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Nielsen Holdings plc - Quarter Report: 2022 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, 2022

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.)

 

 

 

 

675 Avenue of the Americas

New York, New York 10010

 

 

5th Floor Endeavour House

189 Shaftesbury Avenue

London, WC2H 8JR

United Kingdom

(410) 717-7134

(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 359,693,302 shares of the registrant’s Common Stock outstanding as of March 31, 2022.

 

 

 

 


 

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

- 24 -

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

- 32 -

Item 4.

 

Controls and Procedures

- 33 -

PART II.

 

OTHER INFORMATION

- 34 -

Item 1.

 

Legal Proceedings

- 34 -

Item 1A.

 

Risk Factors

- 34 -

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

- 36 -

Item 3.

 

Defaults Upon Senior Securities

- 36 -

Item 4.

 

Mine Safety Disclosures

- 36 -

Item 5.

 

Other Information

- 36 -

Item 6.

 

Exhibits

- 36 -

 

 

Signatures

- 38 -

 

 

 


 

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)

 

2022

 

 

2021

 

 

Revenues

 

$

877

 

 

$

863

 

 

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

 

 

314

 

 

 

277

 

 

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

   shown separately below

 

 

224

 

 

 

206

 

 

Depreciation and amortization

 

 

130

 

 

 

127

 

 

Restructuring charges

 

 

12

 

 

 

 

 

Operating income

 

 

197

 

 

 

253

 

 

Interest expense, net

 

 

66

 

 

 

80

 

 

Other (income)/expense, net

 

 

(9

)

 

 

4

 

 

Income from continuing operations before income taxes and net income of affiliates

 

 

140

 

 

 

169

 

 

Provision for income taxes

 

 

33

 

 

 

60

 

 

Equity in net income of affiliates

 

 

(4

)

 

 

 

 

Net income from continuing operations

 

 

111

 

 

 

109

 

 

Net income from discontinued operations, net of income taxes

 

 

4

 

 

 

467

 

 

Net income

 

 

115

 

 

 

576

 

 

Net income attributable to noncontrolling interests

 

 

10

 

 

 

3

 

 

Net income attributable to Nielsen shareholders

 

$

105

 

 

$

573

 

 

Net income per share of common stock, basic

 

 

 

 

 

 

 

 

 

      Net income from continuing operations attributable to Nielsen shareholders

 

$

0.28

 

 

$

0.30

 

 

      Net income from discontinued operations attributable to Nielsen shareholders

 

$

0.01

 

 

$

1.30

 

 

Net income attributable to Nielsen shareholders

 

$

0.29

 

 

$

1.60

 

 

Net income per share of common stock, diluted

 

 

 

 

 

 

 

 

 

Net income from continuing operations attributable to Nielsen shareholders

 

$

0.28

 

 

$

0.29

 

 

      Net income from discontinued operations attributable to Nielsen shareholders

 

$

0.01

 

 

$

1.30

 

 

Net income attributable to Nielsen shareholders

 

$

0.29

 

 

$

1.59

 

 

Weighted-average shares of common stock outstanding

 

 

 

 

 

 

 

 

 

      Basic

 

 

359,531,490

 

 

 

357,944,731

 

 

      Diluted

 

 

360,662,265

 

 

 

360,189,322

 

 

 

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

 

 

 

- 3 -


 

Nielsen Holdings plc

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

(IN MILLIONS)

 

2022

 

 

2021

 

 

Net income

 

$

115

 

 

$

576

 

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(11

)

 

 

228

 

 

Changes in the fair value of cash flow hedges

 

 

13

 

 

 

5

 

 

Net unrealized pension and other postretirement benefits, net of tax

 

 

3

 

 

 

144

 

 

Total other comprehensive income

 

 

5

 

 

 

377

 

 

Total comprehensive income

 

 

120

 

 

 

953

 

 

Less: comprehensive income attributable to noncontrolling interests

 

 

11

 

 

 

1

 

 

Total comprehensive income attributable to Nielsen shareholders

 

$

109

 

 

$

952

 

 

 

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)

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

482

 

 

$

380

 

Trade and other receivables, net

 

 

543

 

 

 

517

 

Prepaid expenses and other current assets

 

 

256

 

 

 

243

 

Total current assets

 

 

1,281

 

 

 

1,140

 

Non-current assets

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

266

 

 

 

273

 

Operating lease right-of-use asset

 

 

124

 

 

 

144

 

Goodwill

 

 

5,593

 

 

 

5,599

 

Other intangible assets, net

 

 

3,421

 

 

 

3,462

 

Deferred tax assets

 

 

50

 

 

 

55

 

Other non-current assets

 

 

147

 

 

 

147

 

Total assets

 

$

10,882

 

 

$

10,820

 

