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Nielsen Holdings plc - Quarter Report: 2021 March (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 001-35042

 

Nielsen Holdings plc

(Exact name of registrant as specified in its charter)

 

 

England and Wales

 

98-1225347

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

85 Broad Street

New York, New York 10004

(646) 654-5000

 

Nielsen House

John Smith Drive

Oxford

Oxfordshire, OX4 2WB

United Kingdom

+1 (646) 654-5000

(Address of principal executive offices) (Zip Code) (Registrant’s telephone numbers including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Ordinary shares, par value €0.07 per share

NLSN

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

There were 358,497,131 shares of the registrant’s Common Stock outstanding as of March 31, 2021.

 

 

 

 


 

Table of Contents

Contents

 

 

 

 

PAGE

PART I.

 

FINANCIAL INFORMATION

- 3 -

Item 1.

 

Condensed Consolidated Financial Statements

- 3 -

Item 2.

 

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

- 30 -

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

- 44 -

Item 4.

 

Controls and Procedures

- 44 -

PART II.

 

OTHER INFORMATION

- 46 -

Item 1.

 

Legal Proceedings

- 46 -

Item 1A.

 

Risk Factors

- 46 -

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

- 46 -

Item 3.

 

Defaults Upon Senior Securities

- 46 -

Item 4.

 

Mine Safety Disclosures

- 46 -

Item 5.

 

Other Information

- 46 -

Item 6.

 

Exhibits

- 46 -

 

 

Signatures

- 48 -

 

 

 


 

PART I. FINANCIAL INFORMATION

 

Item  1.

Condensed Consolidated Financial Statements

 

Nielsen Holdings plc

Condensed Consolidated Statements of Operations (Unaudited)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

 

2021

 

 

2020

 

 

Revenues

 

$

863

 

 

$

842

 

 

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

 

 

277

 

 

 

324

 

 

Selling, general and administrative expenses, exclusive of depreciation and amortization

   shown separately below

 

 

206

 

 

 

202

 

 

Depreciation and amortization

 

 

127

 

 

 

136

 

 

Restructuring charges

 

 

 

 

 

3

 

 

Operating income

 

 

253

 

 

 

177

 

 

Interest income

 

 

 

 

 

1

 

 

Interest expense

 

 

(80

)

 

 

(83

)

 

Foreign currency exchange transaction losses, net

 

 

(4

)

 

 

(9

)

 

Other expense, net

 

 

 

 

(1

)

 

Income from continuing operations before income taxes

 

 

169

 

 

 

85

 

 

Provision for income taxes

 

 

(60

)

 

 

(25

)

 

Net income from continuing operations

 

 

109

 

 

 

60

 

 

Net income/(loss) from discontinued operations, net of income taxes

 

 

467

 

 

 

(73

)

 

Net income/(loss)

 

 

576

 

 

 

(13

)

 

Net income attributable to noncontrolling interests

 

 

3

 

 

 

5

 

 

Net income/(loss) attributable to Nielsen shareholders

 

$

573

 

 

$

(18

)

 

Net income/(loss) per share of common stock, basic

 

 

 

 

 

 

 

 

 

Net income from continuing operations attributable to Nielsen shareholders

 

 

0.30

 

 

 

0.16

 

 

Net income/(loss) from discontinued operations attributable to Nielsen shareholders

 

 

1.30

 

 

 

(0.21

)

 

Net income/(loss) attributable to Nielsen shareholders

 

$

1.60

 

 

$

(0.05

)

 

Net income/(loss) per share of common stock, diluted

 

 

 

 

 

 

 

 

 

Net income from continuing operations attributable to Nielsen shareholders

 

 

0.29

 

 

 

0.16

 

 

Net income/(loss) from discontinued operations attributable to Nielsen shareholders

 

 

1.30

 

 

 

(0.21

)

 

Net income/(loss) attributable to Nielsen shareholders

 

$

1.59

 

 

$

(0.05

)

 

Weighted-average shares of common stock outstanding, basic

 

 

357,944,731

 

 

 

356,389,022

 

 

Dilutive shares of common stock

 

 

2,244,591

 

 

 

1,272,358

 

 

Weighted-average shares of common stock outstanding, diluted

 

 

360,189,322

 

 

 

357,661,380

 

 

Dividends declared per common share

 

$

0.06

 

 

$

0.06

 

 

 

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

 

 

 

- 3 -


 

Nielsen Holdings plc

Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

(IN MILLIONS)

 

2021

 

 

2020

 

 

Net income/(loss)

 

$

576

 

 

$

(13

)

 

Other comprehensive income/(loss), net of tax

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments (1)

 

 

228

 

 

 

(104

)

 

Changes in the fair value of cash flow hedges (2)

 

 

5

 

 

 

(33

)

 

Defined benefit pension plan adjustments (3)

 

 

144

 

 

 

4

 

 

Total other comprehensive income/(loss)

 

 

377

 

 

 

(133

)

 

Total comprehensive income/(loss)

 

 

953

 

 

 

(146

)

 

Less: comprehensive income/(loss) attributable to noncontrolling interests

 

 

1

 

 

 

(3

)

 

Total comprehensive income/(loss) attributable to Nielsen shareholders

 

$

952

 

 

$

(143

)

 

 

(1)

Net of tax of $(3) million for each of the three months ended March 31, 2021 and 2020.

(2)

Net of tax of $(3) million and $12 million for the three months ended March 31, 2021 and 2020, respectively

(3)

Net of tax of $(43) million and $(1) million for the three months ended March 31, 2021 and 2020, respectively

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

 

 

- 4 -


 

Nielsen Holdings plc

Condensed Consolidated Balance Sheets

 

 

 

March 31,

 

 

December 31,

 

(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,197

 

 

$

500

 

Trade and other receivables, net of allowances for doubtful accounts and sales returns of $22 and $23 as of March 31, 2021 and December 31, 2020, respectively

 

 

504

 

 

 

465

 

Prepaid expenses and other current assets

 

 

319

 

 

 

195

 

Current assets, discontinued operations

 

 

-

 

 

 

1,064

 

Total current assets

 

 

2,020

 

 

 

2,224

 

Non-current assets

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

249

 

 

 

270

 

Operating lease right-of-use asset

 

 

154

 

 

 

161

 

Goodwill

 

 

5,654

 

 

 

5,680

 

Other intangible assets, net

 

 

3,594

 

 

 

3,663

 

