OFFERING MEMORANDUM
CONFIDENTIAL
VNU Group B.V.
g343,000,000 111⁄8% Senior Discount Notes due 2016
We are offering e343,000,000 aggregate principal amount at maturity of our 111⁄8% senior
discount notes due 2016 (the ‘‘Senior Discount Notes’’) for aggregate gross proceeds of
e200,095,910. The Senior Discount Notes are referred to herein as the ‘‘notes,’’ unless the context
otherwise requires.
The Senior Discount Notes mature on August 1, 2016. No cash interest will accrue on the
Senior Discount Notes prior to August 1, 2011. Thereafter, cash interest will accrue on the Senior
Discount Notes at the rate of 111⁄8% per annum and will be payable semiannually on February 1
and August 1 of each year, commencing February 1, 2012. The Senior Discount Notes will have an
initial accreted value of e583.37 per e1,000 principal amount at maturity. The accreted value of each
Senior Discount Note will increase from the date of issuance until August 1, 2011, at a rate of
111⁄8% per annum compounded semiannually such that the accreted value will equal the principal
amount at maturity on that date.
We may redeem some or all of the Senior Discount Notes at any time prior to August 1, 2011
at a price equal to 100% of the accreted value of the Senior Discount Notes redeemed plus
accrued and unpaid interest to the redemption date and an ‘‘applicable premium,’’ as described in
this offering memorandum. We may redeem the Senior Discount Notes at any time on or after
August 1, 2011, in each case, at the redemption prices set forth in this offering memorandum.
The Senior Discount Notes will be our senior unsecured obligations and will rank equal in right
of payment to all of our existing and future senior indebtedness. The notes will be effectively
subordinated to our existing and future secured indebtedness to the extent of the assets securing
such indebtedness and will be structurally subordinated to all obligations of our subsidiaries. None
of our subsidiaries will guarantee the notes.
We have agreed to make an offer to exchange the Senior Discount Notes for registered, freely
tradable notes that have substantially identical terms as the notes for which they are exchanged.
This offering memorandum includes additional information on the terms of the notes, including
redemption and repurchase prices, covenants and transfer restrictions.
We intend to apply to list the Senior Discount Notes on the Luxembourg Stock Exchange’s
Euro MTF market.
Investing in the notes involves a high degree of risk. See ‘‘Risk Factors’’ beginning on
page 27.
We have not registered the notes under the federal securities laws or the securities laws
of any state. The initial purchasers named below are offering the notes only to qualified
institutional buyers under Rule 144A and to persons outside the U.S. under Regulation S. See
‘‘Notice to Investors’’ for additional information about eligible offerees and transfer
restrictions.
Price for the Senior Discount Notes: 58.337% plus accrued interest, if any, from the issue date.
We expect that delivery of the notes will be made on or about August 9, 2006.
Joint Book-Running Managers
Deutsche Bank Securities
ABN AMRO Incorporated
Citigroup
JPMorgan
ING Wholesale Banking
The date of this offering memorandum is August 1, 2006
607055a2.qxd
7/7/06
10:20 PM
Page 1
®
intermediair
contract
D rC
JURIST
COMPANY Q1
212 243-8008 Q2
3
607055a2
07.07.06
CMY K
175sc
This offering memorandum has been prepared by us based on information we have or have
obtained from sources we believe to be reputable. Summaries of documents contained in this
offering memorandum may not be complete; we will make copies of actual documents available to
you upon request. The initial purchasers make no representation or warranty, express or implied, as
to the accuracy or completeness of the information contained in this offering memorandum.
Nothing contained in this offering memorandum is, or should be relied upon as, a promise or
representation by the initial purchasers as to our past or future performance. The information in this
offering memorandum is current only as of the date on the cover, and our business or financial
condition and other information described in this offering memorandum may change after that date.
You should consult your own legal, tax and business advisors regarding an investment in the notes.
Information in this offering memorandum is not legal, tax or business advice.
You should base your decision to invest in the notes solely on information contained in this
offering memorandum. Neither we nor the initial purchasers have authorized anyone to provide you
with any different information.
Contact the initial purchasers with any questions concerning this offering or to obtain
documents or additional information to verify the information in this offering memorandum.
We are offering the notes in reliance on exemptions from registration under the Securities Act
of 1933, as amended (the ‘‘Securities Act’’), for an offer and sale of securities that does not involve
a public offering. If you purchase the notes, you will be deemed to have made certain
acknowledgments, representations and warranties as detailed under ‘‘Notice to Investors.’’ You may
be required to bear the financial risk of an investment in the notes for an indefinite period. Neither
we nor the initial purchasers are making an offer to sell the notes in any jurisdiction where the offer
and sale of the notes is prohibited. We do not make any representation to you that the notes are a
legal investment for you.
Each prospective purchaser of the notes must comply with all applicable laws and regulations
in force in any jurisdiction in which it purchases, offers or sells the notes and must obtain any
consent, approval or permission required by it for the purchase, offer or sale by it of the notes
under the laws and regulations in force in any jurisdiction to which it is subject or in which it makes
such purchases, offers or sales, and neither we nor the initial purchasers shall have any
responsibility therefor.
Neither the Securities and Exchange Commission (the ‘‘SEC’’) nor any state securities
commission has approved or disapproved of the notes or determined if this offering memorandum
is truthful or complete. Any representation to the contrary is a criminal offense.
We have prepared this offering memorandum for use in connection with the offer of the notes
to qualified institutional buyers under Rule 144A of the Securities Act and to persons outside the
U.S. under Regulation S of the Securities Act. You agree that you will hold the information
contained in this offering memorandum and the transactions contemplated hereby in confidence.
You may not distribute this offering memorandum to any person, other than a person retained to
advise you in connection with the purchase of the notes. We and the initial purchasers may reject
any offer to purchase the notes in whole or in part, sell less than the entire principal amount of the
notes offered hereby or allocate to any purchaser less than all of the notes for which it has
subscribed.
We expect that delivery of the notes will be made against payment therefor on or about
August 9, 2006, which will be the sixth business day following the date of pricing of the notes (such
settlement cycle being herein referred to as ‘‘T+6’’). Under Rule 15c6-1 under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade notes on the date of pricing or the next two
succeeding business days will be required, by virtue of the fact that the notes initially will settle
i
T+6, to specify an alternate settlement cycle at the time of any such trade to prevent a failed
settlement. Purchasers of notes who wish to trade notes on the date of pricing or the next two
succeeding business days should consult their own advisor.
THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. PROSPECTIVE PURCHASERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES ANNOTATED, 1955, AS AMENDED, WITH THE STATE OF NEW HAMPSHIRE NOR
THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN
THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE
THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT
MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR
EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE
SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE
PROVISIONS OF THIS PARAGRAPH.
NOTICES TO INVESTORS IN THE EUROPEAN ECONOMIC AREA
In relation to each Member State of the European Economic Area which has implemented the
Prospectus Directive (each, a ‘‘Relevant Member State’’), with effect from and including the date on
which the Prospectus Directive is implemented in that Relevant Member State (the ‘‘Relevant
Implementation Date’’), neither VNU nor anyone acting on its behalf has made or will make an offer
of notes to the public in that Relevant Member State prior to the publication of a prospectus in
relation to the notes which has been approved by the competent authority in that Relevant Member
State or, where appropriate, approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in accordance with the Prospectus Directive,
except that the Initial Purchasers may, with effect from and including the Relevant Implementation
Date, make an offer of the notes to the public in the Relevant Member State at any time:
(a) to legal entities which are authorized or regulated to operate in the financial markets or, if
not so authorized or regulated, whose corporate purpose is solely to invest in securities;
(b) to any legal entity which has two or more of (1) an average of at least 250 employees
during the last financial year, (2) a total balance sheet of more than e43,000,000 and (3) an
annual net turnover of more than e50,000,000 as shown in its last annual or consolidated
accounts; or
(c) in any other circumstances which do not require the publication by VNU of a prospectus
pursuant to Article 3 of the Prospectus Directive.
For the purposes of this restriction, the expression an ‘‘offer of the notes to the public’’ in
relation to any of the notes in any Relevant Member State means the communication in any form
and by any means of sufficient information on the terms of the offering and the notes to be offered
so as to enable an investor to decide to purchase or subscribe the notes, as the same may be
ii
varied in that Member State by any measure implementing the Prospectus Directive in that Member
State and the expression Prospectus Directive means Directive 2003/71/EC and includes any
relevant implementing measure in each Relevant Member State.
NOTICE TO INVESTORS IN THE UNITED KINGDOM
This document and the offering are only addressed to and directed at persons in member
states of the European Economic Area who are ‘‘qualified investors’’ within the meaning of
Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (‘‘Qualified Investors’’). In addition,
in the United Kingdom, this document is being distributed only to, and is directed only at, Qualified
Investors (i) who have professional experience in matters relating to investments falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
‘‘Order’’) and Qualified Investors falling within Article 49(2)(a) to (d) of the Order, and (ii) to whom it
may otherwise lawfully be communicated (all such persons together being referred to as ‘‘relevant
persons’’). This document must not be acted on or relied on (i) in the United Kingdom, by persons
who are not relevant persons, and (ii) in any member state of the European Economic Area other
than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment
activity to which this document relates is available only to (i) in the United Kingdom, relevant
persons, and (ii) in any member state of the European Economic Area other than the United
Kingdom, Qualified Investors, and will be engaged in only with such persons. This document and
its contents are confidential and should not be distributed, published or reproduced (in whole or in
part) or disclosed by recipients to any other person.
NOTICE TO CERTAIN OTHER EUROPEAN INVESTORS
France. In France, the notes may not be directly or indirectly offered or sold to the public,
and offers and sales of the notes will only be made in France to providers of investment services
relating to portfolio management for the account of third parties and/or to qualified investors acting
for their own account, in accordance with Articles L.411-1, L.411-2 and D.411-1 of the Code
Monétaire et Financier. Accordingly, this offering memorandum has not been submitted to the
Autorité des Marchés Financiers. Neither this offering memorandum nor any other offering material
may be distributed to the public or used in connection with any offer for subscription or sale of the
notes to the public in France or offered to any investors other than those (if any) to whom offers
and sales of the notes in France may be made as described above and no prospectus shall be
prepared and submitted for approval (visa) to the Autorité des Marchés Financiers.
Les titres ne peuvent être offerts ni vendus directement ou indirectement au public en France et
ni l’offre ni la vente des titres ne pourra être proposée qu’ à des personnes fournissant le service
d’investissement de gestion de portefeuille pour compte de tiers et/ou à des investisseurs qualifiés
agissant pour compte propre conformément aux Articles L.411-1, L.411-2 et D411 1 du Code
Monétaire et Financier. Par conséquent, ce offering memorandum n’a pas été soumis au visa de
l’Autorité des Marchés Financiers et aucun offering memorandum ne sera preparé ou soumis au visa
de l’Autorité des Marchés Financiers. Ni ce offering memorandum ni aucun autre document
promotionnel ne pourra être communiqué en France au public ou utilisé en relation avec l’offre de
souscription ou la vente ou l’offre de titres au public ou à toute personne autre que les investisseurs
(le cas échéant) décrits ci-dessus auxquels les titres peuvent ˆetre offerts et vendus en France.
Germany. The notes may be offered and sold in Germany only in compliance with the
German Securities Prospectus Act (Wertpapierprospektgesetz) as amended, the Commission
Regulation (EC) No 809/2004 of April 29, 2004 as amended, or any other laws applicable in
Germany governing the issue, offering and sale of securities. The offering memorandum has not
been approved under the German Securities Prospectus Act (Wertpapierprospektgesetz) or the
Directive 2003/71/EC.
iii
SECURITIES AND EXCHANGE COMMISSION REVIEW
The information in this offering memorandum relates to an offering that is exempt from
registration under the Securities Act. We will agree to file one or more registration statements with
the SEC with respect to (i) a registered offer to exchange the notes for new exchange notes having
terms substantially identical in all material respects to the notes exchanged therefor (except that the
new exchange notes will not contain terms with respect to additional interest or transfer restrictions)
or (ii) resales of the notes. See ‘‘Exchange Offer; Registration Rights.’’ In the course of the review
by the SEC of any such registration statement and other filings we may make with the SEC, we
may be required or may elect to make changes to the description of our business, financial
statements and other information in those documents and filings. We believe that our financial
statements and other financial data, including the pro forma financial data, included in this offering
memorandum have been prepared in a manner that complies, in all material respects, with the
regulations published by the SEC and are consistent with current practice with the exceptions of
(i) the presentation of such financial statements and other financial data in Euros, (ii) the omission
of selected historical financial data for the years ended December 31, 2001 and 2002,
(iii) guarantor/non-guarantor financial information, (iv) the exclusion of financial statement schedules
to the financial statements, and (v) the inclusion of pro forma financial data for the twelve months
ended March 31, 2006.
The financial statements and other financial data to be included in the registration statements
filed with the SEC will be presented in U.S. dollars. Financial data presented in U.S. dollars in this
offering memorandum has been based on the convenience translation found elsewhere in this
offering memorandum. The method of translating currencies for purposes of generally accepted
accounting principles (‘‘GAAP’’) in the U.S. and the registration statement differs from that used to
create the convenience translation. See ‘‘Translation of Certain Currencies.’’ Therefore, we cannot
assure you that the financial information contained in this offering memorandum will be directly
comparable to the financial information contained in the registration statements or reported by VNU
in the future and may be materially different, including for periods covered in this offering
memorandum and including, without limitation, the convenience translation into U.S. dollars
provided herein.
SEC rules regulate the use in filings with the SEC of ‘‘non-GAAP financial measures,’’ such as
EBITDA and Adjusted EBITDA, that are derived on the basis of methodologies other than in
accordance with U.S. GAAP. Adjusted EBITDA is defined as EBITDA further adjusted to exclude
unusual items and other adjustments permitted in calculating covenant compliance under the
indentures governing the Senior Notes and Senior Subordinated Discount Notes being offered by
Nielsen Finance LLC and Nielsen Finance Co. and our new senior secured credit facilities and, as a
result, may not be comparable to those of other companies. Comments by the SEC on our financial
data in a registration statement for an exchange offer or shelf registration statement required by the
registration rights agreements may require modification or reformulation of the data we present in
this offering memorandum, including the financial statements and other financial information. Any
such modification or reformulation may be significant.
For a presentation of net income from continuing operations as calculated under U.S. GAAP
and a reconciliation to our EBITDA and Adjusted EBITDA, see ‘‘Offering Memorandum Summary—
Summary Historical and Pro Forma Financial Information’’ included elsewhere in this offering
memorandum.
iv
USE OF NON-GAAP FINANCIAL INFORMATION
We have provided EBITDA and Adjusted EBITDA information in this offering memorandum
because we believe they provide investors with additional information to measure our performance
and evaluate our ability to service our debt.
EBITDA and Adjusted EBITDA are not presentations made in accordance with U.S. GAAP and
our use of the terms EBITDA and Adjusted EBITDA varies from others in our industry. EBITDA and
Adjusted EBITDA should not be considered as an alternative to net earnings (loss), operating
income or any other performance measures derived in accordance with U.S. GAAP as measures of
operating performance or cash flows as measures of liquidity. EBITDA and Adjusted EBITDA have
important limitations as analytical tools and you should not consider them in isolation or as
substitutes for analysis of our results as reported under U.S. GAAP. For example EBITDA:
• excludes certain tax payments that may represent a reduction in cash available to us;
• does not reflect any cash capital expenditure requirements for the assets being depreciated
and amortized that may have to be replaced in the future;
• does not reflect changes in, or cash requirements for, our working capital needs;
• does not reflect the significant interest expense, or the cash requirements necessary to
service interest or principal payments, on our debts;
In addition, Adjusted EBITDA:
• includes estimated cost savings and operating synergies;
• does not include one-time transition expenditures that we anticipate we will need to incur to
realize cost savings;
• does not reflect management fees that may be paid to the Sponsors (as defined below) in
connection with or following the consummation of the Transactions (as defined below);
• does not reflect the impact of earnings or charges resulting from matters that we and the
lenders under our new senior secured credit facilities may consider not to be indicative of
our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add
back certain non-cash and non-recurring charges that are deducted in calculating net
income. However, these are expenses that may recur, vary greatly and are difficult to predict.
They can represent the effect of long-term strategies as opposed to short-term results. In
addition, certain of these expenses can represent the reduction of cash that could be used
for other corporate purposes.
Because of these limitations we rely primarily on our U.S. GAAP results and use EBITDA and
Adjusted EBITDA only supplementally.
MARKET AND INDUSTRY DATA
Information regarding market share, market position and industry data pertaining to our
business contained in this offering memorandum consists of our management’s knowledge of our
business and markets, the 2005 Veronis Suhler Stevenson Communications Industry Forecast (the
‘‘2005 VSS Industry Forecast’’), and other various sources.
Although we believe that the third party sources are reliable, we and the initial purchasers have
not independently verified market industry data provided by third parties or by industry or general
publications, and we and the initial purchasers take no further responsibility for this data. Similarly,
while we believe our internal estimates with respect to our industry are reliable, our estimates have
not been verified by any independent sources, and we and the initial purchasers cannot assure you
v
that they are accurate. While we are not aware of any misstatements regarding any industry data
presented in this offering memorandum, our estimates, in particular as they relate to market share
and our general expectations concerning the global marketing and media research and the
business information industries, involve risks and uncertainties and are subject to change based on
various factors, including those discussed under the section entitled ‘‘Risk Factors’’ below.
USE OF TRADEMARKS
ACNielsen, Nielsen Media Research, Nielsen Entertainment, and NetRatings are our
registered trademarks. This offering memorandum also includes other registered and unregistered
trademarks of ours. All other trademarks, tradenames and service marks appearing in this offering
memorandum are the property of their respective owners.
TRANSLATION OF CERTAIN CURRENCIES
We have provided financial information in this offering memorandum in Euros, as we currently
report our operating results and financial condition (including our U.S. GAAP financial statements) in
Euros. This is largely due to VNU having been listed on the Amsterdam Eurolist by the Euronext
Stock Exchange. We intend to change our financial reporting to U.S. dollars at some point prior to
the filing of the exchange offer registration statement for the notes, as approximately 55% of our
revenues, and 82% of our EBITDA, were earned in U.S. dollars in 2005. We generate revenue and
expenses predominantly in local currencies.
Solely for the convenience of the reader, this offering memorandum contains translations of
certain Euro amounts to U.S. dollars, at the exchange rate used in translating our balance sheet at
March 31, 2006 of e1.00 to $1.1974. This translation should not be construed as a representation
that Euro amounts actually represent such U.S. dollar amounts or could be converted into U.S.
dollars at the rate indicated.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This offering memorandum contains ‘‘forward-looking statements’’ within the meaning of the
federal securities laws, which involve risks and uncertainties. You can identify forward-looking
statements because they contain words such as ‘‘believes,’’ ‘‘expects,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’
‘‘seeks,’’ ‘‘approximately,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘estimates,’’ or ‘‘anticipates’’ or similar expressions
that concern our strategy, plans or intentions. All statements we make relating to the closing of the
Transactions described in this offering memorandum or to our estimated and projected earnings,
margins, costs, expenditures, cash flows, growth rates and financial results are forward-looking
statements. In addition, we, through our senior management, from time to time make forwardlooking public statements concerning our expected future operations and performance and other
developments. These forward-looking statements are subject to risks and uncertainties that may
change at any time, and, therefore, our actual results may differ materially from those that we
expected. We derive many of our forward-looking statements from our operating budgets and
forecasts, which are based upon many detailed assumptions. While we believe that our
assumptions are reasonable, we caution that it is very difficult to predict the impact of known
factors, and it is impossible for us to anticipate all factors that could affect our actual results.
Important factors that could cause actual results to differ materially from our expectations
(‘‘cautionary statements’’) are disclosed under ‘‘Risk Factors’’ and elsewhere in this offering
memorandum, including, without limitation, in conjunction with the forward-looking statements
included in this offering memorandum. All subsequent written and oral forward-looking statements
vi
attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the
cautionary statements. Some of the factors that we believe could affect our results include:
• general economic conditions, including the effects of any economic downturn on advertising
spending levels, and costs of, and demand for, consumer packaged goods, media,
entertainment and technology products;
• our ability to realize anticipated cost savings related to our primary cost saving initiative,
Project Forward;
• the effect of disruptions to our information processing systems;
• the timing and scope of technological advances;
• our substantial indebtedness following consummation of the Transactions described in this
offering memorandum;
• certain covenants in our debt documents following the consummation of the Transactions
described in this offering memorandum;
• customer procurement strategies that could put additional pricing pressure on us;
• consolidation in our customers’ industries may reduce the aggregate demand for our
services;
• regulatory review by governmental agencies that oversee information gathering and changes
in data protection laws;
• the ability to attract and retain customers and key personnel;
• risks to which our international operations are exposed, including local political and
economic conditions, the effects of foreign currency fluctuations and the ability to comply
with local laws;
• criticism of our audience measurement services;
• the possibility that our owners’ interests will conflict with ours or yours;
• the effect of disruptions in the mail, telecommunication infrastructure and/or air services;
• the ability to maintain the confidentiality of our proprietary information gathering processes;
and
• the other factors set forth under ‘‘Risk Factors.’’
We caution you that the foregoing list of important factors may not contain all of the material
factors that are important to you. In addition, in light of these risks and uncertainties, the matters
referred to in the forward-looking statements contained in this offering memorandum may not in fact
occur. We undertake no obligation to publicly update or revise any forward-looking statement as a
result of new information, future events or otherwise, except as otherwise required by law.
vii
(This page has been left blank intentionally.)
OFFERING MEMORANDUM SUMMARY
This summary highlights information appearing elsewhere in this offering memorandum. This
summary is not complete and does not contain all of the information that you should consider before
investing in the notes. You should carefully read the entire offering memorandum, including the
financial data and related notes and section entitled ‘‘Risk Factors.’’
The notes will be issued by VNU Group B.V. (formerly VNU N.V.) (‘‘VNU’’). Unless the context
otherwise requires, references in this offering memorandum to the ‘‘Issuer’’ refers to VNU, and
references to ‘‘we,’’ ‘‘our,’’ ‘‘us,’’ and ‘‘the Company’’ refer to VNU and each of its consolidated
subsidiaries. Financial information identified in this offering memorandum as ‘‘pro forma’’ gives effect
to the closing of the Transactions, which are described in this offering memorandum summary under
‘‘—The Transactions.’’
Our Company
We are a leading global information and media company providing essential marketing and
media measurement information, analytics and industry expertise to customers across the world.
Our Nielsen brands, including ACNielsen, Nielsen Media Research, Nielsen Entertainment and
Nielsen//NetRatings, are recognized worldwide as leaders in marketing information and analysis,
television ratings, entertainment measurement and Internet advertising measurement, respectively.
In addition, our trade shows, online media assets and publications occupy leading positions in a
number of their targeted end markets. Through our broad portfolio of products and services, we
track sales of more than 14 million SKUs of consumer products each year, report on television
viewing habits in countries representing more than 60% of the world’s population, measure Internet
audiences in 18 countries, produce more than 175 trade shows, conferences and events worldwide,
operate more than 200 websites and publish more than 100 print publications. For the twelve
months ended March 31, 2006, we generated revenue of e3,556 million ($4,257 million) and pro
forma Adjusted EBITDA of e804 million ($962 million).
We currently operate in three segments: Marketing Information (‘‘MI’’), Media Measurement &
Information (‘‘MMI’’) and Business Information (‘‘BI’’). Our MI segment provides critical consumer
behavior information and analysis primarily to businesses in the consumer packaged goods
industry. ACNielsen, our leading brand within MI, is a global leader in retail measurement services
and consumer household panel data. MI’s extensive database of retail and consumer information,
combined with advanced analytical capabilities, yields valuable strategic insights and information
that influence our customers’ critical business decisions such as enhancing brand management
strategies, developing and launching new products, identifying new marketing opportunities and
improving marketing return on investment. Our MMI segment provides measurement information of
multiple media platforms, including broadcast and cable television, motion pictures, music, print,
the Internet and outdoor. Our leading brand within MMI, Nielsen Media Research, is the industry
leader in U.S. television audience measurement, and our measurement data is widely accepted as
the ‘‘currency’’ in determining the value of television advertising. Our BI segment is one of the
largest providers of integrated business-to-business information around the world. Through a multichannel approach consisting of trade shows, online media assets and publications, BI offers
attendees, exhibitors, readers and advertisers the insights and connections that assist them in
gaining a competitive edge in their respective markets.
Our business generates a stable and predictable revenue stream and is characterized by
long-term customer relationships, multi-year contracts and high contract renewal rates related to
marketing and media measurement services. Advertising across our segments represented only 8%
of our total revenue in 2005. We serve a global customer base across multiple end markets
including consumer packaged goods, retail, broadcast and cable television, music and online
1
media. The average length of relationship with our top ten customers including Disney/ABC, NBC/
Universal, News Corp., Procter & Gamble and Unilever is 36 years.
Our revenue is highly diversified by business segment, geography and customer. In 2005, 54%
of our revenues were generated from our MI segment, 28% from our MMI segment and the
remaining 18% from our BI segment. We conduct our business activities in more than 100
countries, with 62% of our revenues generated in the Americas, 30% in Europe, the Middle East
and Africa, and the remaining 8% in Asia Pacific. We have over 85,000 customers across our three
business segments, with no single customer having accounted for more than 4% of our total
revenue in 2005.
The following chart sets forth our 2005 segment operating income plus segment depreciation
and amortization (‘‘segment EBITDA’’):
By Segment
By Geography
BI
17%
Europe,
Middle
East and
Africa
13%
MMI
41%
MI
42%
1AUG200619241407
Asia
Pacific
7%
Americas
80%
26JUL200603021044
Marketing Information
Our Marketing Information segment provides essential market research and analysis primarily
to businesses in the consumer packaged goods industry. Our MI segment provides an array of
services including retail measurement services (ACNielsen SCANTRACK), household consumer
panels (ACNielsen Homescan), new product testing (ACNielsen BASES), consumer segmentation
and targeting (ACNielsen Spectra) and marketing optimization (ACNielsen Analytical Consulting). We
believe these products and services give our customers a competitive advantage in making
informed decisions in today’s fast-moving and complex marketplace. Our MI segment operates in
more than 100 countries and serves over 13,000 customers by tracking retail point-of-sale
transactions in more than 325,000 stores and capturing the purchasing behavior of over 265,000
households. Within MI, ACNielsen is a global leader in consumer packaged goods retail
measurement services, with approximately 50% market share in the U.S., over 60% in Western
Europe and approximately 70% across Brazil, Russia, India and China. We believe one of our
primary strengths is our global presence, which is increasingly important in today’s environment as
our largest customers operate globally and continue to expand and invest in developing markets.
MI’s customer base is comprised of the world’s leading consumer packaged goods companies
including Colgate-Palmolive, Nestle, Procter & Gamble and Unilever as well as leading retail chains
such as Carrefour, Kroger, Safeway, Tesco and Walgreens. With a broad global customer base and
long-standing customer relationships, MI’s revenues are stable, predictable and highly diversified. In
2005, the average length of our relationships with MI’s top ten customers was 26 years. These
long-term relationships are strengthened by our ability to integrate products and services into
customers’ workflow and provide a wide range of comparable and consistent data and analyses.
This comparability of information over time enhances our customers’ ability to use our information
in their decision-making and management processes. In addition, our customer service
professionals are often located on-site at our customers’ offices, where they assist in analyzing
information by providing industry context for better decision-making and in developing strategic and
tactical recommendations. MI’s strength of customer relationships is exemplified by average
customer renewal rates in excess of 95% in the U.S. and Europe from 2002 to 2005, which results
2
in high revenue visibility. At the beginning of each fiscal year, more than 50% of the segment’s
revenue base for the upcoming year is typically committed under existing agreements. For the fiscal
year ended December 31, 2005, MI generated approximately 54% and 42% of our revenue and
segment EBITDA, respectively.
Media Measurement & Information
Our Media Measurement & Information segment is a leading provider of media and
entertainment measurement information. The segment measures audiences for U.S. television
(Nielsen Media Research), international television (50% ownership of AGB Nielsen Media Research),
motion pictures (Nielsen EDI), the Internet (approximately 60% ownership of Nielsen//NetRatings
(NASDAQ: NTRT)), outdoor (Nielsen Outdoor) and other media, as well as tracks sales of music
(Nielsen SoundScan) and competitive advertising information (Nielsen Monitor-Plus). Using our
critical measurement information, media owners, advertising agencies, advertisers and retailers plan
and optimize their marketing strategies. MMI is particularly strong in the U.S. television audience
measurement market where our Nielsen ratings are widely accepted as the ‘‘currency’’ for both
buyers and sellers of U.S. television advertising, an industry that had over $60 billion of annual
expenditures in 2005. Nielsen Media Research measures television usage both nationally and
across all the 210 local television markets in the U.S. Our leading market position in measuring the
U.S. television audience has been achieved as a result of continued investment and over 50 years
of experience providing customers with accurate measurement.
MMI has a diversified customer base, consisting of over 25,000 individual customers including
leading broadcast and cable companies such as CBS, Comcast, Disney/ABC, NBC/Universal, News
Corp., Time Warner and Univision; leading advertising agencies such as IPG, Omnicom and WPP;
leading film studios such as 20th Century Fox, Disney, Paramount and Warner Bros.; and other
leading media companies. MMI’s business model allows for both high revenue visibility and
consistent, predictable growth as a result of multi-year contracts and high contract renewal rates
(over 95% in Nielsen Media Research). The average length of MMI’s relationships with its top ten
customers in 2005 was 33 years. Our customers value the high quality service offerings and
technology, which we maintain and improve through continuous innovation and protect via over 100
existing and pending patents in the U.S. alone. For the fiscal year ending December 31, 2005, MMI
generated approximately 28% and 41% of our total revenue and segment EBITDA, respectively.
Business Information
Our Business Information segment is one of the largest providers of integrated
business-to-business information in the world. The segment has more than 175 trade shows and
related conferences and executive summits, over 200 websites and over 100 print publications,
each targeted to specific industry groups. Our BI segment is comprised of two divisions: VNU
Business Media U.S. (‘‘BMU’’) and VNU Business Media Europe (‘‘BME’’), each with its own trade
shows, online media assets and publications. Our BI segment is anchored by the U.S. trade show
business, which is characterized by high margins, diversified end markets and strong free cash
flow. The BMU trade show business operates leading trade shows across a wide range of
industries, such as jewelry, general merchandise and kitchen & bath design. In addition, our
publications such as Billboard and The Hollywood Reporter, benefit from leading brand name
recognition and established audiences. In the U.S., more than 40 publications are distributed to
over 1.2 million professionals, and in Europe, our 70 publications are distributed to over 2.4 million
professionals. Customers include professionals and advertisers from a variety of industries including
marketing, media, advertising, entertainment, informational technology, career management and
finance. For the fiscal year ending December 31, 2005, our BI segment generated approximately
18% and 17% of our total revenue and segment EBITDA, respectively.
3
The table below highlights selected brands, descriptions and client value propositions within
each segment:
Segment
Marketing
Information
Brand
Value Proposition
• Point-of-sale retail measurement
in 88 countries
• Competitive market shares
• Price and promotion impact
• ACNielsen Homescan and
Homepanel
• Household purchase panels in
27 countries
• Brand loyalty
• Use and acceptance of new products
• ACNielsen BASES
• Database of 65,000 product concept
tests and 13,500 launch tests
• Product concept and launch testing
• ACNielsen Spectra
• Consumer lifestyle/lifestage
segmentation
• Consumer targeting
• Customize store assortments
• ACNielsen Analytical Consulting
• Proprietary marketing and media mix
models
• Trade promotion software
• Trade promotion planning
• Marketing and media spend
• TV audience measurement in
48 countries
• ‘‘Currency’’ for television advertising,
advertising exposure and effectiveness
• Nielsen//NetRatings
• Internet audience measurement in 18
countries
• Internet advertising exposure and
effectiveness
• Nielsen EDI
• Nielsen NRG
• Film box office results in 14 countries
and film research
• Performance of film releases
•
•
•
•
• Airplay and/or music/video/book sales
in 22,000 outlets and 19 countries
• Artist/author, publisher/studio and
title performance
• Nielsen Monitor-Plus
• Advertising spend across 15 media
platforms (U.S.)
• Media buying effectiveness
• Share of spending/share of voice
• Nielsen Outdoor
• Audience measurement for billboards
and kiosks
• Outdoor advertising validation/valuation
• Trade Shows
• Over 175 trade shows, conferences and
events
• Connect buyers and sellers in person
Media
• Nielsen Media Research
Measurement • AGB Nielsen Media Research
& Information
Business
Information
Description
• ACNielsen SCANTRACK
• ACNielsen MarketAudit
Nielsen
Nielsen
Nielsen
Nielsen
SoundScan
VideoScan
BookScan/Bookdata
BDS/Music Control
• eMedia
• Over 200 websites and online products
• Marketing of products
• Publications
• Over 100 magazines and newsletters
worldwide
• Marketing of products
Our Strengths
Global Leadership Positions. We hold industry-leading positions in marketing information
services, media measurement services, trade shows and business publications. We have achieved
leading positions and strong brands within each of our business segments, primarily as a result of
our ability to offer customers comprehensive and integrated marketing communications products
and services that are essential for our customers to successfully operate their businesses.
ACNielsen has the leading market share in consumer packaged goods retail measurement in many
of its markets with approximately 50% market share in the U.S., over 60% in Western Europe and
approximately 70% across Brazil, Russia, India and China, and has the ability to provide
comparable information services to customers throughout more than 100 countries. As demand for
market analysis from a single global source continues to grow, ACNielsen is well positioned to
benefit. In MMI, our Nielsen brands related to audience measurement have leading market positions
across multiple media platforms and geographies. For example, Nielsen Media Research’s
measurement information is trusted as the ‘‘currency’’ in determining the value of U.S. television
advertising. Our BI segment is one of the largest global providers of business-to-business
information and, through its trade shows, online media assets and publications, provides customers
with leading coverage of its industry verticals. We believe our size, scale and leading market
positions will continue to contribute to our consistent growth and strong operating margins.
4
Extensive Portfolio of Successful Well-Recognized Brands. We believe the Nielsen family of
brands is one of the most widely recognized marketing information and media measurement
research providers in the world. For over 80 years, ACNielsen has provided trusted service to the
world’s top consumer packaged goods and merchandising customers. ACNielsen SCANTRACK,
ACNielsen Homescan and ACNielsen BASES are leading brands in point-of-sale retail measurement,
consumer household purchase panels and new product concept testing, respectively. For over
50 years, Nielsen Media Research has been recognized as a trusted source of television audience
measurement by virtually all of the leading broadcast and cable networks, syndicators and national
advertisers in the U.S. Nielsen EDI, Nielsen SoundScan and Nielsen//NetRatings are leading brands
providing box office results, music sales and Internet audience measurement, respectively. In BI, we
publish some of the most recognizable business-to-business magazine titles across various
segments including Billboard and The Hollywood Reporter. We believe that our successful,
well-recognized brands along with the quality of service we provide will continue to enable us to
attract new business and retain existing business resulting in both revenue and cash flow growth.
Strong Customer Relationships and High Revenue Visibility. Our long-standing customer
relationships and multi-year contracts contribute to a stable and predictable revenue stream. We
have cultivated strong long-standing customer relationships with many of the world’s leading
consumer packaged goods, media and entertainment companies. In MI, our customers include the
largest consumer packaged goods and merchandising companies in the world. The average length
of our relationships with MI’s top ten customers in 2005 was 26 years. In many cases, our sales
and service staff are located on-site at our customers’ offices and customize the analysis related to
specific client issues and needs. Given our essential products and strong customer service, our
business in MI is characterized by multi-year agreements, with approximately 50% of each year’s
revenues under agreement by the beginning of the fiscal year. Within MMI, our customer base of
over 25,000 customers includes leading media companies to whom we have been providing
audience measurement information for over 50 years. Our MMI customers typically enter into
multi-year contracts and have high renewal rates (over 95% in Nielsen Media Research). The
average length of our relationships with MMI’s top ten customers in 2005 was 33 years. We expect
our strong customer relationships to contribute to our ongoing success and growth.
Diversified Global Business Mix. Our MI, MMI and BI segments contributed 42%, 41% and
17% of our segment EBITDA in 2005, respectively. Our broad portfolio of product offerings, large
customer base, multiple end markets and wide geographic presence provide us with a diverse
revenue stream, with advertising across our segments representing only 8% of our total revenue in
2005. Our MI segment operates in more than 100 countries and serves over 13,000 customers
providing retail point-of-sale tracking in more than 325,000 stores. Our MMI segment serves over
25,000 customers across more than 55 countries in various end markets including television,
motion pictures, music, print, the Internet and outdoor media. In 2005, we generated 62% of our
revenue in the Americas, 30% in Europe, the Middle East and Africa, and 8% in Asia Pacific, with no
single customer representing more than 4% of revenues. We believe our global presence will
continue to expand as we grow our business in rapidly developing markets and our business mix
will continue to broaden as we invest in new products and services.
Highly Resilient Business Model with Consistent Cash Flow Generation. Our customers’
continuous need for information related to key marketing and business development decisions as
well as for media measurement has historically provided us with strong constant currency revenue
growth, high revenue visibility and consistent cash flow generation. In 2004 and 2005, we achieved
constant currency revenue growth of 7% and 5% and constant currency Adjusted EBITDA growth of
4% and 12%, respectively. For purposes of calculating revenue growth and Adjusted EBITDA
growth on a constant currency basis, we have removed the exchange rate impact of (6)% and 0%
respectively, for revenue growth in 2004 and 2005, and (7)% and 0% respectively, for Adjusted
5
EBITDA growth in 2004 and 2005. Both MI and MMI have multi-year customer agreements and high
contract renewal rates. In addition, BI benefits from advance payments related to bookings for trade
shows. We have a disciplined approach to capital expenditures based on new product growth and
return on invested capital analysis. We believe that the largely resilient nature of our revenue base
along with our disciplined approach to spending will enable us to convert a significant portion of
our revenue to cash available for debt service.
Attractive Industry Outlook. We operate in two distinct industries: (i) the global marketing
and media research industry (representing our MI and MMI segments), and (ii) the business
information industry (representing our BI segment). The U.S. market for marketing and media
information is expected to grow at a 7.0% compound annual growth rate (‘‘CAGR’’) from 2005
through 2009, according to the 2005 VSS Industry Forecast. Consumer packaged goods
companies use our MI segment’s marketing information to monitor brand performance and stay
competitive. Growth in our MI segment is expected to be driven by continued globalization and
geographic expansion of consumer packaged goods companies, increased demand for higher
value-added information and related services, as well as the need to improve brand performance,
develop and launch new products and increase marketing return on investment. Growth of our MMI
business is related in part to television and other media advertising spending. The 2005 VSS
Industry Forecast projects U.S. television advertising growth of 7.1% CAGR from 2005 to 2009. In
addition, according to the 2005 VSS Industry Forecast, film entertainment and Internet advertising
are expected to grow at CAGRs of 6.9% and 22.2%, respectively, from 2005 through 2009. We also
participate in the global business information sector through our BI segment by offering trade
shows, online media assets and print publications. According to the 2005 VSS Industry Forecast,
the size of the U.S. market for business-to-business magazines, e-media and trade shows is
estimated to be $23 billion, and is expected to grow at a CAGR of approximately 5.8% from 2005
through 2009. We believe that continued strength in these industries will enhance our growth
potential.
Experienced Management Team. We have a strong and committed management team that
has substantial relevant industry knowledge and a proven track record of operations success. Our
senior management team collectively has over 125 years of experience in their respective
industries. Our management team has grown constant currency revenues and Adjusted EBITDA
through new product development, industry leadership and operating efficiencies. We believe that
our management team positions us well to continue to successfully implement our growth and cost
reduction initiatives.
Our Strategy
Our goals are to continue to increase the value we deliver to our customers, streamline our
operations and grow our business. We intend to execute our goals through the following business
strategies:
Capitalize on Core Brands. We will continue to maintain our focus on our leading brands to
drive growth in each of our businesses. Our Nielsen family of brands has positioned us well in the
market for retail measurement and audience measurement services. We expect to build on these
brands by continuing to improve the quality of our products and enhance our services. We will
continue to improve the measurement of media audiences through increased granularity of our
demographic market data, and of retail information through increased store coverage and
worldwide expansion of ACNielsen Homescan, our consumer household panel. In addition, we
expect to leverage our brand recognition to grow our revenues in areas such as value-added
services, analytics and new measurement opportunities through ACNielsen Advisory Services,
Nielsen//NetRatings and Nielsen Outdoor, among others. We believe that building on our leading
6
brands will drive continued demand for our existing and new products, leading to strong revenue
generation.
Continue to Lead Innovation of Measurement Services. We continue to develop new
solutions and technologies to improve the measurement of consumer trends and measure
audiences across the latest media platforms. In the global market for consumer packaged goods,
we have a partnership with Yahoo! to determine the impact of online advertising on offline
purchasing behavior, and we have launched our immediate consumables panels where panelists
scan purchases of single serve items (such as cans of soda) using a key chain scanner. In media
and entertainment, Nielsen Media Research continues to deploy advanced metering technology
(such as People Meters and Active/Passive Meters) and expand its measurement of television
viewing habits through initiatives capturing digital video recording and video on demand. In
addition, we continue to invest in high growth products and services such as integrated television
and Internet measurement, and the measurement of media consumption on personal electronic
devices, such as downloads for iPods. For example, we recently announced our Anytime Anywhere
Media Measurement (‘‘A2/M2’’) initiative to deliver integrated ratings for all forms of television
viewing, regardless of consumption medium. These initiatives along with our expanded consumer
analysis capabilities have created significant revenue opportunities and broadened our product
offerings. We will continue to focus on developing innovative solutions to provide our clients with
increasingly relevant and precise measurement information.
