currency exchange rates. These increases were primarily due to a 2.4% increase as a result of the impact of acquisitions as well as continued investment in Developing Markets within our Buy segment. These increases were partly offset by the impact of the Transformation Initiative and other productivity related savings, a $34 million decrease in share based compensation expenses and a $37 million decrease in payments in connection with compensation agreements and recruiting expenses for certain corporate executives.

Depreciation and Amortization

Depreciation and amortization increased to $499 million for the year ended December 31, 2008 from $451 million for the year ended December 31, 2007, driven by increased depreciation related to capital investment in hardware and software and increased amortization due to the impact of acquisitions, partly offset by lower amortization on previously acquired intangible assets at our Expositions segment.

Impairment of Goodwill

We recorded a non-cash goodwill impairment charge of $96 million associated with a reporting unit within our Watch segment. A deferred tax benefit of $7 million was recognized as a result of this impairment charge.

Restructuring Costs

We recorded $118 million in restructuring charges for the year ended December 31, 2008 associated with the Transformation Initiative. The charges included severance costs as well as $24 million of contractual termination costs and asset write-offs.

We recorded $133 million in restructuring charges for the year ended December 31, 2007 associated with the Transformation Initiative. The charges included $92 million in severance costs as well as $6 million in asset write-offs and $35 million in consulting fees and other costs, related to reviews of corporate functions and outsourcing opportunities.

Operating Income

Operating income for the year ended December 31, 2008 increased 12.1% to $420 million from $376 million for the year ended December 31, 2007. Excluding “Items affecting Operating Income,” specifically noted above from our respective 2008 and 2007 operating results, adjusted operating income increased 16.5% (15.7% on a constant currency basis), for the year ended December 31, 2008 as compared to the year ended December 31, 2007. Adjusted operating income within our Watch segment increased 29.9% (30.4% on a constant currency basis) reflecting the impact of acquisitions, 10.4% constant currency revenue growth mentioned above and benefits realized from our Transformation Initiative. Adjusted operating income within our Buy segment increased 12.0% (10.5% on a constant currency basis) due to revenue growth in Developing Markets, as well as benefits realized from our Transformation Initiative. Adjusted operating income increased 9.4% (10.3% on a constant currency basis) within our Expositions segment as 3.9% constant currency revenue declines were largely offset by the impact of cost savings. Adjusted operating expenses increased 31.0% (32.4% on a constant currency basis) within Corporate as a result of increased expenditures on global infrastructure and product development initiatives.

 

60


Table of Contents

Interest Income and Expense

Interest income was $17 million for the year ended December 31, 2008 versus $30 million for the year ended December 31, 2007. Interest expense was $701 million for the year ended December 31, 2008 versus $691 million for the year ended December 31, 2007. This increase reflects the additional borrowings associated with our 2007 and 2008 acquisitions as well as an increase associated with the Luxco term loan, partially offset by a decline in the weighted average interest rates of our 2006 Senior Secured Credit Facilities.

(Loss)/Gain on Derivative Instruments

The loss on derivative instruments was $15 million for the year ended December 31, 2008 as compared to a gain of $40 million for the year ended December 31, 2007. The change resulted primarily from movements in the Euro relative to the U.S. dollar in the current period as compared to the prior period, resulting from a foreign currency swap derivative instrument entered into during 2007.

Foreign Currency Exchange Transaction Gains/(Losses), Net

Foreign currency exchange transaction gains or losses, net, represent the net gain or loss on revaluation of external debt and intercompany loans. Fluctuations in the value of foreign currencies, particularly the Euro, relative to the U.S. dollar have a significant effect on our operating results. The average U.S. dollar to Euro exchange rate was $1.47 to €1.00 and $1.37 to €1.00 for the year ended December 31, 2008 and the year ended December 31, 2007, respectively.

Foreign currency exchange resulted in a $20 million gain for the year ended December 31, 2008 versus a $110 million loss recorded in the year ended December 31, 2007 as a result of the appreciation of the U.S. dollar against the Euro and other currencies.

Other (Expense)/Income, net

Other expense was $12 million for the year ended December 31, 2008 as compared to income of $1 million for the year ended December 31, 2007. The 2008 expense was mainly due to a determination that there was a decline in the value of an investment in a publicly listed company and accounted for as an available-for-sale security which was other than temporary and therefore we recognized a $12 million loss.

Loss from Continuing Operations before Income Taxes, and Equity in Net (Loss)/Income of Affiliates

For the year ended December 31, 2008, there was a $271 million loss from continuing operations before income taxes and equity in net (loss)/income of affiliates versus a $354 million loss for the year ended December 31, 2007. The lower 2008 loss as compared with 2007 primarily reflects our improved operating performance as discussed above, lower restructuring expenses related to the Transformation Initiative, lower payments in connection with compensation agreements and recruiting expenses for certain corporate executives, and foreign currency exchange gains that occurred during the year ended December 31, 2008 only partly offset by the goodwill impairment charge of $96 million in 2008 and higher interest costs.

Income Taxes

The effective tax rates for the years ended December 31, 2008 and 2007 were an expense of 13.3% and 3.4%, respectively. The effective tax rate for the year ended December 31, 2008 was lower than the Dutch statutory rate primarily due to the impairment of goodwill which had a tax basis significantly lower than the book basis and therefore a lower tax benefit, tax on distributions from foreign subsidiaries, change in estimates related to global uncertain tax positions, state and foreign withholding and income taxes, change in estimates for other tax positions and certain non-deductible charges, which were partially offset by the impact of the tax rate differences in other jurisdictions where we file tax returns.

 

61


Table of Contents

The effective tax rate for the year ended December 31, 2007 was lower than the Dutch statutory rate primarily related to the tax impact on distributions from foreign subsidiaries. This was partially offset by the recognition of the tax benefit of interest expense related to the Valcon senior secured bridge facility based upon a favorable 2007 Dutch residency ruling. In addition, the change in estimates related to global uncertain tax positions and the valuation allowance also influenced the 2007 tax rate.

Discontinued Operations

For the year ended December 31, 2008, loss from discontinued operations, net of tax was $275 million as compared to a gain of $10 million for the year ended December 31, 2007. Discontinued operations relate to our Publications operating segment as well as our Directories segment. The loss for the year ended December 31, 2008 includes an impairment charge of $336 million relating to our Publications operating segment offset in part by a gain of $19 million relating to the settlement of tax contingencies associated with the sale of our Directories segment to World Directories as well as net losses attributable to the discontinued operations. The gain for the year ended December 31, 2007 includes a $17 million gain on the sale of our Business Media Europe unit offset by net losses attributable to the discontinued operations.

Business Segment Results for the year ended December 31, 2009 versus the year ended December 31, 2008

Revenues

The table below sets forth our segment revenue growth data for the year ended December 31, 2009 compared to the year ended December 31, 2008, both on an as-reported and constant currency basis. In order to determine the percentage change in revenue on a constant currency basis, we remove the positive and negative impacts of changes foreign currency exchange rates:

 

(IN MILLIONS)

   Year ended
December 31,
2009
   Year ended
December 31,
2008
   % Variance
2009 vs. 2008
Reported
    Year ended
December 31,
2008

Constant
Currency
   % Variance
2009 vs. 2008
Constant
Currency
 

Revenues by segment

             

Watch

   $ 1,635    $ 1,480    10.5   $ 1,466    11.5

Buy

     2,993      3,084    (2.9 )%      2,915    2.7

Expositions

     180      240    (25.1 )%      238    (24.6 )% 

Corporate and eliminations

     —        2    n/a        2    n/a   
                                 

Total

   $ 4,808    $ 4,806    0.1   $ 4,621    4.0
                                 

Watch Segment Revenues

Revenues increased 10.5% to $1,635 million for the year ended December 31, 2009 from $1,480 million for the year ended December 31, 2008, or 11.5% on a constant currency basis. Excluding the impact of acquisitions, revenue grew 1.7% (2.6% on a constant currency basis) as our television audience market expansion was offset by lower spending by our customers on enhanced analytical services. This growth was primarily driven by a 4.7% constant currency increase in North American television measurement due to volume increases associated with measurement data from five additional markets being added to the Local People Meter (“LPM”) program.

Buy Segment Revenues

Revenues decreased 2.9% to $2,993 million for the year ended December 31, 2009 from $3,084 million for the year ended December 31, 2008, an increase of 2.7% on a constant currency basis as our customers continue

 

62


Table of Contents

to expand geographically and increase their spending on analytical services. Revenue from Developing Markets decreased 2.6% (a 8.0% increase on a constant currency basis) and revenue from Developed Markets decreased 3.1% (a 0.8% increase on a constant currency basis).

Revenues from Information services decreased 4.7% to $2,157 million for the year ended December 31, 2009 from $2,262 million for the year ended December 31, 2008, an increase of 1.7%, on a constant currency basis excluding a 6.4% unfavorable impact of changes in foreign currency exchange rates. Revenue from Developing Markets declined 4.0%, however, was the primary driver for the constant currency increase mentioned above, increasing 7.5% on a constant currency basis as a result of continued geographic expansion of both our retail measurement and consumer panel services to both new and existing customers.

Revenues from Insights services increased 1.8% to $836 million for the year ended December 31, 2009 from $822 million for the year ended December 31, 2008, or 5.3% on a constant currency basis excluding a 3.5% unfavorable impact of changes in foreign currency exchange rates. These increases were driven by 0.8% growth in Developing Markets (8.9% on a constant currency basis) and the impact of acquisitions. The growth in Developing Markets related to continued expansion of our analytical services, primarily to existing customers who are expanding their presence in these markets.

Expositions Segment Revenues

Revenues for the year ended December 31, 2009 decreased 25.1% to $180 million from $240 million for the year ended December 31, 2008, due largely to lower exhibitor attendance driven by the economic environment.

Operating Income/(Loss)

The table below sets forth supplemental operating income data for the year ended December 31, 2009 compared to the year ended December 31, 2008, both on an as reported and adjusted basis, adjusting for the impact of changes in foreign currency exchange rates as well as those items affecting operating income/(loss), as described above within the Consolidated Results commentary.

 

YEAR ENDED DECEMBER 31, 2009

   Reported
Operating
Income/(Loss)
    Restructuring
and
Impairment
Charges(1)
   Non-GAAP
Adjusted
Operating
Income/(Loss)
 

Operating Income/(Loss)

       

Watch

   $ (73   $ 411    $ 338   

Buy

     361        39      400   

Expositions

     (105     128      23   

Corporate and Eliminations

     (67     11      (56
                       

Total Nielsen

   $ 116      $ 589    $ 705   
                       

 

YEAR ENDED DECEMBER 31, 2008

   Reported
Operating
Income/(Loss)
    Restructuring
and
Impairment
Charges(1)
   Non-GAAP
Adjusted
Operating
Income/(Loss)
 

Operating Income/(Loss)

       

Watch

   $ 171      $ 110    $ 281   

Buy

     315        74      389   

Expositions

     50        1      51   

Corporate and Eliminations

     (116     29      (87
                       

Total Nielsen

   $ 420      $ 214    $ 634   
                       

 

(1) Includes $402 million and $96 million of goodwill and other intangible asset impairment charges within our Watch segment in 2009 and 2008, respectively and $125 million within our Expositions segment in 2009.

 

63


Table of Contents

(IN MILLIONS)

   Year ended
December 31,
2009
    Year ended
December 31,
2008
    % Variance
2009 vs. 2008
Reported
    Year ended
December 31,
2008
Constant
Currency
    % Variance
2009 vs. 2008
Constant
Currency
 

Non-GAAP Adjusted Operating Income/(Loss) by Segment

          

Watch

   $ 338      $ 281      20.6   $ 279      20.9

Buy

     400        389      2.6     371      7.6

Expositions

     23        51      (54.8 )%      51      (53.7 )% 

Corporate and Eliminations

     (56     (87   (36.2 )%      (87   (36.2 )% 
                                    

Total

   $ 705      $ 634      11.1   $ 614      14.8
                                    

Watch. Operating loss was $73 million for the year ended December 31, 2009 compared to operating income of $171 million for the year ended December 31, 2008 due to increases in restructuring and impairment charges offset by the revenue growth mentioned above and cost savings from the impact of our Transformation Initiative. Adjusted operating income for the year ended December 31, 2009 was $338 million compared to adjusted operating income of $281 million for the year ended December 31, 2008, an increase of 20.9% on a constant currency basis.

Buy. Operating income increased to $361 million for the year ended December 31, 2009 from $315 million for the year ended December 31, 2008 due to lower restructuring charges, the revenue growth mentioned above and the effects of the Transformation Initiative and other productivity initiatives. Adjusted operating income for the year ended December 31, 2009 was $400 million compared to adjusted operating income of $389 million for the year ended December 31, 2008, an increase of 7.6% on a constant currency basis.

Expositions. Operating loss was $105 million for the year ended December 31, 2009 compared to operating income of $50 million for the year ended December 31, 2008 due to intangible asset impairment charges as well as declines in our revenues due to the economic environment. Adjusted operating income for the years ended December 31, 2009 was $23 million compared to $51 million, a decrease of 53.7% on a constant currency basis.