Deferred tax assets

 

 

48

 

 

 

53

 

Other non-current assets

 

 

165

 

 

 

159

 

Non-current assets, discontinued operations

 

 

-

 

 

 

1,925

 

Total assets

 

$

11,884

 

 

$

14,135

 

Liabilities and equity:

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and other current liabilities

 

$

487

 

 

$

499

 

Deferred revenues

 

 

148

 

 

 

135

 

Income tax liabilities

 

 

76

 

 

 

15

 

Current portion of long-term debt, finance lease obligations and short-term borrowings

 

 

866

 

 

 

276

 

Current liabilities, discontinued operations

 

 

-

 

 

 

989

 

Total current liabilities

 

 

1,577

 

 

 

1,914

 

Non-current liabilities

 

 

 

 

 

 

 

 

Long-term debt and finance lease obligations

 

 

5,886

 

 

 

6,684

 

Deferred tax liabilities

 

 

687

 

 

 

888

 

Operating lease liabilities

 

 

131

 

 

 

140

 

Other non-current liabilities

 

 

433

 

 

 

429

 

Non-current liabilities, discontinued operations

 

 

-

 

 

 

1,837

 

Total liabilities

 

 

8,714

 

 

 

11,892

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

Common stock, €0.07 par value, 1,185,800,000 and 1,185,800,000 shares authorized; 358,530,521 and 357,678,263 shares issued and 358,497,131 and 357,644,935 shares outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

32

 

 

 

32

 

Additional paid-in capital

 

 

4,314

 

 

 

4,340

 

Retained earnings/(accumulated deficit)

 

 

(643

)

 

 

(1,216

)

Accumulated other comprehensive loss, net of income taxes

 

 

(726

)

 

 

(1,105

)

Total shareholders’ equity

 

 

2,977

 

 

 

2,051

 

Noncontrolling interests

 

 

193

 

 

 

192

 

Total equity

 

 

3,170

 

 

 

2,243

 

Total liabilities and equity

 

$

11,884

 

 

$

14,135

 

 

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

 

 

- 5 -


 

Nielsen Holdings plc

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

(IN MILLIONS)

 

2021

 

 

2020

 

Operating Activities

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

109

 

 

$

60

 

Net loss from discontinued operations

 

 

(75

)

 

 

(73)

 

Gain on disposal of Connect, net of tax, within discontinued operations

 

 

542

 

 

 

-

 

Net income/(loss)

 

 

576

 

 

 

(13

)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

8

 

 

 

16

 

(Gain) on sale of discontinued operations, net of tax

 

 

(542

)

 

 

-

 

Currency exchange rate differences on financial transactions and other (gains)/losses

 

 

11

 

 

 

7

 

Equity in net income of affiliates, net of dividends received

 

 

(1

)

 

 

-

 

Depreciation and amortization

 

 

163

 

 

 

214

 

Changes in operating assets and liabilities, net of effect of businesses acquired and divested:

 

 

 

 

 

 

 

 

Trade and other receivables, net

 

 

(57

)

 

 

(107

)

Prepaid expenses and other assets

 

 

(71

)

 

 

(13

)

Accounts payable and other current liabilities and deferred revenues

 

 

(147

)

 

 

(92

)

Other non-current liabilities

 

 

(17

)

 

 

(20

)

Interest payable

 

 

31

 

 

 

44

 

Income taxes

 

 

1

 

 

 

(41

)

Net cash used in operating activities

 

 

(45

)

 

 

(5

)

Investing Activities

 

 

 

 

 

 

 

 

Acquisition of subsidiaries and affiliates, net of cash acquired

 

 

-

 

 

 

(27

)

Proceeds from the sale of subsidiaries and affiliates, net

 

 

2,245

 

 

 

-

 

Additions to property, plant and equipment and other assets

 

 

(7

)

 

 

(4

)

Additions to intangible assets

 

 

(82

)

 

 

(108

)

Proceeds from the sale of property, plant and equipment and other assets

 

 

3

 

 

 

-

 

Other investing activities

 

 

(1

)

 

 

(3

)

Net cash provided by/(used in) investing activities

 

 

2,158

 

 

 

(142

)

Financing Activities

 

 

 

 

 

 

 

 

Net borrowings under revolving credit facility

 

-

 

 

 

135

 

Repayment of debt

 

 

(1,478

)

 

 

(14

)

Cash dividends paid to shareholders

 

 

(21

)

 

 

(21

)

Activity from share-based compensation plans

 

 

(7

)

 

 

(4

)

Proceeds from employee stock purchase plan

 

 

-

 

 

 

1

 

Finance leases

 

 

(14

)

 

 

(11

)

Other financing activities

 

 

(3

)

 

 

(4

)

Net cash (used in)/provided by financing activities

 

 

(1,523

)

 

 

82

 

Effect of exchange-rate changes on cash and cash equivalents

 

 

(3

)

 

 

(30

)

Net increase/(decrease) in cash and cash equivalents

 

 

587

 

 

 

(95

)

Cash and cash equivalents at beginning of period

 

 

610

 

 

 

454

 

Cash and cash equivalents at end of period

 

$

1,197

 

 

$

359

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

(38

)

 

$

(52

)

Cash paid for interest, net of amounts capitalized

 

$

(57

)

 

$

(50

)

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

 

 

 

- 6 -


 

Nielsen Holdings plc

Condensed Consolidated Statements of Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Income

(Loss), Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Currency

 

 

Cash

 

 

Post

 

 

Total Nielsen

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Paid-in

 

 

(Accumulated)

 

 

Translation

 

 

Flow

 

 

Employment

 

 

Shareholders’

 

 

Noncontrolling

 

 

Total

 

(IN MILLIONS)

 

Stock

 

 

Capital

 

 

(Deficit)

 

 

Adjustments

 

 

Hedges

 

 

Benefits

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance, December 31, 2020

 

$

32

 

 

$

4,340

 

 

$

(1,216

)

 

$

(821

)

 

$

(39

)

 

$

(245

)

 

$

2,051

 

 

$

192

 

 

$

2,243

 

Net income/(loss)

 

 

 

 

 

 

 

 

573

 

 

 

 

 

 

 

 

 

 

 

 

573

 

 

 

3

 

 

 

576

 

Currency translation adjustments, net of

   tax of $(3)

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

 

 

(3

)

 

 

(2

)

 

 

(5

)