Continue to Expand Globally. We intend to extend our already strong global reach and
increase our global leadership. Global reach is increasingly important given our customers’ growth
into new markets, and we are well positioned to increase our global presence in each of our
operating segments. Our substantial presence in rapidly developing markets such as Brazil, Russia,
India and China illustrates our success with this strategy. ACNielsen operations in Central and
Eastern Europe, the Middle East and Africa, have grown constant currency revenue at double-digit
rates for the last six years, led by strong revenue growth in Russia, Poland, Hungary, South Africa,
United Arab Emirates, Pakistan and Nigeria. In 2005, our AGB Nielsen Media Research television
audience measurement (‘‘TAM’’) joint venture, covering 31 countries, continued its expansion in
China, where People Meters are being introduced in 17 provinces, including all major metropolitan
areas. MMI also has other TAM joint ventures covering an additional 16 countries including in Latin
America with IBOPE, and separate ventures in Finland, Switzerland and India. We believe these
expansions will continue to provide us with strong revenue growth opportunities going forward.
Optimize our Portfolio of Product Offerings. We will continue to evaluate our products and
services to determine the optimal offering given current and forecasted customer demand. We will
look to develop businesses that best serve our customers while maintaining a focus on profitability,
thereby maximizing our return on invested capital. We will also consider select acquisitions of
complementary businesses that would enhance our product portfolio. In addition, we will consider
opportunistically divesting operations that we believe to be non-core to our operations. As
marketing activities continue to shift from mass to targeted audiences, we believe the optimization
of our product portfolio will offer more focused solutions to our clients.
Pursue Project Forward and Continue to Reduce Costs. While we have successfully
implemented certain initiatives such as the consolidation of certain data processing facilities and
offshoring, we had never undergone a comprehensive company-wide cost savings plan prior to
Project Forward. In November 2005, we announced Project Forward, an initiative led by our senior
executive team to expand current cost-savings programs to all areas of our operations worldwide.
We have identified opportunities to make fundamental changes in our operations and permanently
reduce our costs by streamlining corporate functions, centralizing information technology and
purchasing and expanding the outsourcing and offshoring of certain operational and production
7
processes, many of which we have begun to implement. We believe we can implement these cost
initiatives by the end of 2008, which we estimate will result in a targeted e125 million of annual cost
savings. We estimate one time costs of approximately e175 million to be incurred over the
corresponding time period in connection with these cost savings. We expect that a run-rate of
e75 million of these cost savings will be achieved within twelve months of the consummation of this
offering. In addition, we intend to continue to pursue opportunities to improve our cost structure
beyond the scope of Project Forward.
The Transactions
The Tender Offer and Acquisition
On March 8, 2006, Valcon Acquisition B.V. (‘‘Valcon’’), formed by investment funds associated
with AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg
Kravis Roberts & Co., and Thomas H. Lee Partners (collectively, the ‘‘Sponsors’’), entered into a
merger protocol to acquire VNU. The price per share paid to VNU shareholders was e29.50 per
ordinary share and e21.00 per 7% preferred share. The tender offer was settled on various dates
from May 24, 2006 through June 14, 2006, and all of VNU’s issued and outstanding preferred B
shares were separately purchased by Valcon for e102 million and such purchases were settled on
various dates commencing May 24, 2006, together representing a combined 98.97% of VNU’s
issued and outstanding share capital. To finance the tender and the purchase of VNU’s shares,
Valcon used a combination of investments in Valcon’s equity through its parent companies by
investment funds associated with or designated by the Sponsors and a senior secured bridge
facility providing for borrowings by Valcon. Valcon has continued to make open market purchases
for additional shares. Valcon intends to acquire the remaining VNU share capital through a statutory
squeeze-out procedure, which is expected to be completed by the end of 2006 or early 2007. As of
July 5, 2006, investment funds associated with or designated by the Sponsors had invested
approximately e3,094 million (based on actual contributions of approximately $3,575 million and
e109 million) in the equity of Valcon through its parent companies, and Valcon had borrowed
approximately e5,100 million (based on actual borrowings of approximately $5,648 million and
e384 million) under its senior secured bridge facility. We intend to use additional equity contributed
to Valcon by investment funds associated with or designated by the Sponsors and additional
investors chosen by the Sponsors (the ‘‘Co-Investors’’), as well as available cash on hand, the
proceeds from this offering, proceeds from the offering by Nielsen Finance LLC and Nielsen
Finance Co. of Senior Notes and Senior Subordinated Discount Notes (each as defined below) and
borrowings under the new senior secured credit facilities described below to repay Valcon’s senior
secured bridge facility, to purchase from Valcon and/or cancel VNU’s preferred B shares, and to
complete the statutory squeeze-out of VNU’s remaining minority shareholders. In connection with
the Transactions, VNU has delisted its shares from the Eurolist by Euronext Amsterdam Stock
Exchange, and has been converted from a Dutch N.V. to a Dutch B.V.
The Financing Transactions
Concurrently with the closing of this offering, we anticipate entering into the following financing
transactions:
• our new senior secured credit facilities, consisting of a seven-year e4,287 million
($5,133 million) term loan facility, all of which will be borrowed at closing, and a six-year
e574 million ($688 million) revolving credit facility, none of which we anticipate will be
borrowed at closing;
• the issuance by Nielsen Finance LLC and Nielsen Finance Co. of $650 million aggregate
principal amount of 10% Senior Notes due 2014, e150 million aggregate principal amount of
8
9% senior notes due 2014 (collectively the ‘‘Senior Notes’’) and $1,070 million aggregate
principal amount at maturity ($585 million aggregate gross proceeds) of 121⁄2% senior
subordinated discount notes due 2016 (the ‘‘Senior Subordinated Discount Notes’’);
• the repayment of all amounts outstanding under Valcon’s senior secured bridge facility and
the purchase and/or cancellation of certain of VNU’s shares with the proceeds of offering,
term loan borrowings under the new senior secured credit facilities, and equity contributed to
Valcon through its parent companies by investment funds associated with or designated by
the Sponsors and the Co-Investors; and
• the completion of the tender offer and consent solicitation, which we refer to as the ‘‘U.S.
Tender Offer,’’ for all $150 million (e125 million) aggregate principal amount of Nielsen Media
Research’s outstanding 7.6% notes due 2009, and the completion of the tender offers and
consent solicitations, which we refer to as the ‘‘Euro and NLG Tender Offers,’’ for all
e500 million aggregate principal amount of VNU’s outstanding 6.625% bonds due 2007, all
e49 million aggregate principal amount of VNU’s outstanding 6.75% fixed rate notes due
2008, all e148 million aggregate principal amount of VNU’s outstanding floating rate notes
due 2006 and all NLG 600 million (e273 million) aggregate principal amount of VNU’s 5.5%
bonds due 2008.
In connection with this tender offer, VNU’s e333 million 1.75% convertible unsubordinated
bonds due 2006 and VNU’s NLG 500 million subordinated loans (e137 million outstanding) were
repaid in May 2006, in each case with available cash on hand.
Unless otherwise stated, we assume for purposes of this offering memorandum that 100% of
the notes subject to the U.S. Tender Offer and 100% of all notes subject to the Euro and NLG
Tender Offers will be tendered in connection with such offers. We intend to redeem any securities
not tendered in the Euro and NLG Tender Offers at par as soon as practicable upon completion of
this offering. As of July 5, 2006, holders had tendered $148 million (e123 million), or 98.4%, of
Nielsen Media Research’s 7.6% notes due 2009 and the consent solicitation had been approved.
Throughout this offering memorandum, we collectively refer to the acquisition of all outstanding
share capital of VNU by Valcon, the completion of the U.S. Tender Offer, the completion of the Euro
and NLG Tender Offers, the repayment of all outstanding amounts under Valcon’s senior secured
bridge facility and the consummation of this offering and the other financing transactions described
above as the ‘‘Transactions.’’
9
Combined Sources and Uses of Funds of Valcon and VNU
The following table sets forth the estimated sources and uses of funds of Valcon and VNU on a
combined basis in connection with the Transactions, assuming they had occurred on March 31,
2006 and based on amounts outstanding on that date. The actual sources and uses of funds may
be different than the amounts set forth below. See ‘‘Use of Proceeds.’’ The sources and uses of the
Transactions set forth in the notes to the unaudited pro forma condensed consolidated financial
information contained elsewhere in this offering memorandum are different from those set forth
below, as they have been prepared for VNU and not for Valcon and VNU combined. For example,
they do not include the equity contribution made to Valcon or the purchase of VNU’s ordinary,
preferred B and 7% preferred shares, as these transactions were conducted by Valcon. For a
presentation of the sources and uses of the Transactions as they apply to VNU, see ‘‘Unaudited Pro
Forma Condensed Consolidated Financial Information.’’
Sources
Estimated available cash
on hand(1) . . . . . . . . . . . . . . .
Senior secured credit facilities:
Revolving credit facility(2) . . . . . .
Term loan facility(3) . . . . . . . . . .
Senior Notes . . . . . . . . . . . . . . .
Senior Subordinated Discount Notes
Senior Discount Notes due 2016
offered hereby . . . . . . . . . . . . .
Rollover of existing VNU debt(4) . . .
Rollover of capital leases and other
debt(5) . . . . . . . . . . . . . . . . . .
Equity contributions(6) . . . . . . . . .
.
e
589
Uses
(Amounts in millions)
Purchase of ordinary and
$ 705
preferred shares(7) . . . . . . . . .
Repayment of existing debt(8) . . . .
—
Rollover of existing VNU debt(4) . .
5,133
Rollover of capital leases and other
830
debt(5) . . . . . . . . . . . . . . . . .
585
Fees and expenses(9) . . . . . . . . .
.
.
.
.
—
4,287
693
489
.
.
200
518
240
620
.
.
135
3,288
162
3,937
Total sources . . . . . . . . . . . . . .
e10,199
$12,212
. .
. .
. .
e 7,899
1,241
518
$ 9,458
1,486
620
. .
. .
135
406
162
486
Total uses . . . . . . . . . . . . . . . .
e10,199
$12,212
(1) As of March 31, 2006, on a pro forma basis, we would have had e280 million of cash and cash equivalents on hand
after giving effect to the consummation of the Transactions.
(2) Upon the closing of this offering, we will enter into a six-year e574 million ($688 million) revolving credit facility, none of
which we anticipate will be borrowed at closing.
(3) Upon the closing of this offering, we will enter into a seven-year e4,287 million ($5,133 million) term loan facility. Nielsen
Finance LLC will be the U.S. borrower under the term loan facility, most of which will be denominated in U.S. dollars
with the balance denominated in Euros.
(4) Consists of VNU’s ¥4,000 million (e28 million) 2.5% notes due 2011, e30 million of 6.75% fixed rate notes due 2012,
e50 million floating rate notes due 2012, e50 million floating rate notes due 2010 and £250 million (e360 million) 5.625%
put resettable securities due 2010 or 2017.
(5) Includes capital lease obligations relating to facilities in Oldsmar, Florida and Markham, Ontario, computer equipment
and software and long-term debt of e7 million of certain of VNU’s consolidated subsidiaries.
(6) Represents amounts invested or assumed to be invested in equity securities of Valcon through its parent companies by
investment funds associated with or designated by the Sponsors and the Co-Investors. The proceeds from the equity
investments have been or will be used by Valcon to purchase VNU’s shares, as well as to pay expenses of Valcon in
connection with the Transactions. None of these proceeds have been or will be contributed to VNU. As of July 5, 2006,
e3,094 million (based on actual contributions of $3,575 million and e109 million) had been invested by investment funds
associated with or designated by the Sponsors and the Co-Investors. The final amount invested in equity of Valcon may
differ from the estimates included above as a result of several factors, including movements in foreign exchange rates,
interest paid or payable by Valcon with respect to its senior secured bridge facility and actual cash available at VNU at
the time of the closing of this offering.
(7) Represents the full issued and outstanding share capital of VNU. As of July 5, 2006, the previous holders of VNU’s
ordinary shares and 7% preferred shares upon the purchase of such shares had received an aggregate of e7,567 million
in cash at the price of e29.50 per ordinary share and e21.00 per 7% preferred share. In addition, holders of VNU’s
10
preferred B shares had received an aggregate of e102 million as consideration for the purchase of all of such shares by
Valcon in a separate transaction. The amount set forth above assumes approximately 258 million ordinary shares and
150,000 7% preferred shares outstanding and includes the net settlement of outstanding options and restricted stock
units of e71 million and the assumed hedge costs of e99 million. As of July 5, 2006, the value of share capital of VNU
held by minority shareholders was approximately e60 million. Valcon intends to use a portion of the equity contributions
set forth above to complete the statutory squeeze-out of VNU’s remaining minority shareholders. Valcon used a
combination of investments in its equity through its parent companies by investment funds associated with or
designated by the Sponsors and a senior secured bridge facility providing for borrowings to finance the acquisition of
ordinary shares, 7% preferred shares and preferred B shares.
(8) Represents the U.S. Tender Offer for all $150 million (e125 million) aggregate principal amount of Nielsen Media
Research’s outstanding 7.6% notes due 2009, and the Euro and NLG Tender Offers for all e500 million aggregate
principal amount of VNU’s outstanding 6.625% bonds due 2007, all e49 million aggregate principal amount of VNU’s
outstanding 6.75% fixed rate notes due 2008, all e148 million aggregate principal amount of VNU’s outstanding floating
rate notes due 2006 and all NLG 600 million (e273 million) aggregate principal amount of VNU’s 5.5% bonds due 2008.
Also represents the repayment of VNU’s e333 million 1.75% convertible unsubordinated bonds due 2006 and the
repayment of VNU’s NLG 500 million subordinated loans (e137 million outstanding) in May 2006, in each case with
available cash on hand. The amount stated above includes accrued interest of e41 million and is presented net of swap
value of e365 million.
(9) Reflects the estimate of fees and expenses associated with the Transactions, including placement and other financing
fees, advisory fees, transaction fees paid to affiliates of the Sponsors, and other transaction costs and professional fees.
See ‘‘Certain Relationships and Related Party Transactions.’’
11
Corporate Structure
As set forth in the diagram below, following consummation of the Transactions, all of our issued
and outstanding capital stock will be held by Valcon, and investment funds associated with or
designated by the Sponsors, together with the Co-Investors, will, indirectly through their ownership
interest in the parent companies of Valcon, own 100% of the issued and outstanding share capital
in VNU on a fully diluted basis. See ‘‘Principal Shareholders.’’
Valcon Acquisition
B.V.
€3,288 million ($3,937 million) of equity (1)
VNU Group B.V.(2)(3)
€30 million existing 6.75% fixed rate notes due 2012
€50 million existing floating rate notes due 2010
€50 million existing floating rate notes due 2012
¥4,000 million (€28 million) existing 2.5% notes due 2011
£250 million (€360 million) existing 5.625% put resettable notes due 2010 or 2017
€343 million 111/8 % senior discount notes due 2016 offered hereby
VNU Intermediate Holding B.V.(3)
VNU Holding and Finance B.V. (3)
VNU International B.V. (3)
VNU Holdings
B.V.(3)
VNU Business
Media Europe B.V.
and subsidiaries(4)
VNU Services
B.V.(3)
ACN Holdings, Inc.(3)
VNU B.V.
and subsidiaries(4)
VNU, Inc.(3)
AC Nielsen Corp.(3)
Nielsen Media
Research Inc.
and other U.S.
Subsidiaries(3)(4)
Non-U.S.
Subsidiaries(4)
U.S.
Subsidiaries(3)(4)
Non-U.S.
Subsidiaries(4)
€105 million Capital Leases
€23 million Capital Leases
Nielsen Finance
LLC (Issuer)
Nielsen Finance Co.
(Issuer)
(5)
$5,133 million new senior secured credit facilities
$650 million 10% senior notes due 2014
€150 million 9% senior notes due 2014
$1,070 million 121/2 % senior subordinated discount notes due 2016
3AUG200617201131
(1) Includes cash equity contributed or assumed to be contributed to Valcon through its parent companies by investment
funds associated with or designated by the Sponsors and the Co-Investors. As of July 5, 2006, e3,094 million (based on
actual contributions of $3,575 million and e109 million) of cash equity had been contributed by investment funds
associated with or designated by the Sponsors.
(2) There will be no guarantors of the notes. VNU is a holding company and does not have any material assets or
operations other than ownership of the capital stock of VNU Intermediate Holding B.V. All of VNU’s operations are
conducted through its subsidiaries and therefore VNU will be dependent upon the cash flow of its subsidiaries to meet
its obligations, including its obligations on the notes.
12
(3) Each of VNU, VNU Intermediate Holding B.V., VNU Holding and Finance B.V., VNU Holdings B.V., VNU International B.V.,
VNU Services B.V., ACN Holdings, Inc., VNU, Inc. and the wholly owned subsidiaries thereof, including the wholly owned
U.S. subsidiaries of ACN Holdings, Inc. and VNU, Inc., in each case that guarantee the new senior secured credit
facilities are expected to guarantee the Senior Notes and the Senior Subordinated Discount Notes. Neither VNU nor
VNU Intermediate Holding B.V. will be subject to any of the covenants contained in the indentures governing the Senior
Notes and the Senior Subordinated Discount Notes that are not payment covenants.
(4) The non-U.S. subsidiaries of ACN Holdings, Inc. and VNU, Inc. will not guarantee the Senior Notes and the Senior
Subordinated Discount Notes due to the adverse tax consequences of non-U.S. subsidiaries providing guarantees of
indebtedness of U.S. entities. In addition, subsidiaries that are not directly or indirectly wholly owned by VNU or that are
not otherwise required to guarantee the new senior secured credit facilities will not guarantee the Senior Notes and the
Senior Subordinated Discount Notes. Certain of our less than wholly owned subsidiaries, including NetRatings and
BuzzMetrics, will also not be subject to the restrictive covenants of our new debt financing, including the notes. On a
pro forma basis after giving effect to the Transactions, the subsidiaries that will not guarantee the Senior Notes and the
Senior Subordinated Discount Notes would have accounted for approximately e1,687 million, or 47%, of our total
revenue, and approximately e230 million, or 37%, of our EBITDA, in each case for the twelve months ended March 31,
2006, and approximately e4,520 million, or 37%, of our total assets, and approximately e1,001 million, or 11%, of our
total liabilities, in each case as of March 31, 2006. On a historical basis without giving pro forma effect to the
Transactions, the non-guarantor subsidiaries accounted for approximately 16% of our total assets as of March, 31, 2006.
The difference between the historical percentage and the pro forma percentage of total assets principally relates to the
creation of significant goodwill and intangibles in connection with the application of purchase accounting for the
Transactions. The guarantors include corporate and segment headquarters entities in the U.S. and the Netherlands
which, in the last twelve month period, incurred stewardship costs and certain one-time expenses (such as the IRI
litigation settlement and IMS Health deal termination costs) that were not allocated to the non-guarantor companies. This
has resulted in a higher proportion of EBITDA being reported by non-guarantor subsidiaries. Had the IRI litigation costs
and the IMS Health deal termination costs not been incurred, the non-guarantor subsidiaries would have accounted for
approximately 33% of our pro forma EBITDA. All non-guarantor financial information is based on a preliminary and
unaudited analysis which is subject to change.
(5) Upon the closing of this offering, we will enter into new senior secured credit facilities. See ‘‘Description of Other
Indebtedness—New Senior Secured Credit Facilities.’’
13
The Sponsors
AlpInvest Partners
AlpInvest Partners N.V. (‘‘AlpInvest Partners’’) is one of the largest private equity investors in the
world with over e30 billion of assets under management including a new e11 billion mandate.
Approximately 80% of these funds will be committed by AlpInvest Partners to private equity funds.
The remainder will be invested directly in companies in Europe and the U.S. AlpInvest Partners has
approximately 55 investment professionals based in Amsterdam and New York. Its shareholders
and main clients are ABP and PGGM, two of the largest pension funds in the world with e187 billion
and e69 billion of assets under management, respectively.
The Blackstone Group
The Blackstone Group (‘‘Blackstone’’) is a global investment and advisory firm with offices in
New York, Atlanta, Boston, Los Angeles, London, Hamburg, Paris and Mumbai and was founded in
1985. The firm has raised a total of approximately $61 billion for alternative asset investing since its
formation. Blackstone will invest in VNU through Blackstone Capital Partners V, a $14.7 billion
general purpose fund. Including the firm’s other private equity funds, Blackstone has raised
approximately $29 billion for private equity investments since its founding. Blackstone’s Private
Equity Group has invested or committed approximately $16.2 billion in equity in 100 separate
transactions, with an aggregate transaction value of over $156 billion. Notable media transactions
sponsored by the firm include Freedom Communications, New Skies Satellites, Cumulus Media
Partners, Montecito Broadcast Group, Sirius Satellite Radio, Houghton Mifflin and Columbia House.
The Carlyle Group
The Carlyle Group (‘‘Carlyle’’) is a global private equity firm with $39 billion under management.
Carlyle invests in buyouts, venture & growth capital, real estate and leveraged finance in Asia,
Europe and North America, focusing on aerospace & defense, automotive & transportation,
consumer & retail, energy & power, healthcare, industrial, technology & business services and
telecommunications & media. Since 1987, the firm has invested $18.1 billion of equity in 463
transactions. The Carlyle Group employs more than 650 people in 14 countries. In the aggregate,
Carlyle portfolio companies have more than $46 billion in revenue and employ more than 184,000
people around the world.
Hellman & Friedman
Hellman & Friedman LLC (‘‘H&F’’) is a private equity investment firm with offices in San
Francisco, New York and London. Since its founding in 1984, H&F has raised and managed over
$8 billion of committed capital and invested in approximately 50 companies. H&F’s strategy is to
invest in superior business franchises and to be a value-added partner to management in select
industries including media, information services, financial services, professional services and
energy. Representative investments include Axel Springer AG, ProSiebenSat.1, Formula One,
DoubleClick, Eller Media, John Fairfax Holdings Limited, Advanstar, Young & Rubicam and Digitas.
Kohlberg Kravis Roberts & Co.
Kohlberg Kravis Roberts & Co. L.P. (‘‘KKR’’), founded in 1976, is one of the world’s oldest and
most experienced private equity firms. KKR specializes in management buyouts, and has
established itself as one of the largest and most active participants in the industry. Since its
founding, KKR has completed more than 140 transactions globally involving in excess of
$200 billion of total financing. Some of KKR’s current investments include VendexKBB, SBS
Broadcasting and SunGard Data Systems. Other notable transactions include RJR Nabisco,
14
Duracell, Safeway, Autozone, Willis, Stop & Shop, Yellow Pages Group, Legrand, PanAmSat and
Storer Communications.
Thomas H. Lee Partners
Thomas H. Lee Partners, L.P. (‘‘THL Partners’’) is a leading private equity firm based in Boston,
Massachusetts that has raised committed capital of over $16 billion over its 30-year history. Since
its founding in 1974, THL Partners has invested over $10 billion of equity capital in more than 100
businesses with an aggregate purchase price of more than $90 billion, completed over 200 add-on
acquisitions for portfolio companies, and generated superior returns for its investors and partners.
THL Partners is focused on identifying and acquiring substantial ownership stakes in mid- to
large-cap growth companies. THL Partners invests in companies with leading market positions,
proven and experienced management teams, recognized brand names and well-defined business
plans, which include opportunities for growth and expansion in their core and related businesses.
Notable transactions sponsored by the firm include American Media, Cott Corporation, Dunkin’
Brands, Grupo Corporativo ONO, Houghton Mifflin, Michael Foods, Inc., Nortek, ProSiebenSat.1
Media AG, Snapple Beverage, Spectrum Brands, Transwestern Publishing, Warner Chilcott and
Warner Music Group.
Additional Information
VNU’s registered office is located at Ceylonpoort 5, 2037 AA Haarlem, the Netherlands and it is
registered at the Commercial Register for Amsterdam under file number 3403 6267. The phone
number of VNU in the Netherlands is +31 23 546 3463, and in the United States is
+1 (646) 654-5000.
15
The Offering
The summary below describes the principal terms of the notes. Certain of the terms and
conditions described below are subject to important limitations and exceptions. The ‘‘Description of
Senior Discount Notes’’ section of this offering memorandum contains a more detailed description
of the terms and conditions of the Senior Discount Notes.
Issuer . . . . . . . . . . . . . . . . . . . . . .
VNU Group B.V.
Notes Offered . . . . . . . . . . . . . . . . .
e343,000,000 aggregate principal amount at maturity
(e200,095,910 aggregate gross proceeds)
Maturity Date . . . . . . . . . . . . . . . . .
August 1, 2016.
Interest . . . . . . . . . . . . . . . . . . . . .
No cash interest will accrue on the notes prior to August 1,
2011. Thereafter, cash interest will accrue on the notes and
will be payable semiannually on February 1 and August 1 of
each year, commencing February 1, 2012, at the rate of
111⁄8% per annum. The notes will have an initial accreted
value of e583.37 per e1,000 principal amount at maturity of
the notes. The accreted value of each note will increase
from the date of issuance until August 1, 2011, at a rate of
111⁄8% per annum compounded semiannually, reflecting the
accrual of non-cash interest, such that the accreted value
will equal the principal amount at maturity on such date.
See ‘‘Description of Senior Discount Notes—Principal,
Maturity and Interest.’’
Original Issue Discount . . . . . . . . . .
The notes are being issued with original issue discount for
U.S. federal income tax purposes. Thus, although cash
interest will not be payable on the notes prior to February 1,
2012, original issue discount will accrue from the issue date
of the notes based on the yield to maturity of the notes and
will generally be included as interest income (including for
periods ending prior to August 1, 2011) for U.S. federal
income tax purposes in advance of receipt of the cash
payments to which the income is attributable. See ‘‘Material
United States Federal Tax Consequences.’’
Ranking . . . . . . . . . . . . . . . . . . . . .
The notes will be our senior unsecured obligations and will:
•
rank senior in right of payment to our future debt and
other obligations that are, by their terms, expressly
subordinated in right of payment to the notes,
including VNU’s guarantee of the Senior Subordinated
Discount Notes;
•
rank equally in right of payment to all of our existing
and future senior debt and other obligations that are
not, by their terms, expressly subordinated in right of
payment to the notes, including VNU’s guarantee of
the Senior Notes; and
•
be effectively subordinated in right of payment to all of
our existing and future secured debt (including
obligations under our new senior secured credit
facilities), to the extent of the value of the assets
16
securing such debt, and be structurally subordinated to
all existing and future obligations of each of our
subsidiaries.
As of March 31, 2006, on a pro forma basis after giving
effect to the Transactions and the use of proceeds therefrom
as described under ‘‘Use of Proceeds,’’ we would have had
e6,322 million ($7,570 million) of indebtedness, consisting of
the notes offered hereby, our existing indebtedness that will
survive the Transactions, and our guarantee of the new
senior secured credit facility, the Senior Notes and the
Senior Subordinated Discount Notes. As of March 31, 2006
after giving pro forma effect to the Transactions, our
subsidiaries would have had e8,125 million ($9,729 million)
of indebtedness and other liabilities, to which the notes
offered hereby are structurally subordinated.
Guarantees . . . . . . . . . . . . . . . . . .
None.
Optional Redemption . . . . . . . . . . .
Prior to August 1, 2011, we will have the option to redeem
some or all of the notes for cash at a redemption price
equal to 100% of their accreted value plus an applicable
make-whole premium (as described in ‘‘Description of
Senior Discount Notes—Optional Redemption’’) plus
accrued and unpaid interest to the redemption date.
Beginning on August 1, 2011, we may redeem some or all
of the notes at the redemption prices listed under
‘‘Description of Senior Discount Notes—Optional
Redemption’’ plus accrued interest on the notes to the date
of redemption.
Change of Control . . . . . . . . . . . . .
None.
Certain Covenants . . . . . . . . . . . . .
The indenture governing the notes will contain covenants
limiting our ability create liens on certain assets to secure
certain debt.
Exchange Offer; Registration Rights .
We will use our reasonable best efforts to register with the
SEC notes having substantially identical terms as the notes
offered hereby, notes having substantially identical terms as
the notes as part of an offer to exchange freely tradable
exchange notes for each such series of notes.
We will use our reasonable best efforts to cause the
exchange offer to be completed or, if required, to have one
or more shelf registration statements declared effective,
within 375 days after the issue date of the notes.
If we fail to meet this target (a ‘‘registration default’’), the
annual interest rate on the notes will increase by 0.25%. The
annual interest rate on the notes will increase by an
additional 0.25% for each subsequent 90-day period during
which the registration default continues, up to a maximum
additional interest rate of 1.0% per year over the interest
rate shown on the cover of this offering memorandum. If the
17
registration default is corrected, the interest rate on the
notes will revert to the original level.
If we must pay additional interest prior to August 1, 2011,
we will pay it to holders as additional accreted value and
after August 1, 2011, we will pay it to you in cash on the
same dates that we make other interest payments on the
notes, until the registration default is corrected.
Transfer Restrictions . . . . . . . . . . . .
We have not registered the notes under the Securities Act.
The notes are subject to restrictions on transfer and may
only be offered or sold in transactions exempt from or not
subject to the registration requirements of the Securities Act.
See ‘‘Notice to Investors.’’
No Prior Market . . . . . . . . . . . . . . .
The notes will be new securities for which there is currently
no market. Although the initial purchasers have informed us
that they intend to make a market in the notes and, if
issued, in the exchange notes, they are not obligated to do
so and they may discontinue market making activities at any
time without notice. Accordingly, we cannot assure you that
a liquid market for the notes (and, if issued, the exchange
notes) will develop or be maintained.
Listing . . . . . . . . . . . . . . . . . . . . . .
We intend to apply to list the notes on the Luxembourg
Stock Exchange’s Euro MTF market.
Use of Proceeds . . . . . . . . . . . . . . .
We will use the net proceeds from the notes offered hereby
together with the proceeds from other debt and equity
financing to consummate the Transactions. See ‘‘Use of
Proceeds.’’
Risk Factors . . . . . . . . . . . . . . . . . .
Investing in the notes involves substantial risks. See ‘‘Risk
Factors’’ for a description of some of the risks you should
consider before investing in the notes.
18
Summary Historical and Pro Forma Financial Information
Set forth below is summary historical consolidated financial data and summary unaudited pro
forma consolidated financial data of our business, at the dates and for the periods indicated. The
historical information for the fiscal years ended December 31, 2003, 2004 and 2005 denominated in
Euros have been derived from VNU’s historical consolidated financial statements included elsewhere in
this offering memorandum, which have been audited by Ernst & Young Accountants. The summary
historical financial information as of March 31, 2006 and for the three month periods ended March 31,
2005 and 2006 denominated in Euros have been derived from our unaudited consolidated financial
statements included elsewhere in this offering memorandum, which have been prepared on a basis
consistent with our annual audited consolidated financial statements. The audited and unaudited
financial statements from which the summary historical and pro forma financial information set forth
below has been derived were prepared in accordance with U.S. GAAP. Previously, we had reported our
financial results in accordance with International Financial Reporting Standards (‘‘IFRS’’), and prior to
January 1, 2004, in accordance with Dutch GAAP. Therefore, the financial information and financial
statements included in this offering memorandum are not directly comparable to such previously
reported financial results. In making your investment decision, you should rely solely on the financial
information contained in this offering memorandum. In the opinion of management, the unaudited
financial information reflects all adjustments, consisting only of normal or recurring adjustments,
necessary for a fair presentation of the results of those periods. The results of operations for the interim
periods are not necessarily indicative of the results to be expected for the full year or any future period.
The financial information set forth below and contained elsewhere in this offering memorandum has
been reported in Euros. However, the majority of our revenues and EBITDA are earned in U.S. dollars.
At some point prior to the filing of the exchange offer registration statement for the notes, we intend to
report our financial results in U.S. dollars. Therefore, we cannot assure you that the financial information
contained in this offering memorandum will be directly comparable to financial information reported by
us in the future, including for periods covered in this offering memorandum, and including, without
limitation, the convenience translation provided in this offering memorandum.
The summary unaudited pro forma consolidated financial data for the twelve months ended
March 31, 2006 have been prepared to give effect to the Transactions as if they had occurred on
January 1, 2005, in the case of the summary unaudited pro forma consolidated statement of income
data and other financial data, and on March 31, 2006, in the case of the summary unaudited pro forma
consolidated balance sheet data. The pro forma adjustments are based upon available information and
certain assumptions that are factually supportable and that we believe are reasonable. The summary
unaudited pro forma consolidated financial data are for informational purposes only and do not purport
to represent what the actual consolidated results of operations or the consolidated financial position of
the company actually would have been if the Transactions had occurred at any given date, nor are they
necessarily indicative of future consolidated results of operations or consolidated financial position.
The historical information for the fiscal year ended December 31, 2005 and the three month period
ended March 31, 2006 denominated in U.S. dollars was translated solely for the convenience of the
reader from Euros to U.S. dollars at the exchange rate used in translating our balance sheet at
March 31, 2006 of $1.1974 to e1.00 and, accordingly do not present such financial information in
accordance with U.S. GAAP. See ‘‘Translation of Certain Currencies’’ and ‘‘Exchange Rate Information.’’
The summary historical and unaudited pro forma consolidated financial data should be read in
conjunction with ‘‘Unaudited Pro Forma Condensed Consolidated Financial Information,’’ ‘‘Selected
Historical Consolidated Financial Information,’’ ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’ and our audited consolidated financial statements and unaudited
condensed consolidated financial statements related notes appearing elsewhere in this offering
memorandum.
19
Year Ended December 31,
2003
(g)
2004
(g)
2005
(g)
Three Months Ended March 31,
2005
($)(1)
2005
(g)
2006
(g)
2006
($)(1)
(Amounts in millions except ratios)
unaudited unaudited unaudited unaudited
Statement of Income Data:
Operating revenues(2):
Marketing Information . . . . . . . . . e1,758 e1,806 e1,874
Media Measurement & Information
901
900
968
Business Information . . . . . . . . .
636
614
618
Corporate . . . . . . . . . . . . . . . .
(3)
(1)
(3)
Operating revenues . . . . . . . . .
Cost of revenues, exclusive of
depreciation and amortization .
Selling, general and administrative
Depreciation and amortization . .
Transaction costs(3) . . . . . . . . .
Goodwill impairment charges(4) . .
Restructuring costs(5) . . . . . . . .
Operating income . . . . . . . . .
Interest expense, net . . . . . . .
Gain (loss) on derivative
instruments . . . . . . . . . . . .
Equity in net income of affiliates
Other (expense) income, net(6) .
$2,244
1,159
740
(4)
e 423
217
151
—
Pro Forma
Twelve Months
Ended
March 31
2006
(g)
2006
($)(1)
unaudited
unaudited
e466
264
161
(1)
$ 558
316
193
(1)
e1,917
1,015
628
(4)
$2,295
1,215
752
(5)
.
3,292
3,319
3,457
4,139
791
890
1,066
3,556
4,257
.
.
.
.
.
.
1,583
1,154
254
—
—
17
1,595
1,129
244
—
104
28
1,661
1,234
253
—
—
5
1,989
1,478
303
—
—
6
393
280
59
—
—
1
441
310
67
44
—
1
528
371
80
53
—
1
1,709
1,259
349
—
—
5
2,046
1,508
418
—
—
6
. .
. .
284
(95)
219
(102)
304
(88)
363
(106)
58
(25)
27
(22)
33
(26)
234
(539)
279
(645)
. .
. .
. .
327
8
(67)
137
6
3
10
6
(62)
12
7
(74)
(6)
2
(70)
(6)
1
8
(7)
1
10
10
5
16
12
6
19
Income (loss) from continuing
operations before income taxes
and minority interests . . . . . . .
(Provision)/benefit for income taxes
Minority interests . . . . . . . . . . . .
457
(175)
6
263
(42)
4
170
(32)
—
202
(38)
—
(41)
(7)
—
8
(12)
—
11
(15)
—
(274)
136
—
(329)
163
—
(48)
e (4)
$
(4)
e (138)
$ (166)
54
(41)
(8)
e 267
(269)
(757)
$ 320
(322)
(906)
e 614
804
184
$ 734
962
220
Income (loss) from continuing
operations . . . . . . . . . . . . . . e 288 e 225 e 138
$ 164
e
Statement of Cash Flows Data:
Net cash provided by (used in)
continuing operations:
Operating activities . . . . . . . . . . e 486 e 313 e 422
Investing activities . . . . . . . . . . .
(316) 1,881
(348)
Financing activities . . . . . . . . . .
(324)
(558) (1,924)
$ 505
(417)
(2,304)
e
68
(113)
(1,174)
e 45
(34)
(7)
$
Other Financial Data:
EBITDA(8) . . . . . . . . . . . . . . . . e 812 e 613 e 511
Adjusted EBITDA(8) . . . . . . . . . .
648
630
699
Capital expenditures(9) . . . . . . . .
275
217
190
$ 611
836
228
e
43
129
34
e 97
158
28
$ 117
191
34
(7)
Balance Sheet Data (at period end):
Cash and cash equivalents . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Pro Forma Credit Statistics:
Net debt, including VNU debt(10) . . . . . . . . . . . . . . . . . . .
Total debt, excluding VNU debt . . . . . . . . . . . . . . . . . . . .
Net debt, excluding VNU debt(11) . . . . . . . . . . . . . . . . . . .
Ratio of Net debt (including VNU debt) to Adjusted EBITDA . .
Ratio of Net debt (excluding VNU debt) to Adjusted EBITDA(12)
Ratio of earnings to fixed charges(13) . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
20
e 280
12,122
6,322
3,170
$
335
14,515
7,570
3,796
e6,153 $ 7,368
5,604
6,710
5,434
6,507
7.7x
7.7x
6.8x
6.8x
—
—
(1) Translated solely for the convenience of the reader from Euros to U.S. dollars at the exchange rate used in translating
our balance sheet at March 31, 2006 of $1.1974 to e1.00. See ‘‘Translation of Certain Currencies’’ and ‘‘Exchange Rate
Information.’’
(2) Operating revenues are presented on an as reported basis. The following table sets forth, for the periods indicated,
certain supplemental revenue growth data, both on an as reported basis and a constant currency basis. In order to
determine the percentage change in items on a constant currency basis, we adjust these items to remove the positive
and negative impacts of foreign exchange. All percentages are calculated using actual amounts.
Three months
Year ended
ended
December 31,
March 31,
2004
2005
2006
Revenue growth, as reported
Marketing Information . . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2.7%
(0.1)%
(3.5)%
0.8%
3.8%
7.5%
0.6%
4.2%
10.3%
21.3%
6.5%
12.5%
Revenue growth, constant currency
Marketing Information . . . . . . . . . . .
Media Measurement & Information . .
Business Information . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7.9%
8.1%
2.7%
7.0%
3.4%
8.7%
1.7%
4.5%
2.9%
11.7%
(0.3)%
4.6%
(3) Represents expenses recorded in the three months ended March 31, 2006 in connection with the Transactions.
These expenses include an accrual of e30 million, representing our estimate of the minimum amount of break up
fees required to be paid and e14 million of transaction expenses, primarily for investment banking and other
advisory services.
(4) We perform an annual impairment test for goodwill and recorded a non-cash charge of e104 million during the
fourth quarter of 2004. This impairment charge reduced the carrying value of goodwill in the Entertainment
reporting unit within MMI. See Note 2 to the audited consolidated financial statements included elsewhere in this
offering memorandum.
(5) Represents costs associated with major restructuring plans, including Marketing Information Europe, Corporate
Headquarters, Project Atlas and Project Forward, each as discussed in Note 11 to the audited consolidated
financial statements for the years ended December 31, 2005, 2004 and 2003 and Note 6 to the condensed
consolidated interim financial statements for the three months ended March 31, 2005 and 2006, and
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ included elsewhere in
this offering memorandum.
(6) In 2003, amount includes foreign currency exchange losses of e65 million. In 2005, amount includes loss of
e75 million from buy-back of debt in the first quarter of 2005 and foreign currency exchange gains of e9 million.
(7) Pro forma net cash provided by operating activities for the twelve months ended March 31, 2006 reflects the
impact of the pro forma adjustments on net income. Pro forma net cash provided by (used in) investing and
financing activities and capital expenditures are assumed to be unchanged from historical cash flows.
(8) EBITDA, a measure used by management to measure operating performance, is defined as income from
continuing operations plus interest, income taxes, depreciation and amortization. EBITDA is not a recognized
term under U.S. GAAP and does not purport to be an alternative to net income as a measure of operating
performance or to cash flows from operating activities as a measure of liquidity. Additionally, EBITDA is not
intended to be a measure of free cash flow available for management’s discretionary use, as it does not consider
certain cash requirements such as interest payments, tax payments and debt service requirements. Our
presentation of EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a
substitute for analysis of our results as reported under U.S. GAAP. See ‘‘Use of Non-GAAP Financial Information.’’
Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions
that are outside the control of operating management and can differ significantly from company to company
depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies
operate and capital investments. In addition, EBITDA provides more comparability between the historical results
of VNU (including its operating segments) and operating results that reflect purchase accounting and the new
capital structure. Management compensates for the limitations of using non-GAAP financial measures by using
them to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends
21
affecting the business than U.S. GAAP results alone. Because not all companies use identical calculations, these
presentations of EBITDA may not be comparable to other similarly titled measures of other companies.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude unusual items and other adjustments required
or permitted in calculating covenant compliance under the indentures governing the Senior Notes and the Senior
Subordinated Discount Notes and/or our new senior secured credit facilities. We believe that the inclusion of
supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide
additional information to investors about certain material non-cash items and about unusual items that we do not
expect to continue at the same level in the future. Such supplementary adjustments to EBITDA may not be in
accordance with current SEC practice or with regulations adopted by the SEC that apply to registration
statements filed under the Securities Act and periodic reports presented under the Securities Exchange Act of
1934, as amended. Accordingly, the SEC may require that Adjusted EBITDA be presented differently in filings
made with the SEC than as presented in this offering memorandum, or not be presented at all. See ‘‘Securities
and Exchange Commission Review.’’ Because not all companies use identical calculations, this presentation of
Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
The rate used for the convenience translation above has been based on a spot rate rather than the average
exchange rate used in translating our income statement for the twelve month period ended March 31, 2006 of
$1.224 to e1.00. Had the convenience translation of Euros to U.S. dollars been prepared using this average rate,
Adjusted EBITDA for the twelve months ended March 31, 2006 on a pro forma basis would have been translated
to $984 million. See ‘‘Translation of Certain Currencies’’ and ‘‘Exchange Rate Information.’’