Liabilities and equity:

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable and other current liabilities

 

$

454

 

 

$

478

 

Deferred revenues

 

 

145

 

 

 

131

 

Income tax liabilities

 

 

21

 

 

 

13

 

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

 

 

35

 

 

 

35

 

Total current liabilities

 

 

655

 

 

 

657

 

Non-current liabilities

 

 

 

 

 

 

 

 

Long-term debt and finance lease obligations

 

 

5,588

 

 

 

5,591

 

Deferred tax liabilities

 

 

560

 

 

 

561

 

Operating lease liabilities

 

 

118

 

 

 

126

 

Other non-current liabilities

 

 

364

 

 

 

389

 

Total liabilities

 

 

7,285

 

 

 

7,324

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

Common stock, €0.07 par value, 1,185,800,000 shares authorized; 359,693,302 and 359,267,580 shares issued and 359,693,302 and 359,267,535 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

32

 

 

 

32

 

Additional paid-in capital

 

 

4,256

 

 

 

4,273

 

Retained earnings/(accumulated deficit)

 

 

(148

)

 

 

(253

)

Accumulated other comprehensive loss, net of income taxes

 

 

(734

)

 

 

(738

)

Total shareholders’ equity

 

 

3,406

 

 

 

3,314

 

Noncontrolling interests

 

 

191

 

 

 

182

 

Total equity

 

 

3,597

 

 

 

3,496

 

Total liabilities and equity

 

$

10,882

 

 

$

10,820

 

 

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)

 

2022

 

 

2021

 

Operating Activities

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

111

 

 

$

109

 

Net income/(loss) from discontinued operations

 

 

4

 

 

 

(75

)

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

 

 

-

 

 

 

542

 

Net income

 

 

115

 

 

 

576

 

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

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

8

 

 

 

8

 

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

 

 

-

 

 

 

(542

)

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

 

 

(9

)

 

 

11

 

Equity in net income of affiliates, net of dividends received

 

 

(4

)

 

 

(1

)

Depreciation and amortization

 

 

130

 

 

 

163

 

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

 

 

 

 

 

 

 

 

Trade and other receivables, net

 

 

(16

)

 

 

(57

)

Prepaid expenses and other assets

 

 

16

 

 

 

(71

)

Accounts payable and other current liabilities and deferred revenues

 

 

(7

)

 

 

(147

)

Other non-current liabilities

 

 

(19

)

 

 

(17

)

Interest payable

 

 

-

 

 

 

31

 

Income taxes

 

 

5

 

 

 

1

 

Net cash provided by/(used in) operating activities

 

 

219

 

 

 

(45

)

Investing Activities

 

 

 

 

 

 

 

 

Proceeds from the sale of subsidiaries and affiliates, net

 

 

1

 

 

 

2,245

 

Additions to property, plant and equipment and other assets

 

 

(17

)

 

 

(7

)

Additions to intangible assets

 

 

(65

)

 

 

(82

)

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

 

 

-

 

 

 

3

 

Other investing activities

 

 

-

 

 

 

(1

)

Net cash (used in)/provided by investing activities

 

 

(81

)

 

 

2,158

 

Financing Activities

 

 

 

 

 

 

 

 

Repayment of debt

 

-

 

 

 

(1,478

)

Cash dividends paid to shareholders

 

 

(22

)

 

 

(21

)

Payments related to tax withholding for share-based payment arrangements

 

 

(4

)

 

 

(7

)

Proceeds from employee stock purchase plan

 

 

1

 

 

 

-

 

Finance leases

 

 

(7

)

 

 

(14

)

Other financing activities

 

 

(4

)

 

 

(3

)

Net cash used in financing activities

 

 

(36

)

 

 

(1,523

)

Effect of exchange-rate changes on cash and cash equivalents

 

 

-

 

 

 

(3

)

Net increase in cash and cash equivalents

 

 

102

 

 

 

587

 

Cash and cash equivalents at beginning of period

 

 

380

 

 

 

610

 

Cash and cash equivalents at end of period

 

$

482

 

 

$

1,197

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

     Cash paid for income taxes

 

$

28

 

 

$

38

 

Cash paid for interest, net of amounts capitalized

 

$

66

 

 

$

57

 

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

 

 

 

- 6 -


 

Nielsen Holdings plc

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2021

 

$

32

 

 

$

4,273

 

 

$

(253)

 

 

$

(647)

 

 

$

(18)

 

 

$

(73)

 

 

$

3,314

 

 

$

182

 

 

$

3,496

 

Net income

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

 

 

 

 

105

 

 

 

10

 

 

 

115

 

Currency translation adjustments, net of

   tax of zero

 

 

 

 

 

 

 

 

 

 

 

(23)

 

 

 

 

 

 

11

 