Cash flow hedges, net of tax of $(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Unrealized gain on pension liability, net of

   tax of $(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

 

 

 

 

 

3

 

Other Comprehensive Income gain/(loss) on disposition, net of tax of $(42)

 

 

 

 

 

 

 

 

 

 

 

233

 

 

 

 

 

 

141

 

 

 

374

 

 

 

 

 

 

374

 

Dividends to shareholders ($0.06 per share of common stock)

 

 

 

 

 

(21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

(3

)

 

 

(24

)

Common stock activity from share-based compensation plans

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Share-based compensation expense

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Other

 

 

 

 

 

(8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8)

 

 

 

3

 

 

 

(5)

 

Balance, March 31, 2021

 

$

32

 

 

$

4,314

 

 

$

(643

)

 

$

(591

)

 

$

(34

)

 

$

(101

)

 

$

2,977

 

 

$

193

 

 

$

3,170

0

 

 

 

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

 

- 7 -


 

Condensed Consolidated Statements of Changes in Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other Comprehensive Income

(Loss), Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Earnings

 

 

Currency

 

 

Cash

 

 

Post

 

 

Total Nielsen

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Paid-in

 

 

(Accumulated)

 

 

Translation

 

 

Flow

 

 

Employment

 

 

Shareholders’

 

 

Noncontrolling

 

 

Total

 

(IN MILLIONS)

 

Stock

 

 

Capital

 

 

(Deficit)

 

 

Adjustments

 

 

Hedges

 

 

Benefits

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance, December 31, 2019

 

$

32

 

 

$

4,378

 

 

$

(1,210

)

 

$

(776

)

 

$

(19

)

 

$

(210

)

 

$

2,195

 

 

$

193

 

 

$

2,388

 

Net income/(loss)

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

5

 

 

 

(13

)

Currency translation adjustments, net of

   tax of $(3)

 

 

 

 

 

 

 

 

 

 

 

(96

)

 

 

 

 

 

 

 

 

(96

)

 

 

(8

)

 

 

(104

)

Cash flow hedges, net of tax of $12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33

)

 

 

 

 

 

(33

)

 

 

 

 

 

(33

)

Unrealized gain on pension liability, net of

   tax of $(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

 

 

 

 

 

4

 

Employee stock purchase plan

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Dividends to shareholders ($0.06 per share of common stock)

 

 

 

 

 

(21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

(3

)

 

 

(24

)

Common stock activity from share-based compensation plans

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Share-based compensation expense

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

16

 

Balance, March 31, 2020

 

$

32

 

 

$

4,370

 

 

$

(1,228

)

 

$

(872

)

 

$

(52

)

 

$

(206

)

 

$

2,044

 

 

$

187

 

 

$

2,231

 

 

 

 

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

 

 

 

- 8 -


 

Nielsen Holdings plc

Notes to Condensed Consolidated Financial Statements

 

Note 1. Background and Basis of Presentation

Background

 

Nielsen Holdings plc (“Nielsen” or the “Company”), together with its subsidiaries, is a leading global data, measurement, and analytics company that provides a holistic and objective understanding of the media industry. With offerings spanning audience measurement, audience outcomes and content, Nielsen offers its clients and partners simple solutions to complex questions and optimizes the value of their investments and growth strategies. It is the only company that can offer de-duplicated cross-media audience measurement. Audience is Everything to Nielsen and its clients, and Nielsen is committed to ensuring that every voice counts.

 

Nielsen offers measurement and analytics services in nearly 60 countries, with its registered office located in Oxford, the United Kingdom and its headquarters located in New York, United States.  

On March 5, 2021, Nielsen completed the previously announced sale of the Company’s Global Connect business (such business, “Global Connect,” and the sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation (“Purchaser”), pursuant to the Stock Purchase Agreement, dated as of October 31, 2020 (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Purchaser acquired Global Connect by means of a sale of the equity interests of certain subsidiaries held by the Company, which operate Global Connect, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and a warrant to purchase equity interests in the company that, following the sale, owns Global Connect (the “Connect Warrant”). The Company received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments, and recorded a preliminary gain of $542 million, net of tax within discontinued operations.  Proceeds from the sale were primarily utilized for debt repayment. See Note 15 Discontinued Operations.

The results of operations of the Global Connect segment have been classified as discontinued operations for all periods presented. Subsequent to the closing of the Connect Transaction, the Company no longer consolidated the financial results of the Global Connect segment. Our continuing business operates as a single operating segment and a single reportable segment.    

 

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the Company’s financial position and the results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States (“GAAP”) applicable to interim periods. For a more complete discussion of significant accounting policies, commitments and contingencies and certain other information, refer to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. All amounts are presented in U.S. Dollars (“$”), except for share data or where expressly stated as being in other currencies, e.g., Euros (“€”). The condensed consolidated financial statements include the accounts of Nielsen and all subsidiaries and other controlled entities. The Company has evaluated events occurring subsequent to March 31, 2021 for potential recognition or disclosure in the condensed consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided.

Earnings per Share

Basic net income per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed using the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Dilutive potential shares of common stock primarily consist of employee stock options and restricted stock units.

The effect of 2,781,930 and 3,388,749 shares of common stock underlying outstanding equity awards under Nielsen’s stock compensation plans were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2021 and 2020, respectively, as such shares would have been anti-dilutive.

Accounts Receivable

The Company extends non-interest bearing trade credit to its customers in the ordinary course of business. To minimize credit risk, ongoing credit evaluations of clients’ financial condition are performed. The allowance for doubtful accounts is made when collection of the full amounts is no longer probable by also incorporating reasonable and supportable forecasts (expected loss).

- 9 -


During the three months ended March 31, 2021, Nielsen sold $10 million of accounts receivable to third parties and recorded an immaterial loss on the sale to interest expense, net in the condensed consolidated statement of operations. As of March 31, 2021 and December 31, 2020, $10 million and $30 million of previously sold receivables, respectively, remained outstanding. The sales were accounted for as true sales, without recourse. Nielsen maintains servicing responsibilities for the receivables sold during the period, for which the related costs are not significant. The proceeds of $10 million from the sales were reported as a component of the changes in trade and other receivables, net within operating activities in the condensed consolidated statement of cash flows.