Historical and pro forma EBITDA and Adjusted EBITDA are calculated as follows (amounts in millions):
Year Ended December 31,
2003
2004
2005
2005
(g)
(g)
(g)
($)
Three Months Ended
March 31,
2005
2006
2006
(g)
(g)
($)
Pro Forma
Twelve
Months
Ended
March 31
2006
2006
(g)
($)
e288
95
175
254
e225
102
42
244
e138
88
32
253
$164
106
38
303
e (48)
25
7
59
$ (4)
26
15
80
e(138)
539
(136)
349
$(166)
645
(163)
418
EBITDA . . . . . . . . . . . . . . . . . . .
Non-cash charges(a) . . . . . . . . . . .
Unusual or non-recurring items(b) . .
Restructuring charges and business
optimization costs(c) . . . . . . . . .
Transaction costs(d) . . . . . . . . . . .
Cost savings(e) . . . . . . . . . . . . . .
Sponsor monitoring fee(f) . . . . . . .
Other(g) . . . . . . . . . . . . . . . . . . .
812
72
(254)
613
114
(126)
511
26
157
611
31
188
614
14
82
734
17
98
Adjusted EBITDA . . . . . . . . . . . .
e648
Income (loss) from continuing
operations . . . . . . . . . . .
Interest expense, net . . . . . .
Provision (benefit) for taxes . .
Depreciation and amortization
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
14
—
—
—
4
35
—
—
—
(6)
e630
12
—
—
—
(7)
e699
22
14
—
—
—
(8)
$836
e (4)
22
12
67
43
7
79
97
8
3
117
10
4
1
—
—
—
(1)
1
44
—
—
5
1
53
—
—
6
e158
$191
e129
12
—
75
8
(1)
e 804
14
—
90
10
(1)
$ 962
(a) Non-cash items consist of the following:
Year Ended December 31,
2003
2004
2005 2005
(g)
(g)
(g)
($)
Three Months
Ended March 31,
2005 2006 2006
(g)
(g)
($)
Pro Forma
Twelve
Months
Ended
March 31
2006 2006
(g)
($)
Goodwill impairment charge(i) . . .
Noncash stock compensation
costs . . . . . . . . . . . . . . . . . .
Provision (reversal) relating to
operating lease(ii) . . . . . . . . . .
Pension and other post
employment benefits reversal(iii) .
Amortization of pension and
OPEB actuarial losses(iv) . . . . .
Other(v) . . . . . . . . . . . . . . . . . .
e—
e104
e—
$—
e—
e—
$—
e—
$—
33
26
19
23
5
5
6
19
23
31
(14)
—
—
—
—
—
—
—
—
—
(4)
(5)
—
—
—
(4)
(5)
3
5
7
(9)
12
(1)
14
(1)
2
—
3
—
4
—
—
(1)
—
(1)
Total non-cash charges . . . . . . .
e72
e 7
e 8
$10
e114
e26
$31
e14
$17
(i) Represents goodwill impairment charges recorded in the fourth quarter of 2004 (see Note 4
above).
(ii) Represents a provision related to an operating lease. The reversal represents an adjustment for
a sublease entered into in 2004 related to this lease.
(iii) Represents a curtailment gain on our Dutch employee benefit plan in the year ended
December 31, 2005.
(iv) Represents the historical amortization of actuarial gains and losses which will be eliminated in
purchase accounting.
(v) Includes other non-cash items that are permitted adjustments in calculating covenant
compliance under the new senior secured credit facilities and the indentures governing the
Senior Notes and the Senior Subordinated Discount Notes, primarily adjustments to previously
recorded provisions in the period presented that are individually immaterial and net to an
immaterial amount (absolute value of each individual item does not exceed e4 million).
23
(b) Unusual or non-recurring items include:
(Gain) loss on early
extinguishment of debt . . . . .
Currency exchange rate
differences on financial
transactions and other (gains)
losses(i) . . . . . . . . . . . . . . .
(Gain) loss on derivative
instruments(ii) . . . . . . . . . . .
IRI settlement and fees(iii) . . . . .
IMS transaction and deal
termination costs(iv) . . . . . . .
IFRS and U.S. GAAP conversion
costs(v) . . . . . . . . . . . . . . .
Duplicative running costs of
European data factory(vi) . . . .
Other(vii) . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . .
Year Ended December 31,
2003
2004
2005
2005
(g)
(g)
(g)
($)
Three Months
Ended March 31,
2005 2006 2006
(g)
(g)
($)
Pro Forma
Twelve
Months
Ended
March 31
2006 2006
(g)
($)
e
e75
$—
e—
$—
(3)
e
(1)
70
(327)
—
e 75
$ 90
e—
(2)
(13)
(16)
(5)
(8)
(10)
(16)
(19)
(137)
—
(10)
49
(12)
59
6
—
6
—
7
—
(10)
49
(12)
59
—
—
30
36
—
—
—
30
36
—
8
11
13
—
—
—
11
13
5
1
6
—
14
1
17
1
4
(1)
4
1
5
2
14
4
17
4
e157
$188
e 3
$ 4
e82
$98
e(254)
e(126)
e79
(i) Represents income from money market funds for the year and foreign exchange gains or
losses on revaluation of intercompany loans. See ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations.’’
(ii) Represents gain on derivative instruments as discussed in ‘‘Management’s Discussion and
Analysis of Financial Condition and Results of Operations’’ and Notes 2 and 10 to our audited
consolidated financial statements appearing elsewhere in this offering memorandum.
(iii) Represents costs incurred in connection with settlement of our antitrust litigation with
Information Resources, Inc.
(iv) Represents costs incurred in connection with termination of our agreement to merge with IMS
Health and related consultant expenses.
(v) Represents consulting costs incurred in connection with our conversion to IFRS and U.S. GAAP.
(vi) Represents the costs incurred in Europe as a result of the parallel running of duplicative data
factory systems, which is expected to be eliminated during 2008.
(vii) Includes other unusual or non-recurring items that are required or permitted adjustments in
calculating covenant compliance under the new senior secured credit facilities and the
indentures governing the Senior Notes and the Senior Subordinated Discount Notes, including
costs associated with an unsuccessful joint venture, payments made in connection with the
100% share acquisition of Nationale Vacaturebank.nl B.V., and costs incurred in anticipation of
Sarbanes-Oxley compliance, that are individually immaterial and net to an immaterial amount
(absolute value of each individual item does not exceed e4 million).
(c) Restructuring charges and business optimization costs include costs associated with Marketing
Information Europe, Project Atlas, Corporate Headquarters and Project Forward, executive severance
payments and certain costs incurred in our European operations.
(d) Represents expenses recorded in the three months ended March 31, 2006 in connection with the
Transactions (see note 3 above).
24
(e) Represents the amount of run-rate cost savings related to Project Forward projected by VNU in good
faith to be realized as a result of specified actions, which is a permitted adjustment in calculating
covenant compliance under the new senior secured credit facilities and the indentures governing the
Senior Notes and the Senior Subordinated Discount Notes. Estimated run-rate cost savings by category
are as follows:
Purchasing(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information technology(ii) . . . . . . . . . . . . . . . . . . . .
Offshoring(iii) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other general and administrative expense reductions(iv)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e20
13
11
31
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e75
(i) Represents estimated cost savings associated with reducing enterprise-wide purchasing costs
and renegotiating vendor terms and prices.
(ii) Represents estimated cost savings associated with consolidating regional data centers and
increased use of central services.
(iii) Represents estimated cost savings associated with extending existing offshoring programs to
additional operational and production processes.
(iv) Represents cost savings associated with eliminating duplicative benefit and compensation
plans, transitioning to a more centralized shared service model, reducing general and
administrative headcount and reduced operating expenses through reduced space standards
and renegotiated leases.
The foregoing description of cost savings by category is based on our good faith estimate, and
although we expect to achieve a run-rate of e75 million of cost savings within twelve months following
the closing of this offering, the actual amount of cost savings we achieve within a given category and in
the aggregate may be greater or less than the estimate set forth above. We have included this amount
as an add back on a pro forma basis for the twelve months ended March 31, 2006 and not the
historical periods presented.
The adjustments reflecting estimated cost savings constitute forward-looking statements described
within the Private Securities Litigation Reform Act of 1995, as amended. In addition, Adjusted EBITDA
does not take into account the approximately e175 million in one-time costs over the next three years
expected to be incurred in connection with the total estimated annual Project Forward cost savings of
e125 million. Actual results may differ materially from those reflected due to a number of factors,
including, without limitation, (i) an inability to reduce our purchasing costs, (ii) an inability to consolidate
our information technology infrastructure, (iii) an inability to extend our offshoring programs and (iv) an
inability to reduce other general and administrative expenses. See ‘‘Risk Factors—Risks Related to Our
Business—We may not realize the anticipated cost savings related to Project Forward pursuant to the
anticipated timetable or at all. We also cannot assure you that we will not exceed one-time restructuring
costs associated with implementing the anticipated cost savings.’’
(f)
Represents the expected annual Sponsor monitoring fee.
(g) These adjustments include the EBITDA impact of significant businesses that were acquired in 2006, gain
on sale of fixed assets, subsidiaries and affiliates, dividends received from affiliates; equity in net income
of affiliates, and the exclusion of Adjusted EBITDA attributable to Net Ratings Inc. which will be an
unrestricted subsidiary.
(9) Capital expenditures represent cash paid for property and equipment, software costs and meter market set-up
costs, which are capitalized and amortized over the original contract period.
(10) Net debt, including VNU debt, is not a defined term under GAAP. Net debt is calculated as total pro forma debt,
less pro forma cash and cash equivalents (net of e75 million of bank overdrafts) at March 31, 2006, excluding
cash and cash equivalents held by our consolidated publicly listed subsidiary NetRatings, Inc. of e36 million.
Depending on the level of cash available for use in the Transactions, the amount of cash and cash equivalents at
the time of closing of this offering may be lower than the pro forma amount used to calculate the amount of net
debt.
25
(11) Net debt, excluding VNU debt, is not a defined term under GAAP. Net debt is calculated as total pro forma debt,
less pro forma cash and cash equivalents (net of e75 million of bank overdrafts) at March 31, 2006, excluding
cash and cash equivalents held by our consolidated publicly listed subsidiary NetRatings, Inc. of e36 million. Net
debt, excluding VNU debt, also excludes e518 million of existing indebtedness of VNU, the VNU Senior Discount
Notes and e1 million of indebtedness at BuzzMetrics that will remain after consummation of the Transactions.
VNU and our unrestricted subsidiaries will not be subject to the restrictive covenants contained in the indentures
governing the Senior Notes and the Senior Subordinated Discount Notes, and VNU’s existing indebtedness is
not, and the VNU Senior Discount Notes will not be, an obligation of any of VNU’s subsidiaries. Therefore, this
indebtedness will not be taken into account when calculating the consolidated leverage ratio under the
indentures governing the Senior Notes and the Senior Subordinated Discount Notes. In addition, depending on
the level of cash available for use in the Transactions, the amount of cash and cash equivalents at the time of
closing of this offering may be lower than the pro forma amount used to calculate the amount of net debt
excluding VNU debt set forth above.
(12) For the reasons discussed in footnote (11) above, the ratio of net debt (excluding VNU debt) to Adjusted EBITDA
presented above does not include in net debt e518 million of existing indebtedness of VNU, the VNU Senior
Discount Notes and e1 million of indebtedness at BuzzMetrics that will remain after consummation of the
Transactions. Although we exclude this indebtedness for purposes of calculating net debt, Adjusted EBITDA is
calculated at the consolidated VNU Level. Further, when we calculate Adusted EBITDA for purposes of
determining the consolidated leverage ratio under the indentures governing the Senior Notes and the Senior
Subordinated Discount Notes, it will be calculated at the covenant party level rather than at the VNU level and
will therefore exclude certain VNU corporate costs and will be somewhat different than the ratio set forth above.
(13) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before income
taxes plus fixed charges. Fixed charges include: interest expense, whether expensed or capitalized, amortization
of debt issuance cost, and the portion of rental expense representative of the interest factor. On a pro forma
basis, earnings would have been insufficient to cover fixed charges by e268 million for the twelve months ended
March 31, 2006.
26
RISK FACTORS
You should carefully consider the risk factors set forth below as well as the other information
contained in this offering memorandum before purchasing any notes. The risks described below are
not the only risks facing us. Additional risks and uncertainties not currently known to us or those we
currently view to be immaterial may also materially and adversely affect our business, financial
condition or results of operations. Any of the following risks could materially and adversely affect our
business, financial condition or results of operations. In such a case, you may lose all or a part of
your original investment.
Risks Related to Our Notes and this Offering
Our substantial indebtedness could adversely affect our financial health and prevent us from
fulfilling our obligations under these notes.
We have now and, after the offering, will continue to have a significant amount of indebtedness.
On March 31, 2006, after giving pro forma effect to the Transactions, we would have had total
indebtedness of e6,322 million ($7,570 million), of which e1,182 million ($1,415 million) would have
consisted of the Senior Notes and Senior Subordinated Discount Notes being issued by Nielsen
Finance LLC and Nielsen Finance Co., e200 million ($240 million) would have consisted of the
Senior Discount Notes, and the balance would have consisted of e4,287 million ($5,133 million)
under the new senior secured credit facilities, e518 million ($620 million) of existing indebtedness of
VNU and e135 million ($162 million) of existing capital lease obligations and other subsidiary
indebtedness.
Our substantial indebtedness could have important consequences to you. For example, it
could:
• make it more difficult for us to satisfy our obligations with respect to the notes;
• increase our vulnerability to general adverse economic and industry conditions;
• require us to dedicate a substantial portion of our cash flow from operations to payments on
our indebtedness, thereby reducing the availability of our cash flow to fund working capital,
capital expenditures, product development efforts and other general corporate purposes;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in
which we operate;
• expose us to the risk of increased interest rates as certain of our borrowings, including
borrowings under our new senior secured credit facilities and VNU’s existing floating rate
notes will be at variable rates of interest;
• restrict us from making strategic acquisitions or causing us to make non-strategic
divestitures;
• limit our ability to obtain additional financing for working capital, capital expenditures, product
development, debt service requirements, acquisitions and general corporate or other
purposes;
• limit our ability to adjust to changing market conditions; and
• place us at a competitive disadvantage compared to our competitors that have less debt.
In addition, the indentures governing the Senior Notes and the Senior Subordinated Discount
Notes contain, and our new senior secured credit facilities will contain financial and other restrictive
covenants that will limit the ability of our operating subsidiaries to engage in activities that may be
in our best interests long-term. The failure to comply with those covenants could result in an event
of default which, if not cured or waived, could result in the acceleration of all of our debts.
27
Despite current indebtedness levels, we and our subsidiaries may still be able to incur
substantially more debt. This could further exacerbate the risks associated with our
substantial leverage.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future.
The terms of the indenture do not prohibit us or our subsidiaries from doing so and the terms of
the indentures governing the Senior Notes and the Senior Subordinated Discount Notes do not fully
prohibit our subsidiaries from doing so. The revolving credit facility under our new senior secured
credit facilities would permit additional borrowing of up to e574 million ($688 million) after
completion of this offering, and all of those borrowings would rank senior to the notes and the
subsidiary guarantees. If new debt is added to our and our subsidiaries’ current debt levels, the
related risks that we and they now face could intensify. See ‘‘Description of Other Indebtedness—
New Senior Secured Credit Facilities.’’
To service our indebtedness, we will require a significant amount of cash. Our ability to
generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness, including these notes, and
to fund planned capital expenditures and product development efforts will depend on our ability to
generate cash in the future. This, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations, that
currently anticipated cost savings and operating improvements will be realized on schedule or that
future borrowings will be available to us under our new senior secured credit facilities in an amount
sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity
needs. Our pro forma cash interest expense for the twelve months ended March 31, 2006 would
have been e430 million ($515 million). At March 31, 2006, on a pro forma basis, we would have
had e4,387 million ($5,252 million) of debt under the new senior secured credit facilities (which will
bear interest at floating rates) and VNU’s existing floating rate notes. A one percent increase in this
floating rate indebtedness would increase annual interest expense by approximately e44 million
($53 million). We may need to refinance all or a portion of our indebtedness, including these notes,
on or before maturity. We cannot assure you that we will be able to refinance any of our
indebtedness, including our new senior secured credit facilities and the notes, on commercially
reasonable terms or at all.
You will be required to pay U.S. federal income tax on accrual of original issue discount on the
notes even if VNU does not pay cash interest.
The Senior Discount Notes will be issued at a substantial discount to their principal amount at
maturity. There will be no periodic payments of cash interest on the Senior Notes prior to August 1,
2011. However, for U.S. federal income tax purposes, original issue discount will accrue from the
issue date of the Senior Discount Notes through the date that the Senior Discount Notes are repaid.
Consequently, you will be required to include amounts in your gross income for U.S. federal income
tax purposes in advance of your receipt of the cash payments to which the income is attributable.
See ‘‘Description of Senior Discount Notes—Principal, Maturity and Interest’’ and ‘‘Material U.S.
Federal Income Tax Consequences.’’
Your right to receive payments on the notes is effectively subordinated to those lenders who
have a security interest in our assets.
Our obligations under the notes are unsecured, but our obligations under our new senior
secured credit facilities and each guarantor’s obligations under their guarantees of the new senior
secured credit facilities are secured by a security interest in substantially all of our domestic
28
tangible and intangible assets, including the stock of most of our wholly-owned U.S. subsidiaries,
and the assets and a portion of the stock of certain of our non-U.S. subsidiaries. If we are declared
bankrupt or insolvent, or if we default under our new senior secured credit facilities, the lenders
could declare all of the funds borrowed thereunder, together with accrued interest, immediately due
and payable. If we were unable to repay such indebtedness, the lenders could foreclose on the
pledged assets to the exclusion of holders of the notes, even if an event of default exists under the
indenture governing the notes offered hereby at such time.
Furthermore, if the lenders foreclose and sell the pledged equity interests in any subsidiary
guarantor as the notes will not be secured by any of our assets, it is possible that there would be
no assets remaining from which your claims could be satisfied or, if any assets remained, they
might be insufficient to satisfy your claims fully. See ‘‘Description of Other Indebtedness.’’
As of March 31, 2006, on a pro forma basis after giving effect to the Transactions, the
aggregate amount of our secured indebtedness and the secured indebtedness of our subsidiaries
would have been approximately e4,415 million ($5,286 million), and approximately e574 million
($688 million) would have been available for additional borrowing under the new senior secured
credit facilities. The indenture governing the notes offered hereby will permit us and our restricted
subsidiaries to incur substantial additional indebtedness in the future, including senior secured
indebtedness. See ‘‘Description of Other Indebtedness—New Senior Secured Credit Facilities.’’
VNU is a holding company, with no revenue generating operations of its own, VNU depends
on the performance of its subsidiaries and their ability to make distributions to it.
VNU is a holding company and does not have any material assets or operations other than
ownership of the capital stock of VNU Intermediate Holding B.V. All of VNU’s operations are
conducted through its subsidiaries and therefore VNU will be dependent upon the cash flow of its
subsidiaries to meet its obligations, including its obligations on the notes. The new senior secured
credit facility and the indentures governing the Senior Notes and the Senior Subordinated Discount
Notes will restrict the ability of VNU’s subsidiaries to pay dividends or make other distributions to
VNU. In addition, certain laws restrict the ability of VNU’s subsidiaries to pay dividends and make
loans and advances to VNU. VNU also only has a shareholder’s claim on the assets of its
subsidiaries. This shareholder’s claim is junior to the claims that creditors and holders of preferred
stock of the subsidiaries have against those subsidiaries.
Your right to receive payments on these notes could be adversely affected if any of our
subsidiaries declare bankruptcy, liquidate, or reorganize.
In the event of a bankruptcy, liquidation or reorganization of any of our subsidiaries, holders of
their indebtedness and their trade creditors will generally be entitled to payment of their claims from
the assets of those subsidiaries before any assets are made available for distribution to us.
Federal and state statutes allow courts, under specific circumstances, to void notes and
require note holders to return payments received.
If we become a debtor in a case under the U.S. Bankruptcy Code or encounters other financial
difficulty, under federal or state fraudulent transfer law a court may void or otherwise decline to
enforce the notes or the guarantees. A court might do so if it found that when we issued the notes,
or in some states when payments became due under the notes, the right to payment under the
notes could be subordinated to all of our other debts if, among other things, we received less than
reasonably equivalent value or fair consideration and either:
• was insolvent or rendered insolvent by reason of such incurrence; or
• was left with inadequate capital to conduct its business; or
29
• believed or reasonably should have believed that it would incur debts beyond its ability to
pay.
The court might also void an issuance of notes, without regard to the above factors, if the court
found that we issued the notes with actual intent to hinder, delay or defraud its creditors.
A court would likely find that we did not receive reasonably equivalent value or fair
consideration for the notes, if we did not substantially benefit directly or indirectly from the issuance
of the notes. If a court were to void the issuance of the notes you would no longer have any claim
against us. Sufficient funds to repay the notes may not be available from other sources, including
the remaining obligors, if any. In addition, the court might direct you to repay any amounts that you
already received from us.
The measures of insolvency for purposes of these fraudulent transfer laws will vary depending
upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred.
Generally, however, we would be considered insolvent if:
• the sum of our debts, including contingent liabilities, was greater than the fair saleable value
of all of our assets; or
• if the present fair saleable value of our assets was less than the amount that would be
required to pay our probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature; or
• we could not pay our debts as they become due.
On the basis of historical financial information, recent operating history and other factors, we
believe that following the issuance of these notes we will not be insolvent, will not have
unreasonably small capital for the business in which we are engaged and will not have incurred
debts beyond our ability to pay such debts as they mature. We cannot assure you, however, as to
what standard a court would apply in making these determinations or that a court would agree with
our conclusions in this regard.
If a bankruptcy petition were filed by or against us, holders of Senior Discount Notes may
receive a lesser amount for their claim than they would have been entitled to receive under
the Indenture governing the Senior Discount Notes.
If a bankruptcy petition were filed by or against us under the U.S. Bankruptcy Code after the
issuance of the Senior Discount Notes, the claim by any holder of the Senior Discount Notes for the
principal amount of the Senior Discount Notes may be limited to an amount equal to the sum of:
• the original issue price for the Senior Discount Notes; and
• that portion of the original issue discount that does not constitute ‘‘unmatured interest’’ for
purposes of the U.S. Bankruptcy Code.
Any original issue discount that was not amortized as of the date of the bankruptcy filing would
constitute unmatured interest. Accordingly, holders of the Senior Discount Notes under these
circumstances may receive a lesser amount than they would be entitled to under the terms of the
Indenture governing the Senior Discount Notes, even if sufficient funds are available.
Dutch insolvency laws to which we are subject may not be as favorable to you as U.S. or
other insolvency laws.
VNU is incorporated under the laws of the Netherlands and has its registered offices in the
Netherlands. Therefore and subject to applicable EU insolvency regulations, any insolvency
proceedings in relation to VNU would likely be based on Dutch insolvency law. Dutch insolvency
proceedings differ significantly from insolvency proceedings in the U.S. and may make it more
30
difficult for holders of notes to recover the amount they would normally expect to recover in a
liquidation or bankruptcy proceeding in the U.S.
Judgments obtained in the U.S. may not be enforceable in the Netherlands against VNU.
The U.S. and the Netherlands do not currently have a treaty providing for the recognition and
enforcement of judgments (other than arbitration awards) in civil and commercial matters.
Therefore, any final judgement for the payment of money rendered by any federal or state court in
the U.S. based on civil liability, whether or not predicated solely upon U.S. federal securities laws,
would not be automatically enforceable in the Netherlands and new proceedings on the merits
would have to be initiated before a Dutch court. However, if the party in whose favor such final
judgment is rendered brings a new suit in a competent court in the Netherlands such a party may
submit to a Dutch court the final judgment that has been rendered in the U.S. and such court will
have the discretion to attach such weight to that judgment as it deems appropriate. To the extent
that a Dutch court finds that the judgment rendered by a federal or state court in the U.S. (a) has
not been rendered in violation of elementary principles of fair trial, and (b) does not contravene
public policy of the Netherlands, the Dutch court will, under current practice, in principle, give
binding effect to such judgment.
You may face foreign exchange risks by investing in the Euro notes.
The Euro notes will be denominated and payable in Euros. If you are a U.S. investor, an
investment in the Euro notes will entail foreign exchange-related risks due to, among other factors,
possible significant changes in the value of the euro relative to the U.S. dollar because of
economic, political and other factors over which we have no control. Depreciation of the Euro
against the U.S. dollar could cause a decrease in the effective yield of the Euro notes below their
stated coupon rates and could result in a loss to you on a U.S. dollar basis.
If an active trading market does not develop for these notes you may not be able to resell
them.
These notes have not been registered under the Securities Act. Accordingly, the notes may
only be offered or sold pursuant to an exemption from the registration requirements of the
Securities Act or pursuant to an effective registration statement. We are required to commence an
exchange offer for the notes, or to register sales of the notes under the Securities Act, within certain
time periods as described in the section called ‘‘Exchange Offer; Registration Rights.’’ Prior to this
offering, there was no public market for these notes and, although we intend to apply for listing of
the notes on the Luxembourg Stock Exchange’s Euro MTF Market, we cannot assure you that an
active trading market will develop for the notes. If no active trading market develops, you may not
be able to resell your notes at their fair market value or at all. Future trading prices of the notes will
depend on many factors, including, among other things, our ability to effect the exchange offer,
prevailing interest rates, our operating results and the market for similar securities. We have been
informed by the initial purchasers that they currently intend to make a market in these notes after
this offering is completed. However, the initial purchasers may cease their market-making at any
time. We do not intend to apply for listing the notes on any securities exchange.
Risks Related to Our Business
We may not realize the anticipated cost savings related to Project Forward pursuant to the
anticipated timetable or at all. We also cannot assure you that we will not exceed one-time
restructuring costs associated with implementing the anticipated cost savings.
The success of Project Forward will depend on our ability to realize the anticipated cost savings. In
addition, we estimate that Project Forward will require us to incur e175 million in one-time restructuring
31
costs and additional capital investment over the next three years. Our ability to successfully realize cost
savings and the timing of any realization may be affected by a variety of factors including, without
limitation, our ability to reduce our purchasing expenditures, consolidate our information technology
infrastructure, extend our offshoring programs and reduce other general and administrative expenses.
The one-time costs associated with implementing Project Forward may exceed the anticipated
restructuring costs. We may not achieve the anticipated cost savings and we may not achieve the cost
savings within the time we currently expect.
We may be unable to adapt to significant technological change which could adversely affect
our business.
We operate in businesses that require sophisticated data collection and processing systems
and software and other technology. Some of the technologies supporting the industries we serve
are changing rapidly. If we are unable to successfully adapt to changing technologies, either
through the development and marketing of new products and services or through enhancements to
our existing products and services to meet customer demand, our business, financial position and
results of operations would be adversely affected. There can be no guarantee that we will be able
to develop new techniques for data collection, processing and delivery or that we will be able to do
so as quickly or as cost-effectively as our competition.
Moreover, the introduction of new products and services embodying new technologies and the
emergence of new industry standards could render existing products and services obsolete. Our
continued success will depend on our ability to adapt to changing technologies, manage and
process ever-increasing amounts of data and information and improve the performance, features
and reliability of our existing products and services in response to changing client and industry
demands. We may experience difficulties that could delay or prevent the successful design,
development, testing, introduction or marketing of our products and services. New products and
services, or enhancements to existing products and services, may not adequately meet the
requirements of current and prospective clients or achieve any degree of significant market
acceptance.
The increased use of radio frequency identification (‘‘RFID’’) technology may make it more
difficult for our household panelists to transmit purchase data to us and may increase our costs of
processing retail data, as our data processing systems are not configured to process RFID codes
or handle the volume of data RFID codes would generate. Increased use of data warehousing, a
technology where large depositories of various sales, product, financial and other data are
established, and software facilitating access to that data is provided by various vendors could
adversely affect our business whereby we provide both the database and the software required to
access that database.
Traditional methods of television advertising are changing as a result of fragmentation of
channels and digital and other new television technologies, such as video-on-demand and digital
video recorders. As a result of these trends, advertisers are showing increased interest in
unconventional forms of advertising such as product placement, digitally inserted advertising and
banner advertising. This may have an adverse effect on the rates that our customers are willing to
pay for network television commercials and consequently on the amounts they are willing to pay for
our services. If we are unable to successfully adapt our media measurement systems to the new
advertising forms, our business, financial position and results of operations could be adversely
affected.
There is a general industry trend toward online adoption of traditional print media in the
business-to-business information field. Many of the publications produced by our Business
Information segment are print publications. If we are unable to successfully adapt our Business
32
Information products to an online media format, our business, financial position and results of
operations could be adversely affected.
Consolidation in the consumer packaged goods, media, entertainment and technology
industries could put pressure on the pricing of our information products and services, thereby
leading to decreased earnings.
Consolidation in the consumer packaged goods, media, entertainment and technology
industries could reduce aggregate demand for our products and services in the future and could
limit the amounts we earn for our products and services. When companies merge, the products
and services they previously purchased separately are often purchased by the combined entity in
the aggregate in a lesser quantity than before, leading to volume compression and loss of revenue.
While we attempt to mitigate the revenue impact of any consolidation by expanding our range of
products and services, there can be no assurance as to the degree to which we will be able to do
so as industry consolidation continues, which could adversely affect our business, financial position
and operating results.
Client procurement strategies could put additional pressure on the pricing of our information
products and services, thereby leading to decreased earnings.
Certain of our clients may continue to seek further price concessions from us. This puts
pressure on the pricing of our information products and services, which could limit the amounts we
earn. While we attempt to mitigate the revenue impact of any pricing pressure through effective
negotiations and by providing services to individual businesses within particular groups, there can
be no assurance as to the degree to which we will be able to do so, which could adversely affect
our business, financial position and operating results.
An economic downturn generally, and in the consumer packaged goods, media, entertainment
or technology industries in particular, could adversely impact our revenue.
We expect that revenues generated from our marketing information and television audience
measurement services and related software and consulting services will continue to represent a
substantial portion of our overall revenue for the foreseeable future. To the extent the businesses we
service, especially our clients in the consumer packaged goods, media, entertainment and
technology industries, are subject to the financial pressures of, for example, increased costs or
reduced demand for their products, the demand for our services, or the prices our clients are
willing to pay for those services, may decline.
Clients of our Media Measurement & Information segment derive a significant amount of their
revenue from the sale or purchase of advertising. During challenging economic times, advertisers
may reduce advertising expenditures and advertising agencies and other media may be less likely
to purchase our media information services.
Our Business Information segment derives a significant amount of its revenues from the sale of
business-to-business publications and reductions by our clients in the number of their subscriptions
to our publications may adversely affect the revenue of our trade publications.
The success of both our MI segment and our MMI segment depends on our ability to recruit
sample participants to participate in our research samples.
Our MI segment uses scanners and diaries to gather consumer data from sample households.
Our MMI segment uses Set Meters, People Meters, Active/Passive Meters and diaries to gather
television audience measurement data from sample households. It is increasingly difficult and costly
to obtain consent from households to participate in the surveys. In addition, it is increasingly
difficult and costly to ensure that the selected sample of households mirrors the behaviors and
33
characteristics of the entire population, covering every relevant segment (for example, African
Americans, Hispanics or households headed by 18-35 year olds). Additionally, as consumers adopt
modes of telecommunication other than traditional telephone service, such as mobile, cable and
Internet calling, it may become more difficult for our MI and MMI segments to reach and recruit
participants for consumer purchasing and audience measurement services, respectively. If we are
unsuccessful in our efforts to recruit appropriate participants and maintain adequate participation
levels, our clients may lose confidence in our ratings services and we could lose the support of the
relevant industry groups. If this were to happen, our consumer purchasing and audience
measurement businesses may be materially and adversely affected.
Data protection laws may restrict our activities.
Data protection laws affect our collection, use, storage and transfer of personally identifiable
information both abroad and in the U.S. Compliance with these laws may require investment or may
dictate that we not offer certain types of products and services. Failure to comply with these laws
may result in, among other things, civil and criminal liability, negative publicity, data being blocked
from use and liability under contractual warranties. In addition, there is an increasing public concern
regarding data protection issues, and the number of jurisdictions with data protection laws has
been slowly increasing. For example, federal and state governmental regulations restrict
telemarketing to individuals who request to be included on a do-not-call list. Currently these
regulations do not apply to survey research of the type that we conduct. If the laws are extended to
include survey research, our ability to recruit participants for our surveys could be adversely
affected, and there can be no assurance that these initiatives or future initiatives will not adversely
affect our ability to generate or assemble data or to develop or market current or future products or
services.
Our success will depend on our ability to protect our intellectual property rights.
The success of our business will depend, in part, on:
• obtaining patent protection for our technology, products and services;
• defending our patents, copyrights, trademarks, service marks and other intellectual property;
• preserving our trade secrets and maintaining the security of our know-how and data; and
• operating without infringing upon patents and proprietary rights held by third parties.
We rely on a combination of contractual provisions, confidentiality procedures and patent,
copyright, trademark, service mark and trade secret laws to protect the proprietary aspects of our
brands, technology, data and estimates. These legal measures afford only limited protection, and
competitors may gain access to our intellectual property and proprietary information. The patents
we own could be challenged, invalidated or circumvented by others and may not be of sufficient
scope or strength to provide us with any meaningful protection or commercial advantage. Our trade
secrets, data and know-how could be subject to unauthorized use, misappropriation, or disclosure,
despite having required our employees, consultants, customers, and collaborators to enter into
confidentiality agreements. Our trademarks could be challenged, forcing us to rebrand our products
or services, resulting in loss of brand recognition and requiring us to devote resources to
advertising and marketing new brands. Furthermore, litigation may be necessary to enforce our
intellectual property rights, to protect our trade secrets and to determine the validity and scope of
our proprietary rights.
There can be no assurance that the intellectual property laws and other statutory and
contractual arrangements we currently depend upon will provide sufficient protection in the future to
prevent the infringement, use or misappropriation of our trademarks, patents, data, technology and
other products and services. In addition, the growing need for global data, along with increased
34
competition and technological advances, puts increasing pressure on us to share our intellectual
property for client applications. Any future litigation, regardless of outcome, could result in
substantial expense and diversion of resources with no assurance of success and could adversely
affect our business, results of operation and financial condition.
If third parties claim that we infringe upon their intellectual property rights, our operating
profits could be adversely affected.
We face the risk of claims that we have infringed third parties’ intellectual property rights. Any
claims of intellectual property infringement, even those without merit, could:
• be expensive and time consuming to defend;
• cause us to cease providing our products and services that incorporate the challenged
intellectual property;
• require us to redesign or rebrand our products or services; if feasible;
• divert management’s attention and resources; or
• require us to enter into royalty or licensing agreements in order to obtain the right to use a
third party’s intellectual property.
Any royalty or licensing agreements, if required, may not be available to us on acceptable
terms or at all. A successful claim of infringement against us could result in our being required to
pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain
products or services, any of which could have a negative impact on our operating profits and harm
our future prospects and financial condition.
Our future required cash contributions to our pension plans may increase if new pension
funding requirements are enacted into law. Further, market changes could affect our pension
liabilities.
Congress is considering legislation to reform funding requirements for underfunded pension
plans on a prospective basis. The proposed legislation as currently drafted would, among other
things, increase the percentage funding target from 90% to 100% and require the use of a more
current mortality table in the calculation of minimum yearly funding requirements. This proposed
legislation is preliminary and could change significantly before it is enacted into law. Our future
required cash contributions may increase based on the funding reform provisions in the U.S. and
other countries where we have defined benefit plans, that are ultimately enacted into law.
Adverse changes in interest rates could negatively affect assets or liabilities in our pension
funds, causing higher pension charges. For example, for our U.S. plans a 50 basis point decrease
in the discount rate assumptions we use to calculate our pension liabilities, without changing any
other assumptions, would increase pension expense by approximately e3 million per year. In
addition, local law and regulation may prohibit the repatriation of funds available from certain
countries.
We may be unable to deduct original issue discount for U.S. federal income tax purposes with
respect to our Senior Subordinated Discount Notes.
In the event the Senior Subordinated Discount Notes are considered to be applicable high yield
discount obligations for U.S. federal income tax purposes, we will not be permitted to deduct for
U.S. federal income tax purposes OID accrued on the Senior Subordinated Discount Notes until
such time as we actually pay such OID in cash or in property other than our stock or our debt (or
stock or debt of a person related to us). Moreover, if the amount of the OID exceeds a certain
threshold amount, such amount will not be deductible at any time by us for U.S. federal income tax
35
purposes (regardless of whether we actually pay such amount in cash or other property). In the
event we are unable to deduct OID for U.S. federal income tax purposes this may have a material
adverse effect on our business financial condition or results of operations.
We generate revenues throughout the world which are subject to exchange rate fluctuations
and our revenue and net income may suffer due to currency translations.
We operate globally, deriving approximately 55% and 18% of our 2005 revenues in U.S. dollars
and Euros, respectively. We currently report our operating results and financial condition in Euros,
although we intend to change our financial reporting to U.S. dollars prior to the filing of the
exchange offer registration statement for the notes. Our U.S. operations earn revenue and incur
expenses primarily in dollars, while our European operations earn revenue and incur expenses
primarily in Euros. Outside the U.S. and the European Union, we generate revenue and expenses
predominantly in local currencies. Because of fluctuations (including possible devaluations) in
currency exchange rates or the imposition of limitations on conversion of foreign currencies into
U.S. dollars, we are subject to currency translation exposure on the profits of our operations, in
addition to economic exposure. This risk could have a material adverse effect on our business,
results of operations and financial condition.
Our international operations are exposed to risks which could impede growth in the future.
We continue to explore opportunities in major international markets around the world for each
of our business segments. Our recent progress in rapidly developing markets such as China,
Russia, India and Brazil illustrates our success with this strategy. We believe there is demand
internationally for quality consumer packaged goods retail information from global retailers and
audience information from global advertisers. However, international business is exposed to various
additional risks, which could adversely affect our business, including:
• costs of customizing services for clients outside of the U.S.;
• reduced protection for intellectual property rights in some countries;
• the burdens of complying with a wide variety of foreign laws;
• difficulties in managing international operations;
• longer sales and payment cycles;
• exposure to foreign currency exchange rate fluctuation;
• exposure to local economic conditions; and
• exposure to local political conditions, including the risks of an outbreak of war, the escalation
of hostilities, acts of terrorism and seizure of assets by a foreign government.
In countries where there has not been a historical practice of using consumer packaged goods
retail information or audience measurement information in the buying and selling of advertising
time, it may be difficult for us to maintain subscribers.
36
Criticism of our audience measurement service by various industry groups and market
segments could adversely affect our business.
Due to the high-profile nature of our services in the media and entertainment information
industries, we could become the target of criticism by various industry groups and market
segments. Although we strive to be fair, transparent and impartial in the production of audience
measurement services, criticism of our business by special interests, and by clients with competing
and often conflicting demands on the measurement service, could result in government regulation.
Currently, the quality of our ratings services are reviewed and audited by the Media Rating Council,
a voluntary trade organization, whose members include many of our key client constituencies. While
we believe that government regulation is unnecessary, no assurance can be given that legislation
will not be enacted in the future that would subject our business to regulation, which could
adversely affect our business.
A relatively small number of clients contribute a significant percentage of our total revenues.
A relatively small number of clients contribute a significant percentage of our total revenues. In
2005, our top ten customers accounted for approximately 21% of our total revenues. We cannot
ensure you that any of our clients will continue to use our services to the same extent, or at all, in
the future. A loss of one or more of our largest clients, if not replaced by a new client or an
increase in business from existing clients, would adversely affect our prospects, business, financial
condition and results of operations.
We rely on third parties to provide certain data and services in connection with the provision
of our current services.
We rely on third parties to provide certain data and services for use in connection with the
provision of our current services. These suppliers of data may increase restrictions on our use of
such data, fail to adhere to our quality control standards, increase the price they charge us for this
data or refuse altogether to license the data to us. In addition, we may need to enter into
agreements with third parties to assist with the marketing, technical and financial aspects of
expanding our services for other types of media. In the event we are unable to use such third party
data and services or if we are unable to enter into agreements with third parties, when necessary,
our business and/or our potential growth could be adversely affected. In the event that such data
and services are unavailable for our use or the cost of acquiring such data and services increases,
our business could be adversely affected.
Long-term disruptions in the mail, telecommunication infrastructure and/or air service could
adversely affect our business.
Our business is dependent on the use of the mail, telecommunication infrastructure and air
service. Long-term disruptions in one or more of these services, which could be caused by events
such as natural disasters, the outbreak of war, the escalation of hostilities, and/or acts of terrorism
could adversely affect our business, financial position and operating results.
Hardware and software failures, delays in the operation of our computer and communications
systems or the failure to implement system enhancements may harm our business.
Our success depends on the efficient and uninterrupted operation of our computer and
communications systems. A failure of our network or data gathering procedures could impede the
processing of data, delivery of databases and services, client orders and day-to-day management
of our business and could result in the corruption or loss of data. While many of our businesses
have appropriate disaster recovery plans in place, we currently do not have full backup facilities
37
everywhere in the world to provide redundant network capacity in the event of a system failure.