Corporate and Eliminations. Operating loss was $67 million for the year ended December 31, 2009 compared to $116 million for the year ended December 31, 2008. Adjusted operating loss for the year ended December 31, 2009 was $56 million versus the $87 million of adjusted operating loss for the year ended December 31, 2008. These decreases were due to lower expenses on certain product initiatives as well as the impact of the Transformation Initiative.

 

64


Table of Contents

Business Segment Results for the year ended December 31, 2008 versus the year ended December 31, 2007

Revenues

The table below sets forth certain supplemental revenue growth data for the year ended December 31, 2008 compared to the year ended December 31, 2007, both on an as-reported and constant currency basis. In order to determine the percentage change in items on a constant currency basis, we adjust these items to remove the positive and negative impacts of foreign exchange:

 

(IN MILLIONS)

   Year ended
December 31,
2008
   Year ended
December 31,
2007
   % Variance
2008 vs. 2007
Reported
    Year ended
December 31,
2007 Constant
Currency
   % Variance
2008 vs. 2007
Constant
Currency
 

Revenues by segment

             

Watch

   $ 1,480    $ 1,339    10.5   $ 1,341    10.4

Buy

     3,084      2,868    7.5     2,937    5.0

Expositions

     240      248    (3.4 )%      249    (3.9 )% 

Corporate and eliminations

     2      3    n/a        3    n/a   
                                 

Total

   $ 4,806    $ 4,458    7.8   $ 4,530    6.1
                                 

Watch Segment Revenues

Revenues increased 10.5% to $1,480 million for the year ended December 31, 2008 from $1,339 million for the year ended December 31, 2007, or 10.4% on a constant currency basis. Excluding the impact of acquisitions and divestitures, Watch revenues increased 7.7% driven by volume increases leading to 8.0% growth in North American television measurement attributable to the launch of additional markets in 2008 under the LPM program. These volume increases were primarily attributable to existing customers.

Buy Segment Revenues

Revenues increased 7.5% to $3,084 million for the year ended December 31, 2008 from $2,868 million for the year ended December 31, 2007, or 5.0% on a constant currency basis. These increases were driven by 18.5% growth in Developing Markets (15.6% on a constant currency basis) and 3.9% growth in Developed Markets (1.5% on a constant currency basis).

Information services revenues increased 6.2% to $2,262 million for the year ended December 31, 2008 from $2,130 million for the year ended December 31, 2007, or 3.6% on a constant currency basis, excluding a 2.6% favorable impact of changes in foreign currency exchange rates. These increases were driven by 17.6% growth in Developing Markets (13.8% on a constant currency basis) and slight increases in Developed Markets as growth in North America and Western Europe was offset by the closure of certain product lines in Japan in 2007.

Insights services revenues increased 11.1% to $822 million for the year ended December 31, 2008 from $738 million for the year ended December 31, 2007, or 9.3% on a constant currency basis, excluding a 1.8% favorable impact of changes in foreign currency exchange rates. These increases were driven by growth in both Developed and Developing Markets resulting from higher client demand for our analytical services.

Expositions Segment Revenues

Revenues for the year ended December 31, 2008 were $240 million versus $248 million for the year ended December 31, 2007 as lower exhibitor attendance was driven by the economic environment.

 

65


Table of Contents

Operating Income/(Loss)

The table below sets forth supplemental operating income data for the year ended December 31, 2008 compared to the year ended December 31, 2007, both on an as-reported and adjusted basis, adjusting for the impact of changes in foreign currency exchange rates as well as those items affecting operating income/(loss), as described above within the Consolidated Results commentary.

 

YEAR ENDED DECEMBER 31, 2008

   Reported
Operating
Income/(Loss)
    Restructuring
and
Impairment
Charges
   Other Items
Affecting
Operating
Income
   Non-GAAP
Adjusted
Operating
Income/(Loss)
 

Operating Income

          

Watch

   $ 171      $ 110    $ —      $ 281   

Buy

     315        74      —        389   

Expositions

     50        1      —        51   

Corporate and Eliminations

     (116     29      —        (87
                              

Total Nielsen

   $ 420      $ 214    $ —      $ 634   
                              

 

YEAR ENDED DECEMBER 31, 2007

   Reported
Operating
Income/(Loss)
    Restructuring
Charges
   Other Items
Affecting
Operating
Income
   Non-GAAP
Adjusted
Operating
Income/(Loss)
 

Operating Income

          

Watch

   $ 188      $ 10    $ 18    $ 216   

Buy

     264        84      —        348   

Expositions

     44        2      —        46   

Corporate and Eliminations

     (120     37      19      (64
                              

Total Nielsen

   $ 376      $ 133    $ 37    $ 546   
                              

 

(IN MILLIONS)

   Year ended
December 31,
2008
    Year ended
December 31,
2007
    % Variance
2008 vs. 2007
Reported
    Year ended
December 31,
2007

Constant
Currency
    % Variance
2008 vs. 2007
Constant
Currency
 

Non-GAAP Adjusted Operating Income/(Loss) by Segment

          

Watch

   $ 281      $ 216      29.9   $ 352      30.4

Buy

     389        348      12.0     215      10.5

Expositions

     51        46      9.4     46      10.3

Corporate and Eliminations

     (87     (64   31.0     (65   32.4
                                    

Total

   $ 634      $ 546      16.5   $ 548      15.7
                                    

Watch. Operating income was $171 million for the year ended December 31, 2008 compared to $188 million for the year ended December 31, 2007. The decrease in operating income was due to increases in restructuring and impairment charges and increases in SG&A expenses, offset by the revenue performance mentioned above and cost savings from the Transformation Initiative. Adjusted operating income was $281 million for the year ended December 31, 2008 compared to an adjusted operating income of $216 million for the year ended December 31, 2007, an increase of 30.4%, on a constant currency basis.

Buy. Operating income was $315 million for the year ended December 31, 2008 compared to $264 million for the year ended December 31, 2007. Adjusted operating income for the year ended December 31, 2008 was $389 million compared to operating income of $348 million for the year ended December 31, 2007, an increase of 10.5%, on a constant currency basis. These increases were due to the revenue performance mentioned above

 

66


Table of Contents

as well as productivity savings following actions implemented under the Transformation Initiative. These savings were partially offset by an increase in SG&A expenses mentioned above due in equal part to the impact of acquisitions and continued investment in Developing Markets.

Expositions. Operating income was $50 million for the year ended December 31, 2008 compared to $44 million for the year ended December 31, 2007. Adjusted operating income was $51 million for the year ended December 31, 2008 compared to an adjusted operating income of $46 million for the year ended December 31, 2007, an increase of 10.3%, on a constant currency basis. These increases were primarily attributable to cost savings initiatives.

Corporate and Eliminations. Operating loss was $116 million for the year ended December 31, 2008 compared to $120 million for the year ended December 31, 2007. The decrease in operating loss was primarily attributable to lower restructuring and other items affecting operating income offset by increased spending on certain product initiatives and increased share compensation expense when compared to 2007. Adjusted operating loss was $87 million for the year ended December 31, 2008 compared to an adjusted operating loss of $64 million for the year ended December 31, 2007.

Supplemental Quarterly Financial Information

The below table presents selected unaudited quarterly financial information for each of the interim periods in the years ended December 31, 2009 and 2008.

 

     2008     2009  

(IN MILLIONS)

   First
Quarter
    Second
Quarter
    Third
Quarter
    Fourth
Quarter
    First
Quarter
    Second
Quarter
    Third
Quarter
    Fourth
Quarter
 

Revenues

   $ 1,156      $ 1,241      $ 1,223      $ 1,186      $ 1,102      $ 1,182      $ 1,227      $ 1,297   

Depreciation and amortization

     116        122        127        134        130        136        143        148   

Operating income/(loss)(1)

     106        154        124        36        112        172        (326     158   

Discontinued operations, net of tax(2)

     —          1        (6     (270     (4     4        (58     (3

Net income/(loss) attributable to Nielsen Holdings

   $ (108   $ (6   $ 22      $ (497   $ 2      $ (10   $ (527   $ 44   

 

(1) Includes restructuring charges of $45 million and $58 million for the third quarter and the fourth quarter of 2008, respectively. The fourth quarter of 2008 also includes a goodwill impairment charge of $96 million. Includes restructuring charges of $56 million in the fourth quarter of 2009. The third quarter of 2009 also includes charges for the impairment of goodwill impairment and intangible assets of $527 million.
(2) The fourth quarter of 2008 includes a goodwill impairment charge relating to the Publications operating segment of $336 million. Includes a net loss after taxes of $14 million relating to the sale of the media properties within our Publications operating segment during the fourth quarter of 2009. The third quarter of 2009 includes a goodwill impairment charge relating to the Publications operating segment of $55 million.

Liquidity and Capital Resources

Overview

As a result of the Acquisition and related financing, our contractual obligations, commitments and debt service requirements over the next several years are significant. Our primary source of liquidity will continue to be cash generated from operations as well as existing cash. At June 30, 2010, cash and cash equivalents were $371 million and our total indebtedness, excluding bank overdrafts, was $8,421 million. In addition, we also had $669 million available for borrowing under our senior secured revolving credit facility at June 30, 2010.

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

 

67


Table of Contents

fund our current obligations, projected working capital requirements, restructuring obligations, 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. It is possible that continued changes to global economic conditions could adversely affect our cash flows through increased interest costs or our ability to obtain external financing or to refinance existing indebtedness.

Financing Transactions

Overview of Financing Transactions

In connection with the Acquisition, we entered into financing transactions consisting of (i) senior secured credit facilities consisting of seven-year $4,175 million and €800 million senior secured term loan facilities and a six-year $688 million senior secured revolving credit facility and (ii) debt securities, consisting of $650 million 10% and €150 million 9% Senior Notes due 2014 of Nielsen Finance LLC and Nielsen Finance Co., $1,070 million 12.5% Senior Subordinated Discount Notes due 2016 of Nielsen Finance LLC and Nielsen Finance Co. and €343 million 11.125% Senior Discount Notes due 2016 of TNC B.V.

Subsequent to the Acquisition, we entered into the following transactions in 2007:

 

   

Effective January 19, 2007, we entered into a cross-currency swap maturing in May, 2010 to hedge our exposure to foreign currency exchange rate movements on part of our GBP-denominated external debt. With this transaction a notional amount of GBP 225 million with a fixed interest rate of 5.625% was swapped to a notional amount of €344 million with a fixed interest rate of 4.033%. The swap was designated as a foreign currency cash flow hedge.

 

   

Effective January 22, 2007, we obtained a 50 and 25 basis point reduction of the applicable margin on our U.S. dollar and Euro senior secured term loan facilities. As of December 31, 2007, this reduction has resulted in estimated interest savings of $22 million.

 

   

On February 9, 2007, we applied $328 million of the BME sale proceeds towards making a mandatory pre-payment on the €800 million senior secured term loan facility which reduced the amount of the Euro facility to €545 million. By making this pre-payment, we were no longer required to pay the scheduled Euro quarterly installments for the remainder of the term of the senior secured term loan facility.

 

   

Effective February 9, 2007, we entered into a cross-currency swap maturing February, 2010 to convert part of our Euro-denominated external debt to U.S. dollar-denominated debt. With this transaction, a notional amount of €200 million with a 3-month Euribor based interest rate is swapped to a notional amount of $259 million with an interest rate based on 3-month USD-Libor minus a spread. No hedge designation was made for this swap.

 

   

Effective May 31, 2007, we obtained a further 25 basis point reduction of the applicable margin on our U.S. dollar and Euro senior secured term loan facilities as a result of achieving a secured leverage ratio below 4.25 as of March 31, 2007.

 

   

To finance the acquisition of Nielsen//NetRatings for $330 million, we borrowed $115 million of the $688 million senior secured revolving credit facility.

 

   

On August 9, 2007, we completed the acquisition of Telephia, Inc. for approximately $449 million. $350 million of the purchase price was borrowed under the incremental provision of our senior secured term loan facilities which increased the total U.S. dollar facility to $4,525 million, and the balance funded through the availability under our senior secured revolving credit facility and cash on hand.

We entered into the following transactions in 2008:

 

   

In February 2008, we entered into a 2-year interest rate swap agreement which fixed the LIBOR-related portion of the interest rates for $500 million of our variable rate debt.

 

68


Table of Contents
   

Effective April 2, 2008, we obtained a 25 basis point reduction of the applicable margin on our U.S. dollar and Euro senior secured term loan facilities as a result of achieving a secured leverage ratio below 4.25 as of December 31, 2007. In addition, we obtained a 25 basis point reduction of the applicable margin on our senior secured revolving credit facility as a result of achieving a total leverage ratio below 6.0 as of December 31, 2007.

 

   

On April 16, 2008, we issued $220 million aggregate principal amount of 10% Senior Notes due 2014. The net proceeds of the offering were used to finance our acquisition of IAG and to pay related fees and expenses.

We entered into the following transactions in 2009:

 

   

In January 2009, we issued $330 million in aggregate principal amount of 11.625 % Senior Notes due 2014 at an issue price of $297 million with cash proceeds of approximately $290 million, net of fees and expenses.