 

Discontinued Operations

We consider assets to be held for sale when management, having the authority through shareholder approval, commits to a formal plan to actively market the assets for sale at a price reasonable in relation to fair value, the asset is available for immediate sale in its present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, the sale of the asset is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, we record the carrying value of an asset at the lower of its carrying value or its estimated fair value, less costs to sell. In accordance with GAAP, assets held for sale are not depreciated or amortized.

If the disposal of the component of an entity (or group of components) represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, it meets the criteria for discontinued operations. The results of discontinued operations, as well as any gain or loss on the disposal transaction, are presented separately, net of tax, from the results of continuing operations for all periods presented. The expenses included in the results of discontinued operations are the direct operating expenses incurred by the discontinued segment that may be reasonably segregated from the costs of the ongoing operations of the Company. Certain corporate costs directly attributable to the discontinued operations and transaction costs directly related to the sale are also presented within net income/(loss) from discontinued operations, net of income taxes. The assets and liabilities have been accounted for as assets held for sale in our condensed consolidated balance sheets through the date of the sale. The operating results related to these lines of business have been included in discontinued operations in our condensed consolidated statements of operations.  The condensed consolidated statement of cash flows presents combined cash flows from continuing operations with cash flows from discontinued operations within each cash flow statement category. See Note 15 – Discontinued Operations for further detail.

 

    

 

 

 

Note 2. Summary of Recent Accounting Pronouncements

 

Income Taxes (Topic 740): Simplifying the Accounting for Income taxes

- 10 -


Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard amends and aims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. Upon adoption, this new standard did not have a significant impact on Nielsen’s financial statements.

Reference Rate Reform-Facilitation of the Effects of Reference Rate Reform on Financial Reporting

On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

 

 

Note 3. Revenue Recognition

Revenue is measured based on the consideration specified in a contract with a customer.  The Company recognizes revenue when it satisfies a performance obligation by transferring control of a product or service to a customer, which generally occurs over time. Substantially all of the Company’s customer contracts are non-cancelable and non-refundable.

Revenue is primarily generated from television, radio, digital and mobile audience measurement services and analytics, which are used by the Company’s clients to establish the value of airtime and more effectively schedule and promote their programming and the Company’s advertising clients to plan and optimize their spending. As the customer simultaneously receives and consumes the benefits provided by the Company’s performance, revenues for these services are recognized over the period during which the performance obligations are satisfied and control of the service is transferred to the customer.

The Company enters into cooperation arrangements with certain customers, under which the customer provides Nielsen with its data in exchange for Nielsen’s services. Nielsen records these transactions at fair value, which is determined based on the fair value of goods or services received, if reasonably estimable. If not reasonably estimable, the Company considers the fair value of the goods or services surrendered.

The table below sets forth the Company’s revenue disaggregated by major product offerings and timing of revenue recognition.

 

(IN MILLIONS)  (UNAUDITED)

  

Three
Months Ended
March 31,
2021

 

  

Three
Months Ended
March 31,
2020

 

 

 

 

 

 

 

 

 

 

Nielsen

 

 

 

 

 

 

 

 

Audience Measurement

  

$

632

 

 

$

615

 

Outcomes/Content

  

 

231

 

 

 

227

 

          Total

  

$

863

 

 

$

842

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

Products transferred at a point in time

 

$

83

 

 

$

70

 

Products and services transferred over time

 

 

780

 

 

 

772

 

Total

 

$

863

 

 

$

842

 

 

Contract Assets and Liabilities

 

Contract assets represent the Company’s rights to consideration in exchange for services transferred to a customer that have not been billed as of the reporting date. While the Company’s rights to consideration are generally unconditional at the time its performance obligations are satisfied, under certain circumstances the related billing occurs in arrears, generally within one month of the services being rendered.

- 11 -


At the inception of a contract, the Company generally expects the period between when it transfers its services to its customers and when the customer pays for such services will be one year or less.

 

          Contract liabilities relate to advance consideration received or the right to consideration that is unconditional from customers for which revenue is recognized when the performance obligation is satisfied and control transferred to the customer.

The table below sets forth the Company’s contract assets and contract liabilities from contracts with customers.

 

(IN MILLIONS)

 

March 31,

2021

 

 

December 31,

2020

 

 

Contract assets

 

$

107

 

 

$

94

 

 

 

Contract liabilities

 

$

148

 

 

$

135

 

 

 

The increase in the contract assets balance during the period was primarily due to $101 million of revenue recognized that was not billed, in accordance with the terms of the contracts, as of March 31, 2021, offset by $88 million of contract assets included in the December 31, 2020 balance that were invoiced to our clients and therefore transferred to trade receivables.

The increase in the contract liability balance during the period is primarily due to $92 million of advance consideration received or the right to consideration that is unconditional from customers for which revenue was not recognized during the period, offset by $78 million of revenue recognized that was included in the December 31, 2020 contract liability balance.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2021, approximately $3.9 billion of revenue is expected to be recognized from remaining performance obligations that are unsatisfied (or partially unsatisfied) for our services. This amount excludes variable consideration allocated to performance obligations related to sales and usage based royalties on licenses of intellectual property.

The Company expects to recognize revenue on approximately 78% of these remaining performance obligations through December 31, 2022, with the balance recognized thereafter.

Deferred Costs

Incremental direct costs incurred to build the infrastructure to service new contracts are capitalized as a contract cost. As of March 31, 2021 and December 31, 2020, the balances of such capitalized costs were $6 million and $3 million, respectively. These costs are typically amortized through cost of revenues over the original contract period beginning when the infrastructure to service new clients is ready for its intended use. The amortization of these costs for each of the three months ended March 31, 2021 and March 31, 2020 was zero. There was no impairment loss recorded in any of the periods presented.

Expected Credit Losses

Nielsen is required to measure expected credit losses on trade accounts receivable. Nielsen considered the asset’s contractual life, the risk of loss and reasonable and supportable forecasts of future economic conditions. The estimate of expected credit losses reflects the risk of loss, even if management believes no loss was incurred as of the measurement date.

The following schedule represents the allowance for doubtful accounts rollforward incorporating expected credit losses as of March 31, 2021 and 2020, respectively.

 

(IN MILLIONS)

  

Balance
Beginning of
Period

  

Charges to
Expense

 

  

Deductions

 

 

Effect of
Foreign
Currency
Translation

 

Balance at
End of
Period

Allowance for doubtful accounts

  

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2021

   

$

11

 

  

$

1

 

 

$

-

 

 

$

-

 

 

$

12

Year ended December 31, 2020

 

$

8

 

 

$

7

 

 

$

(4

)

 

$

-

 

 

$

11

 

 

 

 

 

- 12 -


 

Note 4. Business Acquisitions

 

Acquisitions

For the three months ended March 31, 2021, Nielsen had no acquisitions.