Despite any precautions we may take, damage from fire, floods, hurricanes, power loss,
telecommunications failures, computer viruses, break-ins and similar events at our various computer
facilities could result in interruptions in the flow of data to our servers and from our servers to our
clients. In addition, any failure by our computer environment to provide our required data
communications capacity could result in interruptions in our service. In the event of a delay in the
delivery of data, we could be required to transfer our data collection operations to an alternative
provider of server hosting services. Such a transfer could result in significant delays in our ability to
deliver our products and services to our clients. Additionally, significant delays in the planned
delivery of system enhancements and improvements, or inadequate performance of the systems
once they are completed, could damage our reputation and harm our business. Finally, long-term
disruptions in infrastructure caused by events such as natural disasters, the outbreak of war, the
escalation of hostilities, and acts of terrorism (particularly involving cities in which we have offices)
could adversely affect our businesses. Although we carry property and business interruption
insurance, our coverage may not be adequate to compensate us for all losses that may occur.
Our services involve the storage and transmission of proprietary information. If our security
measures are breached and unauthorized access is obtained, our services may be perceived
as not being secure, and customers may hold us liable or reduce their use of our services.
We store and transmit large volumes of proprietary information. Security breaches could
expose us to a risk of loss of this information, litigation and possible liability and our reputation
could be damaged. For example, hackers or individuals who attempt to breach our network security
could, if successful, misappropriate proprietary information or cause interruptions in our services. If
we experience any breaches of our network security or sabotage, we might be required to expend
significant capital and resources to protect against or to alleviate problems. We may not be able to
remedy any problems caused by hackers or saboteurs in a timely manner, or at all. Techniques
used to obtain unauthorized access or to sabotage systems change frequently and generally are
not recognized until launched against a target, therefore we may be unable to anticipate these
techniques or to implement adequate preventative measures. If an actual or perceived breach of
our security occurs, the perception of the effectiveness of our security measures could be harmed
and we could lose current and potential customers.
If we are unable to attract, retain and motivate employees, we may not be able to compete
effectively and will not be able to expand our business.
Our success and ability to grow are dependent, in part, on our ability to hire, retain and
motivate sufficient numbers of talented people, with the increasingly diverse skills needed to serve
clients and expand our business, in many locations around the world. Competition for highly
qualified, specialized technical and managerial, and particularly consulting personnel, is intense.
Recruiting, training and retention costs and benefits place significant demands on our resources. In
addition, we currently do not have a permanent Chief Executive Officer though our Chief Financial
Officer is currently acting as Chief Executive Officer. Once we appoint a new Chief Executive Officer,
we cannot predict whether such person will be successful in his or her new role as our Chief
Executive Officer. The inability to attract qualified employees in sufficient numbers to meet particular
demands, the loss of a significant number of our employees or the failure of any new Chief
Executive Officer to integrate effectively into our business could have an adverse effect on us,
including our ability to obtain and successfully complete important client engagements and thus
maintain or increase our revenues.
38
In the event we are required to file reports under the Securities Exchange Act 1934 our
internal controls over financial reporting may not be effective and our independent auditors
may not be able to certify as to their effectiveness, which could have a significant and
adverse effect on our business and reputation.
Section 404 of the Sarbanes-Oxley Act of 2002 and rules and regulations of the SEC
thereunder require that companies who are required to file reports under section 13(a) or 15(d) of
the Securities Exchange Act 1934 evaluate their internal controls over financial reporting in order to
allow management to report on, and their independent auditors to attest to, their internal controls
over financial reporting. We are not currently required to comply with Section 404. In the event we
register securities with the SEC under the Securities Act 1933 and become subject to Section 404
we may identify conditions that may be categorized as significant deficiencies or material
weaknesses in our internal controls over financial reporting. If we are unable to implement the
requirements of Section 404 in a timely manner or with adequate compliance, our independent
auditors may not be able to certify as to the effectiveness of our internal control over financial
reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the
SEC. As a result, there could be a negative reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements. In addition, we may be required to incur
costs in improving our internal control system and the hiring of additional personnel. Any such
action could negatively affect our results of operations.
Changes in tax laws or their application or the loss of Dutch tax residence may adversely
affect our reported results.
We operate in more than 100 countries worldwide and our earnings are subject to taxation in
many differing jurisdictions and at differing rates. We seek to organize our affairs in a tax efficient
manner, taking account of the jurisdictions in which we operate. We are treated as a Netherlands
tax resident for Dutch tax purposes. Tax laws that apply to our business may be amended by the
relevant authorities, for example as a result of changes in fiscal circumstances or priorities. In
addition, we may lose our status as a Dutch tax resident. Such amendments or their application to
our business or loss of tax residence, may significantly adversely affect our reported results.
We are controlled by the Sponsors, whose interests may not be aligned with ours or yours.
The Sponsors have the power to control our affairs and policies. The Sponsors also control the
election of the supervisory board, the appointment of management, the entering into of mergers,
sales of substantially all of our assets and other extraordinary transactions. Ten of our twelve
supervisory board members were appointed by the Sponsors. The members elected by the
Sponsors have the authority, subject to the terms of our debt, to issue additional shares, implement
share repurchase programs, declare dividends, pay advisory fees and make other decisions, and
they may have an interest in our doing so. The interests of the Sponsors could conflict with your
interests in material respects. Furthermore, the Sponsors are in the business of making investments
in companies and may from time to time acquire and hold interests in businesses that compete
directly or indirectly with us, as well as businesses that represent major customers of our
businesses. The Sponsors may also pursue acquisition opportunities that may be complementary to
our business, and as a result, those acquisition opportunities may not be available to us. So long
as the Sponsors continue to own a significant amount of our outstanding ordinary shares, they will
continue to be able to strongly influence or effectively control our decisions.
We are subject to significant competition.
We are faced with a number of competitors in several of our markets. Our competitors in each
market may have substantially greater financial marketing and other resources than we do and
39
there can be no assurance that they will not in the future engage in aggressive pricing action to
compete with us. Although we believe we are currently able to compete effectively in each of the
various markets in which we participate, we cannot assure you that we will be able to do so or that
we will be capable of maintaining or further increasing our current market share. Our failure to
compete successfully in our various markets would adversely affect our business, financial
condition, results of operations and cash flow.
The presence of our Global Technology and Information Center in Florida heightens our
exposure to severe weather events and natural disasters.
Our technological data processing operations are concentrated at our Global Technology and
Information Center at a single location in Florida. Our geographic concentration in Florida,
heightens our exposure to a severe weather event or natural catastrophe such as a hurricane. A
severe weather event such as a hurricane could cause severe damage to our property and
technology and could cause major disruption to our operations. Although we have insurance
coverage, if we were to experience a catastrophic loss, we may exceed our policy limits and/or we
may have difficulty obtaining similar insurance coverage in the future. We cannot assure you that an
adverse weather event would not have an adverse impact on our business.
We may be subject to antitrust litigation or government investigation in the future.
In the past, certain of our business practices have been investigated by government antitrust or
competition agencies, and we have on several occasions been sued by private parties for alleged
violations of the antitrust and competition laws of various jurisdictions. Following some of these
actions, we have changed certain of our business practices to reduce the likelihood of future
litigation. Each of these material prior legal activities has been resolved, except for the pending
erinMedia litigation. We are not aware of any current activity that violates competition or antitrust
laws, but there is a risk based upon the leading position of certain of our business operations that
we could, in the future, be the target of investigations by government entities or actions by private
parties challenging the legality of our business practices, and there can be no assurance that any
such investigation or challenge might not result in an award of money damages or some form of
order that might require some change in the way that we do business, which change could
adversely affect our revenue stream and/or profitability.
40
USE OF PROCEEDS
We will use the net proceeds from the sale of the notes in connection with the Transactions
and to pay related fees and expenses. The following table sets forth the estimated sources and
uses of funds of VNU and Valcon in connection with the Transactions, assuming they had occurred
on March 31, 2006 and based on amounts outstanding on that date. The actual sources and uses
of funds may be different than the amounts set forth below. The sources and uses of the
Transactions set forth in the notes to the unaudited pro forma condensed consolidated financial
information contained elsewhere in this offering memorandum are different from those set forth
below, as they have been prepared for VNU and not for Valcon and VNU combined. For example,
they do not include the equity contribution made to Valcon on the purchase of VNU’s ordinary,
preferred B and 7% preferred shares, as these transactions were conducted by Valcon. For a
presentation of the sources and uses of the Transactions as they apply to VNU, see ‘‘Unaudited Pro
Forma Condensed Consolidated Financial Information.’’
Combined Sources and Uses of Funds of Valcon and VNU
Sources
Estimated available cash on hand(1) . .
Senior secured credit facilities:
Revolving credit facility(2) . . . . . . .
Term loan facility(3) . . . . . . . . . . .
Senior Notes . . . . . . . . . . . . . . . .
Senior Subordinated Discount
Notes . . . . . . . . . . . . . . . . . . .
Senior Discount Notes offered hereby .
Rollover of existing VNU debt(4) . . . . .
Rollover of capital leases and other
debt(5) . . . . . . . . . . . . . . . . . . .
Equity contributions(6) . . . . . . . . . . .
Total sources . . . . . . . . . . . . . . .
e
589
—
4,287
693
489
200
518
Uses
(Amounts in millions)
Purchase of ordinary and
$ 705 preferred shares(7) . . . . . . . .
Repayment of existing debt(8) .
—
Rollover of existing VNU debt(4)
5,133
Rollover of capital leases and
830
other debt(5) . . . . . . . . . .
Fees and expenses(9) . . . . . .
585
240
620
135
3,288
162
3,937
e10,199
$12,212
. . . . .
. . . . .
. . . . .
e 7,899
1,241
518
$ 9,458
1,486
620
. . . . .
. . . . .
135
406
162
486
Total uses . . . . . . . . . . . . . . . . . .
e10,199
$12,212
(1) As of March 31, 2006, on a pro forma basis, we would have had e280 million of cash and cash equivalents on hand
after giving effect to the consummation of the Transactions.
(2) Upon the closing of this offering, we will enter into a six-year e574 million ($688 million) revolving credit facility, none of
which we anticipate will be borrowed at closing.
(3) Upon the closing of this offering, we will enter into a seven-year e4,287 million ($5,133 million) term loan facility. Nielsen
Finance LLC will be the U.S. borrower under the term loan facility, most of which will be denominated in U.S. dollars
with the balance denominated in Euros.
(4) Consists of VNU’s ¥4,000 million (e28 million) 2.5% notes due 2011, e30 million of 6.75% fixed rate notes due 2012,
e50 million floating rate notes due 2012, e50 million floating rate notes due 2010 and £250 million (e360 million) 5.625%
put resettable securities due 2010 or 2017.
(5) Includes capital lease obligations relating to facilities in Oldsmar, Florida and Markham, Ontario, computer equipment
and software and long-term debt of e7 million of certain of VNU’s consolidated subsidiaries.
(6) Represents amounts invested or assumed to be invested in equity securities of Valcon through its parent companies by
investment funds associated with or designated by the Sponsors and the Co-Investors. The proceeds from the equity
investments have been or will be used by Valcon to purchase VNU’s shares, as well as to pay expenses of Valcon in
connection with the Transactions. None of these proceeds have been or will be contributed to VNU. As of July 5, 2006,
e3,094 million (based on actual contributions of $3,575 million and e109 million) had been invested by investment funds
associated with or designated by the Sponsors and the Co-Investors. The final amount invested in equity of Valcon may
differ from the estimates included above as a result of several factors, including movements in foreign exchange rates,
41
interest paid or payable by Valcon with respect to its senior secured bridge facility and actual cash available at VNU at
the time of the closing of this offering.
(7) Represents the full issued and outstanding share capital of VNU. As of July 5, 2006, the previous holders of VNU’s
ordinary shares and 7% preferred shares upon the purchase of such shares had received an aggregate of e7,567 million
in cash at the price of e29.50 per ordinary share and e21.00 per 7% preferred share. In addition, holders of VNU’s
preferred B shares had received an aggregate of e102 million as consideration for the purchase of all of such shares by
Valcon in a separate transaction. The amount set forth above assumes approximately 258 million ordinary shares and
150,000 7% preferred shares outstanding and includes the net settlement of outstanding options and restricted stock
units of e71 million and the assumed hedge costs of e99 million. As of July 5, 2006, the value of share capital of VNU
held by minority shareholders was approximately e60 million. Valcon intends to use a portion of the equity contributions
set forth above to complete the statutory squeeze-out of VNU’s remaining minority shareholders. Valcon used a
combination of investments in its equity through its parent companies by investment funds associated with or
designated by the Sponsors and a senior secured bridge facility providing for borrowings to finance the acquisition of
ordinary shares, 7% preferred shares and preferred B shares.
(8) Represents the U.S. Tender Offer for all $150 million (e125 million) aggregate principal amount of Nielsen Media
Research’s outstanding 7.6% notes due 2009, and the Euro and NLG Tender Offers for all e500 million aggregate
principal amount of VNU’s outstanding 6.625% bonds due 2007, all e49 million aggregate principal amount of VNU’s
outstanding 6.75% fixed rate notes due 2008, all e148 million aggregate principal amount of VNU’s outstanding floating
rate notes due 2006 and all NLG 600 million (e273 million) aggregate principal amount of VNU’s 5.5% bonds due 2008.
Also represents the repayment of VNU’s e333 million 1.75% convertible unsubordinated bonds due 2006 and the
repayment of VNU’s NLG 500 million subordinated loans (e137 million outstanding) in May 2006, in each case with
available cash on hand. The amount stated above includes accrued interest of e41 million and is presented net of swap
value of e365 million.
(9) Reflects the estimate of fees and expenses associated with the Transactions, including placement and other financing
fees, advisory fees, transaction fees paid to affiliates of the Sponsors, and other transaction costs and professional fees.
See ‘‘Certain Relationships and Related Party Transactions.’’
42
CAPITALIZATION
The following table sets forth the cash and cash equivalents and capitalization as of March 31,
2006 for VNU only, on a historical basis and on a pro forma basis after giving effect to the
Transactions. The information in this table should be read in conjunction with ‘‘Unaudited Pro
Forma Condensed Consolidated Financial Information,’’ ‘‘Selected Historical Consolidated Financial
Information,’’ ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations’’ and our financial statements included elsewhere in this offering memorandum.
As of March 31, 2006
Historical
Pro-forma
(Amounts in millions)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt:
New Senior Secured Credit Facilities:
Revolving credit facility(1) . . . . . . . . . . . . . . .
Term loan facilities(2) . . . . . . . . . . . . . . . . . .
Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Subordinated Discount Notes . . . . . . . .
Senior Discount Notes offered hereby . . . . . . .
VNU existing senior notes(3) . . . . . . . . . . . . . .
Nielsen Media Research existing senior notes(4)
Other existing debt(5) . . . . . . . . . . . . . . . . . . .
Total Debt . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Capitalization . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e 869
e 280
$
e
e
$
—
—
—
—
—
1,822
125
271
2,218
4,504
e6,722
—
4,287
693
489
200
518
—
135
6,322
3,170
e9,492
335
—
5,133
830
585
240
620
—
162
7,570
3,796
$11,366
(1) Upon the closing of this offering, we will enter into a e574 million ($688 million) revolving credit
facility, none of which we anticipate will be drawn at closing.
(2) Upon the closing of this offering, we will enter into a seven-year e4,287 million ($5,133 million) term
loan facility. Nielsen Finance LLC will be the U.S. borrower under the term loan facility, most of which
will be denominated in U.S. dollars with the balance denominated in Euros.
(3) This indebtedness is solely the obligation of VNU and is therefore structually subordinated to the
indebtedness under the Senior Notes and the Senior Subordinated Discount Notes and consists of
VNU’s ¥4,000 million (e28 million) 2.5% notes due 2011, e30 million face amount of 6.75% fixed rate
notes due 2012, e50 million floating rate notes due 2012, e50 million floating rate notes due 2010,
£250 million (e360 million) 5.625% put resettable securities due 2010 or 2017, e500 million
aggregate principal amount of VNU’s outstanding 6.625% bonds due 2007, e49 million aggregate
principal amount of VNU’s outstanding 6.75% fixed rate notes due 2008, e148 million aggregate
principal amount of VNU’s outstanding floating rate notes due 2006, NLG 600 million (e273 million)
aggregate principal amount of VNU’s 5.5% bonds due 2008 and VNU’s e333 million 1.75%
convertible unsubordinated bonds due 2006). The e333 million 1.75% convertible unsubordinated
bonds due 2006 were repaid in May 2006 with available cash on hand. Upon consummation of the
Transactions, e500 million aggregate principal amount of VNU’s outstanding 6.625% bonds due
2007, e49 million aggregate principal amount of VNU’s outstanding 6.75% fixed rate notes due 2008,
e148 million aggregate principal amount of VNU’s outstanding floating rate notes due 2006 and NLG
600 million (e273 million) aggregate principal amount of VNU’s 5.5% bonds due 2008 are expected
to be repurchased in the Euro and NLG Tender Offers. We intend to redeem any securities not
tendered in the Euro and NLG Tender Offers as soon as practicable upon completion of this offering.
(4) Consists of $150 million (e125 million) aggregate principal amount of Nielsen Media Research’s
outstanding 7.60% notes due 2009. Upon consummation of the Transactions these notes are
expected to be repurchased in the U.S. Tender Offer. As of July 5, 2006, holders had tendered
$148 million (e123 million) of these notes and the related consent solicitation had been approved.
(5) Includes capital lease obligations relating to facilities in Oldsmar, Florida and Markham, Ontario,
computer equipment and software and long-term debt of e7 million of certain of VNU’s consolidated
subsidiaries. Also includes NLG 500 million aggregate principal amount of 5.55% subordinated loans
(e137 million outstanding), which were repaid with available cash on hand in May 2006.
43
EXCHANGE RATE INFORMATION
The financial information presented in this offering memorandum is reported in Euros. We
intend to begin reporting in U.S. dollars prior to the filing of the exchange offer registration
statement for the notes. The table below sets forth, for the periods and dates indicated, the
exchange rate for the U.S. dollar against the Euro based on the Noon Buying Rate. The Noon
Buying Rate on July 5, 2006 was $1.27 to e1.00.
U.S. dollar/Euro Exchange Rates
(U.S. dollar per Euro)
Calendar Year
2006
2005
2004
2003
2002
2001
(through
......
......
......
......
......
June 30, 2006)
............
............
............
............
............
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
End of Period
Average(*)
High
Low
1.28
1.18
1.36
1.26
1.05
0.89
1.24
1.24
1.25
1.14
0.95
0.89
1.28
1.33
1.36
1.26
1.05
0.93
1.19
1.18
1.20
1.07
0.86
0.85
(*) The average of the Noon Buying Rates on the last business day of each full month or portion
of a month during the relevant period.
44
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial statements have been
developed by applying pro forma adjustments to the historical audited consolidated financial
statements and unaudited condensed consolidated financial statements of VNU and subsidiaries
appearing elsewhere in this offering memorandum. The unaudited pro forma condensed
consolidated statements of income give effect to the Transactions as if they had occurred on
January 1, 2005. The unaudited pro forma condensed consolidated balance sheet gives effect to
the Transactions as if they had occurred on March 31, 2006. Assumptions underlying the pro forma
adjustments are described in the accompanying notes, which should be read in conjunction with
these unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma adjustments are based upon available information and certain
assumptions that are factually supportable and that we believe are reasonable under the
circumstances. The unaudited pro forma condensed consolidated financial information is presented
for informational purposes only. The unaudited pro forma condensed consolidated financial
information does not purport to represent what our actual consolidated results of operations or the
consolidated financial condition would have been had the Transactions actually occurred on the
dates indicated, nor are they necessarily indicative of future consolidated results of operations or
consolidated financial condition. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the information contained in ‘‘The Transactions,’’
‘‘Selected Historical Consolidated Financial Data,’’ ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and the audited consolidated financial statements
and the unaudited condensed consolidated financial statements and the related notes thereto
appearing elsewhere in this offering memorandum. All pro forma adjustments and their underlying
assumptions are described more fully in the notes to our unaudited pro forma condensed
consolidated financial statements.
The audited and unaudited financial statements from which the pro forma condensed
consolidated financial statements have been derived were prepared in accordance with U.S. GAAP.
Previously, we had reported our financial results in accordance with IFRS, and prior to January 1,
2004, in accordance with Dutch GAAP. Therefore, the financial information and financial statements
included in this offering memorandum are not directly comparable to such previously reported
financial results. In making your investment decision, you should rely solely on the financial
information contained in this offering memorandum.
The financial information set forth below and contained elsewhere in this offering memorandum
has been reported in Euros. At some point prior to the filing of the exchange offer registration
statement for the notes, we intend to report our financial results in U.S. dollars, as the majority of
our revenues and EBITDA are earned in U.S. dollars. Therefore, we cannot assure you that the
financial information contained in this offering memorandum will be directly comparable to financial
information reported by us in the future, including for periods covered in this offering memorandum,
and including, without limitation, the convenience translation provided herein.
The Transactions related to the tender offer will be accounted for using purchase accounting.
The pro forma information presented, including the allocation of the purchase price, is based on
preliminary estimates of the fair values of assets acquired and liabilities assumed, available
information and assumptions and will be revised as additional information becomes available. The
actual adjustments to our consolidated financial statements upon the closing of the Transactions
related to the tender offer will depend on a number of factors, including additional information
available and the actual balance of our net assets on the closing date of the Transactions related to
the tender offer. Therefore, the actual adjustments will differ from the pro forma adjustments, and
the differences may be material.
45
The final purchase price allocation is dependent on, among other things, the finalization of
asset and liability valuations. As of the date of this offering memorandum, we have not completed
the valuation studies necessary to estimate the fair values of the assets we have acquired and
liabilities we have assumed and the related allocation of purchase price. We have allocated the total
estimated purchase price, calculated as described in Note (a) under ‘‘—Notes to Unaudited Pro
Forma Condensed Consolidated Balance Sheet,’’ to the assets acquired and liabilities assumed
based on preliminary estimates of their fair values. A final determination of these fair values will
reflect our consideration of a final valuation prepared by third-party appraisers. This final valuation
will be based on the actual net tangible and intangible assets that existed as of the closing date of
the tender offer relating to the Transactions. Any final adjustment will change the allocations of
purchase price, which could affect the fair value assigned to the assets and liabilities and could
result in a change to the unaudited pro forma condensed consolidated financial statements,
including a change to goodwill.
The unaudited pro forma condensed consolidated statements of income data do not reflect any
one-time charges directly related to the Transactions that we already have recorded or will record
on or following the closing of the Transactions. These one-time charges include (1) amounts paid to
employees to settle employee stock and certain incentive awards in connection with the
Transactions, and (2) transaction related costs that will be paid in connection with the Transactions.
Additionally, the unaudited pro forma financial information does not reflect the effects of final
purchase price allocation, for example, additional amortization and depreciation, which could be
material.
46
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 2006
Tender Offer
and
Historical Acquisition
Financing Pro Forma
VNU
Adjustments Adjustments
VNU
(Amounts in millions)
Assets
Current assets:
Cash and cash equivalents . . . . . .
Marketable securities . . . . . . . . . . .
Trade and other receivables, net . .
Prepaid expenses and other current
......
......
......
assets .
Total Current Assets . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . .
Trademarks and tradenames, net . . . . .
Customer-related intangible assets, net
Other intangible assets, net . . . . . . . . .
Property, plant and equipment, net . . .
Derivative financial instruments . . . . . .
Deferred tax assets . . . . . . . . . . . . . . .
Other non-current assets . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
. e 869
.
107
.
596
.
390
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
—
—
—
—
1,962
4,255
573
607
446
414
222
62
380
—
2,536
285
1,095
—
—
—
1
95
6
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e8,921
e 4,018
Liabilities, Minority Interests and Stockholders’ Equity
Current liabilities:
Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e 75
Accounts payable and other current liabilities . . . . . . .
639
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
375
Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
208
Current portion of long-term debt and capital lease
obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
531
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt and capital lease obligations . . . . . . . . .
1,828
1,687
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . .
508
310
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . .
4,333
84
4,504
Total Liabilities, Minority Interests and Shareholders’
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e8,921
e
e (589)(g)e
—
—
(143)(h)
(a)
(a)
(a)
(a)
(b)
(c)
(732)
—
—
—
—
—
(222)(h)
—
137 (i)
e (817)
280
107
596
247
1,230
6,791
858
1,702
446
414
—
63
618
e12,122
—
e
—
e
162 (e)
(233)(j)
—
—
—
11 (k)
75
568
375
219
5,150 (d) (5,150)(l)
(527)(g)
43 (g)
5,312
—
(5,856)
5,626 (g)
(1,038)(g)
483 (a)
—
8 (c)
—
5,803
—
(1,785)(f)
e 4,018
(1,268)
—
451 (l)
e (817)
47
1,284
6,275
991
318
8,868
84
3,170
e12,122
See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
47
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Amounts in millions)
Tender Offer and Acquisition Adjustments
(a) Reflects the preliminary allocation to identifiable intangibles, liabilities, deferred income taxes
and goodwill as a result of the pushdown of basis from Valcon following assumed purchase
price allocation:
Purchase price(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated direct acquisition costs(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e7,729
45
Aggregate purchase cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,774
Net assets acquired at historical costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction related adjustments to historical net assets (note (e)) . . . . . . .
4,504
(162)
Net assets acquired at adjusted costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,342
Excess of purchase cost over adjusted net assets acquired . . . . . . . . . . .
3,432
Preliminary allocations to reflect fair value of net assets acquired:
Customer-related intangibles(3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks and tradenames(3) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to pension and OPEB liabilities (note (c)) . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
Preliminary allocation to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,095)
(285)
482
2
e2,536
(1) Represents the total amount of cash consideration to be paid assuming 100% of the
outstanding VNU common shares are acquired at e29.50 per share, 100% of the
outstanding preferred B shares are acquired at e14.11 per share and 100% of the
outstanding 7% preferred shares are acquired at e21.00 per share.
(2) Represents estimated direct acquisition costs, including financial advisory, legal,
accounting and Sponsor fees and other direct costs incurred by Valcon.
(3) These unaudited pro forma condensed consolidated financial statements reflect a
preliminary allocation to goodwill and other intangible assets. An appraisal will be
performed to assist management in determining the fair value of acquired assets,
including identifiable intangible assets. The final purchase price allocation may result
in a materially different allocation for tangible and intangible assets than that presented
in these unaudited pro forma condensed consolidated financial statements. An
increase or decrease in the amount of purchase price allocated to amortizable assets
would impact the amount of annual amortization expense. See Note (c) under
‘‘—Notes to Unaudited Pro Forma Consolidated Statements of Income’’ below. For
purposes of these pro forma condensed consolidated financial statements, preliminary
fair values and useful lives have been estimated based on our experience with
acquired businesses and their related valuations and purchase price allocations. These
estimates follow:
Customer-related intangibles . . . . .
Trademarks and tradenames . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . .
Estimated
Average
Useful Lives
Estimated
Fair Value
12.5 years
Indefinite
Indefinite
e1,702
858
6,791
48
Historical
Cost
e607
573
4,255
Purchase
Accounting
Adjustment
e1,095
285
2,536
Goodwill and indefinite lived intangibles are not amortized and will be evaluated for
impairment on an annual basis. In addition, there could be other fair value adjustments
that we have not yet estimated.
(4) Represents the estimated impact on deferred income tax assets (e1 million) and deferred
income tax liabilities (e483 million) from the purchase accounting adjustments to customerrelated intangibles, trademarks and tradenames and pension and other postretirement
employee benefit (‘‘OPEB’’) liabilities at an assumed statutory tax rate of 35%.
(b) Represents the pushdown of Valcon’s deferred financing costs related to the Transactions.
(c) Reflects the adjustment of other noncurrent assets and liabilities for pension and OPEB based
on preliminary purchase accounting valuations. As a result of unrecognized declines in pension
asset values and changes in actuarial assumptions, we will record an increase to our net
benefit liabilities and our prepaid other noncurrent assets. The estimated pro forma adjustments
are summarized as follows:
Increase in other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e (6)
8
Net adjustments related to pension and OPEB liabilities . . . . . . . . . . . . . . . . . . . .
e
2
As of the date of this offering memorandum, we have not completed the actuarial valuations
related to our employee benefit obligations. The final valuations will be based on exchange
rates, asset values, discount rates and other actuarial assumptions appropriate at the date of
closing. Therefore, the amount ultimately allocated to accrued and prepaid pension cost and
the liabilities for OPEB may differ significantly from the amounts shown above.
(d) Reflects the pushdown of senior secured bridge facility debt assumed to be incurred by Valcon
in connection with the tender offer.
(e) Reflects accruals related to the net settlement of outstanding options and restricted stock units
(e71 million), and transaction related costs (e91 million) that will be paid in connection with the
refinancing. Because these items are included in adjustments to the pro forma balance sheet to
intangible assets and goodwill, they are excluded from pro forma income from continuing
operations.
(f)
Adjustment to shareholders’ equity consists of the following:
Transaction related costs (note (e)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pushdown of Valcon financing costs (note (b)) . . . . . . . . . . . . . . . . . . . . . .
Pushdown of senior secured bridge facility debt (note (d)) . . . . . . . . . . . . . .
Pushdown of Valcon purchase accounting basis for excess of purchase cost
over net assets acquired (note (a)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
...
...
e (162)
95
(5,150)
...
3,432
Net adjustment to stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
e(1,785)
Financing Adjustments
(g) Sources and uses of the refinancing transactions include the following:
Sources
Term loan facilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior notes offered by Nielsen Finance LLC and Nielsen Finance Co. . .
Senior subordinated discount notes offered by Nielsen Finance LLC and
Nielsen Finance Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Discount Notes offered hereby . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement of existing derivative instruments (note (h)) . . . . . . . . . . . . . .
Rollover of existing VNU debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rollover of capital leases and other debt(3) . . . . . . . . . . . . . . . . . . . . . .
...
...
.
.
.
.
.
.
.
.
.
.
e 4,287
693
.
.
.
.
.
489
200
365
518
135
Total sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,687
Uses
Refinance existing debt(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net settlement of outstanding options and restricted stock units(5) . . . . . . . .
Redemption of preferred B shares(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest on refinanced debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer of funds from VNU to Valcon for settlement of senior secured bridge
facility(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rollover of existing VNU debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rollover of capital leases and other debt(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of accrued transaction costs and deferred financing fees(8) . . . . . . .
1,565
71
102
41
4,586
518
135
258
Total uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,276
Pro forma net adjustment to cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e (589)
(1) Upon the closing of this offering, we will enter into a seven-year term loan facility most
of which will be denominated in U.S. dollars with the balance denominated in Euros.
For purposes of these pro forma financial statements, we have assumed that the full
amounts of these facilities are borrowed at closing, e43 million of which is classified as
current and e4,244 million of which is classified as long-term. No amounts are
expected to be borrowed under the revolving credit facility in connection with the
closing of the Transactions.
(2) Consists of our ¥4,000 million (e28 million) 2.5% notes due 2011, e30 million face
amount of 6.75% fixed rate notes due 2012, e50 million floating rate notes due 2012,
e50 million floating rate notes due 2010 and £250 million (e360 million) 5.625% put
resettable securities due 2010 or 2017.
(3) Includes capital lease obligations primarily relating to facilities in Oldsmar, Florida and
Markham, Ontario, computer equipment and software and long term debt of e7 million
held by certain of VNU’s consolidated subsidiaries.
(4) Consists of $150 million (e125 million) aggregate principal amount of Nielsen Media
Research’s outstanding 7.6% notes due 2009, e500 million aggregate principal amount
of VNU’s outstanding 6.625% bonds due 2007, e49 million aggregate principal amount
of VNU’s outstanding 6.75% fixed rate notes due 2008, e148 million aggregate
principal amount of VNU’s outstanding floating rate notes due 2006 and all NLG
600 million (e273 million) aggregate principal amount of VNU’s 5.5% bonds due 2008.
Also represents the repayment of VNU’s e333 million 1.75% convertible
50
unsubordinated bonds due 2006 and VNU’s NLG 500 million subordinated loans
(e137 million outstanding) in May 2006 in each case with available cash on hand. Of
these refinanced debt amounts, e527 million and e1,038 million were presented as
current portion and non-current portion, respectively, on our historical balance sheet
as of March 31, 2006.
(5) In connection with the Transactions, we settled all outstanding options and restricted
stock units (excluding the restricted stock units granted in place of the March 2006
option grant) and paid certain employee incentive awards.
(6) Valcon is assumed to transfer the preferred B shares to VNU at Valcon’s cost to
acquire such shares.
(7) Consists of funds transferred to Valcon in connection with the settlement of the senior
secured bridge facility.
(8) Consists of e137 million of estimated deferred financing costs of VNU, which will be
capitalized and amortized over the related terms of the financings (see note (i)),
e91 million of VNU transaction costs, which will be expensed by VNU prior to or upon
consummation of the Transactions and reflected as an adjustment in historical equity,
and payment of e30 million of liabilities expensed by VNU prior to the Transactions.
(h) Reflects the settlement of our existing derivative instruments.
(i)
Reflects the capitalization of estimated financing costs that we will incur in connection with the
new senior secured credit facilities and the notes offered hereby.
(j)
Reflects payment of fees accrued in connection with the Transactions (e91 million), accrued
employee stock and incentive awards (e71 million), accrued interest on refinanced debt
(e41 million) and accrued break up costs (e30 million).
(k) Represents accrual of estimated taxes incurred in connection with repatriation of cash from
foreign jurisdictions at an assumed statutory withholding rate of 15% (e11 million).
(l)
Adjustment to shareholders’ equity consists of the following (Euros in millions):
Transfer of funds to Valcon in connection with repayment of senior secured
bridge facility(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valcon settlement of senior secured bridge facility debt(2) . . . . . . . . . . . . .
Withholding tax on repatriation of cash—estimated . . . . . . . . . . . . . . . . . .
Redemption of preferred stock(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Net adjustment to shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e (4,586)
5,150
(11)
(102)
e
451
(1) In order to partially fund the repayment of the senior secured bridge facility by Valcon, we
will transfer cash to Valcon using proceeds of the new senior credit facilities and the notes
offered hereby.
(2) Represents the elimination of assumed senior secured bridge facility debt pushdown as
this facility is repaid by Valcon in connection with the refinancing transactions.
(3) Represents cash paid to Valcon in connection with the redemption of all preferred
B shares.
51
Unaudited Pro Forma Condensed Consolidated Statement of Income
for the Twelve Months Ended March 31, 2006
Historical
Pro Forma
Pro Forma
VNU
Adjustments
VNU
(Amounts in millions)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues, exclusive of depreciation and amortization
Selling, general and administrative expenses . . . . . . . . . . . .
e3,556
1,709
1,264
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261
44
5
e —
—
(13)(a)
8 (b)
88 (c)
(44)(d)
—
.
.
.
.
.
.
273
18
(103)
10
5
16
(39)
(14)(e)
(440)(f)
—
—
—
234
4
(543)
10
5
16
Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Provision) benefit for income taxes . . . . . . . . . . . . . . . . . .
219
(37)
(493)
173 (g)
(274)
136
e(320)(h)
e (138)
Operating income . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . .
Gain (loss) on derivative instruments .
Equity in net income of affiliates . . . .
Other (expense) income, net . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Income (loss) from continuing operations . . . . . . . . . . . . . .
e 182
e3,556
1,709
1,259
349
—
5
See Accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Income
52
Unaudited Pro Forma Consolidated Statement of Income
for the Three Months Ended March 31, 2006
Historical
Pro Forma
Pro Forma
VNU
Adjustments
VNU
(Amounts in millions)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues, exclusive of depreciation and amortization . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . .
e890
441
310
e890
441
309
67
44
1
e —
—
(3)(a)
2 (b)
22 (c)
(44)(d)
—
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
27
4
(26)
(6)
1
8
23
(3)(e)
(112)(f)
—
—
—
50
1
(138)
(6)
1
8
Income (loss) from continuing operations before income taxes . .
(Provision) benefit for income taxes . . . . . . . . . . . . . . . . . . . . . .
8
(12)
(92)
32 (g)
(84)
20
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
e (4)
e (60)(h)
e (64)
Operating income . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . .
Gain (loss) on derivative instruments .
Equity in net income of affiliates . . . .
Other (expense) income, net . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
89
—
1
See Accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Income
53
Unaudited Pro Forma Consolidated Statement of Income
for the Year Ended December 31, 2005
Historical VNU
Pro Forma
Adjustments
Pro Forma VNU
(Amounts in millions)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues, exclusive of depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . .
e 3,457
Depreciation and amortization . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . .
253
—
5
—
(12)(a)
8 (b)
88 (c)
—
—
.
.
.
.
.
.
304
17
(105)
10
6
(62)
(84)
(13)(e)
(428)(f)
—
—
—
220
4
(533)
10
6
(62)
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Provision) benefit for income taxes . . . . . . . . . . . . .
170
(32)
(525)
184 (g)
(355)
152
138
e(341)(h)
e (203)
Operating income . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . .
Gain (loss) on derivative instruments
Equity in net income of affiliates . . . .
Other (expense) income, net . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Income (loss) from continuing operations . . . . . . . . .
1,661
1,234
e
e —
e 3,457
1,661
1,230
341
—
5
See Accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Income
54
Unaudited Pro Forma Consolidated Statement of Income
for the Three Months Ended March 31, 2005
Historical
Pro Forma
Pro Forma
VNU
Adjustments
VNU
(Amounts in millions)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues, exclusive of depreciation and amortization . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . .
e 791
393
280
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
—
1
Operating income . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . .
Gain (loss) on derivative instruments .
Equity in net income of affiliates . . . .
Other (expense) income, net . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
—
—
(2)(a)
2 (b)
22 (c)
—
—
e 791
393
280
81
—
1
.
.
.
.
.
.
58
3
(28)
(6)
2
(70)
(22)
(2)(e)
(100)(f)
—
—
—
36
1
(128)
(6)
2
(70)
Loss from continuing operations before income taxes . . . . . . . .
(Provision)/benefit for income taxes . . . . . . . . . . . . . . . . . . . . . .
(41)
(7)
(124)
43 (g)
(165)
36
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
e (48)
e (81)(h)
e (129)
See Accompanying Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Income
55
Notes to Unaudited Pro Forma Consolidated Statements of Income
(Amounts in millions)
(a) Represents the adjustment to selling, general and administrative expenses relating to our
employee benefit plans to eliminate the historical amortization of unrecognized actuarial losses,
prior service costs and the transition obligations. Such obligations will be recorded at fair value
in the final allocation of Valcon’s purchase cost.
(b) Reflects the adjustment to selling, general and administrative expense for the annual monitoring
fee of e8 million ($10 million) that we will pay to the Sponsors after the close of the
Transactions. See ‘‘Certain Relationships and Related Party Transactions.’’
(c) Represents change in amortization based upon preliminary estimates of fair values and useful
lives of identified intangible assets. See Note (a) under ‘‘—Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet’’ above.
These unaudited pro forma condensed consolidated financial statements reflect a preliminary
allocation to tangible assets, liabilities, goodwill and other intangible assets. The final purchase
price allocation will result in a different allocation for tangible and intangible assets than that
presented in these unaudited pro forma condensed consolidated financial statements. An
increase or decrease in the amount of purchase price allocated to amortizable assets would
impact the amount of annual amortization expense. Identifiable intangible assets have been
amortized on a straight-line basis in the unaudited pro forma consolidated statements of
income. The following table shows the decrease to pro forma pre-tax income from operations
for every e100.0 million of purchase price allocated to amortizable and depreciable assets at a
range of weighted-average useful lives:
Decrease to Pro Forma Income (Loss)
from Operations
Twelve months
Three months
Weighted Average Life
Six years . . .
Eight years .
Ten years . .
Twelve years
Fifteen years
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e (17)
(13)
(10)
(8)
(7)
e (4)
(3)
(3)
(2)
(2)
(d) Reflects the elimination of transaction costs recognized in connection with the Transactions
which are included in adjustments to the pro forma balance sheet to intangible assets and
goodwill.
(e) Reflects pro forma adjustment to interest income to reflect use of cash in connection with the
Transactions.
(f)
Reflects pro forma interest expense resulting from our new capital structure using applicable
LIBOR and EURIBOR rates as of August 1, 2006 as follows (note that interest expense on new
56
borrowings for the year ended December 31, 2005 differs from the twelve months ended
March 31, 2006 as a result of differences in exchange rates for these periods):
Year Ended
December 31,
2005
Revolving credit facility . . . . . . .
Term loan facility(1) . . . . . . . . . .
Senior Notes offered by Nielsen
Finance LLC and Nielsen
Finance Co.(2) . . . . . . . . . . . .
Other existing debt obligations(3)
Other(4) . . . . . . . . . . . . . . . . . .
Total cash interest expense . . . .
Senior Subordinated Discount
Notes offered by Nielsen
Finance LLC and Nielsen
Finance Co.(5) . . . . . . . . . . . .
Senior Discount Notes offered
hereby(6) . . . . . . . . . . . . . . . .
Amortization of capitalized debt
issuance costs(7) . . . . . . . . . .
..
..
e
—
319
Three Months
Ended
March 31,
2005
2006
e
—
76
e
—
82
Twelve Months
Ended
March 31,
2006
e
—
325
..
..
..
66
33
3
15
8
1
17
9
1
68
34
3
..
421
100
109
430
..
58
14
15
59
..
22
6
6
22
..
32
8
8
32
Total pro forma interest expense . .
Less historical interest expense . . .
Net adjustment to interest expense
533
(105)
e 428
128
(28)
e 100
138
(26)
e 112
543
(103)
e 440
(1) Reflects pro forma interest on the e3,487 million ($4,175 million) U.S. dollar
denominated term loan facility that is expected to be at a rate of 3-month LIBOR of
5.47% plus 2.75% and the e800 million ($958 million) Euro denominated term loan
facility that is expected to be at a rate of 3-month EURIBOR of 3.17% plus 2.50%.