 

 

(12)

 

 

 

1

 

 

 

(11)

 

Cash flow hedges, net of tax of $(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Net unrealized pension and other postretirement benefits, net of tax of $(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

 

 

 

 

 

3

 

Employee stock purchase plan

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

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

 

 

 

 

 

(22)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22)

 

 

 

(2)

 

 

 

(24)

 

Payments related to tax withholding for share-based payment arrangements

 

 

 

 

 

(4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4)

 

 

 

 

 

 

(4)

 

Share-based compensation expense

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Balance, March 31, 2022

 

$

32

 

 

$

4,256

 

 

$

(148)

 

 

$

(670)

 

 

$

(5)

 

 

$

(59)

 

 

$

3,406

 

 

$

191

 

 

$

3,597

 

 

 

 

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

 

- 7 -


 

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

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

 

Net unrealized pension and other postretirement benefits, 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)

 

Payments related to tax withholding for share-based payment arrangements

 

 

 

 

 

(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.

 

 

 

- 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, serves the world’s media and content ecosystem and is a global leader in audience measurement, data and analytics. Through Nielsen’s understanding of people and their behaviors across all channels and platforms, Nielsen empowers its clients with independent and actionable intelligence so they can connect and engage with their audiences—now and into the future.

 

Nielsen provides a holistic and objective understanding of the media industry to its various client segments. Nielsen’s data is used by its publishing clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content. Nielsen’s data is used by its marketer and advertiser agency clients to plan and optimize their spend and is used by its content creator clients to inform decisions and identify trends.

 

An S&P 500 company, Nielsen has operations in more than 55 countries, with its registered office located in London, the United Kingdom and headquarters located in New York, United States.

 

Proposed Transaction with Consortium of Private Investment Funds

 

On March 28, 2022, Nielsen entered into a definitive agreement (the “Transaction Agreement”) to be acquired by Neptune Intermediate Jersey Limited and Neptune BidCo US Inc. (collectively, the “Purchasing Entities”) by way of a scheme of arrangement (the “Scheme”) between the Company and the Scheme Shareholders (as defined in the Scheme) under Part 26 of the United Kingdom Companies Act 2006, as amended (the “Companies Act 2006”). The Purchasing Entities are controlled by a consortium of private investment funds led by Evergreen Coast Capital Corporation, an affiliate of Elliott Investment Management L.P., and Brookfield Business Partners L.P., together with institutional partners. The Proposed Transaction Agreement provides that at the effective time of the Proposed Transaction, all ordinary shares will be transferred from Nielsen’s shareholders to Neptune BidCo US Inc. in accordance with the provisions of the Scheme and the laws of England and Wales (the “Proposed Transaction”), and that Scheme Shareholders will receive the consideration of $28.00 in cash, without interest, per ordinary share. The Proposed Transaction is subject to approval by Nielsen shareholders, regulatory approvals, consultation with the works council and other customary closing conditions. The Proposed Transaction will also be subject to UK court approval pursuant to a scheme of arrangement. Alternatively, pursuant to the Transaction Agreement, the parties may elect instead to complete the Proposed Transaction pursuant to an agreed-upon tender offer. If the closing conditions are met, the Proposed Transaction is expected to close in the second half of 2022.

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, 2021. 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, 2022 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.

- 9 -


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.

 

 

 

 

Three Months Ended March 31,

 

 

 

 

2022

 

 

 

2021

 

Weighted-average shares of common stock outstanding, basic

 

 

359,531,490

 

 

 

357,944,731

 

Dilutive shares of common stock

 

 

1,130,775

 

 

 

2,244,591

 

Weighted-average shares of common stock outstanding, diluted

 

 

360,662,265

 

 

 

360,189,322

 

The effect of 1,593,609 and 2,781,930 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, 2022 and 2021, respectively, as such shares would have been anti-dilutive.

 

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. Beginning in the first quarter of 2021, Global Connect met the criteria set forth in ASC 205 – 20 “Presentation of Financial Statements – Discontinued Operations,” and has been presented on a discontinued operations basis for all periods presented. Given the Global Connect segment represented a separate segment and approximately 50% of our consolidated revenues, we considered this to be a strategic shift. 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 12 – Discontinued Operations for further detail.

 

 

Note 2. Summary of Recent Accounting Pronouncements

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.

- 10 -


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 for the three months ended March 31, 2022 and 2021.

 

(IN MILLIONS)  (UNAUDITED)

  

2022

 

  

2021

 

Measurement

  

$

645

 

 

$

632

 

Impact/Content

  

 

232

 

 

 

231

 

Total

  

$

877

 

 

$

863

 

 

 

 

 

 

 

 

 

 

Timing of revenue recognition

 

 

 

 

 

 

 

 

Products transferred at a point in time

 

$

93

 

 

$

83

 

Products and services transferred over time

 

 

784

 

 

 

780

 

Total

 

$

877

 

 

$

863

 

 

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.