For the three months ended March 31, 2020, Nielsen paid cash consideration of $2 million associated with both current period and previously executed acquisitions, net of cash acquired. Had these 2020 acquisitions occurred as of January 1, 2020, the impact on Nielsen’s consolidated results of operations would not have been material.

 

 

Note 5. Leases

All significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at commencement. An ROU asset and corresponding lease liability are not recorded for leases with an initial term of 12 months or less (short term leases) and Nielsen recognizes lease expense for these leases as incurred over the lease term. ROU assets represent the Company’s right to use an underlying asset during the reasonably certain lease term, and lease liabilities represent its obligation to make lease payments arising from the lease. Nielsen’s lease terms may include options to extend or terminate the lease when it is reasonably certain that Nielsen will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Nielsen uses the rate implicit in the lease for the discount rate when determining the present value of lease payments whenever that rate is readily determinable. If the rate is not readily determinable, Nielsen uses its incremental borrowing rate, which is updated periodically, based on the information available at commencement date. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term. Nielsen has lease agreements with lease and non-lease components, which are generally accounted for together.

Nielsen has operating and finance leases for real estate facilities, servers, computer hardware, and other equipment. Nielsen’s leases have remaining lease terms of 1 year to 30 years, some of which include options to extend the leases for up to 5 years, and some of which include options to terminate the leases within 1 year.

The components of lease expense were as follows:

 

 

 

 

 

 

(in millions)

 

 

 

Three Months Ended March 31,

 

 

2021

2020

Lease cost

 

 

 

 

 

 

 

 

Finance lease cost:

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

$

10

 

$

11

 

 

Interest on lease liabilities

 

 

1

 

 

2

 

 

Total finance lease cost

 

 

11

 

 

13

 

 

Operating lease cost

 

 

12

 

 

11

 

 

Total lease cost

 

$

23

 

$

24

 

 

 

- 13 -


 

Supplemental balance sheet information related to leases was as follows:

 

(in millions, except lease term and discount rate)

 

 

March 31, 2021

December 31, 2020

 

Operating leases

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

154

 

$

161

 

 

 

 

 

 

 

 

 

Other current liabilities

 

 

55

 

 

50

 

Operating lease liabilities

 

 

131

 

 

140

 

Total operating lease liabilities

 

$

186

 

$

190

 

 

 

 

 

 

 

 

 

Finance leases

 

 

 

 

 

 

 

Property, plant and equipment, gross

 

$

304

 

$

300

 

Accumulated depreciation

 

 

(189

)

 

(175

)

Property, plant and equipment, net

 

 

115

 

 

125

 

 

 

 

 

 

 

 

 

Other intangible assets, gross

 

 

17

 

 

11

 

Accumulated amortization

 

 

(15

)

 

(9

)

Other intangible assets, net

 

 

2

 

 

2

 

 

 

 

 

 

 

 

 

Accounts payable and other current liabilities

 

 

41

 

 

39

 

Long-term debt and capital lease obligations

 

 

53

 

 

59

 

Total finance lease liabilities

 

$

94

 

$

98

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

Other information

 

 

2021

 

 

2020

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

Operating cash flows from finance leases

 

 

(1

)

 

(2

)

Operating cash flows from operating leases

 

 

(13

)

 

(13

)

Financing cash flows from finance leases

 

 

(8

)

 

(6

)

Right-of-use assets obtained in exchange for new finance lease liabilities

 

 

3

 

 

2

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

 

11

 

 

10

 

Weighted-average remaining lease term--finance leases

 

 

3 years

 

3 years

 

Weighted-average remaining lease term--operating leases

 

 

7 years

 

6 years

 

Weighted-average discount rate--finance leases

 

 

5.30

%

 

5.98

%

Weighted-average discount rate--operating leases

 

 

3.30

%

 

4.31

%

 

Annual maturities of Nielsen’s lease liabilities are as follows:

 

(in millions)

 

 

 

 

 

Operating Leases

 

 

 

Finance Leases

 

For April 1, 2021 to December 31, 2021

 

$

43

 

 

$

33

 

2022

 

 

48

 

 

 

30

 

2023

 

 

35

 

 

 

25

 

2024

 

 

21

 

 

 

8

 

2025

 

 

12

 

 

 

1

 

2026

 

 

10

 

 

 

-

 

Thereafter

 

 

47

 

 

 

-

 

Total lease payments

 

 

216

 

 

 

97

 

Less imputed interest

 

 

(30

)

 

 

(3

)

Total

 

S

186

 

 

$

94

 

 

Note 6. Goodwill and Other Intangible Assets

Goodwill

       

- 14 -


 

The table below summarizes the changes in the carrying amount of goodwill for the reporting unit for the three months ended March 31, 2021.

 

(IN MILLIONS)

 

 

Nielsen

 

Balance, December 31, 2020

 

$

5,680

 

 

Acquisitions, divestitures and other adjustments

 

 

(16

)

 

Effect of foreign currency translation

 

 

(10

)

 

Balance, March 31, 2021

 

$

5,654

 

 

 

At March 31, 2021, $31 million of the goodwill is expected to be deductible for income tax purposes.  

 

Goodwill is tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. There were no indicators of impairment related to goodwill during the first quarter end March 31, 2021. Nielsen will continue to closely evaluate any indicators of future impairments related to goodwill.  