(2) Reflects interest on e543 million ($650 million) of U.S. dollar denominated Senior
Notes at 10.00% and e150 million ($180 million) of Euro denominated Senior Notes at
9.00%.
(3) Reflects interest on the existing senior notes (consists of our ¥4,000 million
(e28 million) 2.5% notes due 2011, e30 million of 6.75% fixed rate notes due 2012,
e50 million floating rate notes due 2012, e50 million floating rate notes due 2010 and
£250 million (e360 million) 5.625% put resettable securities due 2010 or 2017) and
interest portion of capital lease obligations.
(4) Represents commitment fees of 0.5% on the assumed e574 million undrawn balance
of the revolving credit facility.
(5) Reflects pro forma interest expense on the Senior Subordinated Discount Notes at
12.5%. No cash interest will accrue on these notes prior to August 1, 2011. Thereafter,
cash interest will accrue and will be payable semiannually.
(6) Reflects pro forma interest expense on the Senior Discount Notes at 11.125%. No
cash interest will accrue on the Senior Discount Notes prior to August 1, 2011.
Thereafter cash interest will accrue and be payable semi-annually.
57
(7) Represents debt issuance costs associated with the new bank facilities amortized over
six years for the revolving facility, seven years for term loan facilities, eight years for
the Senior Notes and ten years for the Senior Subordinated Discount Notes using the
effective interest rate method.
Interest sensitivity
The assumed interest rates for our new revolving credit facility and term loan facilities are
subject to change. A 0.125% change in interest rates on the new debt issuances would
change interest expense for the twelve-month and three month periods by e5 million and
e1 million, respectively.
Using the assumed interest rate for our new U.S. dollar denominated senior secured credit
facilities of 8.22%, a e100 million increase in borrowings under our revolving credit facility
would increase annual interest expense by e8 million.
(g) Represents the income tax effect of the pro forma adjustments, calculated at an assumed
statutory tax rate of 35%.
(h) Net income does not include the effects of the following non-recurring items: e71 million
costs related to the net settlement of outstanding options and restricted stock units, and
e91 million related costs that will be paid in connection with the refinancing. Because the
expense associated with these items are directly related to the transactions and will not
have a continuing impact, they are excluded from pro forma income from continuing
operations.
58
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected historical consolidated financial data of VNU as of the
dates and periods indicated. The selected historical consolidated financial data for each of the three
years in the period ended December 31, 2005 denominated in Euros have been derived from our
audited consolidated financial statements and related notes appearing elsewhere in this offering
memorandum. The selected historical consolidated financial information as of March 31, 2006 and
for each of the three month periods ended March 31, 2005 and 2006 denominated in Euros have
been derived from our unaudited consolidated financial statements and related notes included
elsewhere in this offering memorandum. The results of operations for any period are not necessarily
indicative of the results to be expected for any future period. The audited and unaudited financial
statements from which the historical financial information for the three years ended December 31,
2005 and three months ended March 31, 2005 and 2006 set forth below have been derived were
prepared in accordance with U.S. GAAP Previously, VNU had reported its financial results in
accordance with IFRS and prior to January 1, 2004, in accordance with Dutch GAAP. Therefore, the
financial information and financial statements included in this offering memorandum are not directly
comparable to such previously reported financial results. In making your investment decision, you
should rely solely on the financial information contained in this offering memorandum. Further, the
financial information set forth below and contained elsewhere in this offering memorandum has
been reported in Euros. At some point prior to the filing of the exchange offer registration statement
for the notes, VNU intends to report its financial results in U.S. dollars. Therefore, we cannot assure
you that the financial information contained in this offering memorandum will be directly comparable
to financial information reported by VNU in the future, including for periods covered in this offering
memorandum, and including, without limitation, the convenience translation provided herein. The
historical information for the fiscal year ended December 31, 2005 and the three month period
ended March 31, 2006 denominated in U.S. dollars was translated solely for the convenience of the
reader from Euros to U.S. dollars at the exchange rate used in translating the Company’s balance
sheet at March 31, 2006 of $1.1974 to e1.00 and, accordingly, do not present such financial
information in accordance with U.S. GAAP. See ‘‘Translation of Certain Currencies’’ and ‘‘Exchange
Rate Information.’’ The selected historical consolidated financial data set forth below should be read
in conjunction with, and are qualified by reference to, ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and our audited consolidated financial statements
and unaudited condensed consolidated financial statements and related notes thereto appearing
elsewhere in this offering memorandum.
59
2003
(g)
Year Ended December 31,
Three Months Ended March 31,
2004
2005
2005
2005
2006
2006
(g)
(g)
($)(1)
(g)
(g)
($)(1)
(Amounts in millions except ratios)
unaudited unaudited unaudited unaudited
Statement of Income Data:
Operating revenues . . . . . . . . . . . . . e 3,292 e 3,319 e
Cost of revenues, exclusive of
depreciation and amortization . . . .
1,583
1,595
Selling, general and administrative . .
1,154
1,129
Depreciation and amortization . . . . .
254
244
Transaction costs(2) . . . . . . . . . . . . .
—
—
Goodwill impairment charge(3) . . . . .
—
104
Restructuring costs(4) . . . . . . . . . . . .
17
28
Operating income . . . . . . . . . . . . . .
284
219
Interest income . . . . . . . . . . . . . . . .
14
13
Interest expense . . . . . . . . . . . . . . .
(109)
(115)
Gain (loss) on derivative instruments .
327
137
Equity in net income of affiliates . . . .
8
6
Other (expense) income, net(5) . . . . .
(67)
3
Income (loss) from continuing
operations before income taxes
and minority interests . . . . . . . . . .
457
263
Provision for income taxes . . . . . . . .
(175)
(42)
Minority interests . . . . . . . . . . . . . .
6
4
Income (loss) from continuing
operations . . . . . . . . . . . . . . . . .
288
225
Discontinued operations:
Income from discontinued
operations, net of tax . . . . . . . .
128
87
(Loss) gain on sales of
discontinued operations, net of
tax . . . . . . . . . . . . . . . . . . . . .
(40)
167
Net income (loss) . . . . . . . . . . . . . .
376
479
Preferred stock dividends . . . . . . . .
(6)
(6)
Net income (loss) available to
common shareholders . . . . . . . . . e 370 e 473 e
Balance Sheet Data (at period
end):
Cash and cash equivalents . . . .
Total assets . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . .
Statement of Cash Flows Data:
Net cash provided by (used in)
continuing operations:
Operating activities . . . . . . . . . .
Investing activities . . . . . . . . . . .
Financing activities . . . . . . . . . .
.
.
.
.
.
.
.
.
3,457 $ 4,139 e
791
1,661
1,234
253
—
—
5
304
17
(105)
10
6
(62)
1,989
1,478
303
—
—
6
363
20
(126)
12
7
(74)
393
280
59
—
—
1
58
3
(28)
(6)
2
(70)
441
310
67
44
—
1
27
4
(26)
(6)
1
8
528
371
80
53
—
1
33
5
(31)
(7)
1
10
170
(32)
—
202
(38)
—
(41)
(7)
—
8
(12)
—
11
(15)
—
138
164
(48)
(4)
(4)
—
—
—
—
—
6
144
(6)
7
171
(7)
—
(48)
(1)
1
(3)
(1)
1
(3)
(1)
138 $
164 e
(49) e
(4) $
(4)
. e 917 e 2,688 e 862 $ 1,032 e 1,473
. 10,849 10,178
9,017
10,797
9,145
.
4,035
3,448
2,230
2,670
2,339
.
3,739
3,889
4,512
5,403
3,988
... e
...
...
Other Financial Data:
Ratio of earnings to fixed charges
(unaudited)(6) . . . . . . . . . . . . . . . .
e 890
e 869
8,921
2,218
4,504
486 e 313 e 422 $ 505 e
68 e
(316)
1,881
(348)
(417)
(113)
(324)
(558) (1,924) (2,304) (1,174)
4.1x
2.7x
60
2.2x
2.2x
—
$ 1,066
$ 1,041
10,682
2,656
5,393
45 $
(34)
(7)
54
(41)
(8)
1.4x
1.4x
(1) Translated solely for the convenience of the reader from Euros to U.S. dollars at the exchange rate
used in translating our balance sheet at March 31, 2006 of $1.1974 to e1.00. See ‘‘Translation of
Certain Currencies’’ and ‘‘Exchange Rate Information.’’
(2) Represents expenses recorded in the three months ended March 31, 2006 in connection with the
Transactions. These expenses include an accrual of e30 million representing our estimate of the
minimum amount of breakup fees required to be paid and e14 million of transaction expenses,
primarily for investment banking and other advisory services.
(3) We perform an annual impairment test for goodwill and recorded a non-cash charge of e104 million
during the fourth quarter of 2004. This impairment charge reduced the carrying value of goodwill in
the Entertainment reporting unit within MMI. See Note 2 to the audited consolidated financial
statements included elsewhere in this Offering Memorandum.
(4) Represents costs associated with major restructuring plans, including Marketing Information Europe,
Corporate Headquarters, Project Atlas, and Project Forward, each as discussed in Note 11 to the
audited consolidated financial statements and ‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations’’ included elsewhere in this offering memorandum.
(5) In 2003, amount includes foreign currency exchange losses on revaluation of intercompany loans of
e65 million. In 2005, amount includes loss of e75 million from buy back of debt in the first quarter of
2005.
(6) For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before
income taxes plus fixed charges. Fixed charges include: interest expense, whether expensed or
capitalized; amortization of debt issuance costs; and the portion of rental expense representative of
the interest factors. Earnings were insufficient to cover fixed charges by e39 million for the three
months ended March 31, 2005.
61
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of our results of operations and financial condition covers
periods prior to the consummation of the Transactions. Accordingly, the discussion and analysis of
historical periods does not reflect the significant impact that the Transactions will have on us,
including significantly increased leverage and liquidity requirements. You should read the following
discussion of our results of operations and financial condition with the ‘‘Unaudited Pro Forma
Condensed Consolidated Financial Information,’’ ‘‘Selected Historical Consolidated Financial Data,’’
the audited consolidated financial statements and the unaudited condensed consolidated financial
statements appearing elsewhere in this offering memorandum. This discussion contains forwardlooking statements and involves numerous risks and uncertainties, including, but not limited to, those
described in the ‘‘Risk Factors’’ section of this offering memorandum. Actual results may differ
materially from those contained in any forward-looking statements.
Overview and Outlook
We are a leading global information and media company providing essential marketing and
media measurement information, analytics and industry expertise to customers across the world.
We have over 85,000 customers in over 100 countries and are headquartered in Haarlem in the
Netherlands and New York in the U.S. Through our broad portfolio of products and services, we
track sales of more than 14 million SKUs of consumer products each year, report on television
viewing habits in countries representing more than 60% of the world’s population, measure Internet
audiences in 18 countries, produce more than 175 trade shows, conferences and events worldwide,
operate more than 200 websites and publish more than 100 print publications. We currently operate
in three segments: MI, MMI and BI. Our former Directories business segment was sold effective
November 29, 2004 (see ‘‘—Factors Affecting VNU’s Financial Results—Divestitures’’ and Note 5
‘‘Business Divestitures’’ to the audited consolidated financial statements appearing elsewhere in this
offering memorandum) to focus on our core businesses.
Our Marketing Information segment provides essential market research and analysis primarily
to businesses in the consumer packaged goods industry. Our MI segment provides an array of
services including retail measurement services (ACNielsen SCANTRACK), household consumer
panels (ACNielsen HomeScan), new product testing (ACNielsen BASES), consumer segmentation
and targeting (ACNielsen Spectra) and marketing optimization (ACNielsen Analytical Consulting). We
believe these products and services give our customers a competitive advantage in making
informed decisions in today’s fast-moving and complex marketplace.
Our Media Measurement & Information segment is a leading provider of media and
entertainment measurement information. The segment measures audiences for U.S. television
(Nielsen Media Research), international television (50% ownership of AGB Nielsen Media Research),
motion pictures (Nielsen EDI), the Internet (approximately 60% ownership of Nielsen//NetRatings
(NASDAQ: NTRT)), outdoor (Nielsen Outdoor), and other media as well as tracks sales of music
(Nielsen SoundScan) and competitive advertising information (Nielsen Monitor-Plus). Using our
critical measurement information, media owners, advertising agencies, advertisers and retailers plan
and optimize their marketing strategies.
Our Business Information segment is one of the largest providers of integrated
business-to-business information in the world. The segment has more than 175 trade shows and
related conferences and executive summits, over 200 websites and over 100 print publications,
each targeted to specific industry groups. Our BI segment is comprised of two divisions: BMU and
BME, each with its own trade shows, online media assets and publications.
62
The Acquisition
Between May 24, 2006 and June 14, 2006 Valcon acquired 98.97% of the issued and
outstanding share capital of VNU. To finance the acquisition of VNU’s shares, Valcon used a
combination of investments in Valcon’s equity through its parent companies by investment funds
associated with or designated by the Sponsors and a senior secured bridge facility providing for
borrowings by Valcon. Valcon has continued to make open market purchases for additional VNU
shares. Valcon intends to acquire the remaining VNU share capital through a statutory squeeze-out
procedure. As of July 5, 2006, investment funds associated with or designated by the Sponsors had
invested approximately e3,094 million (based on actual contributions of approximately
$3,575 million and e109 million) in the equity of Valcon through its parent companies, and Valcon
had borrowed approximately e5,100 million (based on actual borrowings of approximately
$5,648 million and e384 million) under its senior secured bridge facility. We intend to use additional
equity contributed to Valcon by investment funds associated with or designated by the Sponsors
and the Co-Investors, as well as available cash on hand, the proceeds from this offering and
borrowings under the new senior secured credit facilities to repay Valcon’s senior secured bridge
facility, to purchase from Valcon and cancel VNU’s preferred B shares, and to complete the
statutory squeeze-out of VNU’s remaining minority shareholders. See. ‘‘Offering Memorandum
Summary—The Transactions.’’
On May 24, 2006, due to the acquisition of VNU by Valcon, VNU made a $45 million payment
to IMS Health Inc. In connection with the Transactions, VNU committed to e26 million of fees for
financial advisory services of which e16 million were contingent on consummation of the
transaction. We also expect to pay e71 million to employees for net settlement of outstanding
options and restricted stock units, primarily during the first half of 2006.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based on our
Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The
preparation of financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and expenses and the related
disclosure of contingent assets and liabilities. The most significant of these estimates relates to
revenue recognition, business combinations, valuation of intangible assets, valuation of long-lived
assets, including computer software, accounting for income taxes, and pension and other
post-retirement benefits. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the valuation of assets and liabilities that are not readily apparent
from other sources. We evaluate these estimates on an ongoing basis. Actual results could vary
from these estimates under different assumptions or conditions. For a summary of the significant
accounting policies, including critical accounting policies discussed below, see Note 2 ‘‘Summary of
Significant Accounting Policies’’ to the audited consolidated financial statements appearing
elsewhere in this offering memorandum.
Revenue Recognition
We recognize revenue for the sale of products when significant risks and rewards of ownership
have been transferred to the customer, we are no longer involved with ownership or control of the
goods sold, the amount of revenue can be measured reliably, it is probable that the economic
benefits associated with the transaction will flow to us and the costs incurred or to be incurred in
respect of the transaction can be measured reliably. Services revenue is recognized over the
contractual service period in a manner reflecting delivery of the related services.
In cases where we deliver multiple products or services within the same contractual
arrangement (a ‘‘multiple element arrangement’’), the individual deliverables within the contract are
63
separated and recognized upon delivery based upon their fair values relative to the total contract
value, to the extent that the fair values are readily determinable and to the extent that the
deliverables have stand-alone value to the customer (the ‘‘relative fair value method’’). In cases
where the fair value is not determinable, or the deliverables do not have stand-alone value to the
customer, the individual elements are considered to be one unit of accounting, and revenue is
recognized when all of the revenue recognition criteria have been met for the particular contract.
We enter into transactions that exchange advertising for advertising, advertising for other
products and services, data for data, or data for other products and services. Revenue from barter
transactions is recognized based on the fair value of the goods or services received or the fair
value of the goods or services provided to customers, whichever is more clearly evident. If the fair
values are not determinable, no recognition is given to such barter transactions. We recognize
revenue from barter transactions as its products are delivered or services are performed. The
related barter expense is recognized as the products or services are utilized by us. Revenue from
barter transactions was e41 million, e37 million and e35 million in 2005, 2004 and 2003,
respectively.
Business Combinations
We account for our business acquisitions under the purchase method of accounting. The total
cost of acquisitions is allocated to the underlying net assets, based on their respective estimated
fair values. Determining the fair value of assets acquired and liabilities assumed requires significant
judgment and often involves the use of significant estimates and assumptions, including
assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and
market multiples, among other items.
Intangible Assets
We target acquisitions that accelerate our strategic development and meet our financial criteria.
In recent years we have significantly rearranged our business portfolio. Our businesses generally
have modest requirements for physical property, plant and equipment. The principal assets
acquired through acquisitions are intangible assets and goodwill. The total carrying value of
intangible assets, including goodwill, as of December 31, 2005 was e5,909 million.
U.S. GAAP requires that goodwill and other indefinite lived intangible assets be tested for
impairment at least annually, or earlier if changes in the operating results of the reporting unit or
other indicators occur, using a two-step approach at the reporting unit level. Our test for goodwill
impairment requires determining the fair value of each reporting unit. Except for the Internet
Measurement reporting unit, none of our other reporting units are separately traded, their fair value
must be estimated using a combination of comparable market multiples, additional market
information and discounted cash flow valuation models. To determine the amount of impairment
and the fair value of assets and liabilities, judgments and estimates are required based on external
market and industry data, and forecasts of operational performance. Differences between our
estimates and the actual performance, as well as market and industry developments, changes in
the business strategy, changes in resources and disposal of businesses could all result in an
impairment charge. In the first step, the estimated fair value of the reporting unit is compared to its
book value, including goodwill and intangible assets. If the estimated fair value is less than the
book value, a second step is performed, in which the fair values of the reporting units’ goodwill and
intangible assets are compared to their respective book values. The fair value of goodwill is
determined based upon the differences between the fair value of the reporting unit and the
difference between the fair values of the identifiable assets and liabilities of the reporting unit. The
fair value of indefinite lived intangible assets is determined based on expected discounted future
cash flows. If the fair value of goodwill and other indefinite lived intangible assets are less than their
book values, the differences are recorded as impairment charges.
64
Pension Costs
We provide a number of retirement benefits to our employees, including defined benefit
pension plans and post retirement medical plans. Pension costs, in respect of defined-benefit
pension plans, primarily represent the increase in the actuarial present value of the obligation for
pension benefits based on employee service during the year and the interest on this obligation in
respect of employee service in previous years, net of the expected return on plan assets.
Differences between this expected return and the actual return on these plan assets and actuarial
changes are not recognized in the statement of earnings, unless the accumulated differences and
changes exceed a certain threshold. The excess is amortized and charged to the statement of
earnings over, at the maximum, the average remaining term of employee service. We recognize
obligations for contributions to defined-contribution pension plans as expenses in the statement of
earnings as they are incurred.
We account for our retirement plans in accordance with SFAS No. 87, ‘‘Employers’ Accounting
for Pensions’’ and SFAS No. 106, ‘‘Employers’ Accounting for Postretirement Benefits Other Than
Pensions,’’ respectively, and, accordingly, the determination of benefit obligations and expenses is
based on actuarial models. In order to measure benefit costs and obligations using these models,
critical assumptions are made with regard to the discount rate, the expected return on plan assets
and the assumed rate of compensation increases. In addition, retiree medical care cost trend rates
are a key assumption used in determining costs for post-employment benefit plans under SFAS
No. 106. Management reviews these critical assumptions at least annually. Other assumptions
involve demographic factors such as the turnover, retirement and mortality rates. Management
reviews these assumptions periodically and updates them as necessary.
The discount rate is the rate at which the benefit obligations could be effectively settled. For
U.S. plans, the discount rate is based on a bond portfolio that includes only long-term bonds with
an Aa rating, or equivalent, from a major rating agency. We believe the timing and amount of cash
flows related to the bonds in this portfolio is expected to match the estimated payment benefit
streams of the U.S. plans. For the Dutch and other non-U.S. plans, the discount rate is set by
reference to market yields on high quality corporate bonds.
At December 31, 2005, we reduced the discount rate from 4.5% to 4.0% for our Dutch pension
plans and post-retirement medical plan and from 5.9% to 5.8% for its U.S. plans. Reductions in the
discount rate also occurred in the remaining country plans, where the range of applicable discount
rates at December 31, 2005 was 1.75% (for Japan) to 9.0% (for Mexico) versus a range of 2.0% (for
Japan) to 9.5% (for South Africa) at December 31, 2004. As a sensitivity measure for our U.S. plans,
a further 50 basis point decrease in the discount rate, without changing any other assumptions,
would increase pension expense by approximately e3 million per year. For our primary Dutch plan,
a similar decrease would reduce pension expense by approximately e0.1 million.
To determine the expected long-term rate of return on pension plan assets, we consider, for
each country, the structure of the asset portfolio and the expected rates of return for each of the
components. For our U.S. plans, a 50 basis point decrease in the expected return on assets would
increase pension expense on our principal plans by approximately e1 million per year. For our
primary Dutch plan, a similar 50 basis point decrease in the expected return on assets would
increase pension expense on our principal Dutch plans by approximately e2 million per year. We
assumed that the weighted averages of long-term returns on our pension plans were 6.1% in 2005
and 6.0% in 2004. The actual return on plan assets will vary from year to year versus this
assumption. Although the actual return on plan assets will vary from year to year, we believe it is
appropriate to use long-term expected forecasts in selecting our expected return on plan assets. As
such, there can be no assurance that our actual return on plan assets will approximate the
long-term expected forecasts.
65
At December 31, 2005, the accumulated benefit obligation exceeded the fair value of assets in
our pension plans by e37 million.
Income Taxes
We operate in over 100 countries worldwide. Over the past five years, we completed many
material acquisitions and divestitures, which have generated complex tax issues requiring
management to use its judgment to make various tax determinations. We try to organize the affairs
of our subsidiaries in a tax efficient manner, taking account of the jurisdictions in which we operate.
The tax payable on a number of disposals made in recent years has not been finally determined.
Although we are confident that tax returns have been appropriately compiled, there are risks that
further tax may be payable on certain transactions or that the deductibility of certain expenditures
may be disallowed for tax purposes. Our policy is to make our best estimate of the provision for tax
risks until a high degree of confidence exists that the tax treatment will be accepted by the tax
authorities. The policy in respect of deferred taxation is to provide in full for timing differences using
the liability method.
Deferred tax assets are only recognized to the extent that they are considered recoverable in
the short-term. This assessment of the recoverability is judgmental in nature and requires
forecasting the taxable profits in jurisdictions where such assets have arisen. These forecasts of
taxable profits take into account any unresolved tax risks. Deferred tax benefits are recognized only
to the extent that the forecast level of taxable profits supports the amount of deferred tax benefits.
Long-Lived Assets
We are required to assess whether the value of our long-lived assets, including our buildings,
improvements, technical and other equipment, and amortizable intangible assets have been
impaired. An assessment is required whenever events or changes in circumstances indicate that the
carrying amount of the assets might not be recoverable. We do not perform a periodic assessment
of assets for impairment in the absence of such information or indicators. Conditions that would
necessitate an impairment assessment include a significant decline in the observable market value
of an asset, a significant change in the extent or manner in which an asset is used, or a significant
adverse change that would indicate that the carrying amount of an asset or group of assets is not
recoverable. Recoverability of assets that are held and used is measured by comparing the sum of
the future undiscounted cash flows derived from an asset (or a group of assets) to their carrying
value. If the carrying value of the asset (or the group of assets) exceeds the sum of the future
undiscounted cash flows, impairment is considered to exist. If an impairment is considered to exist
on the basis of undiscounted cash flows, the impairment charge is measured using an estimation of
the assets’ fair value, typically using a discounted cash flow method. The identification of
impairment indicators, the estimation of future cash flows and the determination of fair values for
assets (or groups of assets) requires us to make significant judgments concerning the identification
and validation of impairment indicators, expected cash flows and applicable discount rates. These
estimates are subject to revision as market conditions and our assessments change.
We were required to perform an assessment of the long-lived assets associated with MI’s
European data factory in 2004, and we determined that no impairment existed. We capitalize
software development costs with respect to major internal use software initiatives or enhancements
in accordance with SOP 98-1. The costs are capitalized from the time that the preliminary project
stage is completed and we consider it probable that the software will be used to perform the
function intended until the time the software is placed in service for its intended use. Once the
software is placed in service, the capitalized costs are generally amortized over periods of three to
five years. If events or changes in circumstances indicate that the carrying value of software may
not be recovered, a recoverability analysis is performed based on estimated undiscounted cash
flows to be generated from the software in the future. If the analysis indicates that the carrying
66
value is not recoverable from future cash flows, the software cost is written down to estimated fair
value and an impairment is recognized. Our estimates are subject to revision as market conditions
and our assessments change.
Factors Affecting Our Financial Results
Foreign Currency
Our financial results are expressed in Euros and are therefore subject to the impact of
movements in exchange rates on the translation of the financial information of individual businesses
whose functional currencies are other than Euros. Our principal foreign exchange exposure is to the
U.S. dollar, which generally reflects our business exposure to the U.S., our most significant market.
As a result, the fluctuations in the value of foreign currencies relative to the Euro had a
significant effect on our operating results. In order to illustrate these effects, the following discussion
describes variances in constant currency terms to facilitate a comparative view of business
operations. During the three months ended March 31, 2006 as compared to the three months
ended March 31, 2005, the Euro weakened against the U.S. dollar so that reported growth was
generally greater than in constant currency. In 2005, 2004 and 2003, the Euro continued to
strengthen against the U.S. dollar so that reported growth was generally less than in constant
currency.
The currency profile of our operating revenues, operating costs and operating income for the
three months ended March 31, 2006, and for the year ended December 31, 2005 are set forth
below:
Continuing Operations
Euros
U.S. Dollars Other Currencies Total
Three Months ended March 31, 2006
Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9%
57.1%
Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.5%
51.7%
Operating (Loss) Income . . . . . . . . . . . . . . . . . . . . . . . . . . (154.8)% 221.0%
27.0%
26.8%
33.8%
100%
100%
100%
Year ended December 31,
Operating Revenues . . . . .
Operating Costs . . . . . . . .
Operating (Loss) Income .
27.0%
27.8%
19.5%
100%
100%
100%
2005
.........................
.........................
.........................
17.7%
20.1%
(1.7)%
55.3%
52.1%
82.2%
Impacts associated with fluctuations in foreign currency are discussed in more detail under
‘‘—Quantitative and Qualitative Disclosures About Market Risks.’’ In countries with currencies other
than the Euro, assets and liabilities are translated into Euros using end-of-period exchange rates;
revenues, expenses and cash flows are translated using average rates of exchange. The average
Euro to U.S. dollar exchange rate was e1.00 to $1.1985 and e1.00 to $1.3252 for the three months
ended March 31, 2006 and March 31, 2005. The average Euro to U.S. dollar exchange rate was
e1.00 to $1.2535, e1.00 to $1.2360, and e1.00 to $1.1187 for the years ended December 31, 2005,
2004 and 2003, respectively.
In the translation of financial statements of subsidiaries that report in the currency of a highly
inflationary country, the effect of changing prices is taken into account. We do not have any
material operations that report in a highly inflationary country. Currency exchange differences on
monetary assets and liabilities of these companies are reflected in the Consolidated Statements of
Income.
Acquisitions and Investments in Affiliates
During the quarter ended March 31, 2006 and in the subsequent period to July 5, 2006 we
made the following notable acquisitions:
67
• In February 2006, VNU acquired a 100% ownership interest in Beverage Data Networks, Inc.
for a total consideration of e16 million.
• In February 2006 VNU acquired an additional 31.9% ownership interest in BuzzMetrics, Inc.
for a total consideration of e13 million to bring its total ownership interest to 50.1%.
• In April 2006 ACNielsen announced that it had agreed to acquire 100% of the retail
measurement business unit of Datos Information Resources for approximately e16 million.
These acquisitions did not materially contribute to operating revenues or operating income for
the three month period ended March 31, 2006.
During the year ended December 31, 2005, we completed several acquisitions for an
aggregate cost of approximately e133 million. The most notable acquisitions in 2005 are listed as
follows:
• In March 2005, Nielsen Media Research International (‘‘NMRI’’), a business within MMI, and
the AGB Group entered into a joint venture arrangement intended to increase MMI’s
coverage internationally, enabling MMI to better serve the needs of media owners with multinational interests. The newly formed entity AGB Nielsen Media Research of which we own
50% of the outstanding shares, merged the television audience measurement services of
Kantar Media Research owned AGB Group operations with those of our wholly-owned
subsidiary, NMRI. As of March 1, 2005, VNU deconsolidated its international television
audience measurement companies, and began accounting for the joint venture under the
equity method. Our share of the joint venture’s loss for the year was e3 million, and is
recorded net of tax in equity in net income of affiliates in the Consolidated Statements of
Income.
• In June 2005, MMI, through NMRI, acquired BBC De Media en Reclame Bank B.V. This
business offers intelligence covering most of the Dutch advertising market such as television,
radio, newspapers and magazines.
• In November 2005, MI acquired the remaining 49% interest in ACNielsen Chile S.A.
These acquisitions contributed e17 million of operating revenues and e4 million of operating
income in 2005, exclusive of the AGB JV deconsolidation impact.
During the year ended December 31, 2004, VNU completed several acquisitions for an
aggregate cost of approximately e78 million, with the most notable acquisitions listed as follows:
• In January 2004, MI, through ACNielsen Emerging Markets, acquired the remaining 51%
interest in AMER Research Ltd., a leading market research company for the Middle East and
North Africa.
• In May 2004, Nielsen Entertainment acquired the remaining 51% interest in Music Control
Europe and Aircheck. The acquisition of these radio airplay monitoring businesses helped
bolster Nielsen Entertainment’s global radio airplay monitoring read with that of the Nielsen
BDS operations in the U.S. and Canada.
• In October 2004, BME acquired Nationale Vacaturebank.nl in the Netherlands, an online job
search company, to strengthen its position in the online market.
• NetRatings acquired Red Sheriff Ltd., a site-centric-based Internet audience measurement
company, in December 2003 and, during the first half of 2004, acquired the remaining
common shares in Red Sheriff Ltd.
These acquisitions contributed e45 million of operating revenues and e6 million of operating
income in 2004.
During the year ended December 31, 2003, we completed several acquisitions for an
aggregate cost of approximately e33 million. The most notable acquisition was Directories’
July 2003 increase in ownership interest of Pagini Aurii, the Romanian Directories business, from
28% to 84%. This interest was later divested in 2004 as part of the divestiture of Directories.
68
Divestitures
During the year ended December 31, 2005, there were no material cash flows from
discontinued operations.
Directories and Claritas Europe
As part of our long-term business strategy, we decided to focus on our core marketing, media
measurement and business information activities. As a result, we began exploring strategic options
for Directories in May 2004 and Claritas Europe in January 2003.
In December 2003, we entered into an agreement to sell our Claritas Europe business to
Acxiom Corporation. The transaction was effective December 2003, for net proceeds of e33 million
in cash, which were received in 2004. The sale resulted in a loss to us of e40 million, net of income
taxes.
In November 2004, we completed the sale of Directories to Directories Acquisition Corp., a
legal entity owned by funds advised by Apax Partners Worldwide LLP and Cinven Limited, for
e2,075 million in cash. After deductions for net indebtedness, working capital and transaction costs,
we received e2,003 million in net cash proceeds. The sale resulted in a gain of e167 million, net of
income taxes. Additionally, the sale price is subject to the adjustment based on final agreement on
working capital and indebtedness. We expect to reach an agreement with the buyers during 2006.
In 2005, we recorded an additional gain of e7 million to reflect the anticipated final closing position.
Prior to its sale, we considered Directories a reportable segment.
The divestiture of Directories reduced our operating income, net income and cash flow. The
cash flow and net income impact was partly offset by the reduced interest expense from the
retirement of debt from proceeds of sale and higher investment income on the remaining proceeds.
The sale of Directories improved our liquidity, improved our business portfolio focus and enhanced
our future growth potential.
Discontinued operations cash flow by activity for the years ended December 31, 2003, 2004
and 2005 are as follows:
2003
2004
2005
(Amounts in millions)
Net cash provided by operating activities . . . . . . . . . . . . . .
Net cash (used) by investing activities . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . .
e199 e166
(75)
(26)
—
1
—
—
Net cash provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e124
—
e141
Summarized results of operations for our discontinued operations are as follows:
Year Ended December 31, 2003
Year ended
Dec. 31, 2004
Year ended December 31, 2005
Total
Total
Total
Claritas Discontinued
Discontinued
Discontinued
Directories Europe Operations Directories Operations Directories Other Operations
(Amounts in millions)
Operating revenues . . . . . . . .
Operating income . . . . . . . . .
Income (loss) before income
taxes . . . . . . . . . . . . . . . .
Income tax (provision), benefit .
Equity in net income of affiliates
.
.
e439
150
.
.
.
e
80
(4)
e 519
146
106
—
25
(6)
3
—
100
3
25
95
(28)
20
Income (loss) . . . . . . . . . . . . .
Gain (loss) on sale, net of tax . .
131
—
(3)
(40)
128
(40)
Income (loss) from discontinued
operations . . . . . . . . . . . . .
e131
88
e
(43)
e
69
e408
131
e408
131
e —
—
e —
—
e —
—
95
(28)
20
—
—
—
—
—
—
—
—
—
87
167
87
167
—
7
—
(1)
—
6
e254
e254
7
e (1)
e
e
6
Other Divestitures
In addition to the divestiture of Directories during the year ended December 31, 2004, we
completed a number of other divestitures for an aggregate consideration of e15 million, resulting in
a gain of e8 million.
Also, in addition to the divestiture of Claritas Europe, during the first half of 2003, we divested
our 35% interest in Independent Media Holdings B.V., a consumer magazine publisher in Russia,
which was part of our former Consumer Information group, to the remaining shareholders resulting
in cash proceeds of e15 million and a gain of e2 million. Divestitures of several other businesses
during 2003 were immaterial.
Other VNU Initiatives
Project Forward
In November 2005, we announced Project Forward, an initiative led by our senior executive
team to expand current cost-savings programs to all areas of our operations worldwide. We have
identified opportunities to make fundamental changes in our operations and permanently reduce
our costs in the following areas:
• Purchasing, through reducing enterprise-wide purchasing costs and renegotiating vendor
terms and prices;
• Information Technology, through consolidating regional data centers and increased use of
central services;
• Offshoring, through extending existing offshoring programs to additional operational and
production processes; and
• Other general and administrative, through eliminating duplicative benefit and compensation
plans, transitioning to a more centralized shared service model, reducing general and
administrative headcount and reducing operating expenses through reduced space
standards and renegotiated leases.
We believe we can implement the foregoing cost initiatives by the end of 2008, which we
estimate will result in a targeted e125 million of annual cost savings. We estimate one-time costs of
approximately e175 million to be incurred over the corresponding time period in connection with
these cost savings. We expect that a run-rate of e75 million of these cost savings will be achieved
within twelve months of the consummation of this offering. These savings are expected to consist of
approximately e20 million attributable to purchasing, approximately e13 million attributable to
information technology, approximately e11 million attributable to offshoring and approximately
e31 million attributable to other general and administrative. We anticipate that the incremental
e50 million of savings through 2008 will be achieved through continued initiatives across all Project
Forward focus areas. The foregoing description of cost savings by category is based on our good
faith estimate, and although we expect to achieve e75 million of run-rate cost savings within twelve
months following the closing of this offering, the actual amount of cost savings we achieve within a
given category and in the aggregate may be greater or less than the estimate set forth above. See
‘‘Risk Factors—Risks Related to Our Business—We may not realize the anticipated cost savings
related to Project Forward pursuant to the anticipated timetable or at all. We also cannot assure you
that we will not exceed one-time restructuring costs associated with implementing the anticipated
cost savings.’’
Marketing Information
European Data Factory. We began operating our new European data factory in 2004. The
factory offers innovative functionalities, but it has taken some time to transition clients from the old
70
to the new factory and for our clients to fully realize all of the new factory’s benefits. As a result,
profits in Europe have been and will continue to be negatively impacted, as the parallel operation of
both systems is expected to be eliminated during 2008. Dual factory and transition costs reached
e14 million in 2005, with comparable expenditures anticipated in 2006 and 2007.
Homescan MegaPanel. ACNielsen completed its Homescan MegaPanel expansion in the U.S.
and launched a major Homescan expansion in Europe during 2005. The U.S. Homescan
MegaPanel expansion increased the size of the panel from 61,500 in 2003 to 91,500 households at
the end of 2004, and to 125,000 households by the end of 2005. U.S. MegaPanel incremental
spending was approximately e13 million, e8 million and e1 million in 2005, 2004 and 2003,
respectively.
Media Measurement & Information
National and Local People Meter Expansions. Our National People Meter panel nearly doubled
in size from 5,000 households in 2003 to approximately 10,000 households in 2006. The increased
panel size will provide MMI with greater insight into an increasingly fragmented and dynamic
marketplace. People Meters collect and transmit tuning and demographic data electronically and
their use is currently being expanded to replace the current Set Meter/diary measurement systems
in 25 local markets. Nielsen Media Research completed its Local People Meter rollout in its first ten
local markets including Boston in 2003, Los Angeles, New York, Chicago and San Francisco in
2004, Philadelphia and Washington D.C. in 2005 and Detroit, Dallas and Atlanta in 2006.
Global Technology and Information Center. The opening in Florida of the new Global
Technology and Information Center for collection, classification, analysis and distribution of viewers’
data was a milestone in MMI’s history.
Results of Operations
The following table sets forth, for the periods indicated, certain amounts included in our
Consolidated Statements of Income.
Three months
ended
Year ended December 31,
March 31,
2003
2004
2005
2005
2006
(Amounts in millions)
Revenues by segment
Marketing Information . . . . . . . . . .
Media Measurement & Information .
Business Information . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e1,758 e1,806 e1,874 e423
901
900
968
217
636
614
618
151
(3)
(1)
(3)
—
e3,292 e3,319 e3,457 e791
e466
264
161
(1)
e890
service
......
......
......
......
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e1,123
133
167
335
e1,163
137
175
331
e1,199
151
189
335
e281
31
41
70
e310
36
46
74
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
e1,758
e1,806
e1,874
e423
e466
Marketing Information revenues by
Retail Measurement Services . . . . . .
Consumer Panel Services . . . . . . . .
Customized Research Services . . . .
Other Services . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
71
Three months
ended
Year ended December 31,
March 31,
2003
2004
2005
2005
2006
(Amounts in millions)
Media Measurement & Information revenues by
division
Media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Internet Measurement . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Information revenues
Business Media U.S. . . . . . . . . .
Business Media Europe . . . . . .
Total . . . . . . . . . . . . . . . . . . . .
.
.
.
.
e 728
137
36
e 901
e 728
124
48
e 900
e 787
127
54
e 968
e177
28
12
e217
e219
30
15
e264
by division
.................
.................
.................
e 422
214
e 636
e 388
226
e 614
e 389
229
e 618
e 96
55
e151
e108
53
e161
e1,841
219
135
810
287
e3,292
e1,770
226
144
886
293
e3,319
e1,868
262
119
910
298
e3,457
e426
55
26
216
68
e791
e497
72
29
218
74
e890
Revenues by geography
United States . . . . . . . . . . . . . . . .
Other Americas . . . . . . . . . . . . . .
The Netherlands . . . . . . . . . . . . . .
Other Europe, Middle East & Africa
Asia Pacific . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
The following table sets forth, for the periods indicated, the relative percentage that segments’
revenue represent to total revenue. All percentages are calculated using actual amounts.
Percent of Revenue
Three months
Year ended
ended
December 31,
March 31,
2003
2004
2005
2005
2006
Marketing Information
Retail Measurement Services .
Consumer Panel Services . . . .
Customized Research Services
Other Services . . . . . . . . . . . .
Total Marketing Information . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
34%
4%
5%
10%
53%
35%
4%
5%
10%
54%
35%
4%
5%
10%
54%
36%
4%
5%
9%
54%
35%
4%
5%
8%
52%
Media Measurement & Information
Media . . . . . . . . . . . . . . . . . . . . . . . . .
Entertainment . . . . . . . . . . . . . . . . . . .
Internet Measurement . . . . . . . . . . . . . .
Total Media Measurement & Information .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
22%
4%
1%
27%
22%
4%
1%
27%
23%
4%
1%
28%
22%
4%
1%
27%
25%
3%
2%
30%
Business Information
Business Media U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Media Europe . . . . . . . . . . . . . . . . . . . . . . . . .
Total Business Information . . . . . . . . . . . . . . . . . . . . . . .
13%
7%
20%
12%
7%
19%
11%
7%
18%
12%
7%
19%
12%
6%
18%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
100%
100%
72
The following table sets forth, for the periods indicated, certain supplemental revenue growth
data, both on an as reported basis and a constant currency basis. In order to determine the
percentage change in items on a constant currency basis, we adjust these items to remove the
positive and negative impacts of foreign exchange. All percentages are calculated using actual
amounts.
Year ended
December 31,
2004
2005
Revenue growth, as reported
Marketing Information . . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
Three months
ended
March 31,
2006
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2.7%
(0.1)%
(3.5)%
0.8%
3.8%
7.5%
0.6%
4.2%
10.3%
21.3%
6.5%
12.5%
Revenue growth, constant currency
Marketing Information . . . . . . . . . . .
Media Measurement & Information . .