 

   

In February 2009, we entered into two three-year forward interest rate swap agreements with starting dates of November 9, 2009. These agreements fix the LIBOR-related portion of interest rates for $500 million of our variable-rate debt at an average rate of 2.47%. The commencement date of the interest rate swaps coincides with a $1 billion notional amount interest rate swap maturity that was entered into in November 2006. These derivative instruments have been designated as interest rate cash flow hedges.

 

   

In March 2009, we purchased and cancelled approximately GBP 101 million of our total GBP 250 million outstanding 5.625% EMTN debenture notes. This transaction was pursuant to a cash tender offer, whereby we paid, and participating note holders received, a price of £940 per £1,000 in principal amount of the notes, plus accrued interest. In conjunction with the GBP note cancellation we satisfied, and paid in cash, a portion of the remarketing settlement value associated with the cancelled notes to the two holders of a remarketing option associated with the notes. In addition, we unwound a portion of our existing GBP/Euro foreign currency swap, which was previously designated as a foreign currency cash flow hedge. We recorded a net loss of $3 million as a result of the combined elements of this transaction in March 2009 as a component of other expense, net in the consolidated statement of operations. The net cash paid for the combined elements of this transaction was approximately $197 million.

 

   

In March 2009, we terminated €200 million notional to $259 million notional cross-currency swap, which previously converted part of our Euro-denominated external debt to U.S. dollar debt and received a cash settlement of approximately $2 million. No hedge designation was made for this swap and therefore all prior changes in fair value were recorded in earnings.

 

   

In April 2009, we issued $500 million in aggregate principal amount of 11.5% Senior Notes due 2016 at an issue price of $461 million with cash proceeds of approximately $452 million, net of fees and expenses.

 

   

In June 2009, we purchased and cancelled all of our remaining outstanding GBP 149 million 5.625% EMTN debenture notes. This transaction was pursuant to a cash tender offer, whereby we paid, and participating note holders received, par value for the notes, plus accrued interest. In conjunction with the GBP note cancellation, we satisfied, and paid in cash, the remarketing settlement value to two holders of the remaining portion of the remarketing option associated with the notes. In addition, we unwound the remaining portion of our existing GBP/Euro foreign currency swap, which was previously designated as a foreign currency cash flow hedge. We recorded a net loss of approximately $12 million in June 2009 as a component of other expense, net in the consolidated statement of operations as a result of the combined elements of this transaction. The net cash paid for the combined elements of this transaction was approximately $330 million.

 

   

In June 2009, we entered into a Senior Secured Loan Agreement with Goldman Sachs Lending Partners, LLC, which provides for senior secured term loans in the aggregated principal amount of $500 million (the “New Term Loans”) bearing interest at a fixed rate of 8.50%. The New Term Loans

 

69


Table of Contents
 

are secured on a pari passu basis with our existing obligations under our 2006 Senior Secured Credit Facilities and have a maturity of eight years. The net proceeds from the issuance of the New Term Loans of approximately $481 million were used in their entirety to pay down senior secured term loan obligations under our 2006 Senior Secured Credit Facilities.

 

   

In June 2009, we received the requisite consent to amend our 2006 Senior Secured Credit Facilities to permit, among other things: (i) future issuances of additional secured notes or loans, which may include, in each case, indebtedness secured on a pari passu basis with our obligations under the 2006 Senior Secured Credit Facilities, so long as (a) the net cash proceeds from any such issuance are used to prepay term loans under the 2006 Senior Secured Credit Facilities at par until $500 million of term loans have been paid, and (b) 90% of the net cash proceeds in excess of the first $500 million from any such issuance (but all of the net cash proceeds after the first $2.0 billion) are used to prepay term loans under the 2006 Senior Secured Credit Facilities at par; and (ii) allow us to agree with lenders to extend the maturity of their term loans and revolving commitments and for us to pay increased interest rates or otherwise modify the terms of their loans in connection with such an extension (subject to certain limitations, including mandatory increases of interest rates under certain circumstances) (collectively, the “Amendment”). In connection with the Amendment, we extended the maturity of $1.26 billion of existing term loans from August 9, 2013 to May 1, 2016. The interest rate margins of term loans that were extended were increased to 3.75%. The Amendment and the subsequent extension of maturity of a portion of the existing term loans is considered a modification of our existing obligations and has been reflected as such in the audited consolidated financial statements. We recorded a charge of approximately $4 million in June 2009 as a component of other expense, net in the consolidated statement of operations primarily relating to the write-off of previously deferred debt issuance costs as a result of this modification.

 

   

In December 2009, we elected to permanently repay $75 million of our existing term loans due August 2013.

We entered into the following transactions during 2010:

 

   

On March 9, 2010, we entered into a three-year interest swap to fix the LIBOR-related portion of interest rates for $250 million of the our variable-rate debt at 1.69%. This swap replaced the $500 million notional amount interest rate swap that matured on February 9, 2010. This derivative instrument has been designated as an interest rate cash flow hedge.

 

   

In March 2010, we elected to permanently repay $25 million of our existing term loans due August 2013.

 

   

In May 2010, our EUR 50 million variable rate EMTN matured and was repaid.

 

   

On August 12, 2010, we completed a term loan extension offer in accordance with the terms of our 2006 Senior Secured Credit Facilities. In connection with completing the term loan extension offer and in order to document the terms of the new class C term loans, as of such date we entered into an amendment to the 2006 Senior Secured Credit Facilities (the “2010 Amendment”). Pursuant to the term loan extension offer and the 2010 Amendment, approximately $1.495 billion of our class A term loans (which mature May 2013) and approximately $5 million of our class B term loans (which mature May 2016) were exchanged for the same principal amount of new class C term loans. The new class C term loans mature on May 1, 2016 and bear a tiered floating interest rate of LIBOR plus a margin of (x) 3.75% to the extent that Nielsen Finance LLC’s Total Leverage Ratio (as defined in the 2006 Senior Secured Credit Facilities) is greater than 5.0 to 1.0 and (y) 3.50% to the extent that Nielsen Finance LLC’s Total Leverage Ratio (as defined in the 2006 Senior Secured Credit Facilities) is less than or equal to 5.0 to 1.0. The foregoing margins are also subject to a decrease of 0.25% in the event and for so long as Nielsen Finance LLC’s corporate credit and/or family rating, as applicable, from either S&P or Moody’s is at least Ba3 or BB-, respectively. The class C term loans will amortize in equal quarterly installments in aggregate annual amounts equal to 1.00% of the original principal amount. No optional prepayments of class C term loans may be made so long as any class A or class B term loans are outstanding. Except as set forth in the 2010 Amendment, the class C term loans shall have the same terms as the class B term loans.

 

70


Table of Contents

As a result of the transactions described above, we are highly leveraged and our debt service requirements are significant. At June 30, 2010, December 31, 2009 and 2008, we had $8,439 million, $8,655 million and $9,384 million in aggregate indebtedness, including bank overdrafts, respectively. Our cash interest paid for the six months ended June 30, 2010 and the years ended December 31, 2009, 2008 and 2007 was $249 million, $495 million, $494 million and $533 million, respectively.

2006 Senior Secured Credit Facilities

The description of the 2006 Senior Secured Credit Facilities below is as of June 30, 2010. On August 12, 2010, we completed a term loan extension offer in accordance with the terms of the 2006 Senior Secured Credit Facilities. See “Overview of Financing Transactions” for further information on the 2010 Amendment.

The senior secured credit agreement provides for two term loan facilities of $2,983 million and €321 million maturing in 2013 and two term loan facilities of $1,013 million and €179 million maturing in 2016, for which total outstanding borrowings were $4,501 million at June 30, 2010. In addition, the senior secured credit agreement contains a six-year $688 million senior secured revolving credit facility under which we had no borrowings outstanding as of June 30, 2010. We had an aggregate of $19 million of letters of credit and bank guarantees outstanding as of June 30, 2010, which reduced our total borrowing capacity to $669 million. The senior secured revolving credit facility of Nielsen Finance LLC, The Nielsen Company (US), Inc., Nielsen Holding and Finance B.V. can be used for revolving loans, letters of credit, guarantees and for swingline loans, and is available in U.S. dollars, Euros and certain other currencies. See “Overview of Financing Transactions” section for further information on 2009 transactions relating to these facilities.

We are required to repay installments only on the borrowings under the two senior secured term loan facilities maturing in 2016 in quarterly principal amounts of 0.25% of their original principal amount, with the remaining amount payable on their maturity date.

Borrowings under the senior secured term loan facilities bear interest at a rate as determined by the type of borrowing, equal to either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.5% or (2) the prime rate or (b) a LIBOR rate for the currency of such borrowings (collectively, the “Base Rate”), plus, in each case, an applicable margin. The applicable margins for the senior secured term loans that mature in 2013 vary depending on our secured leverage ratio. The applicable margins for the senior secured term loans that mature in 2016 are set at fixed rates.

Borrowings under the senior secured revolving credit facility bear interest at a rate equal to an applicable margin plus the Base Rate. The applicable margins for the senior secured revolving credit facility vary depending on our total leverage ratio. We pay a quarterly commitment fee of 0.5% on unused commitments under the senior secured revolving facility. The applicable commitment fee rate may vary subject to us attaining certain leverage ratios.

Our 2006 Senior Secured Credit Facilities are guaranteed by TNC B.V., substantially all of the wholly owned U.S. subsidiaries of TNC B.V. and certain of the non-U.S. wholly-owned subsidiaries of TNC B.V., and are secured by substantially all of the existing and future property and assets (other than cash) of the U.S. subsidiaries of TNC B.V. and by a pledge of substantially all of the capital stock of the guarantors, the capital stock of substantially all of the U.S. subsidiaries of TNC B.V., and up to 65% of the capital stock of certain of the non-U.S. subsidiaries of TNC B.V. Under a separate security agreement, substantially all of the assets of TNC B.V. are pledged as collateral for amounts outstanding under the senior secured credit facilities.

Our 2006 Senior Secured Credit Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of Nielsen Holding and Finance B.V. and its restricted subsidiaries (which together constitute most of our subsidiaries) (collectively, the “Credit Facilities Covenant Parties”) to incur additional indebtedness or guarantees, incur liens and engage in sale and leaseback transactions, make certain loans and investments, declare dividends, make payments or redeem or repurchase capital stock, engage in certain mergers, acquisitions and other business combinations, prepay, redeem or purchase certain indebtedness, amend or otherwise alter terms of certain indebtedness, sell certain assets, transact with affiliates, enter into agreements limiting subsidiary distributions and alter the business the Credit Facilities Covenant Parties conduct. In addition,

 

71


Table of Contents

the Credit Facilities Covenant Parties are required to maintain a maximum total leverage ratio and a minimum interest coverage ratio. Neither Nielsen Holdings nor TNC B.V. is bound by any financial or negative covenants contained in the credit agreement. The senior secured credit facilities also contain certain customary affirmative covenants and events of default. We have maintained compliance with all such covenants described above.

2009 Senior Secured Term Loan

In June 2009, we entered into a Senior Secured Loan Agreement with Goldman Sachs Lending Partners, LLC, which provides for senior secured term loans in the aggregate principal amount of $500 million (the “New Term Loans”) bearing interest at a fixed rate of 8.50%. The New Term Loans are secured on a pari passu basis with our existing obligations under its senior secured credit facilities and have a maturity of eight years. The net proceeds from the issuance of the New Term Loans of approximately $481 million were used in their entirety to pay down senior secured term loan obligations under our existing senior secured credit facilities.

Our New Term Loans are guaranteed by TNC B.V., substantially all of our wholly owned U.S. subsidiaries and certain of our non-U.S. wholly-owned subsidiaries, and are secured by substantially all of the existing and future property and assets (other than cash) of Nielsen’s U.S. subsidiaries and by a pledge of substantially all of the capital stock of the guarantors, the capital stock of substantially all of Nielsen’s U.S. subsidiaries, and up to 65% of the capital stock of certain of Nielsen’s non-U.S. subsidiaries. Under a separate security agreement, substantially all of the assets of Nielsen are pledged as collateral for amounts outstanding under the New Term Loans.

In addition, the New Term Loans include negative covenants, subject to significant exceptions, restricting or limiting the ability of the Credit Facilities Covenant Parties to, among other things, incur, assume or permit to exist additional indebtedness or guarantees, make certain loans and investments, declare dividends, make payments or redeem or repurchase capital stock, engage in mergers, acquisitions and other business combinations, prepay, redeem or purchase certain indebtedness, sell certain assets, transact with affiliates and enter into agreements limiting subsidiary distributions.

Neither Nielsen Holdings nor TNC B.V. is bound by any financial or negative covenants contained in the credit agreement.

The New Term Loans also contain certain customary affirmative covenants and events of default.

Debt Securities

On May 1, 2009, Nielsen Finance LLC and Nielsen Finance Co. (together, “Nielsen Finance”), subsidiaries wholly owned by us, consummated a private offering of $500 million aggregate principal amount of 11.5% Senior Notes due 2016 (the “11.5% Senior Notes”). The 11.5% Senior Notes mature on May 1, 2016. Cash interest accrues at a rate of 11.5% per annum from the issue date and is payable semi-annually from November 2009. In July 2009, we completed an exchange offer for the 11.5% Senior Notes.