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)

 

 

 

 

Contract assets

 

 

 

 

 

Balance December 31, 2021

 

$

97

 

 

Revenue recognized that was not billed for the period

 

 

91

 

 

Contract assets included in December 31, 2021 balance that were invoiced and transferred to trade receivables for the period

 

 

(72

)

 

Balance March 31, 2022

 

$

116

 

 

Contract liabilities

 

 

 

 

 

Balance December 31, 2021

 

$

131

 

 

Advance consideration received or the right to consideration that is unconditional from customers for which revenue was not recognized for the period

 

 

108

 

 

Revenue recognized for the period that was included in the contract liability balance as of December 31, 2021

 

 

(94

)

 

Balance March 31, 2022

 

$

145

 

 

 

- 11 -


 

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2022, 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 80% of these remaining performance obligations through December 31, 2023, 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, 2022 and December 31, 2021, the balances of such capitalized costs were $37 million and $31 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. We amortized $0.3 million of these costs for the three months ended March 31, 2022.  For the three months ended March 31, 2021, there was no amortization recorded given that the Company has not yet begun to transfer the goods and services associated with these capitalized costs. 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 roll forward incorporating expected credit losses as of March 31, 2022 and December 31, 2021, 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, 2022

   

$

6

 

  

$

-

 

 

$

-

 

 

$

-

 

 

$

6

Year ended December 31, 2021

 

$

11

 

 

$

(4

)

 

$

-

 

 

$

(1

)

 

$

6

 

 

 

 

 

Note 4. Other Intangible Assets

Other Intangible Assets

 

 

 

Gross Amounts

 

 

Accumulated Amortization

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

December 31,

 

(IN MILLIONS)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Indefinite-lived intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names and trademarks

 

$

1,833

 

 

$

1,833

 

 

$

 

 

$

 

Amortized intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names and trademarks

 

 

110

 

 

 

110

 

 

 

(97

)

 

 

(96

)

Customer-related intangibles

 

 

2,558

 

 

 

2,558

 

 

 

(1,717

)

 

 

(1,689

)

Covenants-not-to-compete

 

 

26

 

 

 

26

 

 

 

(26

)

 

 

(26

)

Content databases

 

 

168

 

 

 

168

 

 

 

(70

)

 

 

(67

)

Computer software

 

 

1,634

 

 

 

1,572

 

 

 

(1,017

)

 

 

(947

)

Patents and other

 

 

149

 

 

 

148

 

 

 

(130

)

 

 

(128

)

Total

 

$

4,645

 

 

$

4,582

 

 

$

(3,057

)

 

$

(2,953

)

 

 

Other indefinite-lived intangible assets and goodwill 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.  There were no indicators of impairment during the first quarter of 2022.

During the first quarter of 2021, pursuant to Nielsen’s sale of its Global Connect business (such business, “Global Connect,” and the sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation (“Advent”) on March 5, 2021,

- 12 -


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 Global Connect segment. However, as this indefinite-lived trade name was retained by Nielsen as part of the Connect Transaction, the trade name was 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, estimated future revenue (inclusive of long-term revenue growth rates) and discount rate. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. The discount rate Nielsen used in its 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.  Based on the interim impairment assessment as of March 2021, Nielsen concluded that the estimated fair value exceeded carrying value, thus no impairment was recorded. Nielsen will continue to closely evaluate and report on any indicators of future impairments.

 

        There was no impairment or indicators of impairment noted in 2022 with respect to the Company’s amortizable intangible assets. Nielsen will continue to closely evaluate and report on any indicators of future impairments.

 

Amortization expense associated with the above intangible assets was $105 million and $102 million for the three months ended March 31, 2022 and 2021, respectively. These amounts included amortization expense associated with computer software of $70 million and $65 million for the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the net book value of purchased software and internally developed software was $9 million and $608 million, respectively.

 

 

 

- 13 -


 

Note 5. 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, 2022 and 2021.

