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

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

The Netherlands		98-0662038
(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		Diemerhof 2 1112 XL Diemen The Netherlands +31(0) 20 398 87 77
(Address of principal executive offices) (Zip Code) (Registrant’s telephone numbers including area code)

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

				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	- 20 -
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	- 35 -
Item 4.		Controls and Procedures	- 35 -
PART II.		OTHER INFORMATION	- 36 -
Item 1.		Legal Proceedings	- 36 -
Item 1A.		Risk Factors	- 36 -
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	- 36 -
Item 3.		Defaults Upon Senior Securities	- 36 -
Item 4.		Mine Safety Disclosures	- 37 -
Item 5.		Other Information	- 37 -
Item 6.		Exhibits	- 39 -
		Signatures	- 40 -

Item  1.Condensed Consolidated Financial Statements

 

Nielsen Holdings N.V.

Condensed Consolidated Statements of Operations (Unaudited)

   

 

   

   

   

   

   

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

   

 

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Nielsen Holdings N.V.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

   

 

 

·	Net of tax of $(2) million and zero for the three months ended June 30, 2013 and 2012, respectively, and  $9 million and zero for the six months ended June 30, 2013 and 2012, respectively.

 

·	Net of tax of $(4) million and zero for the three months ended June 30, 2013 and 2012, respectively, and $(4) million and zero for the six months ended June 30, 2013 and 2012, respectively

 

·	Net of tax of $(3) million and zero for the three months ended June 30, 2013 and 2012, respectively and $(5) million and $1 million for the six months ended June 30, 2013 and 2012, respectively.

 

·	Net of tax of $(6) million and zero for the three months ended June 30, 2013 and 2012, respectively, and $(16) million and $(1) million for the six months ended June 30, 2013 and 2012, respectively.

   

   

   

   

   

   

   

   

   

   

   

   

   

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

   

   

   

   

 

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Nielsen Holdings N.V.

Condensed Consolidated Balance Sheets

   

 

   

   

   

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

   

   

   

 

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Nielsen Holdings N.V.

Condensed Consolidated Statements of Cash Flows (Unaudited)

   

 

   

   

   

   

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

   

   

   

 

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Nielsen Holdings N.V.

Notes to Condensed Consolidated Financial Statements

   

1. Background and Basis of Presentation

Background

Nielsen Holdings N.V. (“Nielsen” or the “Company”), together with its subsidiaries, is a leading global information and measurement company that provides clients with a comprehensive understanding of consumers and consumer behavior. Nielsen is aligned into two reporting segments: what consumers buy (“Buy”) and what consumers watch (“Watch”). In June 2013, Nielsen completed the sale of its Expositions operating segment (see Note 4, Discontinued Operations, for more information). The Company’s condensed consolidated statements of operations reflect the Expositions operating segment as a discontinued operation.  Nielsen has a presence in approximately 100 countries, with its headquarters located in Diemen, the Netherlands and New York, USA.

The Company was formed by several private equity groups through Valcon Acquisition Holding (Luxembourg) S.à r.l. (“Luxco”). As of December 31, 2012, Luxco owned 236,266,399 shares (or approximately 65%) of the Company’s common stock. In February and May 2013, Luxco and certain Nielsen employees completed a public offering of 40,814,884 shares and 40,250,000, respectively, of the Company’s common stock at a price of $32.55 and $35.01 per share, respectively.       Subsequent to these offerings and as of June 30, 2013, Luxco owned 155,224,724 shares (or approximately 41%) of the Company’s common stock.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the Company’s financial position and the results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) applicable to interim periods. For a more complete discussion of significant accounting policies, commitments and contingencies and certain other information, refer to the consolidated financial statements included in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 13, 2013. 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 June 30, 2013 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 or loss 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 consist of employee stock options and restricted stock.

The effect of 130,918 and 5,931,881 shares of common stock equivalents under stock compensation plans were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2013 and 2012, respectively, as such shares would have been anti-dilutive.

The effect of 125,496 and 5,996,195 shares of common stock equivalents under stock compensation plans were excluded from the calculation of diluted earnings per share for the six months ended June 30, 2013 and 2012, respectively, as such shares would have been anti-dilutive.

Devaluation of Venezuelan Currency

Nielsen has operations in both the Buy and Watch segments in Venezuela and the functional currency for these operations was the Venezuelan bolivares fuertes. Venezuela’s currency was considered hyperinflationary as of January 1, 2010 and further, in January 2010, Venezuela’s currency was devalued and a new currency exchange rate system was announced. In 2010, Nielsen evaluated the new exchange rate system and concluded that the local currency transactions will be denominated in U.S. dollars effective as of January 1, 2010 and until Venezuela’s currency is deemed to be non-hyperinflationary.

In February 2013, the Venezuelan government devalued its currency by 32%. The official exchange rate moved from 4.30 to 6.30 and the regulated System of Transactions with Securities in Foreign Currency market was suspended. As a result of this change

 

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Nielsen recorded a charge of $12 million during the first quarter of 2013 in the foreign currency exchange transaction losses, net line in the condensed consolidated statement of operations primarily reflecting the write-down of monetary assets and liabilities.

   

2. Summary of Recent Accounting Pronouncements

Reclassification from accumulated other comprehensive income

In February 2013, the FASB issued an accounting update “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income”, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The Company has presented the significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification in Note 6 to these condensed consolidated financial statements. This amended guidance does not have any other impact on the Company’s condensed consolidated financial statements.

Foreign Currency Matters

In March 2013, the FASB issued an accounting update, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”, to resolve the diversity in practice regarding the release into net income of the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. The amendment requires an entity that ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This guidance is effective for Nielsen interim and annual reporting periods in 2014. The adoption of this update is not expected to have a significant impact on the Company’s condensed consolidated financial statements.