In January 2009, Nielsen Finance LLC and Nielsen Finance Co. consummated a private offering of $330 million in aggregate principal amount of 11.625% Senior Notes due 2014 (the “11.625% Senior Notes”). The 11.625% Senior Notes mature on February 1, 2014. Cash interest accrues at a rate of 11.625% per annum from the issue date and is payable semi-annually from August 2009. In July 2009, we completed an exchange offer for the 11.625% Senior Notes.

On April 16, 2008, Nielsen Finance LLC and Nielsen Finance Co. consummated a private offering of $220 million aggregate principal amount of 10% Senior Notes due 2014 (the “10% Senior Notes”). The 10% Senior Notes mature on August 1, 2014. Cash interest accrues at a rate of 10% per annum from the issue date and is payable semi-annually from August 2008. In July 2009, we completed an exchange offer for the 10% Senior Notes.

In August 2006, Nielsen Finance LLC and Nielsen Finance Co. issued $650 million 10% and €150 million 9% senior notes due 2014 (the “ Nielsen Finance Senior Notes”). Interest is payable semi-annually from February 2007. In September 2007, we completed an exchange offer for the Nielsen Finance Senior Notes.

 

72


Table of Contents

The senior notes above are collectively referred to herein as the “Senior Notes.”

The carrying values of the combined issuances of the Senior Notes were $1,824 million at June 30, 2010. The Senior Notes are senior unsecured obligations and rank equal in right of payment to all of the existing and future senior indebtedness of Nielsen Finance LLC and Nielsen Finance Co.

The indentures governing the Senior Notes and Senior Subordinated Discount Notes limit the ability of Nielsen Holding and Finance B.V. and its restricted subsidiaries (which together constitute a majority of Nielsen’s subsidiaries) to incur additional indebtedness, pay dividends or make other distributions or repurchase our capital stock, make certain investments, enter into certain types of transactions with affiliates, use assets as security in other transactions and sell certain assets or merge with or into other companies subject to certain exceptions. Upon a change in control, Nielsen Finance is required to make an offer to redeem all of the Senior Notes and Senior Subordinated Discount Notes at a redemption price equal to the 101% of the aggregate accreted principal amount plus accrued and unpaid interest. The Senior Notes and Senior Subordinated Discount Notes are jointly and severally guaranteed by TNC B.V., substantially all of our wholly owned U.S. subsidiaries, and certain of our non-U.S. wholly-owned subsidiaries.

In August 2006, we received proceeds of €200 million ($257 million) on the issuance by TNC B.V. of the €343 million 11.125% senior discount notes due 2016 (“Senior Discount Notes”), with a carrying value of $378 million at June 30, 2010. Interest accretes through 2011 and is payable semi-annually commencing February 2012. The Senior Discount Notes are senior unsecured obligations and rank equal in right of payment to all of the existing and future senior indebtedness of TNC B.V. The notes are effectively subordinated to the existing and future secured indebtedness of TNC B.V. to the extent of the assets securing such indebtedness and will be structurally subordinated to all obligations of the subsidiaries of TNC B.V.

EMTN Program and Other Financing Arrangements

We have a Euro Medium Term Note program (“EMTN”) program in place. All debt securities and most private placements are quoted on the Luxembourg Stock Exchange. We had carrying values of $145 million outstanding under the EMTN program at June 30, 2010. The company can no longer issue new debt under the EMTN program.

Cash Flows six months ended June 30, 2010 versus June 30, 2009

Operating activities. Net cash provided by operating activities was $129 million for the six months ended June 30, 2010, compared to $151 million for the six months ended June 30, 2009. The primary driver for the reduction in cash provided by operating activities was the reduction in working capital performance and higher interest payments, which more than offset the growth in operating income excluding the impact of non-cash depreciation and amortization. The reduction in working capital performance resulted primarily from an approximately $74 million reduction due to the timing of client billings and lower year over year accounts receivable collection performance. Our key collections performance measure, days billing outstanding (DBO), increased by 1 day to 51 days for the six months ended June 30, 2010 compared to a decrease of 1 day to 54 days for the six months ended June 30, 2009. These reductions were only partially offset by the timing of employee compensation and other accruals as well as lower restructuring payments.

Investing activities. Net cash used in investing activities was $154 million for the six months ended June 30, 2010, compared to $143 million for the six months ended June 30, 2009. The primary driver for the increase in the usage of cash from investing activities was the increase in capital expenditures.

Capital expenditures for property, plant, equipment, software and other assets totaled $146 million for the six months ended June 30, 2010 compared to $132 million for the six months ended June 30, 2009. The primary reasons for the increase in capital expenditures related to higher spending for software and technology infrastructure development.

 

73


Table of Contents

Financing activities. Net cash used in financing activities was $97 million and $99 million for the six months ended June 30, 2010 and 2009, respectively. Although the amounts were flat year over year, we repaid our EUR 50 million EMTN in May 2010 and repaid $220 million on our senior secured revolving credit facility and executed numerous financing transactions in 2009 described under the “Overview of Financing Transactions” section above.

Cash Flows 2009 versus 2008

At December 31, 2009, cash and cash equivalents were $514 million, an increase of $47 million from December 31, 2008. Our total indebtedness was $8,655 million.

Operating activities. Net cash provided by operating activities was $517 million for the year ended December 31, 2009, compared to $317 million for the year ended December 31, 2008. The primary drivers for the increase in cash flows from operating activities were growth in operating income excluding the impact of non-cash depreciation and amortization and impairment charges. This growth was further driven by improved working capital performance, offset slightly by an increase in tax payments. The improved working capital performance primarily resulted from a benefit of approximately $149 million relating to improvement in year-over-year accounts receivable collections as well as lower bonus payments. Our DBO decreased by five days to 50 days during the year ended December 31, 2009 compared to an increase of four days to 55 days during the year ended December 31, 2008.

Investing activities. Net cash used in investing activities was $227 million for the year ended December 31, 2009, compared to $591 million for the year ended December 31, 2008. The lower net cash usage was primarily driven by lower acquisition payments as a result of our acquisition of IAG in May 2008 as well as lower capital expenditures and proceeds from the sale of divestitures in 2009, primarily resulting from the sale of the media properties within our Publications operating segment in December 2009.

Financing activities. For the year ended December 31, 2009, we had net cash used in financing activities of $271 million as compared to net cash provided by financing activities of $367 million for the year ended December 31, 2008. The comparative use of cash was mainly driven by our repayments of $295 million on our revolving credit facility in 2009 as compared to net borrowings of $285 million in 2008 as well as the results of the financing transactions described above under the “Overview of Financing Transactionssection above.

Cash Flows 2008 versus 2007

At December 31, 2008, cash and cash equivalents were $467 million, an increase of $65 million from December 31, 2007. Our total indebtedness was $9,384 million at December 31, 2008.

Operating activities. Net cash provided by operating activities was $317 million for the year ended December 31, 2008 compared to $233 million for the year ended December 31, 2007. The primary drivers for the increase in cash flows from operating activities were the growth in operating income excluding the impact of non-cash depreciation and amortization and impairment charges. The growth was further driven by lower interest and tax payments partially offset by lower working capital performance. The lower working capital performance primarily resulted from higher pension, bonus and one-time payments. The year-over-year accounts receivable collection performance was flat where our DBO increased by four days to 55 days and 51 days during the years ended December 31, 2008 and December 31, 2007, respectively.

Investing activities. Net cash used in investing activities was $591 million for the year ended December 31, 2008 compared to $517 million for the year ended December 31, 2007. The higher net cash used was primarily driven by lower proceeds from sale of subsidiaries of $417 million, increased capital expenditures and the impact of the 2007 sale of marketable securities. This was offset by a $594 million reduction of acquisition related expenditures.

 

74


Table of Contents

Financing activities. Net cash provided by financing activities was $367 million for the year ended December 31, 2008 as compared to $9 million for the year ended December 31, 2007. The higher source of cash was mainly driven by higher net borrowings on the senior secured revolving credit facility and lower repayments of other debt, offset by lower proceeds from issuances of other debt as well as the impact of a 2007 capital contribution from Luxco.

Capital Expenditures

Investments in property, plant, equipment, software and other assets totaled $282 million, $370 million and $266 million in 2009, 2008 and 2007, respectively. The most significant expenditures in 2009, 2008, and 2007 were the investment in the data factory systems in U.S. and Europe and NMR U.S.’s rollout of the LPM, active/passive Meter and the expansion of the National People Meter. The decrease in capital spending in 2009 versus 2008 was due to a reduction in LPM spending as well as the completion of other key investments in 2008.

Covenant EBITDA Attributable to TNC B.V.

Our 2006 Senior Secured Credit Facilities contain a covenant that requires our indirect wholly-owned subsidiary, Nielsen Holding and Finance B.V. and its restricted subsidiaries, to maintain a maximum ratio of consolidated total net debt, excluding certain TNC B.V. net debt, to Covenant EBITDA, calculated for the trailing four quarters (as determined under our 2006 Senior Secured Credit Facilities). Currently, the maximum ratio is 8.0 to 1.0, with such maximum ratio declining over time to 6.25 to 1.0 for periods after October 1, 2012.

In addition, our 2006 Senior Secured Credit Facilities contain a covenant that requires Nielsen Holding and Finance B.V. and its restricted subsidiaries to maintain a minimum ratio of Covenant EBITDA to Consolidated Interest Expense, including interest expense relating to TNC B.V., calculated for the trailing four quarters (as determined under our 2006 Senior Secured Credit Facilities). Currently, the minimum ratio is 1.65 to 1.0, with such minimum ratio varying between 1.75 to 1.0 to 1.50 to 1.0 for subsequent periods.

Failure to comply with either of these covenants would result in an event of default under our 2006 Senior Secured Credit Facilities unless waived by our senior credit lenders. An event of default under our senior credit facility can result in the acceleration of our indebtedness under the facility, 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 covenants described above can cause us to go into default under the agreements governing our indebtedness, management believes that our 2006 Senior Secured Credit Facilities and these covenants are material to us. As of June 30, 2010, we were in compliance with the covenants described above.

We also measure the ratio of secured net debt to Covenant EBITDA, as it impacts the applicable borrowing margin under our senior secured term loans due 2013. During periods when the ratio is less than 4.25 to 1.0, the applicable margin is 25 basis points lower than it would be otherwise.

Covenant earnings before interest, taxes, depreciation and amortization (“Covenant EBITDA”) is a non-GAAP measure used to determine our compliance with certain covenants contained in our senior secured credit facilities. Covenant EBITDA is defined in our 2006 Senior Secured Credit Facilities as net income/(loss) from continuing operations for TNC B.V., as adjusted for the items summarized in the table below. Covenant EBITDA is not a presentation made in accordance with GAAP, and our use of the term Covenant EBITDA varies from others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Covenant EBITDA should not be considered as an alternative to net income/(loss), operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. Covenant 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. Because of these limitations we rely primarily on our GAAP results. However, we believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Covenant EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our financing covenants.

 

75


Table of Contents

The following is a reconciliation of TNC B.V.’s income/(loss) from continuing operations, for the twelve months ended June 30, 2010, to Covenant EBITDA as defined above under our 2006 Senior Secured Credit Facilities:

 

     Covenant EBITDA
(unaudited)
 

(IN MILLIONS)

   Twelve months ended
June 30, 2010
 

Loss from continuing operations

   $ (299

Interest expense, net

     649   

Benefit for income taxes

     (158

Depreciation and amortization

     568   
        

EBITDA

     760   

Non-cash charges

     547   

Unusual or non-recurring items(1)

     (51

Restructuring charges and business optimization costs

     87   

Sponsor monitoring fees

     12   

Other(2)

     41   
        

Covenant EBITDA

   $ 1,396   
        

 

Credit Statistics:

  

Net debt, including TNC B.V. net debt(3)

   $ 8,087   

Less: Unsecured debenture loans

     (3,287

Less: Other unsecured net debt

     (5
        

Secured net debt

   $ 4,795   
        

Net debt, excluding $377 million (at June 30, 2010) of TNC B.V. net debt

   $ 7,710   

Ratio of secured net debt to Covenant EBITDA

     3.43   

Ratio of net debt (excluding net debt of TNC B.V.) to Covenant EBITDA

     5.52   

Consolidated interest expense, including TNC B.V. interest expense(4)

   $ 506   

Ratio of Covenant EBITDA to Consolidated Interest Expense, including TNC B.V. interest expense

     2.76   

 

(1) Unusual or non-recurring items include (amounts in millions):

 

     Twelve
months
ended
June 30,
2010
 

Currency exchange rate differences on financial transactions and other losses, net

   $ (115

Loss on derivative Instruments

     39   

Duplicative running costs

     7   

U.S. listing costs/consulting fees

     7   

Other

     11   
        

Total

   $ (51
        
(2) These adjustments include the pro forma EBITDA impact of businesses that were acquired during the last twelve months, loss on sale of fixed assets, subsidiaries and affiliates, dividends received from affiliates; equity in net loss of affiliates, and the exclusion of Covenant EBITDA attributable to unrestricted subsidiaries.
(3) Net debt, including net debt of TNC B.V., is not a defined term under GAAP. Net debt is calculated as total debt less cash and cash equivalents at June 30, 2010 excluding a contractual $10 million threshold and cash and cash equivalents of unrestricted subsidiaries of $6 million.