 

 

 

Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation

 

 

 

 

 

Post-Employment

 

 

 

 

 

 

 

Adjustments

 

Cash Flow Hedges

 

 

Benefits

 

 

Total

 

(IN MILLIONS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2021

 

$

(647

)

$

(18

)

 

$

(73

)

 

$

(738

)

Other comprehensive (loss)/income before

   reclassifications

 

 

(22

)

 

9

 

 

 

13

 

 

 

 

Amounts reclassified from accumulated other

   comprehensive loss

 

 

 

 

4

 

 

 

1

 

 

 

5

 

Net current period other comprehensive (loss)/income

 

 

(22

)

 

13

 

 

 

14

 

 

 

5

 

Net current period other comprehensive income

   attributable to noncontrolling interest

 

 

1

 

 

 

 

 

 

 

 

1

 

Net current period other comprehensive (loss)/income

   attributable to Nielsen shareholders

 

 

(23

)

 

13

 

 

 

14

 

 

 

4

 

Balance March 31, 2022

 

$

(670

)

$

(5

)

 

$

(59

)

 

$

(734

)

 

 

 

Currency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Translation

 

 

 

 

 

Post-Employment

 

 

 

 

 

 

 

Adjustments

 

Cash Flow Hedges

 

 

Benefits

 

 

Total

 

(IN MILLIONS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2020

 

$

(821

)

$

(39

)

 

$

(245

)

 

$

(1,105

)

Other comprehensive (loss)/income before

   Reclassifications

 

 

(5

)

 

1

 

 

 

 

 

 

(4

)

Amounts reclassified from accumulated other

   comprehensive loss

 

 

233

 

 

4

 

 

 

144

 

 

 

381

 

Net current period other comprehensive income

 

 

228

 

 

5

 

 

 

144

 

 

 

377

 

Net current period other comprehensive loss

   attributable to noncontrolling interest

 

 

(2

)

 

 

 

 

 

 

 

(2

)

Net current period other comprehensive income

   attributable to Nielsen shareholders

 

 

230

 

 

5

 

 

 

144

 

 

 

379

 

Balance March 31, 2021

 

$

(591

)

$

(34

)

 

$

(101

)

 

$

(726

)

 

 

 

- 14 -


 

The table below summarizes the reclassification of accumulated other comprehensive loss by component for the three months ended March 31, 2022 and 2021, 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, 2022

 

 

March 31, 2021

 

 

Statement of Operations

Currency Translation Adjustments

 

 

 

 

 

 

 

 

 

 

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

 

$

 

 

$

233

 

 

Net income/(loss) from discontinued operations

Cash flow hedges

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

5

 

 

$

6

 

 

Interest (income)/expense

 

 

 

(1

)

 

 

(2

)

 

(Benefit)/provision for income taxes

 

 

$

4

 

 

$

4

 

 

Total, net of tax

Post-Employment Benefits

 

 

 

 

 

 

 

 

 

 

Amortization of actuarial loss(1)

 

$

3

 

 

$

4

 

 

Other expense, net

 

 

 

(2

)

 

 

(1

)

 

(Benefit)/provision for income taxes

 

 

$

1

 

 

$

3

 

 

Total, net of tax

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

 

$

 

 

$

183

 

 

Net income/(loss) from discontinued operations

 

 

 

 

 

 

(42

)

 

(Benefit)/provision for income taxes

 

 

$

 

 

$

141

 

 

Total, net of tax

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

 

$

1

 

 

$

144

 

 

 

Total reclassification for the period

 

$

5

 

 

$

381

 

 

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.

 

 

 

 

 

Note 6. Fair Value Measurements

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

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

 

Level 1:

  

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

 

  

 

Level 2:

  

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

 

  

 

Level 3:

  

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

 

Financial Assets and Liabilities Measured on a Recurring Basis

The Company’s financial assets and liabilities are measured and recorded at fair value, except for equity method investments 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

- 15 -


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, 2022 and December 31, 2021:

 

 

 

March 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

(IN MILLIONS)

 

2022

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan assets for deferred compensation (1)

 

$

23

 

 

$

23

 

 

$

 

 

$

 

Investment in mutual funds (2)

 

 

1

 

 

 

1

 

 

 

 

 

 

 

Warrant (3)

 

 

6

 

 

 

 

 

 

 

 

 

6

 

      Total

 

$

30

 

 

$

24

 

 

$

 

 

$

6

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap arrangements (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Other current liabilities

 

$

2

 

 

$

 

 

$

2

 

 

$

 

      Other non-current liabilities

 

 

3

 

 

 

 

 

 

3

 

 

 

 

Deferred compensation liabilities (5)

 

 

23

 

 

 

23

 

 

 

 

 

 

 

     Total

 

$

28

 

 

$

23

 

 

$

5

 

 

$

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plan assets for deferred compensation (1)

 

 

24

 

 

 

24

 

 

 

 

 

 

 

Investment in mutual funds (2)

 

 

1

 

 

 

1

 

 

 

 

 

 

 

Warrant(3)

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Total

 

$

31

 

 

$

25

 

 

 

 

 

 

6

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap arrangements (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Other current liabilities

 

$

4

 

 

$

 

 

$

4

 

 

$

 

      Other non-current liabilities

 

 

18

 

 

 

 

 

 

18

 

 

 

 

Deferred compensation liabilities (5)

 

 

24

 

 

 

24

 

 

 

 

 

 

 

Total

 

$

46

 

 

$

24

 

 

$

22

 

 

 

 

 

(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 warrant to purchase equity interests in the company that, following the Connect Transaction, owns Global Connect, which was issued on March 5, 2021 in connection with the Connect Transaction (the “Connect Warrant”), was part of the proceeds related to the sale of Global Connect and included in the net gain on sale of Global Connect. 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 consolidated statement of operations. The Connect Warrant is reported within other non-current assets within the 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.