 

Other Intangible Assets

 

 

 

Gross Amounts

 

 

Accumulated Amortization

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

(IN MILLIONS)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Indefinite-lived intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names and trademarks

 

$

1,833

 

 

$

1,833

 

 

$

 

 

$

 

Amortized intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names and trademarks

 

 

128

 

 

 

128

 

 

 

(111

)

 

 

(110

)

Customer-related intangibles

 

 

2,563

 

 

 

2,564

 

 

 

(1,608

)

 

 

(1,580

)

Covenants-not-to-compete

 

 

26

 

 

 

26

 

 

 

(26

)

 

 

(26

)

Content databases

 

 

168

 

 

 

168

 

 

 

(57

)

 

 

(53

)

Computer software

 

 

1,411

 

 

 

1,372

 

 

 

(758

)

 

 

(692

)

Patents and other

 

 

148

 

 

 

153

 

 

 

(123

)

 

 

(120

)

Total

 

$

4,444

 

 

$

4,411

 

 

$

(2,683

)

 

$

(2,581

)

 

 

- 15 -


 

Other indefinite-lived intangible assets are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. Pursuant to the Connect Transaction, Nielsen granted Advent a license to brand its products and services with the Nielsen name and other trademarks for 20 years following the closing of the Connect Transaction. There was an indefinite-lived trade name historically recognized within the Connect segment.  However, as this indefinite-lived trade name will be retained by Nielsen as part of the Connect Transaction, the trade name is included within continuing operations. During the first quarter of 2021, Nielsen concluded that there was a triggering event for an interim impairment assessment as a result of the change in unit of account of the indefinite-lived intangibles as a result of the sale of Global Connect.  The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of trade names and trademarks are determined using a “relief from royalty” discounted cash flow valuation methodology. Significant assumptions inherent in this methodology include estimates of royalty rates and discount rates.  Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets.  The discount rates we used in our evaluation was 10.1%. Assumptions about royalty rates are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace.  As a result of the interim assessment, Nielsen concluded that the estimated fair values exceeded their carrying values. As such there was no impairment. Nielsen will continue to closely evaluate and report on any indicators of future impairments.

 

 

Amortization expense associated with the above intangible assets was $102 million and $107 million for the three months ended March 31, 2021 and 2020, respectively. These amounts included amortization expense associated with computer software of $65 million and $69 million for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021, the net book value of purchased software and internally developed software was $14 million and $639 million, respectively.

 

 

 

Note 7. Changes in and Reclassification out of Accumulated Other Comprehensive Income/(Loss) by Component

The table below summarizes the changes in accumulated other comprehensive income/(loss), net of tax, by component for the three months ended March 31, 2021 and 2020.

 

 

 

Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation

 

 

 

 

 

Post-Employment

 

 

 

 

 

 

 

Adjustments

 

Cash Flow Hedges

 

 

Benefits

 

 

Total

 

(IN MILLIONS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2020

 

$

(821

)

$

(39

)

 

$

(245

)

 

$

(1,105

)

Other comprehensive income/(loss) before

   reclassifications

 

 

(5

)

 

1

 

 

 

 

 

 

(4

)

Amounts reclassified from accumulated other

   comprehensive (income)/loss

 

 

233

 

 

4

 

 

 

144

 

 

 

381

 

Net current period other comprehensive income/(loss)

 

 

228

 

 

5

 

 

 

144

 

 

 

377

 

Net current period other comprehensive income/(loss)

   attributable to noncontrolling interest

 

 

(2

)

 

 

 

 

 

 

 

(2

)

Net current period other comprehensive income/(loss)

   attributable to Nielsen shareholders

 

 

230

 

 

5

 

 

 

144

 

 

 

379

 

Balance March 31, 2021

 

$

(591

)

$

(34

)

 

$

(101

)

 

$

(726

)

 

 

 

- 16 -


 

 

 

Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation

 

 

 

 

 

Post-Employment

 

 

 

 

 

 

 

Adjustments

 

Cash Flow Hedges

 

 

Benefits

 

 

Total

 

(IN MILLIONS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2019

 

$

(776

)

$

(19

)

 

$

(210

)

 

$

(1,005

)

Other comprehensive income/(loss) before

   reclassifications

 

 

(104

)

 

(34

)

 

 

1

 

 

 

(137

)

Amounts reclassified from accumulated other

   comprehensive (income)/loss

 

 

 

 

1

 

 

 

3

 

 

 

4

 

Net current period other comprehensive income/(loss)

 

 

(104

)

 

(33

)

 

 

4

 

 

 

(133

)

Net current period other comprehensive income/(loss)

   attributable to noncontrolling interest

 

 

(8

)

 

 

 

 

 

 

 

(8

)

Net current period other comprehensive income/(loss)

   attributable to Nielsen shareholders

 

 

(96

)

 

(33

)

 

 

4

 

 

 

(125

)

Balance March 31, 2020

 

$

(872

)

$

(52

)

 

$

(206

)

 

$

(1,130

)

 

 

The table below summarizes the reclassification of accumulated other comprehensive loss by component for the three months ended March 31, 2021 and 2020, respectively.

 

 

 

Amount Reclassified from

 

 

 

 

 

Accumulated Other

 

 

 

(IN MILLIONS)

 

Comprehensive Loss/(Income)

 

 

 

Details about Accumulated

 

 

 

 

 

 

 

 

 

Affected Line Item in the

Other Comprehensive

 

Three Months Ended

 

 

Three Months Ended

 

 

Condensed Consolidated

Income components

 

March 31, 2021

 

 

March 31, 2020

 

 

Statement of Operations

Currency Translation Adjustments

 

 

 

 

 

 

 

 

 

 

      Currency translation (gains)/losses on dispositions(2)

 

$

233

 

 

$

 

 

Net income/(loss) from discontinued operations

 

 

 

 

 

 

 

 

Net income/(loss) from discontinued operations

 

 

$

233

 

 

$

 

 

Total, net of tax

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

6

 

 

$

2

 

 

Interest (income)/expense

 

 

 

(2

)

 

 

(1

)

 

(Benefit)/provision for income taxes

 

 

$

4

 

 

$

1

 

 

Total, net of tax

Post-Employment Benefits

 

 

 

 

 

 

 

 

 

 

Amortization of actuarial loss(1)

 

$

4

 

 

$

4

 

 

 

 

 

 

(1

)

 

 

(1

)

 

(Benefit)/provision for income taxes

 

 

$

3

 

 

$

3

 

 

Total, net of tax

     Unrealized (gains)/losses on pension liability on dispositions(2)

 

$

183

 

 

$

 

 

Net income/(loss) from discontinued operations

 

 

 

(42

)

 

 

 

 

Net income/(loss) from discontinued operations

 

 

$

141

 

 

$

 

 

Total, net of tax

Total Post-Employment Benefits reclassified from accumulated other comprehensive (income)/loss

 

$

144

 

 

$

3

 

 

 

Total reclassification for the period

 

$

381

 

 

$

4

 

 

Net of tax

 

 

(1)

This accumulated other comprehensive loss component is included in the computation of net periodic pension cost.