 

76


Table of Contents
(4) Consolidated interest expense is not a defined term under GAAP. Consolidated interest expense for any period is defined in our senior secured credit facilities as the sum of (i) the cash interest expense of Nielsen Holding and Finance B.V. and its subsidiaries with respect to all outstanding indebtedness, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance and net costs under swap contracts, net of cash interest income, and (ii) any cash payments in respect of the accretion or accrual of discounted liabilities during such period related to borrowed money (with a maturity of more than one year) that were amortized or accrued in a previous period, excluding, in each case, however, among other things, the amortization of deferred financing costs and any other amounts of non-cash interest, the accretion or accrual of discounted liabilities during such period, commissions, discounts, yield and other fees and charges incurred in connection with certain permitted receivables financing and all non-recurring cash interest expense consisting of liquidated damages for failure to timely comply with registration rights obligations and financing fees.

See “—Liquidity and Capital Resources” for further information on our indebtedness and covenants.

Transactions with Related Parties

We recorded $6 million, $12 million, $11 million, $11 million and $7 million, respectively, in SG&A related to management fees payable to the Sponsors under advisory agreements, sponsor travel and consulting for the six months ended June 30, 2010 and for the years ended December 31, 2009, 2008, 2007 and 2006, respectively. From the date of acquisition through June 30, 2010, we have paid $47 million in these fees to the Sponsors. Upon the completion of this offering, we anticipate that we will pay a fee of approximately $103 million to the Sponsors in connection with the termination of such advisory agreements in accordance with their terms.

In May 2006, Luxco, our direct parent, executed a loan agreement with us for principal amount Euro 500 million in conjunction with the Acquisition. The loan accreted interest at 10.00% per annum and was payable annually at the request of Luxco or the Company. If interest was not paid at the end of each year, such interest was deemed capitalized. No interest was paid on this loan through December 31, 2008 and the corresponding carrying value at such date, including capitalized interest, was $892 million. In January 2009, the loan agreement was terminated and the underlying carrying value, including accrued interest, was capitalized by Luxco in exchange for 78,332,870 shares in the Company’s common stock. Nielsen recorded $3 million, $3 million, $86 million and $73 million in interest expense associated with this loan for the six months ended June 30, 2009 and the years ended December 31, 2009, 2008 and 2007, respectively.

A portion of the borrowings under the senior secured credit facility have been purchased by certain of the Sponsors in market transactions not involving the Company. Based on information made available to the Company, amounts held by the Sponsors and their affiliates were $554 million and $445 million as of December 31, 2009 and 2008, respectively. Interest expense associated with amounts held by the Sponsors and their affiliates approximated $16 million, $22 million and $28 million during the years ended December 31, 2009, 2008 and 2007, respectively. At June 30, 2010, $527 million of the senior secured credit facilities and $22 million of senior debenture loans were held by the Sponsors and their affiliates. Of the $549 million of debt held by the Sponsors and their affiliates, Kohlberg Kravis Roberts & Co. and their affiliates held $236 million, The Blackstone Group and their affiliates held $198 million and The Carlyle Group and their affiliates held $115 million. The Sponsors, their subsidiaries, affiliates and controlling stockholders may, from time to time, depending on market conditions, seek to purchase debt securities issued by Nielsen or its subsidiaries or affiliates in open market or privately negotiated transactions or by other means. Nielsen makes no undertaking to disclose any such transactions except as may be required by applicable laws and regulations.

Effective January 1, 2009, we entered into an employer health program arrangement with Equity Healthcare LLC (“Equity Healthcare”). Equity Healthcare negotiates with providers of standard administrative services for health benefit plans and other related services for cost discounts, quality of service monitoring, data services and

 

77


Table of Contents

clinical consulting and oversight by Equity Healthcare. Because of the combined purchasing power of its client participants, Equity Healthcare is able to negotiate pricing terms from providers that are believed to be more favorable than the companies could obtain for themselves on an individual basis. Equity Healthcare is an affiliate of The Blackstone Group, one of our Sponsors.

In consideration for Equity Healthcare’s provision of access to these favorable arrangements and its monitoring of the contracted third parties’ delivery of contracted services to us, we pay Equity Healthcare a fee of $2 per participating employee per month (“PEPM Fee”). As of December 31, 2009, we had approximately 8,000 employees enrolled in our self-insured health benefit plans in the United States. Equity Healthcare may also receive a fee (“Health Plan Fees”) from one or more of the health plans with whom Equity Healthcare has contractual arrangements if the total number of employees joining such health plans from participating companies exceeds specified thresholds.

Commitments and Contingencies

Outsourced Services Agreements

On February 19, 2008, we amended and restated our Master Services Agreement dated June 16, 2004 (“MSA”), with Tata America International Corporation and Tata Consultancy Services Limited (jointly “TCS”). The term of the amended and restated MSA is for ten years, effective October 1, 2007; with a one year renewal option granted to us, during which ten year period (or if we exercise our renewal option, eleven year period) we have committed to purchase at least $1 billion in services from TCS. Unless mutually agreed, the payment rates for services under the amended and restated MSA are not subject to adjustment due to inflation or changes in foreign currency exchange rates. TCS will provide us with Information Technology, Applications Development and Maintenance and Business Process Outsourcing services globally. The amount of the purchase commitment may be reduced upon the occurrence of certain events, some of which also provide us with the right to terminate the agreement.

In addition, in 2008, we entered into an agreement with TCS to outsource our global IT Infrastructure services. The agreement has an initial term of seven years, and provides for TCS to manage our infrastructure costs at an agreed upon level and to provide Nielsen’s infrastructure services globally for an annual service charge of $39 million per year, which applies towards the satisfaction of our aforementioned purchased services commitment with TCS of at least $1 billion over the term of the amended and restated MSA. The agreement is subject to earlier termination under certain limited conditions.

Other Contractual Obligations. Our other contractual obligations include capital lease obligations, facility leases, leases of certain computer and other equipment, agreements to purchase data and telecommunication services, the payment of principal on debt and pension fund obligations.

At December 31, 2009, the minimum annual payments under these agreements and other contracts that had initial or remaining non-cancelable terms in excess of one year are as listed in the following table. There were no significant changes to our minimum commitments that occurred through the date of this prospectus. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at December 31, 2009, we are unable to make reasonably reliable estimates of the timing of any potential cash settlements with the respective taxing authorities. Therefore, $152 million of unrecognized tax benefits (which includes interest and penalties of $23 million) have been excluded from the contractual obligations table below. See Note 13 – Income Taxes – to the audited consolidated financial statements included elsewhere in this prospectus for a discussion on income taxes.

 

78


Table of Contents
     Payments due by period

(IN MILLIONS)

   Total    2010    2011    2012    2013    2014    After
2014

Capital lease obligations and other debt(a)

   $ 236    $ 34    $ 19    $ 19    $ 19    $ 15    $ 130

Operating leases(b)

     397      92      74      63      47      41      80

Other contractual obligations(c)

     908      331      220      219      132      4      2

Short-term and long-term debt(a)

     8,509      85      57      128      3,381      1,397      3,461

Interest(d)

     3,114      481      430      576      533      463      631

Pension fund obligations(e)

     28      28      —        —        —        —        —  
                                                

Total

   $ 13,192    $ 1,051    $ 800    $ 1,005    $ 4,112    $ 1,920    $ 4,304
                                                

 

(a) Our short-term and long-term debt obligations, including capital lease and other financing obligations, are described in Note 10 to the audited consolidated financial statements “Long-Term Debt and Other Financing Arrangements.” Other debt includes bank overdrafts of $15 million due within one year.
(b) Our operating lease obligations are described in Note 15 to the audited consolidated financial statements “Commitments and Contingencies.”
(c) Other contractual obligations represent obligations under agreement, which are not unilaterally cancelable by us, are legally enforceable and specify fixed or minimum amounts or quantities of goods or services at fixed or minimum prices. We generally require purchase orders for vendor and third party spending. The amounts presented above represent the minimum future annual services covered by purchase obligations including data processing, building maintenance, equipment purchasing, photocopiers, land and mobile telephone service, computer software and hardware maintenance, and outsourcing. Our remaining commitments under the outsourced services agreements with TCS have been included above on an estimated basis over the years within the contractual period in which we expect to satisfy our obligations.
(d) Interest payments consist of interest on both fixed-rate and variable-rate debt. See Note 10 to the audited consolidated financial statements, “Long-Term Debt and Other Financing Arrangements.”
(e) Our contributions to pension and other post-retirement defined benefit plans were $44 million, $49 million and $31 million during 2009, 2008 and 2007, respectively. Future pension and other post-retirement benefits contributions are not determinable for time periods after 2010. See Note 9 to the audited consolidated financial statements, “Pensions and Other Post-Retirement Benefits,” for a discussion on plan obligations.

Guarantees and Other Contingent Commitments

At December 31, 2009, we were committed under the following significant guarantee arrangements:

Sub-lease guarantees. We provide sub-lease guarantees in accordance with certain agreements pursuant to which we guarantee all rental payments upon default of rental payment by the sub-lessee. To date, we have not been required to perform under such arrangements, and do not anticipate making any significant payments related to such guarantees and, accordingly, no amounts have been recorded.

Letters of credit and bank guarantees. Letters of credit and bank guarantees issued and outstanding amount to $19 million at June 30, 2010.

Legal Proceedings and Contingencies. In addition to the legal proceedings described below and in Note 15 to the audited consolidated financial statements, “Commitments and Contingencies,” we are presently a party to certain lawsuits arising in the ordinary course of our business. We believe that none of our current legal proceedings will have a material adverse effect on our business, results of operations or financial condition.

Sunbeam Television Corp. Sunbeam Television Corp. (“Sunbeam”) filed a lawsuit in Federal District Court in Miami, Florida on April 30, 2009. The lawsuit alleges that Nielsen Media Research, Inc. violated Federal and Florida state antitrust laws and Florida’s unfair trade practices laws by attempting to maintain a monopoly and abuse its position in the market, and breached its contract with Sunbeam by producing defective ratings data through its sampling methodology. The complaint did not specify the amount of damages sought and also sought declaratory and equitable relief. Nielsen believes this lawsuit is without merit and intends to defend it vigorously.

 

79


Table of Contents

Off-Balance Sheet Arrangements

Except as disclosed above, 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 expenditure or capital resources.

Summary of Recent Accounting Pronouncements

Business Combinations

In December 2007, the Financial Accounting Standards Board (“FASB”) issued a revised standard for accounting for business combinations, which was effective for fiscal years beginning on or after December 15, 2008 and applies to all business combinations. The standard provides that, upon initially obtaining control, an acquirer shall recognize 100 percent of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100 percent of its target. As a consequence, the prior step acquisition model was eliminated. Additionally, the standard changed prior practice, in part, as follows: (i) contingent consideration arrangements are fair valued at the acquisition date and included on that basis in the purchase price consideration; (ii) transaction costs are expensed as incurred, rather than capitalized as part of the purchase price; (iii) pre-acquisition contingencies, such as those relating to legal matters, are generally accounted for in purchase accounting at fair value; (iv) in order to accrue for a restructuring plan in purchase accounting, the requirements for accounting for costs associated with exit or disposal activities have to be met at the acquisition date; and (v) changes to valuation allowances for deferred income tax assets and adjustments to unrecognized tax benefits generally are recognized as adjustments to income tax expense rather than goodwill. We adopted the new standard effective January 1, 2009 and such adoption did not have a material impact on our audited consolidated financial statements as of December 31, 2009 and for the year then ended.

Fair Value Measurements

In January 2010, the FASB issued updates to its fair value measurements standards that require entities to provide new disclosures and clarify existing disclosures relating to fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010. We do not currently have fair value measurements within the Level 3 category and therefore the adoption did not have a material impact on our unaudited condensed consolidated financial statements as of June 30, 2010 or for the six months then ended.

In February 2008, the FASB delayed the effective date of its fair value measurements standard for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of 2009. Therefore, effective January 1, 2009, we adopted the standard for non-financial assets and non-financial liabilities. The adoption did not have a significant impact on our audited consolidated financial statements as of December 31, 2009 and for the year then ended. The additional disclosures required by this statement are included in Note 7—“Fair Value Measurements”.

Derivative Instruments Disclosures

In March 2008, the FASB issued a revised standard, which enhances required disclosures regarding derivative instruments and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for as hedges as defined by the FASB’s hedge accounting guidance; and (c) derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. The adoption of this standard,

 

80


Table of Contents

effective January 1, 2009, had no impact on our audited consolidated financial statements as of December 31, 2009 and for the year then ended. The additional disclosures required by this statement are included in Note 7 to the audited consolidated financial statements, “Fair Value Measurements.”