Business Information . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
7.9%
8.1%
2.7%
7.0%
3.4%
8.7%
1.7%
4.5%
2.9%
11.7%
(0.3)%
4.6%
Three months ended March 31, 2006 compared to the three months ended March 31, 2005
When comparing our results for the three months ended March 31, 2006 with those of the
three months ended March 31, 2005, the following should be noted:
• We incurred e44 million of transaction costs related to the Valcon acquisition in the first
quarter of 2006. See Note 14 ‘‘Valcon Acquisition Costs and Related Payments’’ to the
unaudited financial statements for the three months ended March 31, 2006 appearing
elsewhere in this offering memorandum.
• We incurred a loss of e75 million from the debt buy back in the three months ended
March 31, 2005 and there was no comparable loss in the three months ended March 31,
2006.
Operating Revenues
VNU Consolidated. Operating revenues increased 12.5%, from e791 million for the three
months ended March 31, 2005 to e890 million for the three months ended March 31, 2006.
Excluding a 7.9% favorable impact of foreign exchange, primarily related to the appreciation of the
U.S. dollar versus the Euro, revenues on a constant currency basis increased 4.6%. Constant
currency revenue grew at MI by 2.9% and at MMI by 11.7%, partly offset by a decline at BI of less
than 1%.
Marketing Information. Operating revenues for MI increased 10.3% from e423 million for the
three months ended March 31, 2005 to e466 million for the three months ended March 31, 2006.
Excluding a positive impact of foreign exchange of 7.4%, constant currency revenues increased
2.9%. The increase in constant currency was primarily attributable to 3.6% growth in Retail
Measurement Services, and to a lesser extent 7.1% in Consumer Panel Services and 5.1% in
Customized Research Services, partly offset by a decrease of 3.0% in Other Services.
Retail Measurement Services constant currency increase was due to increased sales of key
account data, increased category and product improvements and geographic expansion, primarily
in Latin America, Emerging Markets (Eastern Europe, Middle East and Africa) and Asia Pacific.
73
Consumer Panel Services constant currency revenues increased due to MegaPanel expansion in
the U.S., expansion of the panel in Australia and the launch of service in Portugal. Customized
Research Services increased 5.1% in constant currency due primarily to increased penetration of
proprietary products in Emerging Markets. Other Services decreased 3.0% in constant currency due
primarily to lower project revenue in the U.S., timing at ACNielsen BASES and general weakness in
Europe, partly offset by growth in development of services in Mexico, large ad-hoc projects at
ACNielsen Spectra and strong sales in Claritas.
Media Measurement & Information. Operating revenues for MMI increased 21.3% from
e217 million for the three months ended March 31, 2005 to e264 million for the three months ended
March 31, 2006. Excluding a positive foreign currency impact of 9.6%, constant currency revenue
was up 11.7%. The increase was primarily due to 12.3% growth in the Media division.
Media’s constant currency increase was due to the continued demand for Nielsen Media
Research’s television audience measurement services in the U.S., a 14.6% increase, and to a lesser
extent, a 2.1% increase outside of the U.S. Growth in the U.S. was primarily due to new business
and price increases, the National People Meter expansion, and the full quarter impact of the Local
People Meter rollout in Washington, D.C. and Philadelphia in 2005 and the launch of Dallas, Detroit
and Atlanta in 2006.
Business Information. Operating revenues for BI increased 6.5%, from e151 million for the first
three months ended March 31, 2005 to e161 million for the three months ended March 31, 2006.
Excluding the 6.8% favorable impact of foreign exchange, constant currency revenue decreased
less than 1.0%. Our Trade Shows business in the U.S. experienced growth due to timing of 13.7%,
partly offset by a 9.2% decline at Business Publications in the U.S. and a 3.4% decrease in
Business Media Europe, all in constant currency.
Our Trade Shows business operating revenues in the U.S. increased in constant currency due
to timing of shows, biennial events, growth of existing shows and launch of one new show. Net
square feet of floor space used and attendance at events in the first three months of 2006
increased 4.7% and 30.1% respectively, from the comparable period of the prior year.
Business Publications operating revenues in the U.S. decreased 9.2% in constant currency
primarily due to lost revenue from discontinued titles and continued softness in advertising revenue.
Business Media Europe operating revenues decreased 3.4% in constant currency, due primarily
from difficult market conditions in IT advertising, sustained difficulty with newsstand sales, and
closure of two titles. This was partially offset by improved growth in print and online recruitment
revenue mainly due to Intermediair.
Cost of Revenues, Exclusive of Depreciation and Amortization (Cost of Revenues)
Cost of revenues increased from e393 million for the three months ended March 31, 2005 to
e441 million for the three months ended March 31, 2006, an increase of 12.1%. Excluding the 7.0%
increase from foreign exchange, cost of revenues would have increased by 5.1%. Constant
currency cost of revenues increased 3.6% at MI and 14.1% at MMI, partly offset by a reduction in
costs at BI of 3.4%.
The 3.6% increase in constant currency cost of revenues at MI was due to higher data
collection and processing costs associated with category and geographic expansion, service/
product enhancement and increased retailer cooperation costs.
MMI constant currency cost of revenues increased 14.1%, entirely due to an increase in costs
in Media in the U.S. The increased costs were due to the expansion of the Local People Meter and
74
National People Meter in the U.S., primarily from higher personnel costs, increased software
maintenance and increased support costs.
BI constant currency cost of revenues decreased 3.4%, primarily due to a 6.0% decrease in
costs in Business Media Europe from the closure of titles and the reduction in page volumes and
circulation on existing titles. The decrease was slightly offset by a 15.9% increase in constant
currency costs due to timing of events at Trade Shows, that was offset by lower publication costs
on lower revenues in the U.S.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from e280 million for the three months
ended March 31, 2005 to e310 million for the three months ended March 31, 2006, or 11.2%.
Excluding the 7.3% increase from foreign exchange, expenses would have increased 3.9%. The
increase in constant currency was primarily due to higher costs at MI, MMI, and BI, of 5.1%, 1.1%
and 6.3% respectively.
The 5.1% constant currency increase at MI was due to higher client sales and service and
recruitment costs in the U.S., and slightly higher client service and sales costs in Emerging Markets
and Asia Pacific. The increase was partly offset by lower human resource spending and marketing
savings in Europe.
MMI constant currency costs increased 1.1% due to higher personnel costs in the U.S, partly
offset by lower costs due to the establishment of the AGB Nielsen Media Research joint venture in
2005.
BI constant currency costs in the first quarter of 2006 increased 6.3% due to the e4 million gain
from the sale of five titles at Business Media U.S. in the first quarter of 2005.
Depreciation and Amortization
Depreciation and amortization costs increased from e59 million for the three months ended
March 31, 2005, to e67 million for the three months ended March 31, 2006, or 13.0%. Excluding the
8.3% increase from foreign exchange, costs would have increased 4.7%. The increase in constant
currency was due to 23.1% expense growth at MMI resulting from the continued rollout of the Local
People Meters.
Transaction Costs
On March 8, 2006, Valcon and we announced the tender offer. We also agreed to reimburse
Valcon’s transaction expenses up to e30 million if the transaction were terminated. In
November 2005, in connection with the agreement on the termination of our planned merger with
IMS Health, we agreed to pay $45 million to IMS Health should we be acquired within twelve
months following the termination. Based on the facts and circumstances that existed as of
March 31, 2006, we were unable to determine whether the tender offer for us by Valcon would be
successful. Therefore, we have accrued e30 million, representing our estimate of the minimum
amount that would be required to be paid to either IMS, in the event the Valcon acquisition was
successful or to the investors in Valcon, if the acquisition was not successful. On May 24, 2006, due
to the consummation of the transaction by Valcon, we made the $45 million payment to IMS.
During the three months ended March 31, 2006 we also recorded e14 million of transaction
expenses, primarily for investment advisory services. Both of these charges are reflected as
transaction costs in the unaudited condensed consolidated statements of income appearing
elsewhere in this offering memorandum.
75
Restructuring Costs
In the three months ended March 31, 2006, we recorded no additional restructuring costs to
the existing programs. We incurred and paid e1 million in consulting fees for Project Forward for
the three months ended March 31, 2006.
Operating Income
For the foregoing reasons, operating income for the three months ended March 31, 2006 was
e27 million, or a 52.8% decrease from the e58 million for the three months ended March 31, 2005.
Excluding the 16.8% positive impact of foreign exchange, operating income would have decreased
69.6%. The constant currency decrease was primarily due to the e44 million of transaction costs
recorded at corporate due to the acquisition by Valcon, partly offset by constant currency operating
income growth of 6.3%. MMI reported strong operating results with an increase of 17.0% that was
partly offset by decreases in MI of 48.6% and BI of 7.0%.
Marketing Information. MI’s operating income increased from e5 million for the three months
ended March 31, 2005 to e6 million for the three months ended March 31, 2006, or 16.9%.
Excluding the impact from foreign exchange of 65.5%, operating income decreased 48.6%. The
constant currency decrease in operating income was due to increased expense coupled with low
revenue growth.
Media Measurement & Information. Operating income for MMI increased to e46 million in the
three months ended March 31, 2006 from e36 million in the three months ended March 31, 2005.
Excluding the 10.5% impact from foreign exchange, MMI’s operating income increased 17.0%. The
increase was due primarily from the increase in revenue in Media.
Media’s increase in operating income was largely due to higher revenues that were partly offset
by higher costs from the National People Meter expansion and the Local People Meter rollout in the
U.S. In addition, the 2005 first quarter included the China TAM expansion losses which activities
were subsequently transferred to the AGB Nielsen Media Research joint venture.
Business Information. BI’s operating income increased from e23 million in the three months
ended March 31, 2005 to e24 million in the three months ended March 31, 2006, or 4.7%.
Excluding an 11.7% impact from foreign exchange, constant currency operating income decreased
7.0%. The decrease was due to operating losses at the Publications businesses in the U.S. and
Europe, partly offset by strong performance at our Trade Shows business in the U.S.
Other Income (Expense), net
Other income (expense), net changed from an expense of e70 million primarily due to a loss of
e75 million from the debt buy back during the three months ended March 31, 2005, to income of
e8 million in the three months ended March 31, 2006.
Provision for Income Taxes
The effective tax rate for the three months ended March 31, 2006 and 2005 was 162.5% and
(16.3%), respectively, which vary significantly from the estimated annual effective tax rates for the
respective years due to unusual charges. During the three months ended March 31, 2006, a
e30 million charge was recorded relating to the minimum deal indemnification payable to either the
consortium of private equity firms or IMS Health (See Note 15 ‘‘Subsequent Events’’ to the
unaudited financial statements for the three months ended March 31, 2006 appearing elsewhere in
this offering memorandum). During the three months ended March 31, 2005, a e75 million loss was
76
recorded on the retirement of various debt instruments. The tax benefit associated with the
aforementioned items was recorded at a tax rate lower than our effective tax rate.
Loss from Continuing Operations
Loss from continuing operations was e48 million in the three months ended March 31, 2005
and e4 million in the three months ended March 31, 2006. The reduction in loss reflects the after
tax effect of the loss on the buy back of debt in the first quarter of 2005 and the transaction costs
that were incurred in the first quarter of 2006.
Income from Discontinued Operations
Income from discontinued operations, net of tax was e1 million for the three months ended
March 31, 2006 and relates to the previous sale of our consumer information business.
Year ended December 31, 2005 compared to the year ended December 31, 2004
When comparing our results for the year ended December 31, 2005 with those of the year
ended December 31, 2004, the following should be noted:
• Our consolidated financial statements for the year ended December 31, 2005 reflect the
effect of foreign currency exchange rates on our operations, several acquisitions (primarily
the AGB Nielsen Media Research joint venture), and the early extinguishment of
e1,101 million of debt.
• We settled an antitrust litigation with Information Resources, Inc. (‘‘IRI’’), and paid IMS Health
deal costs for the failed acquisition in 2005. The antitrust litigation brought more than ten
years ago by IRI, against ACNielsen, Dun & Bradstreet and IMS Health, was settled and paid
by us on February 16, 2006. A charge for e47 million (e28 million after tax) was taken to
expenses in 2005. In the fourth quarter of 2005, we terminated our agreement to merge with
IMS Health. A charge of e30 million (e27 million after tax) was recorded related to the failed
deal costs of the merger in the fourth quarter of 2005.
• Our consolidated financial statements for the year ended December 31, 2004 reflect the
effect of foreign currency exchange rates on our operations, several divestitures (in particular
Directories) and acquisitions, as well as restructuring charges.
• During 2004, we recorded an impairment charge of e104 million to reduce the carrying value
of goodwill in the Entertainment reporting unit within MMI.
Operating Revenues
VNU Consolidated. Operating revenues increased 4.2%, from e3,319 million in 2004 to
e3,457 million in 2005. Excluding a 0.3% negative impact of foreign exchange, primarily related to
the depreciation of the U.S. dollar versus the Euro, revenues on a constant currency basis
increased 4.5%. Constant currency revenue grew at all three businesses, MI by 3.4%, MMI by 8.7%
and BI by 1.7%.
Marketing Information. Operating revenues for MI increased 3.8% from e1,806 million in 2004
to e1,874 million in 2005. Excluding a positive impact of foreign exchange of 0.4%, revenue would
have increased 3.4%. The increase was attributable to growth in all of the product lines, primarily
Retail Measurement Services, and to a lesser extent Consumer Panel Services and Customized
Research Services. Retail Measurement Services increased 2.4% in constant currency due to
increased sales of key account data, increased category and channel penetration and increased
coverage, primarily in Latin America and emerging markets. Consumer Panel Services revenue
77
increased 10.4% in constant currency, primarily from growth in MegaPanel, the consumer direct
service and ad hoc custom projects. Customized Research Services increased 7.5% in constant
currency due primarily to the growth in most markets in Asia Pacific and increased penetration of
proprietary products in emerging markets. Other services increased 1.4% in constant currency due
primarily to growth in ACNielsen BASES international markets, one time client projects in the U.S.
and increased ad hoc revenue at ACNielsen Spectra. Offsetting these factors were weaknesses in
France, Germany and Italy due to competitive pressures and the divestiture in January 2005 of NRB
at Claritas U.S.
Media Measurement & Information. Operating revenues for MMI increased 7.5% from
e900 million in 2004 to e968 million in 2005. Excluding a negative foreign currency impact of 1.2%,
constant currency revenue would have increased by 8.7%. The increase was primarily due to 9.3%
growth in Media, and to a lesser extent, a 12.8% increase in Internet Measurement and a 4.1%
increase at Entertainment.
Media’s constant currency increase was due to steady demand for Nielsen Media Research’s
television audience measurement services in the U.S., with a 12.8% increase, partly offset by a
14.3% decrease outside of the U.S. Growth in the U.S. was due to price increases, 90% completion
of the expansion of the National People Meter sample, the full year impact of the four markets
launched in 2004 and two new markets launched in 2005, from the continued implementation of the
Local People Meter technology and the addition of new clients and business. The decrease in
Nielsen Media Research’s revenue outside of the U.S. was due to the establishment of the AGB
Nielsen Media Research joint venture by AGB and Nielsen Media Research International. The joint
venture’s results were recorded in equity in net income of affiliates from March 2005.
Constant currency revenue grew 12.8% for NetRatings, Inc., our approximately 60%—owned
Internet Measurement business. The increase in revenue was primarily due to new business sales
of products and services based on NetRatings MegaPanel, the launch of new product offerings and
price increases for existing products and services.
Nielsen Entertainment’s revenue increased 4.1% on a constant currency basis, primarily due to
syndicated and custom analysis product offerings in entertainment consulting services and
measurement businesses for film, home entertainment, music, book and video game industries. The
increase was also due to the full year impact of the acquisition of the remaining 50% interest in
Music Control Europe (Aircheck) in 2004, new product development, process reengineering and
strategic alliances.
Business Information. Operating revenues for BI increased slightly, 0.6%, from e614 million in
2004 to e618 million in 2005. Excluding the 1.0% negative impact of foreign exchange, constant
currency revenue increased 1.6%. The constant currency increase was due primarily to a 9.4%
growth in Trade Shows in the U.S. partly offset by a 3.2% decrease in Business Publications in the
U.S. and supplemented by a 1.6% increase in BME.
Our Trade Shows business in the U.S. increased in constant currency due to improved product
offerings, realignment and growth at existing shows, and the launch of new events in 2005. Net
square feet of floor space used and attendance at events in 2005 increased from the prior year.
Trade Shows in the U.S. launched ten, seven and three new trade shows in 2005, 2004 and 2003,
respectively. Three shows were cancelled in 2005 and one was cancelled in 2004.
Our Business Publications revenue in the U.S. decreased 3.2% from the prior year in constant
currency. The decrease was primarily due to lost revenue from seven divested titles, and fluctuating
revenues from our other titles.
BME increased 1.6% in constant currency revenue. Print publications in Europe increased
3.3%, primarily from solid performances in the United Kingdom and the Netherlands (primarily
78
Intermediair growth), an increase in the recruitment market and a full year impact of the National
Vacaturebank.nl acquisition in October 2004, partly offset by declines in its PC publication
advertising and copy sales and declines in Display Advertising markets. Recovery in the recruitment
advertising market and higher market share helped achieve better performance in 2004. Trade
Shows in Europe declined from prior year due to the BIAS biennial event that occurred in 2004. The
Netherlands and United Kingdom represent 64% of the BME’s revenues. For Trade Shows in
Europe, eight, thirteen and five new trade shows were launched in 2005, 2004 and 2003,
respectively. Six shows were cancelled in 2005, three shows were canceled in 2004, and one was
cancelled in 2003.
Cost of Revenues, Exclusive of Depreciation and Amortization (Cost of Revenues)
Cost of revenues increased from e1,595 million in 2004 to e1,661 million in 2005, an increase
of 4.1%. Excluding the 0.1% increase from foreign exchange, cost of revenues would have
increased 4.0%. Constant currency cost of revenues increased at MI by 4.8% and at MMI by 6.6%,
partly offset by a decrease in cost of revenues at BI of 1.9%.
Cost of revenues in constant currency increased at MI 4.8% due to higher data collection and
processing costs, the ramp-up for the new factory in Europe, increased retailer cooperation
expenses due to channel and geographic expansion, and higher pension costs in Europe. This
increase in constant currency was partly offset by lower outsourced data processing costs,
decreased data collection costs resulting from the higher penetration of e-panel at ACNielsen
BASES and the year over year impact of the NRB divestiture in 2005.
MMI constant currency cost of revenues increased 6.6% primarily due to the costs associated
with the corresponding growth in revenue, partly offset by savings in Entertainment and Internet. In
Media, costs increased due to expansion of the Local People Meter and National People Meter in
the U.S., primarily from staffing, commission, predevelopment software costs and maintenance
expenses, partly offset by lower costs in International due to the 2005 formation of the AGB Nielsen
Media Research joint venture. The 5.1% decrease in Entertainment costs was due primarily to
personnel and monitoring cost savings at Music, to lower intercept costs at Film and savings due to
a change in the product revenue mix at Film and Home Entertainment. The decrease in costs at
Internet was primarily due to lower overall panel recruitment costs, the elimination of the Hispanic
panel in the third quarter of 2004, partly offset by expansion of the scope of information for
MegaPanel and additional expenses related to certain custom research projects.
BI constant currency cost of revenues decreased 1.9%, primarily due to lower costs in BME,
partly offset by increased costs at Trade Shows in the U.S. BME costs decreased 6.8% from the
prior year primarily due to reductions in page volumes and circulation that has led to lower
production and distribution fees and some discontinued titles in Italy and Germany in 2005, and to
a lesser extent, lower costs in Europe Trade Shows resulting from the BIAS biennial event that
occurred in 2004. Business Media U.S. operating costs increased 2.3% as a result of ten new
shows and the continued growth at many of the existing shows at Trade Shows in the U.S. in 2005,
partly offset by a 1.6% reduction of costs at Business Publication U.S. resulting from lower
manufacturing costs on lower sales.
Selling, General and Administrative Expenses
Selling, general and administrative costs increased from e1,129 million in 2004 to
e1,234 million in 2005, an increase of 9.3%. Excluding the 0.9% decrease from foreign exchange,
selling, general and administrative costs would have increased 10.2%. The increase in constant
currency was primarily due to higher costs at corporate and 2.0%, 2.4%, and 0.9% increases at MI,
MMI and BI, respectively.
79
Corporate and other costs increased from 2004 primarily due to the settlement of the antitrust
litigation with IRI, and payment of the IMS Health deal costs for the failed acquisition in 2005. The
antitrust litigation brought on more than 10 years ago by IRI, against ACNielsen, Dun & Bradstreet
and IMS Health, was settled and paid by VNU on February 16, 2006. A charge of e47 million
(e28 million after tax) was taken to expense in 2005. During 2005, VNU was in merger negotiations
with IMS Health. In the fourth quarter of 2005, VNU terminated its agreement to merge with IMS
Health. VNU incurred approximately e30 million (e27 million after tax) in deal costs relating to the
IMS Health merger. Corporate costs also increased in 2005, compared with 2004, as 2004 included
the reversal of a portion of an accrual for a New York City real estate lease. In November 2000,
Nielsen Media Research, Inc. entered into a 15-year lease for 155,000 square feet of office space in
New York City. Subsequently, the New York operations of Nielsen Media Research, Inc. were
consolidated into office space of VNU, Inc., leaving Nielsen Media Research’s space vacant. During
2003, we recorded an additional charge to selling, general and administrative expenses of
e31 million to accrue the net present value of the future minimum lease commitment less the
estimated sublease income to be realized once the space was sublet. The annual increase in the
present value of this accrual is reflected as occupancy costs. Reflecting an improvement in the real
estate market in 2004, the property was sublet and e14 million of the loss accrual was reversed.
The 2.0% increase at MI was due to higher client service and sales costs in ACNielsen BASES,
Latin America, Emerging Markets and Canada, higher personnel costs in Canada and higher facility
costs at ACNielsen BASES. The increase was partly offset primarily from human resources and
marketing savings in Europe and to a lesser extent, a reduction of consulting and personnel related
costs in the U.S. and the divestiture of NRB at Claritas U.S.
MMI constant currency costs increased 2.4% primarily due to higher expenses at Internet,
Entertainment and Media in the U.S., partly offset by a 20.4% expense reduction at Nielsen Media
Research International due to the establishment of the AGB Nielsen Media Research joint venture.
Internet costs increased 20.9% due to higher personnel costs for product marketing and analytics in
2005 due to business growth, a severance charge in the fourth quarter of 2005 and the 2004
impact from the one-time insurance settlement related to patent litigation that reduced NetRatings’
expenses that year. Entertainment costs increased 8.4% resulting from higher costs for the sales
group at EDI, the startup of Airplay Monitor in 2005 and higher personnel costs. Expense grew at
Media in the U.S. due to additional consulting costs, higher community/public relations costs and
costs to support digital technology, partly offset by reduced legal fees and the sale of MRP in the
prior year.
BI costs increased slightly by 0.9%, due to a decrease in Business Media U.S. expenses of
4.6% that were more than offset by a 10.5% increase at BME. In the U.S., expenses primarily
decreased due to a 7.3% reduction in headcount at Business Publications that reduced personnel
and occupancy costs. In Europe, costs increased due to additional sales costs and the full year
consolidation of the National Vacaturebank.nl acquisition in 2005.
Depreciation and Amortization
Depreciation and amortization costs increased from e244 million in 2004 to e253 million in
2005, representing an increase of 3.8%. Excluding the 2.2% increase from foreign exchange,
expenses would have increased 1.6%. The increase in constant currency was primarily due to
higher costs at MMI of 2.2% and MI of 4.1%. The expense variances at BI and Corporate were not
significant.
MMI increases were due to the implementation of the National Expansion and Local People
Meter service into two new markets in 2005 and the full year impact of the Local People Meter
80
service in four markets entered into in 2004 and the introduction of Active/Passive meter technology
in 2005. The increase in costs at MI was primarily the result of higher software amortization costs.
Goodwill Impairment Charges
During the fourth quarter of 2004, we performed our annual impairment test for goodwill and
recorded a non-cash charge of e104 million. This impairment charge reduced the carrying value of
goodwill in the Entertainment reporting unit within MMI. The charge reflects the impact of increased
competition and client consolidation in the film sector and deterioration of the music market
resulting from increased piracy, including the illegal duplication of compact discs. We also
performed this test in 2005 and 2003 and no charges were recorded.
Restructuring Costs
Our restructuring costs reflect estimates and we reassess the requirements for completing each
individual plan under our restructuring programs at least bi-annually. As discussed in Note 11
‘‘Restructuring Activities’’ to the audited consolidated financial statements appearing elsewhere in
this offering memorandum, we had three major active restructuring plans during the years 2005,
2004 and 2003: Marketing Information Europe Restructuring, Corporate Headquarters Restructuring
and Project Atlas Restructuring.
Marketing Information Europe Restructuring. In December 2004, we initiated a restructuring
plan within MI to improve the competitiveness of the European retail measurement business. The
2004 charge of e11 million was entirely for severance benefits associated with headcount
reductions of 81 employees in Europe. Cash outlays related to this plan totaled e7 million in 2005,
and are expected to be approximately e4 million in 2006. The MI Europe restructuring plan is
anticipated to generate annual savings of e5 million beginning in 2006.
Corporate Headquarters Restructuring. In November 2004, we initiated a restructuring plan in
conjunction with the relocation of a portion of the Corporate Headquarters from Haarlem in the
Netherlands to New York in the U.S. The relocation is the consequence of the recent changes in
our business portfolio (including the sale of Directories) and the fact that the majority of our
operations are now managed from New York. This plan will result in a headcount reduction of
approximately 40 employees in Haarlem. The 2004 charge of e9 million consisted primarily of
severance benefits. Cash payments related to this plan were e5 million in 2005 and are expected to
be approximately e2 million in 2006 and e2 million thereafter.
Project Atlas Restructuring. In December 2003, we launched Project Atlas, a multi-year
business improvement program in MI. This program was designed to enable MI to better meet
client needs, improve operational efficiency, accelerate revenue growth through the introduction of
new products and services and increase operating margins. Primarily concentrated in MI’s North
American operations, Project Atlas activities are expected to streamline key operational practices to
enhance quality and lower production costs, create a more streamlined and state-of-the-art
technology platform and use global purchasing power to achieve cost efficiencies.
Project Atlas began in 2003 and is expected to be completed by 2007 and result in headcount
reductions in excess of 700 employees, primarily in North America. The initial charge of e17 million
in 2003 consisted of e13 million for severance benefits and e4 million for related consulting
expenses. Additional charges of e5 million and e8 million in 2005 and 2004, respectively, were
entirely for severance benefits. Additional expected charges for the plan are e1 million in 2006. We
estimate that cash outlays will be e6 million in 2006 and e1 million in 2007. Through December 31,
2005 headcount has been reduced by approximately 500 in connection with Project Atlas.
81
In connection with all of the restructuring actions discussed above, severance benefits were
computed pursuant to the terms of local statutory minimum requirements in labor contracts or
similar employment agreements.
Operating Income
For the foregoing reasons, operating income for the year ended December 31, 2005 was
e304 million, or a 39.0% increase from the e219 million operating income for the year ended
December 31, 2004. Excluding the 6.3% negative impact of foreign exchange, operating income
would have increased 45.3% from 2004 to 2005. The constant currency increase was primarily due
to the impact of a goodwill impairment charge at MMI’s Entertainment reporting unit of e104 million
in 2004 that was partly offset by the e14 million reversal of the accrual for a New York City lease
that was subsequently subleased in 2004. Excluding the impairment charge, all three business
segments reported strong operating results, 14.9%, 28.1% and 22.9% for MI, MMI and BI
respectively that was offset by increased costs at Corporate primarily due to the settlement of the
antitrust litigation with IRI, and payment of the IMS Health deal costs for the failed acquisition in
2005.
Marketing Information. MI’s operating income increased 16.5% from e126 million in 2004 to
e147 million in 2005. Excluding a decrease from foreign exchange of 1.5%, operating income in
constant currency increased 18%. Constant currency operating income growth was primarily due to
higher 2004 restructuring expenses for Project Atlas and the MI Europe restructuring, coupled with
revenue gains falling directly to operating income in the Americas, Asia Pacific and Emerging
Markets, partly offset by a decline in operating income in Europe due to higher expenses
associated with running two factories simultaneously and lower revenues.
Media Measurement & Information. Operating income for MMI increased from e43 million in
2004 to e182 million in 2005. The unit incurred a goodwill impairment charge of e104 million in
2004 for its Entertainment reporting unit. Excluding the charge and the 3.8% impact from foreign
exchange, MMI’s operating income increased 28.1%. The increase was due primarily to the
increase in revenue in Media in the U.S.
Media’s increase in operating income was due to revenue growth in constant currency in the
U.S., partly offset by higher production, data acquisition, staffing, administration and marketing
costs. The higher expenses were the result of expanding the National People Meter and the
continued expansion of the Local People Meter from current set meter/diary methodology into four
of the largest U.S. markets. Nielsen Media Research outside of the U.S. declined from prior year
due to the formation of the AGB Nielsen Media Research joint venture.
NetRatings’ improved operating performance was due to the increase in revenue, decreased
cost of revenues, partly offset by increased sales and marking costs and severance charges in
2005. Nielsen Entertainment’s constant currency operating income increased primarily due to
revenue gains and headcount savings at Nielsen Book.
Business Information. BI’s operating income increased from e65 million in 2004 to e76 million
in 2005, an increase of 17.5%. Excluding a 4.3% negative impact from foreign exchange, constant
currency operating income increased 21.8%. The increase was due to strong performance at VNU
Trade Shows in the U.S., improvements at BME, partly offset by an operating loss at Business
Publications in the U.S.
Business Media U.S. increased 17.3% in constant currency, as growth in VNU Trade Shows
was partly offset by a decline at Business Publications in the U.S. VNU Trade Shows growth was
due to additional shows in 2005, continued growth at existing shows as revenue from existing
shows exceeded increased expenses. Business Publications in the U.S. decline was primarily due
to lower revenue, partly offset by the divestiture in 2005 of loss generating titles.
82
Operating income for BME increased slightly more than 100% from the prior year. The increase
was due to revenue growth, primarily in the Netherlands and to a lesser degree in the United
Kingdom, partly offset by the contingent earn-out payment deemed to be compensation expense
for the acquisition of National Vacaturebank.nl in 2004, difficulties experienced in most other
markets in Europe and the BIAS event not occurring in 2005.
Interest Income and Expense
Interest income increased by e4 million, an increase of 26.9%, from 2004 to 2005 due to more
favorable cash positions globally that generated higher interest income in 2005, partly offset by a
negative impact of foreign exchange. Interest expense decreased 8.2% from 2004 to 2005, as a
result of debt reductions at the end of 2004 and throughout 2005.
Other (Expense) Income, net
Other (expense) income, net was e3 million of income in 2004, compared to expense of
e62 million in 2005. The expense in 2005 was primarily due to a loss of e75 million from the debt
buy back in the first quarter of 2005, partly offset by a gain of e9 million on foreign currency
transactions.
Gain on Derivative Instruments
Our gain on derivative instruments decreased from e137 million in 2004, to e10 million in 2005.
The decline was largely a result of recording changes in the fair value of hedges in equity during
2005, as described below.
We use derivative instruments principally to manage the risk associated with movements in
foreign currency exchange rates and the risk that changes in interest rates will affect the fair value
or cash flows of our debt obligations. To qualify for hedge accounting, the hedging relationship
must meet several strict conditions with respect to documentation, probability of occurrence, hedge
effectiveness and reliability of measurement. As such documentation was not in place as of
December 31, 2004, no derivative instruments outstanding qualified for hedge accounting prior to
that date.
See Note 2 ‘‘Summary of Significant Accounting Policies’’ and Note 10 ‘‘Derivative Financial
Instruments’’ to the audited consolidated financial statements appearing elsewhere in this offering
memorandum and ‘‘—Quantitative and Qualitative Disclosures about Market Risk’’ for additional
information regarding accounting for derivative instruments.
Equity in Net Income of Affiliates
Equity in net income of affiliates was e6 million in 2005 and e6 million in 2004.
Provision for Income Taxes
Income taxes are computed on pre-tax earnings based upon the Consolidated Statements of
Income using the applicable tax rates in effect in the relevant countries. Differences between the
recorded deferred tax assets and liabilities and the realization of such assets and liabilities are
reflected in the income tax charge to the Consolidated Statements of Income.
Income taxes, expressed as a percentage of income from continuing operations before income
taxes, equity in net income of affiliates and minority interests (effective tax rate) were 19.5% in 2005,
and 16.3% in 2004. The 2005 effective tax rate was impacted by the release of provisions for tax
exposures as a result of the completion of a tax audit in the Netherlands resulting in a settlement of
certain items affecting the years 2000 through 2006. These issues were primarily related to the
Dutch taxation of our financing activities. Furthermore, we lowered the provision for tax exposures
related to transfer-pricing issues based on the expiration of various jurisdictional statutes of
83
limitation and the successful defense of the inter-company charges in tax audits in several
jurisdictions. The effective tax rate was also influenced by releases of valuation allowances on
deferred tax assets as several jurisdictions now have a demonstrated ability to realize these assets
and by other favorable tax true-up adjustments upon finalization of the Dutch income tax returns.
Although the Dutch financing activities lowered the effective tax rate in 2004, the 2005 Dutch
inter-company finance activities resulted in an increase of the effective tax rate due to a loss on the
buy-back of convertibles. The tax benefit associated with this buy-back loss was at a lower tax rate
than the statutory tax rate.
At December 31, 2005 and 2004, we had net operating loss carryforwards of approximately
e734 million and e497 million, respectively, that will begin to expire in 2009, and tax credit
carryforwards of approximately e20 million and e13 million, respectively, that will begin to expire in
2014. Due to the uncertainty of achieving sufficient profits to utilize these operating loss
carryforwards and tax credit carryforwards, we currently believe it is more likely than not that a
portion of these losses will not be realized. Therefore, we have recorded a net valuation allowance
of approximately e113 million and e94 million, at December 31, 2005 and 2004, respectively, related
to these net operating loss carryforwards and tax credit carryforwards. In addition, we have
established valuation allowances of e69 million and e56 million, at December 31, 2005 and 2004,
respectively, on deferred tax assets, related to temporary differences, which we currently believe will
not be realized.
Our future effective tax rates could be adversely affected by earnings being lower than
anticipated in countries where we have lower statutory rates and higher than anticipated in
countries where we have higher statutory rates, by changes in the valuation of our deferred tax
assets, or by changes in tax laws, regulations, accounting principles, or interpretations thereof.
We establish liabilities for possible assessments by taxing authorities resulting from known tax
exposures including, but not limited to, inter-company transfer pricing, and various other tax
matters. Such amounts represent a reasonable provision for taxes ultimately expected to be paid,
and may need to be adjusted over time as more information becomes known.
Minority Interests
Minority interests decreased from income of e4 million in 2004 to e0 in 2005. The decrease
was the result of improved performance and reduction of the loss at NetRatings.
Income from Continuing Operations
Income from continuing operations declined from e225 million in 2004 to e138 million in 2005.
The decline reflects the e104 million goodwill impairment charge in 2004 that reduced income. As
discussed under ‘‘—Gain on Derivative Instruments,’’ the strict documentation required for
derivatives to qualify for hedge accounting was not in place during 2004. For this reason, changes
in the fair value of derivatives were recognized immediately in the income statement. A decline in
the derivative gain of e127 million was represented year over year due to VNU qualifying for hedge
accounting treatment on January 1, 2005. The aforementioned items were offset in part by
e77 million (e55 million after tax) of increased costs from the settlement of the antitrust agreement
with IRI, payment of the IMS Health failed deal costs, Other (expense), net of e62 million resulting
primarily from the loss on the debt buy back in 2005 and a e10 million lower tax provision in 2005
compared with 2004.
Discontinued Operations
The total of income from discontinued operations, net of tax and gain (loss) on sales of
discontinued operations, net of tax, decreased from e254 million in 2004 to e6 million in 2005. See
Note 5 ‘‘Business Divestitures’’ to the audited consolidated financial statements appearing
elsewhere in this offering memorandum.
84
Financial Condition
This section discusses the major balance sheet variances from 2004 compared to 2005.
Total assets. Total assets decreased e1,161 million from e10,178 million to e9,017 million. The
decline was driven by a lower cash position of e1,826 million (mainly due to debt redemption
payments of e1,332 million and clearing bank overdrafts of e563 million), and lower derivatives of
e230 million and primarily offset by currency translation effect on assets.
Current assets. Current assets decreased e1,556 million from e3,559 million to e2,003 million
driven by a lower cash position of e1,826 million (discussed above) mainly offset by currency
translation effect on current assets in combination with higher receivables of e96 million, prepaid
expenses of e52 million and an increase of short-term derivatives of e136 million.
Total liabilities. Total liabilities decreased e1,788 million from e6,205 million to e4,417 million
driven by debt redemption (of which e1,101 million with Directories sale proceeds), clearing bank
overdrafts of e563 million, a decrease of tax liability positions of e41 million and the D&B Legacy
Tax Matter payment of e37 million, mainly offset by currency translation effect on liabilities.
Current liabilities. Current liabilities decreased e275 million from e2,170 million to
e1,895 million, driven by clearing bank overdrafts of e563 million, a decrease of current tax liability
position of e131 million, mainly offset by an increase in the current portion of external debt of
e372 million, and currency translation effect on current liabilities.
Shareholders’ equity. The increase of shareholders’ equity of e623 million from e3,889 million
to e4,512 million is mainly driven by a net currency translation effect of e530 million due to a
weaker Euro compared to the U.S. dollar at year end 2005 compared with 2004. The currency
translation effect change, in combination with 2005 net income of e144 million less the dividend
payments of e78 million, were the primary drivers of the increase.
Year ended December 31, 2004 compared to the year ended December 31, 2003
When comparing our results for the year ended December 31, 2004 with those of the year
ended December 31, 2003, the following should be noted:
• Our Consolidated Financial Statements for the year ended December 31, 2004 reflect the
effect of foreign currency exchange rates on its operations, several divestitures (in particular
Directories) and acquisitions, as well as restructuring charges.
• Our Consolidated Financial Statements for the year ended December 31, 2003 reflect several
divestitures (in particular Claritas Europe and Independent Media Holding B.V.) and
acquisitions (in particular the increase in interest in Romanian Directories).
Operating Revenues
VNU Consolidated. Operating revenues increased less than 1%, from e3,292 million in 2003 to
e3,319 million in 2004, reflecting a 6.2% negative impact of foreign exchange, primarily related to
the depreciation of the U.S. dollar versus the Euro, which partly offset a 7.0% increase in revenues
on a constant currency basis. Constant currency revenue grew at all three business units, MI by
7.9%, MMI by 8.1% and BI by 2.7%.
Marketing Information. Operating revenues for MI increased 2.7% from e1,758 million in 2003
to e1,806 million in 2004. Excluding a negative impact of foreign exchange of 5.2%, revenue would
have increased 7.9%. The increase was attributable to growth in all of the product lines. Retail
Measurement Services increased 8.1% in constant currency due primarily to new client wins, the
acquisition of the remaining interest in AMER, and increased sales of key account data. Revenue
from Other Database Services increased 6.4% in constant currency due primarily to a strong
85
performance at ACNielsen BASES from increased penetration of the existing client base as well as
sales to new clients, and growth in Claritas U.S. from the launch of a new division in the first half
2003 and higher renewal rates. Customized research services increased 10.4% in constant currency
due to the acquisition of the remaining interest in AMER in Emerging Markets as well as the
recovery from the SARS epidemic in Asia Pacific that occurred in 2003. The SARS epidemic in Asia
Pacific during the first half of 2003 had an adverse impact on revenue because VNU’s ability to
perform research interviews was extremely limited during the epidemic. Consumer Panel revenue
increased 8.3% in constant currency, primarily from the consumer direct service and sales to new
client.
Media Measurement & Information. Operating revenues for MMI decreased less than 1% from
e901 million in 2003 to e900 million in 2004. Excluding a negative foreign currency impact of 8.2%,
constant currency revenue would have been up 8.1%. Constant currency growth was primarily
driven by 8.1% growth in Media and 43.2% growth in Internet Measurement, partly offset by a slight
decrease in Entertainment.
Media’s constant currency growth was fueled by steady demand for Nielsen Media Research’s
television audience measurement services in the U.S., with an 11.0% increase, and outside of the
U.S., with an 8.0% increase, as a result of agreements with new clients and the introduction of new
products and services partly offset by the sale of MRP in March 2004. Growth in the U.S. was due
to the expansion of the National People Meter sample, continued implementation of the Local
People Meter technology to four new markets and an increase in the demand for the Hispanic
Panel. Local People Meter collects and transmits viewing data electronically and is currently being
expanded to replace the current set meter/diary measurement systems. Nielsen Media Research’s
revenue outside of the U.S. increased primarily due to growth in India, Spain and Germany.
Constant currency revenue grew 43.2% for NetRatings, Inc., our approximately 60% owned
Internet Measurement business. The acquisitions completed in 2003 (primarily Red Sheriff)
contributed over 60% of the increase. The remaining increase in revenue was primarily due to new
business sales of products and services, the launch of new product offerings, price increases for
existing products and services, and an increase in sales of custom research and analytical services,
partly offset by the discontinuation of the custom panel in Germany.
Nielsen Entertainment’s revenue decrease of 2.0% on a constant currency basis was due
primarily to a decline at Nielsen Film, as the unit had to cope with reduced marketing spending in
its sector, increased competition and pricing pressures, partly offset by constant currency growth at
Nielsen Music (due in part to the purchase of the remaining 50% interest in Music Control Europe
in 2004), Nielsen Interactive (new business unit launched in 2004 for the measurement of Video
Games) and Nielsen Home Entertainment.
Business Information. Operating revenues for BI decreased by 3.5% from e636 million in 2003
to e614 million in 2004, primarily due to the negative impact of foreign exchange and the continued
decline of advertising revenue in the U.S. Excluding a negative impact of foreign exchange of 6.2%,
constant currency revenue increased 2.7%. The increase was due to 11.0% growth in VNU Trade
Shows in the U.S., a 5.4% increase in BME, partly offset by a 4.7% decrease at Business
Publications in the U.S.