(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.

- 16 -


 

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 7 – 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, 2022, 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 each of the three months ended March 31, 2022 and 2021, Nielsen recorded an insignificant net loss associated with foreign currency derivative financial instruments within other (income)/expense, net in its condensed consolidated statements of operations. As of March 31, 2022 and December 31, 2021, the notional amounts of the outstanding foreign currency derivative financial instruments were $34 million and $29 million, respectively.

Interest Rate Risk

Nielsen is exposed to cash flow interest rate risk on the floating-rate U.S. Dollar 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, 2022, 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

 

 

Interest Rates

 

 

$

250,000,000

 

 

July 2022

 

 

2.00

%

 

$

150,000,000

 

 

April 2023

 

 

2.26

%

 

$

250,000,000

 

 

May 2023

 

 

2.72

%

 

$

250,000,000

 

 

June 2023

 

 

2.07

%

 

$

150,000,000

 

 

July 2023

 

 

1.82

%

 

- 17 -


 

The effect of cash flow hedge accounting on the condensed consolidated statement of operations for the three months ended March 31, 2022 and 2021 respectively is as follows:

 

 

 

Interest Expense

 

 

 

 

Three Months Ended March 31,

 

 

(IN MILLIONS)

 

2022

 

 

2021

 

 

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

   the effects of cash flow hedges are recorded)

 

$

66

 

 

$

80

 

 

Amount of loss reclassified from accumulated other comprehensive income into income, net of tax

 

$

4

 

 

$

4

 

 

 

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.

 

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, 2022 and 2021, respectively, 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)

 

2022

 

 

2021

 

 

 

 

 

2022

 

 

2021

 

Interest rate swaps

 

$

(11

)

 

$

(1

)

 

Interest expense

 

 

$

5

 

 

$

6

 

 

 

Note 7. Long-term Debt and Other Financing Arrangements

Unless otherwise stated, interest rates are as of March 31, 2022.

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

 

 

 

March 31, 2022

 

December 31, 2021

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

 

 

(IN MILLIONS)

 

Carrying

 

 

Interest

 

 

 

Carrying

 

Interest

 

 

 

Senior secured term loans

 

Amount

 

 

Rate

 

 

 

Value

 

Rate

 

 

 

Maturing in 2023, L+ 1.75%

 

$

743

 

 

 

 

 

 

 

$

742

 

 

 

 

 

 

 

Maturing in 2023, L+ 2.00%

 

 

1,351

 

 

 

 

 

 

 

 

1,351

 

 

 

 

 

 

 

Maturing in 2023 $850 revolving credit facility, L+ 1.75%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total (with weighted-average interest rate)

 

 

2,094

 

 

 

2.30

%

 

 

 

2,093

 

2.10

%

 

 

 

Senior debenture loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$500 maturing in 2025, 5.000%

 

 

498

 

 

 

 

 

 

 

 

498

 

 

 

 

 

 

 

$1,000 maturing in 2028, 5.625%

 

 

987

 

 

 

 

 

 

 

 

987

 

 

 

 

 

 

 

$750 maturing in 2030, 5.875%

 

 

740

 

 

 

 

 

 

 

 

740

 

 

 

 

 

 

 

$625 maturing in 2029, 4.500%

 

 

616

 

 

 

 

 

 

 

 

616

 

 

 

 

 

 

 

$625 maturing in 2031, 4.750%

 

 

616

 

 

 

 

 

 

 

 

616

 

 

 

 

 

 

 

Total (with weighted-average interest rate)

 

 

3,457

 

 

 

5.51

%

 

 

 

3,457

 

 

5.52

%

 

 

 

Total long-term debt

 

 

5,551

 

 

 

4.31

%

 

 

 

5,550

 

 

4.24

%

 

 

 

Finance lease and other financing obligations

 

 

72

 

 

 

 

 

 

 

 

76

 

 

 

 

 

 

 

Total debt and other financing arrangements

 

 

5,623

 

 

 

 

 

 

 

 

5,626

 

 

 

 

 

 

 

Less: Current portion of long-term debt, finance lease and other

   financing obligations and other short-term borrowings

 

 

35

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

 

Non-current portion of long-term debt and finance lease and other

   financing obligations

 

$

5,588

 

 

 

 

 

 

 

$

5,591

 

 

 

 

 

 

 

- 18 -


 

 

The total fair value of senior secured term loans and debenture loans was approximately $5,574 million and $5,646 million at March 31, 2022 and December 31, 2021, respectively. The fair value of the Company’s long-term debt instruments was based on the yield on public debt where available or current borrowing rates available for financings with similar terms and maturities and such fair value measurements are considered Level 1 or Level 2 in nature, respectively.