Revenue Recognition

In October 2009, the FASB issued updates to its accounting standards pertaining to multiple-deliverable revenue arrangements requiring entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The guidance eliminates the residual method of revenue allocation and requires revenue to be allocated using the relative selling price method and is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We are currently evaluating the impact of the revised accounting standards, but do not expect its adoption to have a material impact on our consolidated financial statements.

Changes in the Consolidation Model for Variable Interest Entities

In June 2009, the FASB issued an update that amends the consolidation guidance applicable to variable interest entities (“VIE”) and changes how a reporting entity evaluates whether an entity is considered the primary beneficiary of a VIE and is therefore required to consolidate such VIE and will also require assessments at each reporting period of which party within the VIE is considered the primary beneficiary and will require a number of new disclosures related to VIE. These updates are effective for fiscal years beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our unaudited condensed consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in market rates and market prices such as interest rates, foreign currency exchange rates, and changes in the market value of equity instruments. We are exposed to market risk, primarily related to foreign exchange and interest rates. We actively monitor these exposures. Historically, in order to manage the volatility relating to these exposures, we entered into a variety of derivative financial instruments, mainly interest rate swaps, cross-currency swaps and forward rate agreements. Currently we only employ basic contracts, that is, without options, embedded or otherwise. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings, cash flows and the value of our net investments in subsidiaries resulting from changes in interest rates and foreign currency rates. It is our policy not to trade in financial instruments.

Foreign Currency Exchange Rate Risk

We operate globally and we predominantly generate revenue and expenses in local currencies. Because of fluctuations (including possible devaluations) in currency exchange rates or the imposition of limitations on conversion of foreign currencies into our reporting currency, we are subject to currency translation exposure on the profits of our operations, in addition to transaction exposure.

Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating foreign entities’ statements of earnings and balance sheets from functional currency to our reporting currency (the U.S. Dollar) for consolidation purposes. Translation risk exposure is managed by creating “natural hedges” in our financing or by using derivative financial instruments aimed at offsetting certain exposures in the statement of earnings or the balance sheet. We do not use derivative financial instruments for trading or speculative purposes.

 

81


Table of Contents

The table below details the percentage of revenues and expenses by currency for the six months ended June 30, 2010 and the year ended December 31, 2009:

 

     U.S. Dollars     Euro     Other Currencies  

Six months ended June 30, 2010

      

Revenues

   53   14   33

Operating costs

   54   15   31

Year ended December 31, 2009

      

Revenues

   53   16   31

Operating costs

   59   15   26

Based on the year ended December 31, 2009, a one cent change in the U.S. dollar/Euro exchange rate will impact revenues by approximately $5 million annually, with an immaterial impact on operating income.

We have operations in both our Watch and Buy segments in Venezuela and our functional currency for these operations is the Venezuelan bolivares fuertes. Venezuela’s currency was considered hyperinflationary as of January 1, 2010 and further, in January 2010, Venezuela’s currency was devalued and a new currency exchange rate system was announced. We have evaluated the new exchange rate system and have concluded that our local currency transactions will be denominated in U.S. dollars until Venezuela’s currency is deemed to be non hyperinflationary. We recorded a charge of $7 million associated with the currency devaluation in January 2010 in our foreign exchange transaction gains, net line item. In June 2010, a further revision to the currency exchange rate system was made. The impact of the hyperinflationary accounting was not material to our consolidated results of operations for the six months ended June 30, 2010.

Effective July 1, 2010, we designated our EUR 321 million variable rate senior secured term loan due 2013 and our EUR 179 million variable rate senior secured term loan due 2016 as non-derivative hedges of our net investment in a European subsidiary. Beginning on July 1, 2010, gains or losses attributable to fluctuations in the Euro as compared to the U.S. Dollar associated with this debenture will be recorded to the cumulative translation adjustment within stockholders’ equity, net of income tax. Our net income/(loss) reflected foreign currency exchange gains of $96 million for the six months ended June 30, 2010 and losses of $7 million for the six months ended June 30, 2009 associated with these loans.

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 June 30, 2010, we had $4,563 million in carrying value of floating-rate debt under our 2006 Senior Secured Credit Facilities and our EMTN floating rate notes. A one percentage point increase in these floating rates would increase our annual interest expense by approximately $46 million. Recent developments in the U.S. and global financial markets have resulted in adjustments to our tolerable exposures to interest rate risk. In February 2009, we modified the reset interest rate underlying our $4,525 million senior secured term loan in order to achieve additional economic interest benefit and, as a result, all existing floating-to-fixed interest rate swap derivative financial instruments became ineffective. All changes in fair value of the affected interest rate swaps are reflected as a component of derivative gains and losses within our consolidated statement of operations.

On March 9, 2010, we entered into a three-year interest swap to fix the LIBOR-related portion of interest rates for $250 million of our variable-rate debt at 1.69%. This swap replaced the $500 million notional amount interest rate swap that matured on February 9, 2010. This derivative instrument has been designated as an interest rate cash flow hedge.

 

82


Table of Contents

In February 2009, we entered into two three-year forward interest rate swap agreements with starting dates of November 9, 2009. These agreements fix the LIBOR-related portion of interest rates for $500 million of our variable-rate debt at an average rate of 2.47%. The commencement date of the interest rate swaps coincided with the $1 billion notional amount interest rate swap that matured on November 9, 2009. These derivative instruments have been designated as interest rate cash flow hedges.

Derivative instruments involve, to varying degrees, elements of non-performance, or credit risk. We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties associated with these instruments, as these transactions were executed with a diversified group of major financial institutions with a minimum investment-grade or better credit rating. Our credit risk exposure is managed through the continuous monitoring of our exposures to such counterparties.

 

83


Table of Contents

BUSINESS

Our Company

We are a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. We deliver critical media and marketing information, analytics and industry expertise about what consumers watch (consumer interaction with television, online and mobile) and what consumers buy on a global and local basis. Our information, insights and solutions help our clients maintain and strengthen their market positions and identify opportunities for profitable growth. We have a presence in approximately 100 countries, including many developing and emerging markets, and hold leading market positions in many of our services and geographies. Based on the strength of the Nielsen brand, our scale and the breadth and depth of our solutions, we believe we are the global leader in measuring and analyzing consumer behavior in the segments in which we operate.

We help our clients enhance their interactions with consumers and make critical business decisions that we believe positively affect our clients’ sales. Our data and analytics solutions, which have been developed through substantial investment over many decades, are deeply embedded into our clients’ workflow as demonstrated by our long-term client relationships, multi-year contracts and high contract renewal rates. The average length of relationship with our top ten clients, which include The Coca-Cola Company, NBC Universal, Nestle S.A., News Corp., The Procter & Gamble Company and the Unilever Group, is more than 30 years. Typically, before the start of each year, nearly 70% of our annual revenue has been committed under contracts in our combined Watch and Buy segments.

We align our business structure into three reporting segments, the principal two of which are What Consumers Watch (media audience measurement and analytics) and What Consumers Buy (consumer purchasing measurement and analytics). Our Watch and Buy segments, which together generated 96% of our revenues in 2009, are built on an extensive foundation of proprietary data assets that are designed to yield essential insights for our clients to successfully measure, analyze and grow their businesses.

Our Watch segment provides viewership data and analytics primarily to the media and advertising industries across television, online and mobile screens. According to ZenithOptimedia, a leading global media services agency, in 2008, total global spending on advertising across television, online and mobile platforms was at least $236 billion. Our Watch data is used by our media clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content, and by our advertising clients to plan and optimize their spending. Within our Watch segment, our ratings are the primary metrics used to determine the value of programming and advertising in the U.S. total television advertising marketplace, which was approximately $77 billion in 2008 according to Veronis Suhler Stevenson. Our Watch segment has more than 5,000 clients across the media, digital media and telecommunications industry, with renewal rates in excess of 90%. We are a leader in providing measurement services across what we refer to as the three screens: television, online and mobile.

Our Buy segment provides retail transactional measurement data, consumer behavior information and analytics primarily to businesses in the consumer packaged goods industry. According to Euromonitor International, global consumer spending in the product categories we measure was over $7.1 trillion in 2008. Our extensive database of retail and consumer information, combined with our advanced analytical capabilities, helps generate strategic insights that influence our clients’ key business decisions. We track billions of sales transactions per month in retail outlets in approximately 100 countries around the world and our data is used by our clients to measure their sales and market share. We are the only company offering such extensive global coverage for the collection, provision and analysis of this information for consumer packaged goods. Our Buy products and services also enable our clients to better manage their brands, uncover new sources of demand, launch and grow new products, analyze their sales, improve their marketing mix and establish more effective consumer relationships.

 

84


Table of Contents

The information from our Watch and Buy segments, when brought together, can deliver powerful insights into the effectiveness of advertising by linking media consumption trends with consumer purchasing data to better understand how media exposure drives purchase behavior. In 2009, we launched a new service entitled Advertiser Solutions. This offering will focus on our ability to link media consumption data across the three screens with consumer purchasing data to better understand how media exposure drives purchase behavior. We believe these integrated insights will better enable our clients to enhance the return on investment of their advertising and marketing spending.

Our third segment, Expositions, operates one of the largest portfolios of business-to-business trade shows in the United States. Each year, we produce approximately 40 trade shows, which in 2009 connected approximately 270,000 buyers and sellers across 20 industries. Expositions represented 4% of our 2009 revenues.

Our Company was founded in 1923 by Arthur C. Nielsen, Sr., who invented an approach to measuring competitive sales results that made the concept of “market share” a practical management tool. For nearly 90 years, we have advanced the practice of market research and media audience measurement to provide our clients a better understanding of their consumer. The Nielsen Company B.V. and its subsidiaries were purchased on May 24, 2006 through Nielsen Holdings by a consortium of private equity firms. Subsequently, David Calhoun was appointed Chief Executive Officer in August 2006. Mr. Calhoun and the management team have focused on building an open, simple and integrated operating model that drives innovation, delivers greater value to our clients and enhances the scalability of our global platform.

Services and Solutions

We align our business structure into three reporting segments: What Consumers Watch (media audience measurement and analytics), What Consumers Buy (consumer purchasing measurement and analytics) and Expositions. See Note 16 to our audited consolidated financial statements, “Segments,” for further information regarding our operating segments and our geographic areas.

What Consumers Watch

Our Watch segment provides viewership data and analytics primarily to the media and advertising industries across television, online and mobile devices. For the fiscal year ended December 31, 2009, revenues from our Watch segment represented approximately 34% of our consolidated revenue. This segment has historically generated stable revenue streams that are characterized by multi-year contracts and high contract renewal rates. At the beginning of each fiscal year, approximately 90% of the segment’s revenue base for the upcoming year is typically committed under existing agreements. As of 2009, our top five clients represented 26% of segment revenue and the average length of relationship with these same clients is more than 30 years. No customer accounted for 10% or more of our Watch segment revenue in 2009.

Television Audience Measurement Services

Nielsen is the global leader in television audience measurement. In the United States, which is by far the world’s largest market for television programming, broadcasters and cable networks use our television audience ratings as the primary currency to establish the value of their airtime and more effectively schedule and promote their programming. Advertisers use this information to plan television advertising campaigns, evaluate the effectiveness of their commercial messages and negotiate advertising rates.

Nielsen provides two principal television ratings services in the United States: measurement of national television audiences and measurement of local television audiences in all 210 designated local television markets. We use various methods to collect the data from households including electronic meters—which provide minute-by-minute viewing information for next day consumption by our clients—and written diaries. These methods enable us to collect not only television device viewing data but also the demographics of the

 

85


Table of Contents

audience (i.e., who in the household is watching), from which we calculate statistically reliable and accurate estimates of total television viewership. We have made significant investments over decades to build an infrastructure that can accurately and efficiently track television audience viewing, a process that has become increasingly complex as the industry has converted to digital transmission and integrated new technologies allowing for developments such as time-shifted viewing.

Our measurement techniques are constantly evolving to account for new television viewing behavior, increased fragmentation and new media technologies. For example, to help advertisers and programmers understand time-shifted viewing behavior, we created the “C3” ratings, which is a measure of how many people watch programming and commercials during live and time-shifted viewing up to three days after the program aired. The C3 rating has quickly become the primary metric for buying and selling advertising on national broadcast television.

We measure television viewing in 29 countries outside the United States, including Australia, Indonesia, Italy, Mexico and South Korea. The international television audience measurement industry operates on a different model than in the United States. In many international markets, a joint industry committee of broadcasters in each individual country selects a single official audience measurement provider, which provides the “currency” through an organized bidding process that is typically revisited every several years. We have strong relationships in these countries and see a significant opportunity to expand our presence into additional countries around the world.