Our Trade Shows business in the U.S. increased from 2003 to 2004, in constant currency, due
to improved product offerings, realignment and growth at existing shows, which contributed to
approximately 70% of the gains, and the launch of seven new events in 2004. Net square feet of
floor space used and attendance at events in 2004 increased from the prior year.
Our Business Publications business revenue in the U.S. decreased 4.7% from 2003 to 2004 in
constant currency. The decrease was due primarily to a decline in revenue from existing titles (68%
86
of the decline), and to a lesser extent, closed publications and a change in the frequency in a
number of titles during the year.
BME constant currency revenue increased by 5.4% from 2003 to 2004. The increase was
achieved primarily from solid performances in the United Kingdom and the Netherlands and to a
lesser extent, Italy and France, offset by declines in advertisement and copy sales of our PC
publication in Germany and Spain. Recovery in the recruitment advertising market and higher
market share has helped achieve better performance in 2004. The Netherlands and the United
Kingdom represent 52% of the BME’s revenues.
Cost of Revenues, Exclusive of Depreciation and Amortization (Cost of Revenues)
Cost of revenues increased from e1,583 million in 2003 to e1,595 million in 2004, an increase
of less than 1.0%. Excluding the 5.7% decrease from foreign exchange, cost of revenues would
have increased 6.5%. Constant currency cost of revenues increased at all three business units, MI
by 8.8%, MMI by 6.3% and BI by 0.4%.
Cost of revenues in constant currency increased at MI 8.8% from 2003 to 2004 due to
transition costs for the new data factory in Europe, the consolidation of AMER due to the purchase
of the remaining 51% share of the business, increased cooperation expenses due to channel and
geographic expansion, the geographic expansion of ACNielsen BASES and higher pension costs in
Europe.
MMI constant currency cost of revenues increased 6.3% from 2003 to 2004 primarily due to the
costs associated with the corresponding growth in revenue, partly offset by savings in
Entertainment. In Media, costs increased due to expansion of the Local People Meter and National
People Meter in the U.S., primarily from staffing, commission, software and maintenance expenses
and the television audience measurement expansion in China. The Internet increase was primarily
due to the expansion and building of NetRatings MegaPanel in the U.S. and internationally, building
a Hispanic panel and costs associated with acquisitions. The Entertainment decrease was due to
lower data collection costs and savings from the consolidation of Whitaker and Nielsen Book
services, partly offset by increased outsourced data collection costs at EDI and increased retailer
cooperation payments.
BI constant currency cost of revenues increased 0.4% from 2003 to 2004, as a result of an
increase in trade show rental space and newsstand returns in Europe and increased costs due to
the growth in trade shows in the U.S., partly offset by lower expenses in U.S. publications for
production, distribution and headcount due to decreased advertising revenue.
Selling, General and Administrative Expenses
Selling, general and administrative costs decreased from e1,154 million in 2003 to
e1,129 million in 2004, or 2.2%. Excluding the 6.4% decrease from foreign exchange, selling,
general and administrative costs would have increased 4.2%. The increase in constant currency
was due primarily to increases at all three business units, MI by 8.2%, MMI by 6.5%, and BI by
2.3%, that was partly offset by a real estate accrual reversal in Corporate.
The 8.2% increase at MI was due to higher initiative spending, higher client service costs as a
result of new contracts in the U.S., global expansion of ACNielsen BASES services, impact of the
purchase of the remaining 51% interest in AMER and higher pension costs in the U.S. and Europe.
MMI constant currency costs increased in Media, Entertainment and Internet. The increase was
due to higher public relations cost in the U.S. and increased costs at the Entertainment unit for
product development and geographical expansion to address increased competition and pricing
pressures. Entertainment costs also increased due to the acquisition of Music Control. Internet
costs increased due to higher personnel costs resulting from acquisitions completed during 2003
87
and higher expenses related to compliance with new corporate governance regulations, offset by
the one-time insurance settlement related to patent litigation.
BI costs were up 2.3% as a result of increased marketing and sales costs in the United
Kingdom and Holland, and higher general and administrative to support the growth of the Trade
shows in the U.S., partly offset by savings in U.S. publications due to discontinuing some
non-profitable titles and promotional expense cuts.
In November 2000, Nielsen Media Research, Inc. entered into a 15-year lease for 155,000
square feet of office space in New York City. Subsequently, the New York operations of Nielsen
Media Research, Inc. were consolidated into the office space of VNU, Inc., leaving this space
vacant. During 2003, we recorded an additional change to selling, general and administrative
expense of e31 million to accrue the net present value of the future minimum lease commitment
less the estimated sublease income to be realized once the space was sublet. The annual increase
in the present value of this accrual is reflected as occupancy costs. Reflecting an improvement in
the real estate market in 2004, the property was sublet and e14 million of the loss accrual was
reversed.
Depreciation and Amortization
Depreciation and amortization costs decreased from e254 million in 2003 to e244 million in
2004; a 3.9% decline. Excluding the 5.9% decrease from foreign exchange, depreciation and
amortization costs would have increased 2.0%. The increase in constant currency was due primarily
to an 9.8% increase at MMI and to a lesser extent a 13.4% increase at Corporate, partly offset by
decreased costs in BI by 11.6% and MI by 0.5%.
MMI increases were due to the implementation of the Local People Meter into three markets
and the expense associated with Oldsmar, which was occupied in late 2003. The decrease in costs
at MI was the result of the write down of Category Business Planner software in 2003, partly offset
by amortization of the new data factory in Europe. The cost changes at BI and Corporate were not
significant.
Goodwill Impairment Charges
During the fourth quarter of 2004, we performed our annual impairment test for goodwill, and
recorded a non-cash charge of e104 million. This impairment charge reduced the carrying value of
goodwill in the Entertainment reporting unit within MMI. The charge reflects the impact of increased
competition and client consolidation during 2004 in the film sector and the continued deterioration
of the music market resulting from increased piracy and illegal duplication of compact discs.
Restructuring Costs
Our restructuring costs reflect estimates and we reassess the requirements for completing each
individual plan under our restructuring programs at least bi-annually. As discussed in Note 11
‘‘Restructuring Activities’’ to the audited consolidated financial statements appearing elsewhere in
this offering memorandum, we had three major active restructuring plans during the years 2004 and
2003: Marketing Information Europe Restructuring, Corporate Headquarters Restructuring and
Project Atlas Restructuring.
Marketing Information Europe Restructuring. In December 2004, we initiated a restructuring
plan within MI to improve the competitiveness of the European retail measurement business. The
2004 charge of e11 million was entirely for severance benefits. This plan will result in headcount
reductions of 81 employees in Europe.
Corporate Headquarters Restructuring. In November 2004, we initiated a restructuring plan in
conjunction with the relocation of a portion of our Corporate Headquarters from Haarlem in the
88
Netherlands to New York in the U.S. The relocation is the consequence of the recent changes in
our business portfolio (including the sale of World Directories) and the fact that the majority of
operations are now managed from New York. This plan will result in a headcount reduction of
approximately 40 employees in Haarlem. The 2004 charge of e9 million consisted primarily of
severance benefits.
Project Atlas Restructuring. In December 2003, we launched Project Atlas, a multi-year
business improvement program in MI. This program was designed to enable MI to better meet
client needs, improve operational efficiency, accelerate revenue growth through the introduction of
new products and services and increase operating margins. Primarily concentrated in MI’s North
American operations, Project Atlas activities are expected to streamline key operational practices to
enhance quality and lower production costs, create a more streamlined and state-of-the-art
technology platform and use global purchasing power to achieve cost efficiencies.
Project Atlas began in 2003 and was expected to result in headcount reductions in excess of
700 employees, primarily in North America. The initial charge of e17 million in 2003 consisted of
e13 million for severance benefits and e4 million for related consulting expenses incurred in 2003.
In connection with all of the restructuring actions discussed above, severance benefits were
computed pursuant to the terms of local statutory minimum requirements in labor contracts or
similar employment agreements.
Refer to Note 11 ‘‘Restructuring Activities’’ to the audited consolidated financial statements
appearing elsewhere in this offering memorandum for additional details on our restructuring
activities.
Operating Income
For the foregoing reasons, operating income for the year ended December 31, 2004 was
e219 million, or a 22.6% decrease from the e284 million operating income for the year ended
December 31, 2003.
2004 operating income from continuing operations decreased from e288 million in 2003 to
e225 million in 2004, or 21.9%. Excluding the 6.0% negative impact of foreign exchange (primarily
the weaker U.S. dollar), operating income would have been down 16.6%. The decrease was the
result of an impairment charge at MMI’s Entertainment reporting unit of e104 million in 2004 offset
in part by the year over year benefit of e45 million from the New York City lease accrual (2004
includes a e14 million reversal while a charge of e31 million was recorded in 2003) and strong
operating results in all three business segments.
Marketing Information. MI’s operating income increased from e125 million in 2003 to
e126 million in 2004 or 1.9%. Excluding a negative impact from foreign exchange of 5.7%,
operating income increased 7.6%. Constant currency operating income growth was due to the
timing of the 2003 impairment on the Category Business Planner software, lower share
compensation costs, incremental income from the acquisition of the remaining interest in AMER and
revenue growth in the Americas. The growth was partly offset by transition costs for the new data
factory in Europe, higher pension costs (particularly in the U.S. and the United Kingdom), higher
cooperation expenses driven by geographic and channel expansions, as well as the revenue mix
due to higher key account sales, and the expansion of the ACNielsen Homescan consumer panel in
the U.S.
Media Measurement & Information. Operating income for MMI decreased to e43 million in
2004 from e137 million in 2003. The unit incurred a goodwill impairment charge of e104 million in
2004 for its Entertainment reporting unit. The negative impact of this charge was mitigated by the
substantial constant currency growth in revenues from Nielsen Media Research’s U.S. operations,
89
MMI’s largest business unit, and improved operating performance at NetRatings, partly offset by
declines at Entertainment, and Nielsen Media Research outside the U.S.
Media’s increase in operating income was due to revenue growth in constant currency in the
U.S., partly offset by higher production, data acquisition, staffing, administration and marketing
costs. The higher expenses were the result of expanding the National People Meter and the
continued expansion of the Local People Meter from current set meter/diary methodology into four
of the largest U.S. markets. This increase was partially offset by Nielsen Media Research outside of
the U.S. decline from prior year due to investment in new products such as Nielsen Outdoor as well
as the television audience measurement service expansion in China more than offset the increase
in revenue and the impact of the sale of MRP in March, 2004
NetRatings’ improved operating performance was due to an increase in revenue, decreased
cost of revenues and the reversal of restructuring charges.
Nielsen Entertainment’s constant currency operating income decreased due to an overall
decline at Nielsen Film, increased costs due to the Music Control acquisition and retailer co-op
payments. The decrease was due to declining revenue at Nielsen Film and the significant
investments in technology, product development and geographical expansion designed to enhance
future growth and competitiveness in the market place, partly offset by lower data collection costs
as a result of lower sales. The investments were needed as a result of increased competition and
pricing pressures.
Business Information. BI’s operating income increased from e59 million in 2003 to e65 million
in 2004 or 10.4%. Excluding an 8.5% negative impact from foreign exchange (primarily due to the
impact of the weaker U.S. dollar), constant currency operating income increased 18.9%. The
increase was due to strong performance at VNU Trade Shows, improvements at Business
Publications in the Netherlands, and reduced personnel and operating expenses in Business
Publications in the U.S. The cost structure of the segment improved due to ongoing cost-saving
measures, including lowering headcounts and discontinuing non-profitable titles.
Headcount of BI in the U.S. was down slightly from the end of 2003. The reductions at
Business Publications in the U.S. were almost entirely offset by increases in headcount at Trade
Shows due to growth. Essentially all of BI’s operating income in 2004 was generated in the U.S.
The increase in constant currency operating income in the U.S. was due solely to our Trade Shows
business, whose significant revenue growth from new shows and the realignment of existing events
was partly offset by increased costs. Our publishing business in the U.S. in 2004 continued to
experience declining advertising revenues, but the declines were mostly offset by headcount
reductions, savings from manufacturing and distribution, lower external commissions and
promotional expenses.
Operating income for BME increased due to revenue growth, primarily in the Netherlands and
the United Kingdom, partly offset by increases in the cost of revenues and selling, general and
administrative costs due to the top line growth.
Interest Income and Expense
Interest income was down 2.7% from 2003 to 2004 due to lower 2004 foreign exchange
translation of interest earned in non-Euro countries. Interest expense increased 5.6% from 2003 to
2004 due to an increase in our average interest rate on borrowings.
Other (Expense) Income, net
Other (expense) income, net was e3 million in 2004 compared with an expense of e67 million
in 2003. The net expense in 2003 includes e65 million of exchange losses on revaluation of
intercompany loans.
90
Gain on Derivative Instruments
Our gain on derivative instruments decreased 58.2% from e327 million in 2003 to e137 million
in 2004, largely as a result of the strengthening of the Euro versus the U. S. dollar. The Euro
strengthened to a greater extent in 2003, resulting in a more significant gain on revaluation of our
foreign currency forward exchange contracts in that year.
We use derivative instruments principally to manage the risk associated with movements in
foreign currency exchange rates and the risk that changes in interest rates will affect the fair value
or cash flows of our debt obligations. To qualify for hedge accounting, the hedging relationship
must meet several strict conditions with respect to documentation, probability of occurrence, hedge
effectiveness and reliability of measurement. As such documentation was not in place in 2004 and
2003, no derivative instruments outstanding qualified for hedge accounting and changes in fair
values of e137 million and e327 million were recognized as gains in 2004 and 2003, respectively.
See Note 2 ‘‘Summary of Significant Accounting Policies’’ and Note 10 ‘‘Derivative Financial
Instruments’’ to the audited consolidated financial statements appearing elsewhere in this offering
memorandum and ‘‘—Quantitative and Qualitative Disclosures about Market Risk,’’ for additional
information regarding accounting for derivative instruments.
Equity in Net Income of Affiliates
Equity in net income of affiliates was e8 million in 2003 and e6 million in 2004. The decline
from 2003 to 2004 was the result of the consolidation of AMER in January 2004 and the
consolidation of Music Control in March 2004.
Provision for Income Taxes
Income taxes are computed on pre-tax earnings based upon the Consolidated Statements of
Income using the applicable tax rates in effect in the relevant countries. Differences between the
recorded deferred tax assets and liabilities and the realization of such assets and liabilities are
reflected in the income tax charge to the Consolidated Statements of Income.
Income taxes, expressed as a percentage of income from continuing operations before income
taxes, equity in net income of affiliates and minority interests (effective tax rate) were 16.3% in 2004
and 39.0% in 2003.
The lower effective tax rate in 2004 when compared to 2003 is primarily attributable to a
change in the mix of earnings, as well as the reversal of certain valuation allowances.
Minority Interests
Minority interests decreased from e6 million in 2003 to e4 million in 2004. The decline was the
result of improved performance and reduction of the loss at NetRatings.
Income from Continuing Operations
Income from continuing operations declined 21.9% from e288 million in 2003 to e225 million in
2004. The decline reflects a higher gain of e190 million in 2003 from derivative transactions, as well
as a e104 million goodwill impairment charge in 2004. As discussed under ‘‘—Gain on Derivative
Instruments,’’ the strict documentation required for derivatives to qualify for hedge accounting was
not in place during 2004 and 2003. For this reason, changes in the fair value of derivatives were
recognized immediately in the income statement. The aforementioned items were offset in part by a
e133 million lower tax provision in 2004 compared with 2003.
91
Discontinued Operations
The total of income from discontinued operations, net of tax and gain (loss) on sales of
discontinued operations, net of tax, increased 188.6% from e88 million in 2003 to e254 million in
2004. Refer to Note 5 ‘‘Business Divestitures’’ of the audited consolidated financial statements
included elsewhere in this offering memorandum for further information on discontinued operations.
Liquidity and Capital Resources
Cash Flows
Operating Activities. At March 31, 2006, we had e869 million of cash and cash equivalents
with which to manage operations, an increase of e7 million from December 31, 2005. Cash inflow
from operations was e45 million, a decrease of e23 million compared to the three months ended
March 31, 2005. The decrease primarily represents lower working capital resulting from the
payment in connection with the settlement of the antitrust litigation with IRI (e47 million), partly
offset by lower pension funding and lower interest payments in the first quarter of 2006.
At December 31, 2005, we had e862 million of cash and cash equivalents. Our net cash inflow
from operating activities in 2005 amounted to e422 million, a decrease of 11.9% from e479 million
in 2004. The decrease is primarily due to the negative impact on cash flow of the 2004 divestiture
of Directories, compared to the lower 2005 interest payments and higher interest receipts from the
Directories’ proceeds. We generate significant cash flows, as our principal businesses do not
generally require major fixed or working capital investments.
Our net cash inflow from operating activities in 2004 amounted to e479 million, a decrease of
30.1% from e685 million in 2003.
Investing Activities. Our cash flow used in investing activities for the three months ended
March 31, 2006 was e34 million compared to e113 million for the three months ended March 31,
2005, a decrease of e79 million. The decrease was primarily due to lower acquisition payments
from the comparative period, payments from the sale of our Directories business made in the first
quarter of 2005 that did not recur in 2006 and higher net proceeds from investments in marketable
securities.
Our cash flow from investing activities decreased from a cash inflow of e1,855 million in 2004
to a cash use of e348 million in 2005. The change was primarily due to the e2,003 million received
in 2004 for the sale of the Directories (see Note 5 ‘‘Business Divestitures’’ to the audited
consolidated financial statements appearing elsewhere in this offering memorandum) and increased
expenditures for acquisitions of e59 million in 2005. We also had an unfavorable variance of
e115 million resulting from the 2004 proceeds on sale of foreign currency swaps, which in 2005
were recorded as financing activities upon documentation of the derivatives as effective hedges at
January 1, 2005 (see Note 10 ‘‘Derivative Financial Instruments’’ to the audited consolidated
financial statements appearing elsewhere in this offering memorandum).
Our cash flow from investing activities increased from a cash use of e391 million in 2003 to a
cash inflow of e1,855 million in 2004. In addition to the e2,003 million received in 2004 for the sale
of Directories (see Note 5 ‘‘Business Divestitures’’ to the audited consolidated financial statements
appearing elsewhere in this offering memorandum), capital expenditures were favorable by
e58 million from 2003. In 2003 capital expenditures included the investment in systems
infrastructure to support the building of MMI’s Oldsmar, Florida Global Technology and Information
Center and the leasehold improvements in the New York facility to support NMR’s move into the
U.S. headquarters site in New York. Cash flows from other investing activities in 2004 reflected the
higher proceeds on sale of foreign currency swaps of e102 million.
92
Financing Activities. Our cash flow used in financing activities for the three months ended
March 31, 2006 was e7 million compared to e1,174 million for the three months ended March 31,
2005, a decrease of e1,167 million. The decrease was due to e1,188 million of debt repayments
that occurred in the first quarter of 2005.
Our cash used for financing activities increased to e1,924 million in 2005 from e557 million in
2004. The increase was due to higher net repayments of long and short-term debt and decreased
bank overdrafts in 2005. The repayments of debt increased to e1,332 million in 2005 from
e667 million in 2004, mainly reflecting the higher 2005 debt redemptions from the cash received for
the sale of the Directories in late 2004.
Our 2004 cash used in financing activities increased to e557 million, an increase of 71.9% from
e324 million in 2003. The increase was due to higher net repayments of long and short-term debt of
e584 million in 2004 from e242 million in 2003, mainly reflecting the pay down of debt from the
cash received for the sale of Directories in late 2004. The increase was also impacted by higher
bank overdrafts in 2004, partly offset by the absence of proceeds from the 2003 Oldsmar, Florida
and Markham Canada capital lease transactions (see Note 13 ‘‘Long-Term Debt and Other
Financing Arrangements’’ to the audited consolidated financial statements appearing elsewhere in
this offering memorandum).
Capital Expenditures. Our recent capital expenditures principally relate to computer
equipment, office facilities and, increasingly, investment in system infrastructure to support the
building of MMI’s Oldsmar, Florida Global Technology and Information Center and the leasehold
improvements in the New York City facility to support Nielsen Media Research’s move in 2003.
Capital expenditures for MI remained unchanged at e13 million, for the three months ended
March 31, 2006 and 2005. Capital expenditures at MMI were e13 million in the three months ended
March 31, 2006 as compared to e21 million for the three months ended March 31, 2005. The
decrease was primarily due to higher spending for the rollout of the Local People Meters in the first
quarter of 2005.
Investments in property, plant, equipment, software and other assets totaled e28 million in the
three months ended March 31, 2006, a decrease of 17.6%, from e34 million in the three months
ended March 31, 2005. MI and MMI accounted for 93.6% and 98.5% of the total capital
expenditures, in the first quarters of 2006 and 2005, respectively.
Capital expenditures at MI were e87 million, e82 million and e81 million in 2005, 2004, and
2003 respectively. In 2005 and 2004 the largest investments were made in the new data factory in
Europe and the expansion of the Megapanel in the U.S. Spending in 2004 and 2003 included
amounts in North America for Project Atlas.
Capital expenditures at MMI were e94 million, e116 million and e158 million in 2005, 2004, and
2003 respectively. The most significant investment item in 2005 and 2004 was the rollout of the
Local People Meter and the expansion of the National People Meter in the U.S. Other significant
investments were made in the Florida Global Technology and Information Center, e4 million,
e25 million and e76 million in 2005, 2004, and 2003 respectively.
We expect the capital expenditures for MI and MMI to continue at the historical levels, while
BI’s capital requirements will remain minimal. The Company did not have significant commitments
for the purchase of capital equipment as of March 31, 2006.
93
Investments in property, plant, equipment, software and other assets totaled e190 million,
e217 million and e275 million in 2005, 2004 and 2003 respectively. MI and MMI accounted for
95.1%, 91.4% and 86.9% of our total capital expenditures in 2005, 2004 and 2003, respectively.
Pro forma Indebtedness
After the consummation of the Transactions, we will be highly leveraged. As of March 31, 2006,
on a pro forma basis, after giving effect to the Transactions, we would have had outstanding
e6,322 million ($7,570 million) in aggregate indebtedness (including e135 million ($162 million) of
payment obligations relating to capital lease obligations and other subsidiary debt), with an
additional e574 million ($688 million) of borrowing capacity available under our new senior secured
revolving credit facility (not giving effect to any outstanding letters of credit, which would reduce the
amount available under our new senior secured revolving credit facility). Our liquidity requirements
will be significant, primarily due to debt service requirements and financing costs incurred in
connection with the Transactions. On a pro forma basis, after giving effect to the Transactions, our
cash interest expense for the twelve months ended March 31, 2006 would have been e430 million
($515 million).
New Senior Secured Credit Facilities
Overview. After consummation of the Transactions, our new senior secured credit facilities will
consist of e4,861 million ($5,821 million) in senior secured financing, comprised of a e4,287 million
($5,133 million) term loan facility and a e574 million ($688 million) revolving credit facility. Nielsen
Finance LLC will be the borrower under the term facility. Nielsen Finance LLC, VNU Holding and
Finance B.V. and AC Nielsen Company of Canada will be the borrowers under the revolving credit
facility. The new senior secured revolving credit facility will include borrowing capacity available for
revolving loans, letters of credit and for swingline loans, and will be available in U.S. dollars, Euros
and certain other currencies.
Interest Rate and Fees. Borrowings denominated in Euros or U.S. dollars other than swingline
loans, will bear interest at a rate equal to an applicable margin plus, at our option, either (a) an
adjusted LIBOR or EURIBOR rate, determined by reference to settlement rates established for
deposits in dollars in the London interbank market for a period equal to the interest period of the
loan and the maximum reserve percentages established by the applicable regulations to which our
lenders are subject, for a one-, two-, three- or six-month interest period, or a nine- or twelve-month
period, if agreed to by our lenders or (b) an alternate base rate in the case of U.S. dollar loans
determined by reference to the greater of (1) the prime rate of Citibank and (2) the federal funds
rate, as published by the Federal Reserve Bank of New York, plus one-half of 1%. Swingline loans
will bear interest at the interest rate applicable to alternate base rate revolving loans. The applicable
margin for borrowings under the new revolving credit facility may be reduced subject to our
attaining certain leverage ratios. Interest rates on loans denominated in other currencies will be
based on rates common for such currencies plus an applicable margin.
In addition to paying interest on the outstanding principal under the senior secured credit
facilities, on the last day of each calendar quarter we will be required to pay each lender (i) a
commitment fee in respect of any unused commitments under the new senior secured revolving
facility and the delayed draw portion of the term loan facility and (ii) a letter of credit fee in respect
of the aggregate face amount of outstanding letters of credit under the new senior secured
revolving facility.
Amortization. We are required to repay installments on the loans under the term loan facility in
quarterly principal amounts of 0.25% of their original principal amount for the first six years and
94
three quarters, with the remaining amount payable on the date that is seven years from the date of
the repayment of the senior secured bridge facility.
Principal amounts outstanding under the term loan facility are due and payable in full at
maturity, seven years from the date of the repayment of the senior secured bridge facility.
Principal amounts outstanding under the revolving credit facility are due and payable in full at
maturity, six years from the date of the repayment of the senior secured bridge facility.
Certain Covenants and Events of Default. The senior secured credit facilities will contain a
number of covenants that, among other things, restrict, subject to certain exceptions, our (and most
of our subsidiaries’) ability to:
• incur, assume or permit to exist additional indebtedness or guarantees;
• incur liens and engage in sale and leaseback transactions;
• make certain loans and investments;
• declare dividends, make payments or redeem or repurchase capital stock;
• engage in certain mergers, acquisitions and other business combinations;
• prepay, redeem or purchase certain indebtedness, including the notes offered hereby;
• amend or otherwise alter terms of certain indebtedness, including the senior subordinated
discount notes offered hereby;
• sell certain assets;
• transact with affiliates;
• enter into agreements limiting subsidiary distributions; and
• alter the business that we conduct.
In addition, the senior secured credit facilities will, after an initial grace period, require us to
maintain a maximum total leverage ratio.
The senior secured credit facilities will also contain certain customary affirmative covenants and
events of default.
Notes offered by Nielsen Finance LLC and Nielsen Co.
The indentures governing the Senior Notes and the Senior Subordinated Discount Notes being
offered by Nielsen Finance LLC and Nielsen Co. will limit our (and most or all of our subsidiaries’)
ability to:
• incur additional indebtedness;
• pay dividends or make other distributions or repurchase our capital stock;
• make certain investments
• enter into certain types of transactions with affiliates;
• use assets as security in other transactions; and
• sell certain assets or merge with or into other companies.
Subject to certain exceptions, the indentures governing the Senior Notes and the Senior
Subordinated Discount Notes will permit us and our restricted subsidiaries to incur additional
indebtedness, including secured indebtedness. See ‘‘Description of Senior Notes’’ and ‘‘Description
of Senior Subordinated Discount Notes.’’
95
Notes offered hereby
In connection with the Transactions we are offering e343 million aggregate principal amount at
maturity of Senior Discount Notes due 2016. For further information concerning the notes see
‘‘Description of Senior Discount Notes.’’
Existing Indebtedness
EMTN Notes. In October 2001, we established a e2,000 million Euro Medium Term Note
(‘‘EMTN’’) program. Under this program, debenture loans and private placements can be issued up
to the program amount, both on a long-term and short-term basis. In October 2003, the program
amount was increased to e2,500 million. At December 31, 2005 and 2004, e712 million and
e1,294 million, respectively, of the program amount was issued under the EMTN program. Upon
consummation of the Transactions e518 million will remain outstanding under this program.
Capital Lease Obligations. We lease computer equipment and automobiles under capital
leases. Additionally, we entered into leasing transactions for buildings in Oldsmar, Florida and
Markham, Ontario. Due to significant continuing involvement, as defined in SFAS No. 98,
‘‘Accounting for Leases,’’ the transactions did not qualify for sale-leaseback accounting and have
been accounted for as financings. The proceeds received from the buyers-lessors are recorded as
capital lease obligations on our Consolidated Balance Sheets. Leases under capital lease do not
include terms of renewal, purchase options, or escalation clauses.
Commitments and Contingencies
Contractual Obligations. Our contractual obligations include capital lease obligations, facility
leases, leases of certain computer and other equipment, agreements to purchase data and
telecommunication services, the payment of principal and estimated interest on debt and pension
fund obligations. At March 31, 2006, on a pro forma basis, after giving effect to the Transactions,
the minimum annual payment under these agreements and other contracts that had initial or
remaining non-cancelable terms in excess of one year are as listed in the following table:
Payments due by period
(amounts in millions)
TOTAL
Capital lease obligations and other debt(a)
Operating leases(b) . . . . . . . . . . . . . . . . .
Other contractual obligations(c) . . . . . . . . .
Short term and long term debt . . . . . . . . .
Pension fund obligations(d) . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2006
2007
2008
2009
2010
AFTER
2010
. e 135 e 7 e 5 e 5 e 12 e 5 e 101
.
560
103
81
69
57
51
199
.
236
109
48
30
25
15
9
.
6,187
43
43
43
43
453
5,562
.
24
24
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . e 7,142 e 286 e 177 e 147 e 137 e 524 e 5,871
(a) Our capital lease obligations are described in Note 13 ‘‘Long-Term Debt and Other Financing
Arrangements’’ to the audited consolidated financial statements appearing elsewhere in this
offering memorandum.
(b) Our operating lease obligations are described in Note 19 ‘‘Commitments and Contingencies’’ to
the audited consolidated financial statements appearing elsewhere in this offering
memorandum.
(c) Other contractual obligations represent obligations under agreement, which are not unilaterally
cancelable by us, are legally enforceable and specify fixed or minimum amounts or quantities
96
of goods or services at fixed or minimum prices. We generally require purchase orders for
vendor and third party spending. The amounts presented above represent the minimum future
annual services covered by purchase obligations including data processing, building
maintenance, equipment purchasing, photocopiers, land and mobile telephone service,
computer software and hardware maintenance, and outsourcing. Annual expense under these
purchase obligations for the years 2005, 2004 and 2003 were e317 million, e299 million, and
e342 million, respectively.
(d) Our contributions to pension and other post-retirement benefits plans for the years 2005, 2004,
and 2003 were e48 million, e38 million, and e24 million, respectively. Future pension and other
post-retirement benefits contributions are not determinable for time periods after 2006.
The impact of lower market interest rates, combined with the impact of derivatives related to
the debt repurchase, resulted in a one-time loss in 2005 of e75 million.
During the first quarter of 2006, we renewed or extended existing operating lease obligations
for commitments totaling approximately e25 million having an average term of 6.7 years.
Our Project Forward initiative to expand current cost-savings programs to all areas of our
operations worldwide, will require the outlay of significant amounts of cash in its initial stages. This
cash outlay may negatively impact our liquidity. Laws and public regulations may prohibit the
repatriation of funds available from certain countries. Such restrictions have not had an impact on
our ability to meet our cash obligations in the past.
Management expects our cash flows from operations, combined with availability under our new
senior secured revolving credit facility, to provide sufficient liquidity to fund our current obligations,
projected working capital requirements, restructuring obligations and capital spending for a period
that includes the next twelve months.
Guarantees and Indemnifications. In addition to contractual obligations and commercial
commitments given, we have entered into various guarantees or other specific agreements. The
most significant ones are guarantees by VNU, Inc. and VNU in favor of their subsidiaries and
guarantees with external parties in the U.S. and Europe. These obligations total approximately
e11 million. See Note 19 ‘‘Commitments and Contingencies’’ to the audited consolidated financial
statements appearing elsewhere in this offering memorandum for further information on guarantees.
Our contingent commitments for which no liability had been accrued at December 31, 2005
were e10 million for guarantees and e1 million for letters of credit.
Nielsen Media Research International, one of our subsidiaries, has provided sub-lease
guarantees in accordance with certain real estate sub-lease agreements pursuant to which VNU
guarantees all rental payments upon default of rental payment by the sub-lessee. VNU does not
anticipate making any significant payments under real estate sub-lease guarantees. Accordingly, no
liabilities were recorded with respect to such guarantees.
In connection with the sale of Directories in 2004, VNU has an exposure under a tax indemnity
guarantee with the acquirer, pursuant to which VNU has agreed to pay any tax obligations relating
to periods prior to the sale. VNU has accrued e27 million at December 31, 2005 and March 31,
2006, which is not included in the table above. See Note 5 ‘‘Business Divestitures’’ to the audited
consolidated financial statements appearing elsewhere in this offering memorandum for further
discussion.
VNU guarantees subsidiary credit facilities with international banks totaling e87 million. At
December 31, 2005, no amounts were outstanding under these facilities.
VNU has no material liabilities for other guarantees arising in the normal course of business at
December 31, 2005.
97
Termination Agreement VNU—IMS Health. On November 17, 2005, IMS Health announced
their agreement with us on the termination of the planned merger of the two companies. Under the
terms of the termination agreement, amongst other things, we agreed to pay an amount of
$45 million to IMS Health, Inc. should we be acquired pursuant to any agreement entered into
within the twelve months following the termination. IMS Health agreed to pay $15 million should
IMS Health be acquired pursuant to any agreement entered into within twelve months from the
termination. On May 24, 2006, due to the consummation of the transaction by Valcon, we made the
$45 million payment to IMS Health.
Letters of Credit. VNU has letters of credit outstanding of e1 million to an international bank in
relation to certain guarantees of real estate leases of VNU subsidiaries, which expire through 2014.
Dun & Bradstreet Legacy Tax Matters. In November 1996, Dun & Bradstreet, then known as
the Dun & Bradstreet Corporation (‘‘Old D&B’’) separated into three public companies by spinning
off the A.C. Nielsen Company and Cognizant Corporation. In June 1998, Old D&B changed its
name to R.H. Donnelley Corporation and spun-off the Dun & Bradstreet Corporation (‘‘New D&B’’),
and Cognizant Corporation changed its name to Nielsen Media Research, Inc., and spun-off IMS
Health. In September 2000, New D&B changed its name to Moody’s Corporation and spun-off a
company now called The Dun & Bradstreet Corporation. In November 1999, we acquired Nielsen
Media Research, Inc. and in 2001 we acquired the A.C. Nielsen Company.
Pursuant to the agreements affecting the November 1996 spin-off, among other things, certain
liabilities, including contingent liabilities relating to the IRI Action and tax liabilities arising out of
certain prior business transactions (the ‘‘D&B Legacy Tax Matters’’), were allocated among Old
D&B, A.C. Nielsen and Cognizant under the Original Joint Defense Agreement. See Note 19
‘‘Commitments and Contingencies’’ to the audited consolidated financial statements appearing
elsewhere in this offering memorandum.
As a result of the June 1998 Cognizant spin-off, IMS Health and Nielsen Media Research
agreed they would share equally Cognizant’s share of liability arising out of the D&B Legacy Tax
Matters after IMS Health paid the first $0.1 million of such liability. Nielsen Media Research’s
aggregate liability for payments related to the D&B Legacy Tax Matters and legal fees of the IRI
Action shall not exceed $125 million.
In connection with the acquisition of Nielsen Media Research, we recorded, in 1999, a liability
for Nielsen Media Research’s aggregate liability for payments related to the D&B Legacy Tax
Matters and legal fees of the IRI Action. We believe we have adequately provided for any remaining
liability related to these matters.
Other Contingencies. In connection with our acquisition of Nationale Vacaturebank.nl in 2004,
we may be required to pay contingent consideration up to a maximum of e11 million based on the
continued employment and the achievement of certain EBIT targets during 2005 and 2006. Based
on 2005 operating results, an earnout of e3 million was recognized as selling, general and
administrative expenses in 2005.
In connection with our 51% share in BuzzMetrics, formerly known as Trendum, we have a call
option to acquire an additional 35% at a price based on year 2007 multiples of either EBITA or total
revenues. The call option is exercisable from January 1, 2008 until 30 days after our receipt of
financial statements containing the information required to make the calculation. Based on current
estimates, the value of the call option is not material.
In connection with our acquisition of a further 15% share in VNU Business Publications Espana
S.A. in 2004, we had a call option to acquire an additional 10% at a price based on the higher of
an average of 2004 and 2005 multiples of EBITDA or a guaranteed amount of e2 million. The call
option was exercised at the end of 2005 for the guaranteed amount.
98
Off-Balance Sheet Arrangements
Except as disclosed above, we have no off-balance sheet arrangements that currently have or
are reasonably likely to have a material effect on our consolidated financial condition, changes in
financial condition, results of operations, liquidity, capital expenditure or capital resources.
Summary of Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 153, ‘‘Exchanges of Nonmonetary Assets-An
Amendment of APB Opinion No. 29.’’ SFAS No. 153 amends APB Opinion No. 29, ‘‘Accounting for
Nonmonetary Transactions,’’ to eliminate the exception from fair value measurement for
nonmonetary exchanges of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 specifies
that a nonmonetary exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153 is effective for
nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of
SFAS No. 153 did not have a material impact on VNU’s financial position, results of operations or
cash flows.
In March 2005, the FASB issued FIN 47 ‘‘Accounting for Conditional Asset Retirement
Obligations,’’ which clarifies how the term conditional asset retirement obligation is used in SFAS
No. 143 ‘‘Accounting for Asset Retirement Obligations.’’ SFAS No. 143 applies to a legal obligation
to perform an asset retirement activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of the entity. FIN 47 clarifies
that an entity is required to recognize a liability for the fair value of a conditional asset retirement
obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective
for fiscal years ending after December 15, 2005. FIN 47 is effective for fiscal periods beginning after
December 15, 2005. The adoption of FIN 47 did not have a material impact on our financial
position, results of operations or cash flows.
In November 2005, the FASB issued Staff Position FAS No. 115-1 and FAS 124-1, ‘‘The
Meaning of Other Than Temporary Impairment and its Application to Certain Investments’’ (‘‘FSP’’).
FSP provides accounting guidance for determining and measuring other-than-temporary
impairments of debt and equity securities, and confirms the disclosure for investments in unrealized
loss positions as outlined in EITF 03-01, ‘‘The Meaning of Other-Than-Temporary Impairments and
its Application to Certain Investments’’. These amendments are effective for all reporting periods
beginning after December 15, 2005. The adoption of FSP did not have a material impact on our
financial position, results of operations or cash flows.
In February 2006, FASB issued SFAS No. 155 ‘‘Accounting for Certain Hybrid Financial
Instruments.’’ This statement amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. It resolves issues addressed in Statement 133
Implementation Issue No. D1, ‘‘Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets.’’ SFAS No. 155 permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require bifurcation, and
clarifies which interest-only strips and principal-only strips are not subject to the requirements of
Statement No. 133. This Statement is effective for all financial instruments acquired or issued after
the beginning of an entity’s first fiscal year that begins after September 15, 2006. We are evaluating
the potential impact of SFAS No. 155 on our consolidated financial results.
Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential loss arising from adverse changes in market rates and market
prices, such as interest rates, foreign currency exchange rates and changes in the market value of
99
equity instruments. We are exposed to market risk, primarily related to foreign exchange and
interest rates. We actively monitor these exposures. To manage the volatility relating to these
exposures, we enter into a variety of derivative financial instruments, mainly interest rate swaps,
cross-currency swaps and forward rate agreements. Our objective is to reduce, where it is deemed
appropriate to do so, fluctuations in earnings, cash flows and the value of their net investments in
subsidiaries resulting from changes in interest rates and foreign currency rates. In principle, we only
employ basic contracts, that is, without options, embedded or otherwise. It is our policy to not trade
in financial instruments.
Foreign Currency Exchange Risk
We operate globally, deriving approximately 55% of our 2005 revenues in U.S. dollars. We
generate revenue and expenses in local currencies. Because of fluctuations (including possible
devaluations) in currency exchange rates or the imposition of limitations on conversion of foreign
currencies into Euros, we are subject to currency translation exposure on the profits of our
operations, in addition to economic exposure.
Foreign currency translation risk is the risk that exchange rate gains or losses arise from
translating foreign entities’ the statements of earnings and balance sheets from functional currency
to our reporting currency (the Euro) for consolidation purposes. Translation risk exposure is
managed by creating ‘‘natural hedges’’ in our financing or by using derivative financial instruments
aimed at offsetting certain exposures in the statement of earnings or the balance sheet.
The table below details the percentage of revenues and expenses by currency in the year
ended December 31, 2005.
Euro
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. dollars
18%
20%
Other
currencies
55%
52%
27%
28%
One eurocent change in the Euro/U.S. dollar exchange rate will affect revenues by e24 million,
operating income by e3 million, net income by e2 million, and net income per common share by
e0.01 (calculation based on the fiscal 2005 figures).
The table below provides information, by functional currency, about our forward foreign
exchange contracts outstanding as of December 31, 2005.
As of December 31, 2005
Forward foreign exchange
Euro sold for U.S. Dollar . .
Forward foreign exchange
British £ sold for Euros . . .
Average
contractual
exchange rate
Fair Value
(Asset)
Liability(1)
(in millions)
e 171
1.1996
e 0.8
e 11
0.7103
e (0.3)
Contract
amount
(in millions)
contracts
........................
contracts
........................
(1) All forward exchange contracts mature before December 31, 2006.
Interest Rate Risk
At March 31, 2006 on a pro forma basis after giving effect to the Transactions we would have
had e4,387 million of debt under our existing EMTN floating rate notes and our new senior secured
credit facilities, which are based on a floating rate index. A one percent increase in these floating
rates would increase annual interest expense by approximately e44 million. Given our anticipated
increased exposure to volatility in floating rates after the Transactions, we expect to evaluate
hedging opportunities and may enter into hedging transactions in the future.
100
BUSINESS
Our Company
We are a leading global information and media company providing essential marketing and
media measurement information, analytics and industry expertise to customers across the world.