   

3. Business Acquisitions

For the six months ended June 30, 2013, Nielsen paid cash consideration of $19 million associated with both current period and previously executed acquisitions, net of cash acquired. Had the current period acquisitions occurred as of January 1, 2013, the impact on Nielsen’s consolidated results of operations would not have been material.

For the six months ended June 30, 2012, Nielsen paid cash consideration of $74 million associated with both current period and previously executed acquisitions, net of cash acquired. Had the current period acquisitions occurred as of January 1, 2012, the impact on Nielsen’s consolidated results of operations would not have been material.

   

4. Discontinued Operations

In June 2013, the Company completed the sale of its expositions business, which operates one of the largest portfolios of business-to-business trade shows and conference events in the United States, for total cash consideration of $950 million and recorded a gain of $303 million.  The condensed consolidated statements of operations reflect the operating results of this business as a discontinued operation.

In March 2013, Nielsen completed the exit and shut down of one of its legacy online businesses and recorded a net loss of $3 million associated with this divestiture. The condensed consolidated statements of operations reflect the operating results of this business as a discontinued operation.

 

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Summarized results of operations for discontinued operations are as follows:

   

 

   

Nielsen allocated a portion of its consolidated interest expense to discontinued operations based upon the ratio of net assets sold as a proportion of consolidated net assets. For the three and six months ended June 30, 2013 and 2012, interest expense of $3 million and $6 million, respectively and $8 million and $12 million, respectively, was allocated to discontinued operations.

Following are the major categories of cash flows from discontinued operations, as included in Nielsen’s condensed consolidated statements of cash flows:

   

 

   

   

5. Goodwill and Other Intangible Assets

Goodwill

The table below summarizes the changes in the carrying amount of goodwill by reportable segment for the six months ended June 30, 2013.

   

 

   

At June 30, 2013, $71 million of the goodwill is expected to be deductible for income tax purposes.

 

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Other Intangible Assets

   

 

Amortization expense associated with the above intangible assets was $79 million and $71 million for the three months ended June 30, 2013 and 2012, respectively. These amounts included amortization expense associated with computer software of $43 million and $36 million for the three months ended June 30, 2013 and 2012, respectively.

The amortization expense for the six months ended June 30, 2013 and 2012 was $154 million and $144 million, respectively. These amounts included amortization expense associated with computer software of $82 million and $73 million for the six months ended June 30, 2013 and 2012, respectively.

   

6. Changes in and Reclassification out of Accumulated Other Comprehensive Loss by Component

The table below summarizes the changes in accumulated other comprehensive loss, net of tax by component for the six months ended June 30, 2013.

   

 

The table below summarizes the reclassification of accumulated other comprehensive loss by component for the three and six months ended June 30, 2013.

   

 

 

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7. Restructuring Activities

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

   

 

Nielsen recorded $8 million and $16 million in restructuring charges, primarily relating to severance cost, for the three months ended June 30, 2013 and 2012, respectively. Nielsen recorded $43 million and $53 million in restructuring charges for the six months ended June 30, 2013 and 2012, respectively, primarily relating to severance and contract termination costs.

Of the $60 million in remaining liabilities for restructuring actions, $48 million is expected to be paid within one year and is classified as a current liability within the condensed consolidated balance sheet as of June 30, 2013.

   

8. Fair Value Measurements

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

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

   

 

 

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Financial Assets and Liabilities Measured on a Recurring Basis

The Company’s financial assets and liabilities are measured and recorded at fair value, except for equity method investments, cost method investments, and long-term debt. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The following table summarizes the valuation of the Company’s material financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

   

 

   

 

      

Derivative Financial Instruments

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

To qualify for hedge accounting, the hedging relationship must meet several conditions with respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. Nielsen documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions as well

 

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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 9—Long-term Debt and Other Financing Arrangements for more information). Since it is Nielsen’s policy to only enter into derivative contracts with banks of internationally acknowledged standing, Nielsen considers the counterparty risk to be remote.

It is Nielsen’s policy to have an International Swaps and Derivatives Association (“ISDA”) Master Agreement established with every bank with which it has entered into any derivative contract. Under each of these ISDA Master Agreements, Nielsen agrees to settle only the net amount of the combined market values of all derivative contracts outstanding with any one counterparty should that counterparty default. Certain of the ISDA Master Agreements contain cross-default provisions where if the Company either defaults in payment obligations under its credit facility or if such obligations are accelerated by the lenders, then the Company could also be declared in default on its derivative obligations. At June 30, 2013, Nielsen had no material exposure to potential economic losses due to counterparty credit default risk or cross-default risk on its derivative financial instruments.

Interest Rate Risk

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

As of June 30, 2013 the Company had the following outstanding interest rate swaps utilized in the management of its interest rate risk:

   

 

Nielsen expects to recognize approximately $10 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.

 

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Fair Values of Derivative Instruments in the Consolidated Balance Sheets

The fair values of the Company’s derivative instruments as of June 30, 2013 and December 31, 2012 were as follows:

   

 

Derivatives in Cash Flow Hedging Relationships

The pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended June 30, 2013 and 2012 was as follows:

   

 

The pre-tax effect of derivative instruments in cash flow hedging relationships for the six months ended June 30, 2013 and 2012 was as follows:

   

 

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

The Company did not measure any material non-financial assets or liabilities at fair value during the three or six months ended June 30, 2013.

   

 

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9. Long-term Debt and Other Financing Arrangements

Unless otherwise stated, interest rates are as of June 30, 2013.