 

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

 

(IN MILLIONS)

 

 

 

 

For April 1, 2022 to December 31, 2022

 

$

 

2023

 

 

2,094

 

2024

 

 

 

2025

 

 

498

 

2026

 

 

 

2027

 

 

 

Thereafter

 

 

2,959

 

 

 

$

5,551

 

 

 

Note 8. Shareholders’ Equity

Common stock activity is as follows:

 

 

 

Three Months Ended

 

 

 

March 31, 2022

 

Actual number of shares of common stock outstanding

 

 

 

 

Beginning of period

 

 

359,267,535

 

Shares of common stock issued through compensation plans

 

 

425,767

 

End of period

 

 

359,693,302

 

 

 

Dividends and Share Repurchase Program

 

On January 31, 2013, the Company’s Board of Directors (the “Board”) adopted a cash dividend policy to pay quarterly cash dividends on its outstanding common stock. Under this plan, Nielsen has paid consecutive quarterly cash dividends since 2013. Nielsen paid cash dividends of $22 million and $21 million, or $0.06 per share of common stock, in the three months ended March 31, 2022 and 2021, respectively. Any decision to declare and pay dividends in the future will be made at the discretion of our Board subject to the restrictions set forth in the Transaction Agreement, as applicable, and will be subject to the Board’s continuing determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our shareholders, and are in compliance with all laws and agreements to which we are subject.

 

On April 14, 2022, the Board declared a cash dividend of $0.06 per share on Nielsen’s common stock. The dividend is payable on June 16, 2022 to shareholders of record at the close of business on June 2, 2022.

 

On February 26, 2022, the Board authorized the repurchase of up to $1 billion of the Company’s ordinary shares. The Board authorization may be suspended, modified or terminated at any time without prior notice subject to compliance with applicable laws and regulation. This share repurchase authorization replaces all previous authorizations. The timing of any repurchases will depend on a number of factors, including constraints specified in any Rule 10b5-1 trading, price, general business and market conditions, and alternative investment opportunities as well the restrictions set forth in the Transaction Agreement. This authorization has been executed within the limitations of the authority granted to Nielsen on August 6, 2015, which was extended by the authority approved by Nielsen’s shareholders at its annual general meetings of shareholders held on May 12, 2020 and May 25, 2021 (the “Authority”), with such Authority to remain in place until the end of the 2022 annual general meeting of shareholders, which is expected to be held on May 17, 2022, or close of business on August 25, 2022, whichever is earlier. Nielsen has requested approval from its shareholders at its 2022 annual general meeting of shareholders to renew this authority for a period of one year. Pursuant to the Authority, the Company may only repurchase ordinary shares in accordance with procedures for “off-market” purchases under the Companies Act 2006 and, in order to be compliant with the Companies Act 2006, share repurchases can only be made pursuant to the terms of one or more share repurchase agreements entered into in either of the forms approved, and with counterparties that have also been approved, by shareholders at the annual general meeting of shareholders.

 

- 19 -


 

At Nielsen’s 2021 annual general meeting of shareholders, two forms of share repurchase contracts were approved by shareholders. The first provides that the counterparty will purchase shares on the New York Stock Exchange at such prices and in such quantities as the Company may instruct from time to time, subject to the limitations set forth in Rule 10b-18 of the Exchange Act, as amended. The second form of agreement provides that the amount of shares to be purchased each day, the limit price and the total amount that may be purchased under the agreement will be determined at the time the agreement is executed. Both agreements provide that the counterparty will purchase the ordinary shares as principal and sell any ordinary shares purchased to the Company in record form. Any such shares repurchased by the Company pursuant to either form of contract will be cancelled. Nielsen has requested approval from its shareholders at its 2022 annual general meeting of shareholders to approve similar forms of repurchase contracts.

 

There were no share repurchases for the three months ended March 31, 2022 or 2021, and the Board has no present intention to exercise the Authority, as a result of entering into the Transaction Agreement (See Note 1 above).

 

Note 9. Income Taxes

The effective tax rates for the three months ended March 31, 2022 and 2021 were 24% ($33 million tax expense) and 36% ($60 million tax expense), respectively. The decrease in Nielsen’s income tax expense for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was primarily driven by a decrease in earnings in the current period as well as the absence of the unfavorable impact of deferred tax revaluation recognized in the prior period. Nielsen’s effective tax rate may fluctuate from time to time due to geographic mix of earnings.