 

 

(2)

The sale of Global Connect resulted in a total reclassification from accumulated other comprehensive income of $374 million, including accumulated currency translation adjustment of $233 million, and unrealized gain on pension liability of $141 million, net of taxes for the three months ended March 31, 2021.

 

 

- 17 -


 

Note 8. Restructuring Activities

 

Productivity Initiatives

Restructuring charges are primarily related to programs associated with Nielsen’s plans to reduce selling, general and administrative expenses as well as automation initiatives. These charges mostly represent severance costs related to employee separation packages. The amounts are calculated based on salary levels and past service periods. Severance costs are generally charged to earnings when planned employee terminations are approved.

A summary of the changes in the liabilities for restructuring activities is provided below:

 

(IN MILLIONS)

 

Total Initiatives

 

Balance at December 31, 2020

 

$

14

 

Charges

 

 

-

 

Payments

 

 

(7

)

Balance at March 31, 2021

 

$

7

 

 

 

 

Nielsen recorded zero and $3 million in restructuring charges primarily relating to the productivity initiatives referenced above for the three months ended March 31, 2021 and 2020, respectively.

The $7 million in remaining liabilities for restructuring actions at March 31, 2021, is expected to be paid within one year and is classified as a current liability within the condensed consolidated balance sheet as of March 31, 2021.

 

 

Note 9. Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

There are three levels of inputs that may be used to measure fair value:

 

Level 1:

  

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

  

 

Level 2:

  

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

  

 

Level 3:

  

Pricing inputs that are generally unobservable and may not be corroborated by market data.

 

- 18 -


 

Financial Assets and Liabilities Measured on a Recurring Basis

The Company’s financial assets and liabilities are measured and recorded at fair value, except for equity method investments and long-term debt. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. In addition, the Company records changes in the fair value of equity investments with readily determinable fair values in net income rather than in accumulated other comprehensive income/(loss). Investments that do not have readily determinable fair values are recognized at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adjustments related to the observable price changes will also be recognized in net income.

The following table summarizes the valuation of the Company’s material financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020:

 

 

 

March 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

(IN MILLIONS)

 

2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan assets for deferred compensation (1)

 

 

23

 

 

 

23

 

 

 

 

 

 

 

Investment in mutual funds (2)

 

 

2

 

 

 

2

 

 

 

 

 

 

 

Warrant(3)

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Interest rate swap arrangements (4)

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

30

 

 

$

25

 

 

$

 

 

 

5

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap arrangements (4)

 

$

44

 

 

 

 

 

$

44

 

 

 

 

Deferred compensation liabilities (5)

 

 

23

 

 

 

23

 

 

 

 

 

 

 

Total

 

$

67

 

 

$

23

 

 

$

44

 

 

 

 

zz 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan assets for deferred compensation (1)

 

 

24

 

 

 

24

 

 

 

 

 

 

 

Investment in mutual funds (2)

 

 

2

 

 

 

2

 

 

 

 

 

 

 

Interest rate swap arrangements (4)

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

26

 

 

$

26

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap arrangements (4)

 

$

52

 

 

 

 

 

$

52

 

 

 

 

Deferred compensation liabilities (5)

 

 

24

 

 

 

24

 

 

 

 

 

 

 

Total

 

$

76

 

 

$

24

 

 

$

52

 

 

 

 

 

(1)

Plan assets are comprised of investments in mutual funds, which are intended to fund liabilities arising from deferred compensation plans. These investments are carried at fair value, which is based on quoted market prices at period end in active markets. These investments are classified as equity securities with any gains or losses resulting from changes in fair value recorded in other income/(expense), net in the condensed consolidated statement of operations.

(2)

Investments in mutual funds are money-market accounts held with the intention of funding certain specific retirement plans.

(3)

The estimated fair value of the Connect Warrant issued March 5, 2021, of $5 million which was part of the proceeds related to the sale was included in the net gain on sale of the Global Connect segment. The Connect Warrant is marked-to-market each reporting period with the subsequent change in fair value recorded to other income/(expense), net in the condensed consolidated statement of operations.  The Connect Warrant is reported within other non-current assets within the condensed consolidated balance sheet.  The fair value of the Connect Warrant asset is estimated using a Black-Scholes option-pricing model.

(4)

Derivative financial instruments include interest rate swap arrangements recorded at fair value based on externally-developed valuation models that use readily observable market parameters and the consideration of counterparty risk.

- 19 -


(5)

The Company offers certain employees the opportunity to participate in a deferred compensation plan. A participant’s deferrals are invested in a variety of participant directed stock and bond mutual funds and are classified as equity securities. Changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the equity securities is also reflected in the changes in fair value of the deferred compensation obligation.

Derivative Financial Instruments

Nielsen primarily uses interest rate swap derivative instruments to manage the risk that changes in interest rates will affect the cash flows of its underlying debt obligations.

To qualify for hedge accounting, the hedging relationship must meet several conditions with respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. Nielsen documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions as well as the hedge effectiveness assessment, both at the hedge inception and on an ongoing basis. Nielsen recognizes all derivatives at fair value either as assets or liabilities in the consolidated balance sheets, and changes in the fair values of such instruments are recognized currently in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, Nielsen recognizes the changes in fair value of these instruments in accumulated other comprehensive income/(loss).

Nielsen manages exposure to possible defaults on derivative financial instruments by monitoring the concentration of risk that Nielsen has with any individual bank and through the use of minimum credit quality standards for all counterparties. Nielsen does not require collateral or other security in relation to derivative financial instruments. A derivative contract entered into between Nielsen or certain of its subsidiaries and a counterparty that was also a lender under Nielsen’s senior secured credit facilities at the time the derivative contract was entered into is guaranteed under the senior secured credit facilities by Nielsen and certain of its subsidiaries (see Note 10 – Long-term Debt and Other Financing Arrangements for more information). Since it is Nielsen’s policy to only enter into derivative contracts with banks of internationally acknowledged standing, Nielsen considers the counterparty risk to be remote.

It is Nielsen’s policy to have an International Swaps and Derivatives Association (“ISDA”) Master Agreement established with every bank with which it has entered into any derivative contract. Under each of these ISDA Master Agreements, Nielsen agrees to settle only the net amount of the combined market values of all derivative contracts outstanding with any one counterparty should that counterparty default. Certain of the ISDA Master Agreements contain cross-default provisions pursuant to which the Company could be declared in default on its derivative obligations if the Company either defaults in payment obligations under its credit facility or if such obligations are accelerated by the lenders. At March 31, 2021, Nielsen had no material exposure to potential economic losses due to counterparty credit default risk or cross-default risk on its derivative financial instruments.