Online Audience Measurement Services

Nielsen is a global provider of internet media and market research, audience analytics and social media measurement. We employ a variety of measurement offerings to provide online publishers, internet and media companies, marketers and retailers with metrics to better understand the behavior of online audiences. Our online measurement service has a presence in 46 countries including the United States, France, South Korea and Brazil—markets that account for approximately 80% of global internet users. Through a combination of patented panel and census data collection methods, we monitor and measure the internet surfing, online buying and video viewing (including television content) of online audiences. We provide critical advertising metrics such as audience demographics, page and ad views, and time spent—as well as quantify the effectiveness of advertising by reporting online behavioral observations, attitudinal changes and actual offline purchase activity. We track, measure and analyze consumer-generated media including opinions, advice, peer-to-peer discussions and shared personal experiences on over 100 million blogs, social networks, user groups and chat boards.

Mobile Measurement Services

We provide independent measurement and consumer research for telecom and media companies in the mobile telecommunications industry. Clients, principally mobile carriers and device manufacturers, rely upon our data to make consumer marketing, competitive strategy and resource allocation decisions. In the United States, our metrics are a leading indicator for market share, customer satisfaction, device share, service quality, revenue share, content audience and other key performance indicators. We also benchmark the end-to-end consumer experience to pinpoint problem areas in the service delivery chain, track key performance metrics for mobile devices and identify key market opportunities (e.g., demand tracking for device features and services). While mobile internet consumption is still nascent, we are expanding quickly in this area to capture internet, video and other media on mobile devices. As the mobile industry continues to grow, there is an opportunity for Nielsen to measure media and data content on mobile devices worldwide and to integrate mobile measurement with other media platforms. We offer mobile measurement services in 10 countries worldwide, including the United States, where we are the market leader, and are focused on expanding our presence in developing markets such as Brazil, China, India and Africa.

Three-Screen Media Measurement

We continue to develop advanced measurement techniques of the three principal screens—television, online and mobile devices. In the United States, we are already utilizing a single-source TV and PC panel to deliver

 

86


Table of Contents

cross-screen insights to clients. Our cross-screen measurement solution provides information about simultaneous usage of more than one screen (e.g. if a consumer uses Facebook while watching a TV program), unduplicated reach (i.e. total audience net of duplication across platforms), cause and effect analysis (e.g. if a TV advertisement spurs a consumer to view a specific website online) and program viewing behavior (e.g. what platforms consumers use to view certain programming). We also provide advertising effectiveness research across multiple platforms. We plan to continue evolving our cross media measurement capabilities, including mobile measurement, to provide more insights into cross-platform viewing behavior.

What Consumers Buy

Our Buy segment provides retail transactional measurement data, consumer behavior information and analytics primarily to businesses in the consumer packaged goods industry. This segment is organized into two areas: Information, which provides retail scanner and consumer panel-based measurement, and Insights, which provides a broad range of analytics. For the fiscal year ended December 31, 2009, revenues from our Buy segment represented approximately 62% of our consolidated revenue. This segment has historically generated stable revenue streams that are characterized by multi-year contracts and high contract renewal rates. At the beginning of each fiscal year, approximately 60% of the segment’s revenue base for the upcoming year is typically committed under existing agreements. As of 2009, our top five Buy segment clients represented 22% segment revenue and the average length of relationship with these same clients is over 30 years. No customer accounted for 10% or more of our Buy segment revenue in 2009.

Information: Retail Measurement Services

Nielsen is a global leader in retail measurement services. Our purchasing data provides market share, competitive sales volumes, and insights into such activities as distribution, pricing, merchandising and promotion. By combining this detailed information with our in-house expertise and professional consultative services, we produce valuable insights that help our clients improve their marketing and sales decisions and grow their market share.

Depending on the sophistication of each country’s retailer systems, we collect retail sales information from stores using electronic point-of-sale technology and/or teams of local field auditors. Stores within our worldwide retail network include grocery, drug, convenience and discount retailers, who, through various cooperation arrangements, share their sales data with us. The electronic retail sales information collected by stores through checkout scanners is transmitted directly to us. In certain developing markets where electronic retail sales information is unavailable, we collect information through in-store inventory and price checks conducted by over 15,000 field auditors. For all information we collect, our quality control systems validate and confirm the source data. The data is then processed into client-specific databases that clients access using our proprietary software that allows them to query the databases, conduct customized analysis and generate reports and alerts.

Information: Consumer Panel Measurement

We conduct consumer panels around the world that help our clients understand consumer purchasing dynamics at the household level. Among other things, this information offers insight into shopper behavior such as trial and repeat purchase for new products and likely substitutes, as well as customer segmentation. In addition, our panel data augments our retail measurement information in circumstances where we do not collect data from certain retailers.

Our consumer panels collect data from approximately 250,000 household panelists across 25 countries who use in-home scanners to record purchases from each shopping trip. In the United States, for example, approximately 100,000 selected households, constituting a demographically balanced sample, participate in the panels. Data received from household panels undergo a quality control process including UPC verification and validation, before being processed into databases and reports. Clients may access these databases to perform analyses.

 

87


Table of Contents

Insights: Analytical Services

Utilizing our foundation of consumer purchasing information, we provide a wide and growing selection of consumer intelligence and analytical services that help clients make smarter business decisions throughout their product development and marketing cycles. We draw actionable insights from our retail and consumer panel measurement data sets, our online behavioral information, as well as a variety of other proprietary data sets. For example, we maintain more than 2,500 demographic characteristics to describe households within each of the eight million U.S. census blocks to provide consumer segmentation and demographic insights. We continually expand an existing database by conducting approximately eight million surveys annually that capture consumer reaction to new product launches around the world to help our clients manage their product development cycles. We also collect and analyze more than 20 million surveys annually to measure consumer engagement and recall of advertisements across television and online to provide important insights on advertising and content effectiveness. We believe the analyses we derive from these comprehensive data sets help our clients answer some of their most challenging sales and marketing questions.

Our analytical services are organized into eight primary categories that follow our clients’ business development process:

 

Growth and Demand Strategy:    We help clients identify unsatisfied customer demand and meet that demand by delivering the right products to the right place at the right price at the right time.
Market Structure and Segmentation:    Using our demographic and retail databases, we provide clients with a precise understanding of market structures, and how to segment and reach their best customers.
Brand and Portfolio Management:    We work with clients to maximize their product and brand portfolios including brand and category assessments, positioning and messaging evaluation and strategic portfolio alignment.
Product Innovation Services:    We help clients forecast, evaluate and optimize the sales potential of new products, improve the positioning and performance of existing products, and refine go-to-market strategies.
Pricing and Sales Modeling:    We use our extensive data to develop pricing simulations and modeling services that guide clients through pricing decisions.
Retail Marketing Strategies:    We use our breadth of information to help retailers and manufacturers optimize use of in-store space, addressing factors such as channel selection, site and market selection, shelf space and assortment levels.
Marketing ROI Strategies:    We integrate large-scale consumer purchasing and media consumption data to provide marketing return-on-investment analysis.
Advertising Engagement:    We measure and provide insights into the effectiveness of advertising, product placement and programming across multiple platforms.

Insights: Advertiser Solutions

Our Advertiser Solutions offering will integrate data from our Watch and Buy segments and use the analytical services listed above to provide end-to-end solutions directly to advertisers. We believe this full suite of consumer behavior data and marketing insights will help our clients answer some of their most important marketing questions.

Expositions

In our Expositions segment, we operate one of the largest portfolios of business-to-business trade shows in the United States. Each year, we produce approximately 40 trade shows, which in 2009 connected approximately

 

88


Table of Contents

270,000 buyers and sellers across 20 industries. Our leading events include the Hospitality Design Conference and Expo, the Kitchen/Bath Industry Show, the ASD Merchandise Shows, the JA International Jewelry Summer and Winter Shows and the Interbike International Bike Show and Expo. This segment represented 4% of our 2009 revenues. In addition, we are developing digital platforms and solutions for buyers and sellers to connect and transact on a 365-day a year basis.

Competitive Advantages

We are faced with a number of competitors in the markets in which we operate. Some of our competitors in each market may have substantially greater financial marketing and other resources than we do and may benefit from other competitive advantages. See “—Competitive Landscape” and “Risk Factors—We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.”

Notwithstanding the challenges presented by the competitive landscape, we believe that we have several competitive advantages including the following:

Global Scale and Brand. We provide a breadth of information and insights about the consumer in approximately 100 countries. In our Watch segment, our ratings are the primary metrics used to determine the value of programming and advertising in the U.S. total television advertising marketplace, which was approximately $77 billion in 2008 according to Veronis Suhler Stevenson. In our Buy segment, we track billions of sales transactions per month in retail outlets in approximately 100 countries around the world. We also have approximately 250,000 household panelists across 25 countries. We believe our footprint, neutrality, credibility and leading market positions will continue to contribute to our long-term growth and strong operating margins as the number and role of multinational companies expands. Our scale is supported by our global brand, which is defined by the original Nielsen code created by our founder, Arthur C. Nielsen, Sr.: impartiality, thoroughness, accuracy, integrity, economy, price, delivery and service.

Strong, Diversified Client Relationships. Many of the world’s largest brands rely on us as their information and analytics provider to create value for their business. We maintain long-standing relationships and multi-year contracts with high renewal rates due to the value of the services and solutions we provide. In our Watch segment, our client base includes leading broadcast, cable and internet companies such as CBS, Comcast, Disney/ABC, Google, Microsoft, NBC Universal, News Corp., Time Warner, Univision and Yahoo!; leading advertising agencies such as IPG, Omnicom and WPP; and leading telecom companies such as AT&T, Nokia and Verizon. In our Buy segment, our clients include the largest consumer packaged goods and merchandising companies in the world such as The Coca-Cola Company, Kraft Foods and The Procter & Gamble Company, as well as leading retail chains such as Carrefour, Kroger, Safeway, Tesco and Walgreens, and leading automotive companies such as Chrysler, Ford and Toyota. The average length of relationship with our top 10 clients across both our Watch and Buy segments is more than 30 years. In addition, due to our growing presence in developing markets, we have cultivated strong relationships with local market leaders that can benefit from our services as they expand globally. Our strong client relationships provide both a foundation for recurring revenues as well as a platform for growth.

Enhanced Data Assets and Measurement Science. Our extensive portfolio of transactional and consumer behavioral data across our Watch and Buy segments enables us to provide critical information to our clients. For decades, we have employed advanced measurement methodologies that yield statistically accurate information about consumer behavior while having due regard for their privacy. We have a particular expertise in panel measurement, which is a proven methodology to create statistically accurate research insights that are fully representative of designated audiences. This expertise is a distinct advantage as we extrapolate more precise insights from emerging large-scale census databases to provide greater granularity and segmentation for our clients. We continue to enhance our core competency in measurement science by improving research approaches and investing in new methodologies. We have also invested significantly in our data architecture to enable the integration of distinct data sets including those owned by third parties. We believe that our expertise, established standards and increasingly granular and comprehensive data assets provide us with a distinct advantage as we deliver more precise insights to our clients.

 

89


Table of Contents

Innovation. Nielsen has focused on innovation to deepen our capabilities, expand in new and emerging forms of measurement, enhance our analytical offerings and capitalize on industry trends. For example, we are continuously developing advanced delivery technologies that allow us to maximize the full suite of our data assets for our clients. The most significant example of this is our new delivery platform, Nielsen Answers, which brings our broad portfolio of our data and information to a single client desktop. As a second example, our Nielsen Catalina joint venture, announced in December 2009, will integrate consumer purchase and media consumption data sets to provide return-on-investment measurement for television and online advertising campaigns. In addition, our partnership with Facebook provides advertising effectiveness measurement of social networking activity on Facebook’s active user base of over 400 million.

Scalable Operating Model. Our global presence and operating model allow us to scale our services and solutions rapidly and efficiently. We have a long track record of establishing leading products that can be quickly expanded across clients, markets and geographies. Our global operations and technology organization enables us to achieve faster, higher quality outcomes for clients in a cost-efficient manner. Our flexible architecture allows us to incorporate leading third-party technologies as well as data from external sources, and enables our clients to use our technology and solutions on their own technology platforms. In addition, we work with leading technology partners such as Cognos, Netezza, Tata Consultancy Services and TIBCO, which allows for greater quality in client offerings and efficiency in our global operations.

The Nielsen Opportunity

We believe companies, including our clients, require an increasing amount of data and analytics to set strategy and direct operations. This has resulted in a large market for business information and insight which we believe will continue to grow. Our clients are media, advertising and consumer packaged goods companies in the large and growing markets. We believe that significant economic, technological, demographic and competitive trends facing consumers and our clients will provide a competitive advantage to our business and enable us to capture a greater share of our significant market opportunity. We may not be able to realize these opportunities if these trends do not continue or if we are otherwise unable to execute our strategies. See “Risk Factors—We may be unable to adapt to significant technological change which could adversely affect our business” and “Risk Factors—Our international operations are exposed to risks which could impede growth in the future.”

Developing markets present significant expansion opportunities. Brand marketers are focused on attracting new consumers in developing countries as a result of the fast-paced population growth of the middle class in these regions. In addition, the retail trade in these markets is quickly evolving from small, local formats toward larger, more modern formats with electronic points of sale, a similar evolution to what occurred in developed markets over the last several decades. We provide established measurement methodologies to help give consumer packaged goods companies, retailers and media companies an accurate understanding of local consumers to allow them to harness growing consumer buying power in fast growing markets like Brazil, Russia, India and China.