 

The estimated liability for unrecognized tax benefits as of March 31, 2022 is $174 million. If the balance of the Company’s tax positions is sustained by the taxing authorities in the Company’s favor, the Company’s effective tax rate would be reduced in future periods by $26 million.

 

The Company files numerous consolidated and separate income tax returns in the U.S. Federal jurisdiction and in many state and foreign jurisdictions. The Company is no longer subject to U.S. Federal tax examination for periods prior to 2017. The tax positions and related attributes from 2017 onward are open to examination. In addition, the Company has subsidiaries in various states, provinces and countries that are currently under audit for years ranging from 2011 through 2021, and the tax positions and related attributes in those particular years are also open to examination.

 

To date, the Company is not aware of any material adjustments not already accrued related to any of the current Federal, state or foreign audits under examination.

 

 

Note 10. Commitments and Contingencies

 

Legal Proceedings and Contingencies

In August 2018, a putative shareholder class action lawsuit was filed in the Southern District of New York, naming as defendants Nielsen, former Chief Executive Officer Dwight Mitchell Barns, and former Chief Financial Officer Jamere Jackson. Another lawsuit, which alleged similar facts but also named other Nielsen officers, was filed in the Northern District of Illinois in September 2018 and transferred to the Southern District of New York in December 2018. The actions were consolidated on April 22, 2019, and the Public Employees’ Retirement System of Mississippi was appointed lead plaintiff for the putative class. The operative complaint was filed on September 27, 2019, and asserts violations of certain provisions of the Securities Exchange Act of 1934, as amended, based on allegedly false and materially misleading statements relating to the outlook of Nielsen’s Buy segment (now “Global Connect,” which was sold in the first quarter of 2021), Nielsen’s preparedness for changes in global data privacy laws and Nielsen’s reliance on third-party data. Nielsen moved to dismiss the operative complaint on November 26, 2019. On January 4, 2021, certain of the allegations against Nielsen and its officers were dismissed, while others were sustained. On February 3, 2022, the parties reached a settlement in principle to resolve this litigation for $73 million. On March 15, 2022, the terms of the settlement were formalized and submitted to the Court for approval. The Court preliminarily approved the settlement on April 4, 2022, and set a final approval hearing for July 20, 2022. Nielsen expects the amount of the settlement payment to be paid by its insurance carriers.

In addition, in January 2019, a shareholder derivative lawsuit was filed in New York Supreme Court against a number of Nielsen’s current and former officers and directors. The derivative lawsuit alleges that the named officers and directors breached their fiduciary duties to the Company in connection with factual assertions substantially similar to those in the putative class action complaint. The derivative lawsuit further alleges that certain officers and directors engaged in trading Nielsen stock based on material, nonpublic information. An amended complaint was filed on May 7, 2021, which Nielsen moved to dismiss on July 16, 2021. By agreement dated September 8, 2021, the action was stayed for a period of 90 days. On January 31, 2022, the stay was extended to June 1, 2022. Nielsen intends to defend this lawsuit vigorously. Based on currently available information, Nielsen believes that it has meritorious defenses to this action and that its resolution is not likely to have a material adverse effect on Nielsen’s business, financial position, or results of operations.

- 20 -


 

Nielsen is subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, the Company does not expect that the ultimate disposition of these matters will have a material adverse effect on its operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect the Company’s future results of operations or cash flows in a particular period.

 

 

Note 11. Segments

 

As discussed in Note 12 – Discontinued Operations, the Global Connect segment has been classified as discontinued operations beginning with the first quarter of 2021. The Company evaluated segment reporting in accordance with ASC 280 “Segment Reporting” and beginning with the first quarter of 2021, the Company concluded that it operates as a single operating segment and a single reportable segment consisting principally of television, radio, online and mobile audience and advertising measurement and corresponding analytics. Nielsen aligns its operating segment in order to conform to management’s internal reporting structure. Nielsen operates as a complete unit - from the conception of a product, through the collection of the data, into the technology and operations, all the way to the data being sold and delivered to the client. The reporting structure of Nielsen is and has historically been centralized under one Chief Operating Decision Maker (“CODM”), who evaluates Nielsen’s operating financial results to assess its performance.

 

Business Segment Information

 

(IN MILLIONS)

 

 

Three Months Ended March 31,

 

 

 

 

 

 

2022

 

 

 

2021

 

 

Revenues

 

$

877

 

 

$

863

 

 

Operating income

 

 

197

 

 

 

253

 

 

Depreciation and amortization

 

 

130

 

 

 

127

 

 

Restructuring charges (1)

 

 

12

 

 

 

 

 

Share-based compensation expense

 

 

8