Foreign Currency Exchange Risk

For the three months ended March 31, 2021 and 2020, Nielsen recorded an insignificant net loss and a net loss of $3 million, respectively, associated with foreign currency derivative financial instruments within foreign currency exchange transactions losses, net in its condensed consolidated statements of operations. As of March 31, 2021 and December 31, 2020, the notional amount of the outstanding foreign currency derivative financial instruments were $29 million and $68 million, respectively.

Interest Rate Risk

Nielsen is exposed to cash flow interest rate risk on the floating-rate U.S. Dollar and Euro Term Loans, and uses floating-to-fixed interest rate swaps to hedge this exposure. For these derivatives, Nielsen reports the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income/(loss) and reclassifies it into earnings in the same period or periods in which the hedged transaction affects earnings, and within the same income statement line item as the impact of the hedged transaction.

 

As of March 31, 2021, the Company had the following U.S. Dollar term loan floating-to-fixed rate outstanding interest rate swaps designated as hedges utilized in the management of its interest rate risk:

 

 

 

Notional Amount

 

 

Maturity Date

 

 

 

 

 

 

 

 

 

 

 

$

250,000,000

 

 

October 2021

 

 

 

$

250,000,000

 

 

July 2022

 

 

 

$

150,000,000

 

 

April 2023

 

 

- 20 -


 

 

Notional Amount

 

 

Maturity Date

 

 

 

$

250,000,000

 

 

May 2023

 

 

 

$

250,000,000

 

 

June 2023

 

 

 

$

150,000,000

 

 

July 2023

 

 

 

The effect of cash flow hedge accounting on the condensed consolidated statement of operations for the three months ended March 31, 2021 and 2020 respectively is as follows:

 

 

 

Interest Expense

 

 

 

 

Three Months Ended March 31,

 

 

(IN MILLIONS)

 

2021

 

 

2020

 

 

Interest expense (Location in the consolidated statement of operations in which

   the effects of cash flow hedges are recorded)

 

$

80

 

 

$

83

 

 

Amount of gain/(loss) reclassified from accumulated other comprehensive income into income, net of tax

 

$

(4

)

 

$

(1

)

 

Amount of loss reclassified from accumulated other comprehensive income into

   income as a result that a forecasted transaction is no longer probable of

   occurring, net of tax

 

$

 

 

$

 

 

 

Nielsen expects to recognize approximately $24 million of net pre-tax losses from accumulated other comprehensive loss to interest expense in the next 12 months associated with its interest-related derivative financial instruments.

Fair Values of Derivative Instruments in the Consolidated Balance Sheets

The fair values of the Company’s derivative instruments as of March 31, 2021 and December 31, 2020 were as follows:

 

 

 

 

March 31, 2021

 

December 31, 2020

 

Derivatives Designated as Hedging

 

Prepaid Expense

 

 

Other

 

 

Other 

 

Prepaid Expense

 

Other

 

 

Other

 

Instruments

 

and Other Current

 

 

Current

 

 

Non-Current

 

and Other Current

 

Current

 

 

 Non-Current

 

(IN MILLIONS)

 

Assets

 

 

Liabilities

 

 

Liabilities

 

Assets

 

Liabilities

 

 

Liabilities

 

Interest rate swaps

 

$

 

 

 

$

4

 

$

40

 

$

 

$

4

 

 

$

48

 

 

Derivatives in Cash Flow Hedging Relationships

The pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended March 31, 2021 and 2020 was as follows:

 

 

 

 

 

 

 

 

 

Amount of (Gain)/Loss

 

 

 

Amount of (Gain)/Loss

 

 

 

 

 

Reclassified from AOCI

 

 

 

Recognized in OCI

 

 

Location of (Gain)/ Loss

 

 

into Income

 

 

 

(Effective Portion)

 

 

Reclassified from AOCI

 

 

(Effective Portion)

 

Derivatives in Cash Flow

 

Three Months Ended

 

 

into Income  (Effective

 

 

Three Months Ended

 

Hedging Relationships

 

March 31,

 

 

Portion)

 

 

March 31,

 

(IN MILLIONS)

 

2021

 

 

2020

 

 

 

 

 

2021

 

 

2020

 

Interest rate swaps

 

$

(1

)

 

$

47

 

 

Interest expense

 

 

$

6

 

 

$

2

 

 

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company is required, on a nonrecurring basis, to adjust the carrying value for certain assets using fair value measurements. The Company’s equity method investments, and non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

The Company did not measure any material non-financial assets or liabilities at fair value during the three months ended March 31, 2021.

 

 

 

 

- 21 -


 

Note 10. Long-term Debt and Other Financing Arrangements

Unless otherwise stated, interest rates are as of March 31, 2021.

Annual maturities of Nielsen’s long-term debt are as follows:

 

  

 

March 31, 2021

 

 

December 31, 2020

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Interest

 

 

Carrying

 

 

Fair

 

 

Interest

 

 

Carrying

 

 

Fair

(IN MILLIONS)

 

Rate

 

 

Amount

 

 

Value

 

 

Rate

 

 

Amount

 

 

Value

$1,125 million Senior secured term loan (LIBOR based variable rate of

   1.85%) due 2023

 

 

 

 

 

$

741

 

 

$

741

 

 

 

 

 

 

$

754

 

 

$

752

$2,303 million Senior secured term loan (LIBOR based variable rate of

   2.10%) due 2023

 

 

 

 

 

 

1,599

 

 

 

1,599

 

 

 

 

 

 

 

1,603

 

 

 

1,602

545 million Senior secured term loan (Euro LIBOR based variable rate

   of 2.50%) due 2023 

 

 

 

 

 

 

239

 

 

 

238

 

 

 

 

 

 

 

251

 

 

 

250

€660 million Senior secured term loan (Euro LIBOR based variable rate

   of 3.75%) due 2025 

 

 

 

 

 

 

611

 

 

 

623

 

 

 

 

 

 

639

 

 

654

$550 million Senior secured term loan (LIBOR based variable rate of

   4.75%) due 2025 

 

 

 

 

 

 

421

 

 

 

431

 

 

 

 

 

 

419

 

 

434

$850 million Senior secured revolving credit facility (Euro LIBOR or

   LIBOR based variable rate) due 2023