The media landscape is dynamic and changing. Consumers are rapidly changing their media consumption patterns. The growing availability of the Internet, and the proliferation of new formats and channels such as mobile devices, social networks and other forms of user-generated media have led to an increasingly fragmented consumer base that is more difficult to measure and analyze. In addition, simultaneous usage of more than one screen is becoming a regular aspect of daily consumer media consumption. We have effectively measured and tracked media consumption through numerous cycles in the industry’s evolution—from broadcast to cable, from analog to digital, from offline to online and from live to time-shifted. We believe our distinct ability to provide metrics across television, online and mobile platforms helps clients better understand, adapt to and profit from the continued transformation of the global media landscape.

Increasing amounts of consumer information are leading to new marketing approaches. The advent of the internet and other digital platforms has created rapid growth in consumer data that is expected to intensify as more entertainment and commerce are delivered across these platforms. As a result, companies are looking for real-time access to more granular levels of data to understand growth opportunities more quickly and more

 

90


Table of Contents

precisely. This presents a significant opportunity for us to work with companies to effectively manage, integrate and analyze large amounts of information and extract meaningful insights that allow marketers to generate profitable growth.

Consumers are more connected, informed and in control. Today, more than three-quarters of the world’s homes have access to television, there are more than 1.8 billion internet users around the globe, and there are two-thirds as many mobile phones in the world as people. Advances in technology have given consumers a greater level of control of when, where and how they consume information and interact with media and brands. They can compare products and prices instantaneously and have new avenues to learn about, engage with and purchase products and services. These shifts in behavior create significant complexities for our clients. Our broad portfolio of information and insights enables our clients to engage consumers with more impact and efficiency, influence consumer purchasing decisions and actively participate in and shape conversations about their brands.

Demographic shifts and changes in spending behavior are altering the consumer landscape. Consumer demographics and related trends are constantly evolving globally, leading to changes in consumer preferences and the relative size and buying power of major consumer groups. Shifts in population size, age, racial composition, family size and relative wealth are causing marketers continuously to re-evaluate and reprioritize their consumer marketing strategies. We track and interpret consumer demographics that help enable our clients to engage more effectively with their existing consumers as well as forge new relationships with emerging segments of the population.

Consumers are looking for greater value. Economic and social trends have spurred consumers to seek greater value in what they buy as exemplified by the rising demand for “private label” (store branded) products. For instance, in the United States, the absolute dollar share for private label consumer packaged goods increased more than $10 billion over the last two years. This increased focus on value is causing manufacturers, retailers and media companies to re-evaluate brand positioning, pricing and loyalty. We believe companies will increasingly look to our broad range of consumer purchasing insights and analytics to more precisely and effectively measure consumer behavior and target their products and marketing offers at the right place and at the right price.

Our Growth Strategy

We believe we are well-positioned for growth worldwide and have a multi-faceted strategy that builds upon our brand, strong client relationships and integral role in measuring and analyzing the global consumer. Our growth strategy is also subject to certain risks. For example, we may be unable to adapt to significant technological changes such as changes in the technology used to collect and process data or in methods of television viewing. In addition, consolidation in our customers’ industries may reduce the aggregate demand for our services. See “Risk Factors.”

Continue to grow in developing markets

Developing markets comprised approximately 17% of our 2009 revenues and represent a significant long-term opportunity for us given the growth of the middle class and the rapid evolution and modernization of the retail trade in these regions. Currently, the middle class is growing by 70 million people globally each year, with Brazil, Russia, India and China expected to contribute approximately half of all global consumption growth in 2010. Key elements of our strategy include:

 

   

Continuing to grow our existing services in local markets while simultaneously introducing into developing markets new services drawn from our global portfolio;

 

   

Partnering with existing clients as they expand their businesses into developing and emerging markets and providing the high-quality measurement and insights to which they are accustomed; and

 

   

Building relationships with local companies that are expanding beyond their home markets by capitalizing on the global credibility and integrity of the Nielsen brand.

 

91


Table of Contents

Continue to develop innovative products and services

We intend to continue developing our product and service portfolio to provide our clients with comprehensive and advanced solutions. Key elements of our strategy include:

 

   

Further developing our analytics offerings across all facets of our client base to provide a more comprehensive offering and help our clients think through their most important challenges;

 

   

Continuing to grow our leadership in measurement and insight services related to each individual screen (TV, online and mobile) and expanding our three screen measurement services to help our media clients more effectively reach their target audiences and better understand the value of their content; and

 

   

Expanding our Advertiser Solutions offering, which integrates our proprietary data and analytics from both the Watch and Buy segments, by developing powerful tools to help clients better understand the effectiveness of advertising spending on consumer purchasing behavior.

Continue to attract new clients and expand existing relationships

We believe that substantial opportunities exist to both attract new clients and to increase our revenue from existing clients. Building on our deep knowledge and the embedded position of our Watch and Buy segments, we expect to sell new and innovative solutions to our new and existing clients, increasing our importance to their decision making processes.

Continue to pursue strategic acquisitions to complement our leadership positions

We have increased our capabilities and expanded our geographic footprint through acquisitions in the areas of online and mobile measurement, social networking, advanced analytics and advertising effectiveness. Going forward, we will consider select acquisitions of complementary businesses that enhance our product and geographic portfolio and can benefit from our scale, scope and status as a global leader.

Technology Infrastructure

We operate with an extensive data and technology infrastructure utilizing 14 primary data centers in eight countries around the world. Our global database has the capacity to house approximately 21 petabytes of information, with our Watch segment processing approximately one billion tuning and viewing records each month and our Buy segment processing approximately nine trillion purchasing data points each month. Our technology infrastructure plays an instrumental role in meeting service commitments to global clients and allows us to quickly scale our products across practice areas and geographies. Our technology platform utilizes an open approach that facilitates integration of distinct data sets, interoperability with client data and technology, and partnerships with leading technology companies such as Cognos, Netezza, Tata Consulting and TIBCO.

Intellectual Property

Our patents, trademarks, trade secrets, copyrights and all of our other intellectual property are important assets that afford protection to our business. Our success depends to a degree upon our ability to protect and preserve certain proprietary aspects of our technology and our brand. To ensure that objective, we control access to our proprietary technology. Our employees and consultants enter into confidentiality, non-disclosure and invention assignment agreements with us. We protect our rights to proprietary technology and confidential information in our business arrangements with third parties through confidentiality and other intellectual property and business agreements.

We hold a number of third-party patent and intellectual property license agreements that afford us rights under third party patents, technology and other intellectual property. Such license agreements most often do not

 

92


Table of Contents

preclude either party from licensing its patents and technology to others. Such licenses may involve one-time payments or ongoing royalty obligations, and we cannot ensure that future license agreements can or will be obtained or renewed on acceptable terms, or at all.

Competitive Landscape

There is no single competitor that offers all of the services we offer in all of the markets in which we offer them. We have many competitors worldwide that offer some of the services we provide in selected markets. While we maintain leading positions in many markets in which we operate, our future success will depend on our ability to enhance and expand our suite of services, provide reliable and accurate measurement solutions and related information, drive innovation that anticipates and responds to emerging client needs, strengthen and expand our geographic footprint, and protect consumer privacy. See “Risk Factors—We face competition, which could adversely affect our business, financial condition, results of operations and cash flow.” We believe our global presence and integrated portfolio of services are key assets in our ability to effectively compete in the marketplace. A summary of the competitive landscape for each of our segments is included below:

What Consumers Watch

While we do not have one global competitor in our Watch segment, we face numerous competitors in various areas of our operations in different markets throughout the world. We are the clear market leader in U.S. television audience measurement; however, there are many emerging players and technologies that will increase competitive pressure. Numerous companies such as Canoe Ventures, Dish Networks, Kantar (a unit of WPP), Rentrak and TiVo are attempting to provide measurement solutions using set-top box data to provide an alternative form of television audience measurement. Our principal competitor in television audience measurement outside the United States is Kantar, with additional companies such as Ipsos, GfK and Médiamétrie representing competitors in individual countries. Our online service faces competition in the United States and globally from companies that provide panel-based internet measurement services such as comScore, providers of site-centric Web analytics solutions, including Coremetrics, Google, Omniture and WebTrends and companies that measure consumer generated media on the internet such as BuzzLogic, Cymfony, and Umbria. Although the mobile measurement service is still nascent, there are a variety of companies and technologies that could represent competitors to Nielsen in this area.

What Consumers Buy

While we do not have one global competitor in our Buy segment, we face numerous competitors in various areas of our service in different markets throughout the world. Competition includes companies specializing in marketing research, in-house research departments of manufacturers and advertising agencies, retailers that sell information directly or through brokers, information management and software companies, and consulting and accounting firms. In retail measurement, our principal competitor in the United States is Information Resources, Inc., which is also present in some European markets. Our retail measurement service also faces competition in individual markets from local companies. Our consumer panel services and analytics services have many direct and/or indirect competitors in all markets around the world including in selected cases GfK, Ipsos, Kantar and local companies in individual countries.

Expositions

The trade show industry is highly fragmented with numerous competitors serving individual business sectors or geographies. Our primary competitors in this segment are Reed Expositions, Advanstar and Hanley Wood.

Regulation

Our operations are subject to and affected by data protection laws in many countries. These laws constrain whether and how we collect personal data (i.e., information relating to an identifiable individual), how that data may be used and stored, and whether, to whom and where that data may be transferred. Data collection methods

 

93


Table of Contents

that may not always be obvious to the data subject, like the use of cookies online, or that present a higher risk of abuse, such as collecting data directly from children, tend to be more highly regulated; and data transfer constraints can impact multinational access to a central database and cross-border data transfers.

Some of the personal data we collect may be considered “sensitive” by the laws of many jurisdictions because they may include certain demographic information and consumption preferences. “Sensitive” personal data typically are more highly regulated than non-sensitive data. Generally, this means that for sensitive data the data subject’s consent should be more explicit and fully informed and security measures surrounding the storage of the data should be more rigorous. The greater constraints that apply to the collection and use of sensitive data increase the administrative and operational burdens and costs of panel recruitment and management.

The attention privacy and data protection issues attract can offer us a competitive advantage. Because we recognize the importance of privacy to our panelists, our customers, consumers in general, and regulators, we devote dedicated resources to enhancing our privacy and security practices in our product development plans and other areas of operation, and participate in privacy policy organizations and “think tanks.” We do this to improve both our practices and the perception of Nielsen as a leader in this area.

Professional Client Services

Our professional client services teams, which comprise approximately 9,500 employees, are responsible for leading our client relationships and coordinating our entire Nielsen experience with clients around the world. These teams are led by professional client business partners and analytics associates who understand our clients’ most important business issues and opportunities. Our professional and client services organization counsels a wide range of client executives who are charged with driving their own company’s growth agenda including, Presidents/CEOs, Chief Marketing Officers, and brand and sales executive teams.

Employees

As of June 30, 2010, we employed approximately 33,500 people worldwide. Approximately 20% of our employees are covered under collective bargaining or works council agreements. The Company may become subject to additional agreements or experience labor disruptions which may result in higher operating costs over time. We believe that our employee relations are good.

Properties

We lease property in more than 610 locations worldwide. We also own seven properties worldwide, including our offices in Oxford, United Kingdom, Mexico City, Mexico and Sao Paulo, Brazil. Our leased property includes offices in New York, New York, Oldsmar, Florida, and Markham, Canada. In addition, we are subject to certain covenants including the requirement that we meet certain conditions in the event we merge into or convey, lease, transfer or sell our properties or assets as an entirety or substantially as an entirety to, any person or persons, in one or a series of transactions.

Legal Proceedings

In addition to the legal proceedings described below, we are presently a party to certain lawsuits arising in the ordinary course of our business. We believe that none of our current legal proceedings will have a material adverse effect on our business, results of operations or financial condition.

Sunbeam Television Corp.

Sunbeam Television Corp. (“Sunbeam”) filed a lawsuit in Federal District Court in Miami, Florida on April 30, 2009. The lawsuit alleges that Nielsen Media Research, Inc. violated Federal and Florida state antitrust laws and Florida’s unfair trade practices laws by attempting to maintain a monopoly and abuse its position in the market, and breached its contract with Sunbeam by producing defective ratings data through its sampling methodology. The complaint did not specify the amount of damages sought and also sought declaratory and equitable relief. Nielsen believes this lawsuit is without merit and intends to defend it vigorously.

 

94


Table of Contents

Corporate Structure

The following chart reflects our corporate structure, assuming that the Conversion and this offering had been completed as of June 30, 2010.

LOGO

 

(1) The Sponsors hold their interest in Nielsen Holdings indirectly through their holdings in Valcon Acquisition Holding (Luxembourg) S.à r.l., a private limited company incorporated under the laws of Luxembourg. See “Principal Stockholders.”
(2) As part of the Conversion, Nielsen Holdings B.V. will be converted into a Dutch public company with limited liability and renamed as Nielsen Holdings N.V. on or prior to the completion of this offering. See “Prospectus Summary—Company Information.”

Market an