Our Nielsen brands, including ACNielsen, Nielsen Media Research, Nielsen Entertainment and
Nielsen//NetRatings, are recognized worldwide as leaders in marketing information and analysis,
television ratings, entertainment measurement and Internet advertising measurement, respectively.
In addition, our trade shows, online media assets and publications occupy leading positions in a
number of their targeted end markets. Through our broad portfolio of products and services, we
track sales of more than 14 million SKUs of consumer products each year, report on television
viewing habits in countries representing more than 60% of the world’s population, measure Internet
audiences in 18 countries, produce more than 175 trade shows, conferences and events worldwide,
operate more than 200 websites and publish more than 100 print publications. For the twelve
months ended March 31, 2006, we generated revenue of e3,556 million ($4,257 million) and pro
forma Adjusted EBITDA of e804 million ($962 million).
We currently operate in three segments: Marketing Information (‘‘MI’’), Media Measurement &
Information (‘‘MMI’’) and Business Information (‘‘BI’’). Our MI segment provides critical consumer
behavior information and analysis primarily to businesses in the consumer packaged goods
industry. ACNielsen, our leading brand within MI, is a global leader in retail measurement services
and consumer household panel data. MI’s extensive database of retail and consumer information,
combined with advanced analytical capabilities, yields valuable strategic insights and information
that influence our customers’ critical business decisions such as enhancing brand management
strategies, developing and launching new products, identifying new marketing opportunities and
improving marketing return on investment. Our MMI segment provides measurement information of
multiple media platforms, including broadcast and cable television, motion pictures, music, print,
the Internet and outdoor. Our leading brand within MMI, Nielsen Media Research, is the industry
leader in U.S. television audience measurement, and our measurement data is widely accepted as
the ‘‘currency’’ in determining the value of television advertising. Our BI segment is one of the
largest providers of integrated business-to-business information around the world. Through a multichannel approach consisting of trade shows, online media assets and publications, BI offers
attendees, exhibitors, readers and advertisers the insights and connections that assist them in
gaining a competitive edge in their respective markets.
Our business generates a stable and predictable revenue stream and is characterized by
long-term customer relationships, multi-year contracts and high contract renewal rates related to
marketing and media measurement services. Advertising across our segments represented only 8%
of our total revenue in 2005. We serve a global customer base across multiple end markets
including consumer packaged goods, retail, broadcast and cable television, music and online
media. The average length of relationship with our top ten customers including Disney/ABC, NBC/
Universal, News Corp., Procter & Gamble and Unilever is 36 years.
Our revenue is highly diversified by business segment, geography and customer. In 2005, 54%
of our revenues were generated from our MI segment, 28% from our MMI segment and the
remaining 18% from our BI segment. We conduct our business activities in more than 100
countries, with 62% of our revenues generated in the Americas, 30% in Europe, the Middle East
and Africa, and the remaining 8% in Asia Pacific. We have over 85,000 customers across our three
business segments, with no single customer having accounted for more than 4% of our total
revenue in 2005.
101
The following chart sets forth our 2005 segment operating income plus segment depreciation
and amortization (‘‘segment EBITDA’’):
By Segment
By Geography
Europe,
Middle
East and
Africa
13%
BI
17%
MMI
41%
MI
42%
Asia
Pacific
7%
Americas
1AUG200619241407
80%
26JUL200603021044
Our Strengths
Global Leadership Positions. We hold industry-leading positions in marketing information
services, media measurement services, trade shows and business publications. We have achieved
leading positions and strong brands within each of our business segments, primarily as a result of
our ability to offer customers comprehensive and integrated marketing communications products
and services that are essential for our customers to successfully operate their businesses.
ACNielsen has the leading market share in consumer packaged goods retail measurement in many
of its markets with approximately 50% market share in the U.S., over 60% in Western Europe and
approximately 70% across Brazil, Russia, India and China, and has the ability to provide
comparable information services to customers throughout more than 100 countries. As demand for
market analysis from a single global source continues to grow, ACNielsen is well positioned to
benefit. In MMI, our Nielsen brands related to audience measurement have leading market positions
across multiple media platforms and geographies. For example, Nielsen Media Research’s
measurement information is trusted as the ‘‘currency’’ in determining the value of U.S. television
advertising. Our BI segment is one of the largest global providers of business-to-business
information and, through its trade shows, online media assets and publications, provides customers
with leading coverage of its industry verticals. We believe our size, scale and leading market
positions will continue to contribute to our consistent growth and strong operating margins.
Extensive Portfolio of Successful Well-Recognized Brands. We believe the Nielsen family of
brands is one of the most widely recognized marketing information and media measurement
research providers in the world. For over 80 years, ACNielsen has provided trusted service to the
world’s top consumer packaged goods and merchandising customers. ACNielsen SCANTRACK,
ACNielsen Homescan and ACNielsen BASES are leading brands in point-of-sale retail measurement,
consumer household purchase panels and new product concept testing, respectively. For over
50 years, Nielsen Media Research has been recognized as a trusted source of television audience
measurement by virtually all of the leading broadcast and cable networks, syndicators and national
advertisers in the U.S. Nielsen EDI, Nielsen SoundScan and Nielsen//NetRatings are leading brands
providing box office results, music sales and Internet audience measurement, respectively. In BI, we
publish some of the most recognizable business-to-business magazine titles across various
segments including Billboard and The Hollywood Reporter. We believe that our successful,
well-recognized brands along with the quality of service we provide will continue to enable us to
attract new business and retain existing business resulting in both revenue and cash flow growth.
Strong Customer Relationships and High Revenue Visibility. Our long-standing customer
relationships and multi-year contracts contribute to a stable and predictable revenue stream. We
have cultivated strong long-standing customer relationships with many of the world’s leading
consumer packaged goods, media and entertainment companies. In MI, our customers include the
largest consumer packaged goods and merchandising companies in the world. The average length
102
of our relationships with MI’s top ten customers in 2005 was 26 years. In many cases, our sales
and service staff are located on-site at our customers’ offices and customize the analysis related to
specific client issues and needs. Given our essential products and strong customer service, our
business in MI is characterized by multi-year agreements, with approximately 50% of each year’s
revenues under agreement by the beginning of the fiscal year. Within MMI, our customer base of
over 25,000 customers includes leading media companies to whom we have been providing
audience measurement information for over 50 years. Our MMI customers typically enter into
multi-year contracts and have high renewal rates (over 95% in Nielsen Media Research). The
average length of our relationships with MMI’s top ten customers in 2005 was 33 years. We expect
our strong customer relationships to contribute to our ongoing success and growth.
Diversified Global Business Mix. Our MI, MMI and BI segments contributed 42%, 41% and
17% of our segment EBITDA in 2005, respectively. Our broad portfolio of product offerings, large
customer base, multiple end markets and wide geographic presence provide us with a diverse
revenue stream, with advertising across our segments representing only 8% of our total revenue in
2005. Our MI segment operates in more than 100 countries and serves over 13,000 customers
providing retail point-of-sale tracking in more than 325,000 stores. Our MMI segment serves over
25,000 customers across more than 55 countries in various end markets including television,
motion pictures, music, print, the Internet and outdoor media. In 2005, we generated 62% of our
revenue in the Americas, 30% in Europe, the Middle East and Africa, and 8% in Asia Pacific, with no
single customer representing more than 4% of revenues. We believe our global presence will
continue to expand as we grow our business in rapidly developing markets and our business mix
will continue to broaden as we invest in new products and services.
Highly Resilient Business Model with Consistent Cash Flow Generation. Our customers’
continuous need for information related to key marketing and business development decisions as
well as for media measurement has historically provided us with strong constant currency revenue
growth, high revenue visibility and consistent cash flow generation. In 2004 and 2005, we achieved
constant currency revenue growth of 7% and 5% and constant currency Adjusted EBITDA growth of
4% and 12%, respectively. For purposes of calculating revenue growth and Adjusted EBITDA
growth on a constant currency basis, we have removed the exchange rate impact of (6)% and 0%
respectively, for revenue growth in 2004 and 2005, and (7)% and 0% respectively, for Adjusted
EBITDA growth in 2004 and 2005. Both MI and MMI have multi-year customer agreements and high
contract renewal rates. In addition, BI benefits from advance payments related to bookings for trade
shows. We have a disciplined approach to capital expenditures based on new product growth and
return on invested capital analysis. We believe that the largely resilient nature of our revenue base
along with our disciplined approach to spending will enable us to convert a significant portion of
our revenue to cash available for debt service.
Attractive Industry Outlook. We operate in two distinct industries: (i) the global marketing
and media research industry (representing our MI and MMI segments), and (ii) the business
information industry (representing our BI segment). The U.S. market for marketing and media
information is expected to grow at a 7.0% CAGR from 2005 through 2009, according to the 2005
VSS Industry Forecast. Consumer packaged goods companies use our MI segment’s marketing
information to monitor brand performance and stay competitive. Growth in our MI segment is
expected to be driven by continued globalization and geographic expansion of consumer packaged
goods companies, increased demand for higher value-added information and related services, as
well as the need to improve brand performance, develop and launch new products and increase
marketing return on investment. Growth of our MMI business is related in part to television and
other media advertising spending. The 2005 VSS Industry Forecast projects U.S. television
advertising growth of 7.1% CAGR from 2005 to 2009. In addition, according to the 2005 VSS
Industry Forecast, film entertainment and Internet advertising are expected to grow at CAGRs of
103
6.9% and 22.2%, respectively, from 2005 through 2009. We also participate in the global business
information sector through our BI segment by offering trade shows, online media assets and print
publications. According to the 2005 VSS Industry Forecast, the size of the U.S. market for
business-to-business magazines, e-media and trade shows is estimated to be $23 billion, and is
expected to grow at a CAGR of approximately 5.8% from 2005 through 2009. We believe that
continued strength in these industries will enhance our growth potential.
Experienced Management Team. We have a strong and committed management team that
has substantial relevant industry knowledge and a proven track record of operations success. Our
senior management team collectively has over 125 years of experience in their respective
industries. Our management team has grown constant currency revenues and Adjusted EBITDA
through new product development, industry leadership and operating efficiencies. We believe that
our management team positions us well to continue to successfully implement our growth strategy
and cost reduction initiatives.
Our Strategy
Our goals are to continue to increase the value we deliver to our customers, streamline our
operations and grow our business. We intend to execute our goals through the following business
strategies:
Capitalize on Core Brands. We will continue to maintain our focus on our leading brands to
drive growth in each of our businesses. Our Nielsen family of brands has positioned us well in the
market for retail measurement and audience measurement services. We expect to build on these
brands by continuing to improve the quality of our products and enhance our services. We will
continue to improve the measurement of media audiences through increased granularity of our
demographic market data, and of retail information through increased store coverage and
worldwide expansion of ACNielsen Homescan, our consumer household panel. In addition, we
expect to leverage our brand recognition to grow our revenues in areas such as value-added
services, analytics and new measurement opportunities through ACNielsen Advisory Services,
Nielsen//NetRatings and Nielsen Outdoor, among others. We believe that building on our leading
brands will drive continued demand for our existing and new products, leading to strong revenue
generation.
Continue to Lead Innovation of Measurement Services. We continue to develop new
solutions and technologies to improve the measurement of consumer trends and measure
audiences across the latest media platforms. In the global market for consumer packaged goods,
we have a partnership with Yahoo! to determine the impact of online advertising on offline
purchasing behavior, and we have launched our immediate consumables panels where panelists
scan purchases of single serve items (such as cans of soda) using a key chain scanner. In media
and entertainment, Nielsen Media Research continues to deploy advanced metering technology
(such as People Meters and Active/Passive Meters) and expand its measurement of television
viewing habits through initiatives capturing digital video recording and video on demand. In
addition, we continue to invest in high growth products and services such as integrated television
and Internet measurement, and the measurement of media consumption on personal electronic
devices, such as downloads for iPods. For example, we recently announced our Anytime Anywhere
Media Measurement, (‘‘A2/M2’’) initiative to deliver integrated ratings for all forms of television
viewing, regardless consumption medium. These initiatives along with our expanded consumer
analysis capabilities have created significant revenue opportunities and broadened our product
offerings. We will continue to focus on developing innovative solutions to provide our clients with
increasingly relevant and precise measurement information.
104
Continue to Expand Globally. We intend to extend our already strong global reach and
increase our global leadership. Global reach is increasingly important given our customers’ growth
into new markets, and we are well positioned to increase our global presence in each of our
operating segments. Our substantial presence in rapidly developing markets such as Brazil, Russia,
India and China illustrates our success with this strategy. ACNielsen operations in Central and
Eastern Europe, the Middle East and Africa, have grown constant currency revenue at double-digit
rates for the last six years, led by strong revenue growth in Russia, Poland, Hungary, South Africa,
United Arab Emirates, Pakistan and Nigeria. In 2005, our AGB Nielsen Media Research television
audience measurement (‘‘TAM’’) joint venture, covering 31 countries, continued its expansion in
China, where People Meters are being introduced in 17 provinces, including all major metropolitan
areas. MMI also has other TAM joint ventures covering an additional 16 countries including in Latin
America with IBOPE, and separate ventures in Finland, Switzerland and India. We believe these
expansions will continue to provide us with strong revenue growth opportunities going forward.
Optimize our Portfolio of Product Offerings. We will continue to evaluate our products and
services to determine the optimal offering given current and forecasted customer demand. We will
look to develop businesses that best serve our customers while maintaining a focus on profitability,
thereby maximizing our return on invested capital. We will also consider select acquisitions of
complementary businesses that would enhance our product portfolio. In addition, we will consider
opportunistically divesting operations that we believe to be non-core to our operations. As
marketing activities continue to shift from mass to targeted audiences, we believe the optimization
of our product portfolio will offer more focused solutions to our clients.
Pursue Project Forward and Continue to Reduce Costs. While we have successfully
implemented certain initiatives such as the consolidation of certain data processing facilities and
offshoring, we had never undergone a comprehensive company-wide cost savings plan prior to
Project Forward. In November 2005 we announced Project Forward, an initiative led by our senior
executive team to expand current cost-savings programs to all areas of our operations worldwide.
We have identified opportunities to make fundamental changes in our operations and permanently
reduce our costs by streamlining corporate functions, centralizing information technology and
purchasing and expanding the outsourcing and offshoring of certain operational and production
processes, many of which we have begun to implement. We believe we can implement these cost
initiatives by the end of 2008, which we estimate will result in a targeted e125 million of annual cost
savings. We estimate one time costs of approximately e175 million to be incurred over the
corresponding time period in connection with these cost savings. We expect that a run-rate of
e75 million of these cost savings will be achieved within twelve months of the consummation of the
Transactions. In addition, we intend to continue to pursue opportunities to improve our cost
structure beyond the scope of Project Forward.
105
Business Segment Overview
The table below highlights selected brands, descriptions and client value propositions within
each segment:
Segment
Marketing
Information
Brand
Description
• ACNielsen SCANTRACK
• ACNielsen MarketAudit
•
Point-of-sale retail
measurement in 88 countries
• Competitive market shares
• Price and promotion impact
•
ACNielsen Homescan and
Homepanel
•
Household purchase panels
in 27 countries
• Brand loyalty
• Use and acceptance of new
products
•
ACNielsen BASES
•
Database of 65,000 product
concept tests and 13,500
launch tests
•
•
ACNielsen Spectra
•
Consumer lifestyle/lifestage
segmentation
• Consumer targeting
• Customize store assortments
•
ACNielsen Analytical
Consulting
•
Proprietary marketing
and media mix models
Trade promotion planning
• Trade promotion software
• Marketing and media spend
•
Media
Measurement
& Information
Business
Information
Value Proposition
Product concept and launch
testing
• Nielsen Media Research
• AGB Nielsen Media Research
•
TV audience measurement in
48 countries
•
‘‘Currency’’ for television
advertising, advertising
exposure and effectiveness
•
Nielsen//NetRatings
•
Internet audience
measurement in 18 countries
•
Internet advertising exposure
and effectiveness
•
•
Nielsen EDI
Nielsen NRG
•
Film box office results in 14
countries and film research
•
Performance of film releases
•
•
•
•
Nielsen
Nielsen
Nielsen
Nielsen
•
Airplay and/or music/video/
book sales in 22,000
outlets and 19 countries
•
Artist/author, publisher/studio
and title performance
•
Nielsen Monitor-Plus
•
Advertising spend across 15
media platforms (U.S.)
• Media buying effectiveness
• Share of spending/share
of voice
•
Nielsen Outdoor
•
Audience measurement for
billboards and kiosks
•
Outdoor advertising
validation/valuation
•
Trade Shows
•
Over 175 trade shows,
conferences and events
•
Connect buyers and sellers
in person
•
eMedia
•
Over 200 websites and online
products
•
Marketing of products
•
Publications
•
Over 100 magazines and
newsletters worldwide
•
Marketing of products
SoundScan
VideoScan
BookScan/Bookdata
BDS/Music Control
106
Our Business Segments
Marketing Information
Our Marketing Information segment provides essential market research and analysis primarily
to businesses in the consumer packaged goods industry. Our MI segment provides an array of
services including retail measurement services (ACNielsen SCANTRACK), household consumer
panels (ACNielsen Homescan), new product testing (ACNielsen BASES), consumer segmentation
and targeting (ACNielsen Spectra) and marketing optimization (ACNielsen Analytical Consulting). We
believe these products and services give our customers a competitive advantage in making
informed decisions in today’s fast-moving and complex marketplace. Our MI segment operates in
more than 100 countries and serves over 13,000 customers by tracking retail point-of-sale
transactions in more than 325,000 stores and capturing the purchasing behavior of over 265,000
households. Within MI, ACNielsen is a global leader in consumer packaged goods retail
measurement services, with approximately 50% market share in the U.S., over 60% in Western
Europe and approximately 70% across Brazil, Russia, India and China. We believe one of our
primary strengths is our global presence, which is increasingly important in today’s environment as
our largest customers operate globally and continue to expand and invest in developing markets.
MI’s customer base is comprised of the world’s leading consumer packaged goods companies
including Colgate-Palmolive, Nestle, Procter & Gamble and Unilever as well as leading retail chains
such as Carrefour, Kroger, Safeway, Tesco and Walgreens. With a broad global customer base and
long-standing customer relationships, MI’s revenues are stable, predictable and highly diversified. In
2005, the average length of our relationships with MI’s top ten customers was 26 years. These
long-term relationships are strengthened by our ability to integrate products and services into
customers’ workflow and provide a wide range of comparable and consistent data and analyses.
This comparability of information over time enhances our customers ability to use our information in
their decision-making and management processes. In addition, our customer service professionals
are often located on-site at our customers’ offices, where they assist in analyzing information by
providing industry context for better decision-making and in developing strategic and tactical
recommendations. MI’s strength of customer relationships is exemplified by average customer
renewal rates in excess of 95% in the U.S. and Europe from 2002 to 2005, which results in high
revenue visibility. At the beginning of each fiscal year, more than 50% of the segment’s revenue
base for the upcoming year is typically committed under existing agreements. For the fiscal year
ended December 31, 2005, MI generated approximately 54% and 42% of our revenue and segment
EBITDA, respectively.
Our MI segment is comprised of two divisions, ACNielsen and ACNielsen Advisory Services.
These divisions provide the following services on a global basis: Retail Measurement Services,
Consumer Panel Services, Customized Research Services and various other advisory services
including new product launch services and consumer targeting and segmentation. While each of
these products and services provides significant value on a stand alone basis, they can be
combined to provide clients with more enhanced and in-depth analyses.
Retail Measurement Services (‘‘RMS’’)
RMS provides customers with information and analytics across 88 countries on competitive
sales volumes, market shares, distribution, pricing, merchandising and promotional activities. By
combining this detailed information with our in-house expertise and professional assistance we
enable our customers to improve their key marketing decisions. We offer these services under our
ACNielsen SCANTRACK and ACNielsen Market Audit brands.
RMS collects retail sales information from over 325,000 stores using electronic point-of-sale
technology and teams of local field auditors. These stores include grocery, drug and discount
107
retailers who, through various cooperation arrangements, share their sales data with us. The
method of collection depends upon the sophistication of the retailers’ systems. RMS downloads
electronic retail sales information collected by stores through checkout scanners to our servers on a
regular basis. Where electronic retail sales information is unavailable, such as in certain developing
markets, we collect retail sales information through in-store inventory and price checks conducted
by field auditors. Across all of our markets, field auditors collect data regarding product placement
in stores, including the facing and positioning on store shelves as well as other information.
RMS quality control systems validate, confirm and correct the collected data. It is then
processed into databases and reports by product, brand and category. Customers access RMS
databases using proprietary software such as NITRO and WorkstationPlus which allow them to
query the databases, conduct customized analysis and generate customized reports and alerts. For
example, clients can view and analyze information by specific product categories, geography or
retail channel. Information can be accessed through ACNielsen i-Sights which can provide a suite of
reports linked to the key business issues of the user. Information can also be accessed online
through an extranet web portal, ACNielsen Answers.
Consumer Panel Services (‘‘CPS’’)
CPS provides clients with consumer purchasing information, including demographics, based
upon individual household consumption. Clients use this information to more precisely target and
better segment their consumers. In addition, we are able to use CPS information to augment our
retail measurement information in circumstances where we do not collect retail data from certain
retailers. CPS primarily offers its services through our ACNielsen Homescan and ACNielsen
Homepanel brands.
CPS collects data from household panelists who use in-home scanners and paper diaries to
record purchases from each shopping trip. In the U.S., approximately 125,000 randomly selected
households, constituting a demographically balanced sample of U.S. households, participate in the
household panel. The extent to which CPS uses home scanners as opposed to diaries depends
upon local factors such as the availability of suitable communications infrastructure. Data received
from CPS household panels undergoes a quality control process, including UPC verification and
validation before it is processed into databases and reports. CPS clients may access these
databases and perform analysis using our Panelfact proprietary software. In addition, CPS provides
clients with templated alerts, dashboards and reports which can be accessed over the Internet or
through a desktop application.
Customized Research Services (‘‘CRS’’)
CRS provides clients with a suite of customized research services as well as consumer and
industry studies. CRS clients are able to use these services and studies to derive information and
insights into consumer attitudes and purchasing behavior, to evaluate and understand why
marketing campaigns succeed or fail, and to address issues such as promotions, pricing, consumer
targeting and marketing mix. CRS is offered through brands such as Winning Brands and
ShopperTrends.
CRS collects information through surveys, personal interviews, focus groups, online
evaluations, from panels maintained by CRS and third party panel providers. Once information is
collected, it is subject to CRS quality control standards and is then processed into databases and
reports. CRS provides customized research services and consumer and industry studies to clients
through presentations and reports.
108
New Product Launch Services (ACNielsen BASES)
ACNielsen BASES provides sales forecasts for new products and product restages across a
number of industries, particularly in the consumer packaged goods field. Clients use this
information to evaluate the sales potential of new products, identify potential customers, forecast
sales volume and refine concept design and communication.
ACNielsen BASES maintains panels in several countries and uses third party panel providers to
survey consumers. Panelists are exposed to new product ideas and prototypes in order to gauge
their interest. ACNielsen BASES quality control systems organize and validate the information it
collects. Using this information ACNielsen BASES delivers marketing recommendations and
additional diagnostics to help customers refine the product, price and/or their marketing plan.
Consumer Targeting and Segmentation (ACNielsen Spectra)
ACNielsen Spectra provides customers in the consumer packaged goods industry with
consumer targeting and segmentation analytics, integrating information about households,
geographies and retail shopping locations. Customers use ACNielsen Spectra services, including its
proprietary consumer segmentation grid (the Spectra Grid), for category management and media
and marketing planning. ACNielsen Spectra uses multiple database sources, including those from
ACNielsen, Scarborough and third parties, to develop the Spectra Grid. The Spectra Grid is typically
accessed through an extranet web portal, InfiNet.
Analytical Consulting Services (ACNielsen Analytic Consulting or ‘‘AAC’’)
AAC provides software tools and analysis to help clients make decisions with respect to
marketing, marketing investment and pricing and promotion. AAC’s proprietary Decisionsmart
software tool enables clients to develop trade planning and promotion schedules and forecasts,
interpret outputs of applications and provide recommendations to better drive trade planning and
promotions. In addition, AAC consultants with industry expertise assist clients with their marketing
decisions.
Site Selection and Consumer Targeting (Claritas)
Claritas provides recommendations on site selection for new retail stores and information for
consumer targeting for direct mail campaigns, in each case primarily outside of the consumer
packaged goods industry. Clients use Claritas to determine certain characteristics of their potential
and existing customers such as where they live and shop, what they buy and how to best reach
them. This information contributes to customers’ strategies regarding direct mailing activities at
household and individual levels, as well as mass-marketing activities.
Media Measurement & Information
Our Media Measurement & Information segment is a leading provider of media and
entertainment measurement information. The segment measures audiences for U.S. television
(Nielsen Media Research), international television (50% ownership of AGB Nielsen Media Research),
motion pictures (Nielsen EDI), the Internet (approximately 60% ownership of Nielsen//NetRatings
(NASDAQ: NTRT)), outdoor (Nielsen Outdoor) and other media, as well as tracks sales of music
(Nielsen SoundScan) and competitive advertising information (Nielsen Monitor-Plus). Using our
critical measurement information, media owners, advertising agencies, advertisers and retailers plan
and optimize their marketing strategies. MMI is particularly strong in the U.S. television audience
measurement market where our Nielsen ratings are widely accepted as the ‘‘currency’’ for both
buyers and sellers of U.S. television advertising, an industry that had over $60 billion of annual
expenditures in 2005. Nielsen Media Research measures television usage both nationally and
109
across all the 210 local television markets in the U.S. Our leading market position in measuring the
U.S. television audience has been achieved as a result of continued investment and over 50 years
of experience providing customers with accurate measurement.
MMI has a diversified customer base, consisting of over 25,000 individual customers including
leading broadcast and cable companies such as CBS, Comcast, Disney/ABC, NBC/Universal, News
Corp., Time Warner and Univision; leading advertising agencies such as IPG, Omnicom and WPP;
leading film studios such as 20th Century Fox, Disney, Paramount and Warner Bros.; and other
leading media companies. MMI’s business model allows for both high revenue visibility and
consistent, predictable growth as a result of multi-year contracts and high contract renewal rates
(over 95% in Nielsen Media Research). The average length of MMI’s relationships with its top ten
customers in 2005 was 33 years. Our customers value the high quality service offerings and
technology, which we maintain and improve through continuous innovation and protect via over 100
existing and pending patents in the U.S. alone. For the fiscal year ending December 31, 2005, MMI
generated approximately 28% and 41% of our total revenue and segment EBITDA, respectively.
Our MMI segment is comprised of three divisions, Media, Internet Measurement and
Entertainment. These divisions provide many different services including television audience
measurement, Internet usage measurement and box office movie measurement.
Media
Media Measurement. Nielsen Media Research and AGB Nielsen Media Research collectively
measure the size and demographic composition of television audiences in 48 countries worldwide.
Advertisers use this information to plan television advertising campaigns, evaluate the effectiveness
of their commercial messages and negotiate advertising rates. Television broadcasters and cable
networks use this information as a tool to establish the value of their airtime and more effectively
schedule and promote their programming.
Nielsen Media Research in the U.S. and AGB Nielsen Media Research in countries outside the
U.S. collect audience data from demographically balanced samples of randomly selected
households. In the U.S., Nielsen Media Research provides three principal ratings services:
Measurement of national television audiences (‘‘National Ratings Services’’), measurement of local
television audiences in each of the 210 designated television markets (‘‘Local Ratings Services’’),
and measurement of national and local television audiences among Hispanic households
(‘‘Hispanic Ratings Services’’).
Both Nielsen Media Research and AGB Nielsen Media Research use various methods to collect
the data from households including electronic meters and written diaries. Our electronic meters
include our standard Set Meter, and Active/Passive Meters. A Set Meter is connected to a television
and captures household-level viewing data by monitoring the channel to which the television is
tuned. A People Meter is an attachment to a Set Meter which adds functionality to the Set Meter by
not only collecting television set tuning data (which channel the set is tuned to) but also the
demographics of the audience (who in the household is watching). In 2005, we introduced into our
samples electronic meters based on our next-generation Active/Passive metering technology, which
is designed to measure television tuning in a digital environment and has enabled us to reflect
time-shifted viewing on digital video recorders in our ratings.
Our National Ratings Services is based on a sample of approximately 10,000 households using
People Meters. Approximately 15% of such households are measured using Active/Passive Meters.
Our Local Ratings Services use People Meters in the top ten local television markets, a combination
of Set Meters and written diaries in the next 46 local television markets, and only written diaries in
the remaining 154 local television markets. The local television markets in the U.S. where Nielsen
uses electronic meters represent approximately 70% of the television households in the U.S.
110
Information is downloaded from the electronic meters to our servers where it is subject to
quality control including digital coding. We then process the information into databases and reports
which is then distributed overnight to customers. In addition, our customers can license Nielsen
Media Research software which enables them to access, manipulate and customize varying levels
of information directly from the Nielsen Media Research database.
Advertising Information Services (‘‘AIS’’). AIS provides commercial occurrence data and tracks
the proportion of all advertising within a product category attributable to a particular brand or
advertiser. We measure advertising expenditures, placements and creative content in 21 countries
by company, by brand, and by product category across monitored media. Such media include
print, outdoor advertising, radio and freestanding inserts as well as television. Customers use this
service to manage their media spend by benchmarking their own performance against that of their
competitors. We provide Advertising Information Services in the U.S. under our Monitor-Plus brand.
Other Media Services. Our media division also provides a number of other products and
services. Nielsen Outdoor measures both consumer exposure to outdoor advertising and outdoor
advertising audience demographics. It uses a randomly selected demographically balanced panel
of individuals. Using GPS technology, Nielsen Outdoor measures the frequency panelists have the
opportunity to view certain billboards. Standard Rate & Data Service collects information on media
advertising rates, publishing dates and contact data on media outlets in the U.S. Interactive Market
Systems (‘‘IMS’’) provides media planning and analysis software to analyze both industry and
proprietary research data. The software is used by advertising agencies, advertisers, publishers,
broadcasters, other media owners and researchers. IMS software can be used for television, press,
radio, outdoor and Internet planning. Scarborough Research, a joint venture between VNU and
Arbitron, Inc. (‘‘Arbitron’’), measures the lifestyle and shopping patterns, media behaviors, and
demographics of consumers in the U.S. A total of 75 local markets are measured at regular
intervals through telephone surveys, product booklets and diaries.
Ventures. Nielsen Ventures provides measurement and analysis of sports sponsorship data,
product placement and consumer generated word-of-mouth. Nielsen Ventures introduced ‘‘Fanlinks’’
in 2005, a service developed with ACNielsen to link consumers’ sports media consumption to
product purchasing. ACNielsen Homescan panelists are surveyed to identify sports fans and their
degree of sports entertainment consumption. Survey results are cross-tabulated against purchasing
behavior to provide a view of today’s sports fan and how consumption of sports entertainment
translates to purchasing behavior. Nielsen Ventures also continues to develop and expand sales of
services such as ‘‘Placeviews,’’ which is a software product that enables clients to measure the
impact of product placement on television and in movies by identifying which brands are featured,
what type of placement is used, when and where the placement occurred and the audience
exposure at the time of the placement.
Internet Measurement
Nielsen//NetRatings. NetRatings, Inc. (NASDAQ:NTRT), of which we own approximately 60%,
gathers data and tracks global online activity. NetRatings’ customers use this data to make informed
business decisions regarding their Internet marketing strategies. NetRatings’ services include:
Internet audience measurement services (NetView, SiteCensus and Market Intelligence);
advertisement measurement services (AdRelevance, Adintelligence and WebRF); and Internet
market research services (Homescan Online, which provides integrated views of consumers’ online
behavior and offline purchasing patterns, Webintercept and MegaPanel).
NetRatings collects information through panels in locations around the world to measure both
at-home and at-work activity. Panelists are recruited through a variety of methods, including random
digit dialing and online surveys, as well as through partnerships with local market research
111
providers. Our Megapanel service, for example, tracks Internet usage and buying behavior among
more than a million people in countries including the U.S., the United Kingdom, France and
Germany. The information NetRatings gathers is used to produce syndicated and custom reports
and is made available to clients on a weekly or monthly basis.
Entertainment
Nielsen EDI. Nielsen EDI provides box-office information for the motion picture industry.
Clients use this information in deciding where and for how long a movie will play, as well as the
allocation of advertising and promotional dollars. Nielsen EDI tracks movie theater box-office
receipts provided by major cinema chains in the U.S. such as AMC, Regal Entertainment Group
and National Amusements. Nielsen EDI also captures similar information in other countries around
the world.
Nielsen SoundScan, Nielsen BookScan and Nielsen VideoScan. Through these brands, we
track and report in-store and online retail sales of audio products, books and video entertainment
products. Clients use these services to monitor their market share. Each of these businesses
compiles point-of-sale data from retailers on a weekly basis and prepares reports which are
delivered to clients regularly through an Internet portal.
Nielsen National Research Group (‘‘NRG’’). NRG tests movie promotional materials, predicts
the gross box office receipts of upcoming and recently released movies and compiles film
awareness studies in the U.S. Clients use NRG’s research to develop, or make changes to, their
marketing plans. NRG’s clients include major film studios in the U.S. We also offer similar services
in Europe, Australia and Japan.
Nielsen Broadcast Data Systems (‘‘BDS’’). BDS monitors radio airplay on a continuous basis
from 1,500 radio stations in the U.S. This data is used by music labels, radio stations and
performing rights organizations to adjust station playlists and to determine marketing spend for
various titles. Using patented computer technology, BDS provides daily reporting, and in certain
cases real-time reporting, to its client base through the Internet. In certain countries in Europe,
Nielsen Music Control provides similar radio airplay monitoring services.
Business Information
Our Business Information segment is one of the largest providers of integrated
business-to-business information in the world. The segment has more than 175 trade shows and
related conferences and executive summits, over 200 websites and over 100 print publications,
each targeted to specific industry groups. Our BI segment is comprised of two divisions: VNU
Business Media U.S. (‘‘BMU’’) and VNU Business Media Europe (‘‘BME’’), each with its own trade
shows, online media assets and publications. Our BI segment is anchored by the U.S. trade show
business, which is characterized by high margins, diversified end markets and strong free cash
flow. The BMU trade show business operates leading trade shows across a wide range of
industries, such as jewelry, general merchandise and kitchen & bath design. In addition, our
publications, such as Billboard and The Hollywood Reporter, benefit from leading brand name
recognition and established audiences. In the U.S., more than 40 publications are distributed to
over 1.2 million professionals, and in Europe, our 70 publications are distributed to over 2.4 million
professionals. Customers include professionals and advertisers from a variety of industries including
marketing, media, advertising, entertainment, informational technology, career management and
finance. For the fiscal year ending December 31, 2005, our BI segment generated approximately
18% and 17% of our total revenue and segment EBITDA, respectively.
112
Business Media U.S. (‘‘BMU’’)
Trade Shows. Each year, our BMU division produces more than 50 trade shows (including
expositions and conferences), with a total audience of approximately 425,000 and a total booth
space of approximately six million square feet for attendees principally comprised of retailers,
distributors and business professionals. Industry leaders use these events to sell existing products
and to promote the launch of new products in order to reach decision-makers in their respective
industries. BMU Trade Shows was ranked first in terms of show square footage and second in
number of top 200 shows, respectively, in the annual Tradeshow Week rankings of the top 200 U.S.
trade shows for 2005. Our portfolio is diversified across a large number of end markets. Leading
events include the Hospitality Design Conference and Expo, the Kitchen/Bath Industry Show and
Conference, Associated Surplus Dealers/Associated Merchandise Dealers shows, the Interbike
International Bike Show and Expo and the JA International Jewelry Summer and Winter Shows.
Online Media & Publications. Our BMU division publishes more than 40 trade publications and
maintains related online sites across various segments including marketing and media, retail trade,
construction, real estate, travel, food and beverage, health, sports training and gifts, among others.
These publications are distributed to approximately 1.2 million readers. Well known titles include
Billboard, The Hollywood Reporter, Adweek, Brandweek, Film Journal International, Commercial
Property News and National Jeweler. Billboard covers leading music artists and the marketing plans
for their upcoming releases, including music videos. The Hollywood Reporter is a leading film and
entertainment magazine which keeps industry professionals abreast of films that are in production
and development. Brandweek and Adweek are leading sources for the latest brand management
strategies and tools. The websites related to these titles provide further information on their
respective industry groups and developments. Our BMU division’s online media offerings and
publications attract brand managers who we then help to build an integrated, business-to-business
marketing campaign that reaches retailers through many of the same online and print media.
Business Media Europe (‘‘BME’’)
Trade Shows. Our BME division organizes over 70 trade shows in the Netherlands through its
joint venture with Jaarbeurs, 10 trade shows in the United Kingdom and Italy, and more than 15
trade shows in China and elsewhere in Asia through its 35% ownership of VNU Exhibitions Asia.
BME is committed to organizing creative and profitable platforms that connect people and markets.
Online Media & Publications. Our BME division operates a network of websites in seven
countries in Europe. BME’s online properties generate approximately 100 million page impressions
per month from over 19 million unique users across the network. The sites offer a wide range of
services for customers, including breaking news, product updates and reviews, jobs and career
advice, webcasts and Podcasts. We are developing lead generation opportunities for customers
and providing measurement of the effectiveness of their Internet advertising across the countries in
which we operate. BME also has a strong online recruitment position in the Netherlands with its
Intermediair.nl, NVB and Computable.nl brands, in the United Kingdom with Computingjobs and
AccountancyAgejobs and in Belgium with Datanewsjobs. BME has recently launched contextual job
linking, which enables readers/browsers accessing job information and career advice, to quickly
identify specific, current job opportunities.
Our BME division operates publishing houses under the name of VNU Business Publications in
the Netherlands, the United Kingdom, Belgium, France, Germany, Italy and Spain. Our BME unit
publishes 70 business publications in these seven European countries which are distributed to
approximately 2.4 million readers. These publications cover a range of subject areas, including
information technology, media and marketing, electronics, finance, management and career
development and include titles such as Intermediair, Computable and Management Team in the
113
Netherlands, Computing, IT Week, Accountancy Age and Computer Active in the United Kingdom,
PC Actual and Computing and Anuncios in Spain, PC Profesionell in Germany, PC Magazine,
Automazione Oggi and Pubblicita Italia in Italy, SVM and PC Expert in France.
Sales and Marketing
Our MI and MMI services typically comprise information, the software tools to access the
information and a Client Service team to help interpret the information and ensure that the client
derives maximum value. The Client Service team is often located at the client site, and can also be
available on an ‘‘as needed’’ basis, either in person or by phone. Client Service is responsible for
both managing the client relationship and developing new sales opportunities with the client. The
majority of services are usually provided on an ongoing or continuous basis, and therefore typically
agreed for multiple years.
Large customers typically subscribe to a market measurement service from VNU or one of its
competitors, so an important role of Client Service is to focus on client retention and to win
business held by competitors. Another key Client Service responsibility within our MI business, is to
sell additional products and services beyond the core measurement services. These additional
services include targeting and segmentation (ACNielsen Homescan, ACNielsen Spectra), new
product testing (ACNielsen BASES) and other advisory services.
Our large customers often need to monitor their business on a regional or global basis. To
meet this need, VNU will sometimes assign a senior Client Service professional to be the regional
or global account manager. This person may be based at the client’s headquarters building, where
he or she can develop relationships with the customer’s senior executives, further enhancing our
client relationship. At the same time, many smaller target companies do not subscribe to a
continuous measurement service so we also employ a specialist Client Service team to target this
market opportunity with offerings tailored to fit the needs of smaller companies.
Marketing activities are focused on strategic marketing, product management, new product
development and ensuring that Client Service is well-equipped with information and support
materials on VNU’s product and service offerings. Marketing strategy is set globally, while marketing
activities are managed on a regional basis. VNU’s investment in Client Service means that we have
personal contact with our clients on a daily basis. Therefore, marketing communications efforts are
focused on supporting Client Service with brochures, fact sheets, client advisory boards, websites
and, in larger markets, annual conferences and newsletters. Spending on advertising and public
relations is not considered key to our business success and is therefore limited.
Competition
Marketing Information
ACNielsen has numerous competitors in its various lines of business throughout the world.
Competition includes companies specializing in marketing research, the in-house research
departments of manufacturers and advertising agencies, retailers that sell information directly or
through brokers, information management and software companies, and consulting and accounting
firms. In retail measurement services, ACNielsen’s principal competitor in the U.S. is Information
Resources, Inc. Information Resources, Inc. is also active in Europe and, through joint ventures,
Latin America. Our consumer panel services, custom research services, and other advisory services
business have direct and/or indirect competition in many markets in which they operate. Principal
competitive factors include innovation, quality, timeliness, reliability and comprehensiveness of data
and analytical services, flexibility in tailoring services to client needs, price, and geographic and
market coverage.
114
Media Measurement & Information
Nielsen Media Research has maintained a strong leadership position in the television ratings
measurement industry in the U.S. Nielsen Media Research’s ratings have been criticized on
occasion by various participants in the television industry. This criticism, in part, may increase the
likelihood of additional competition in the media research business. Outside of the U.S. AGB
Nielsen Media Research faces competition from various competitors in several of the jurisdictions in
which it operates. Our other Media Measurement & Information businesses also face direct and
indirect competition in most markets in which they operate. Principal competitive factors include
innovation, quality, timeliness, reliability and comprehensiveness of data and analytical services,
flexibility in tailoring services to client needs, price, and geographic and market coverage.
Business Information
The Business Information group faces competition in each of its principal product markets.
Typically, there are several competitors that target the same industry sector. Furthermore, trade
publications are subject to competition for advertising revenues from other media including the
Internet and trade shows. In the U.S., our trade publications face competition principally from Reed
Elsevier. The competition for trade shows is highly fragmented, both by product offering and
geography. Because of the availability of alternative venues and dates and the ability to define
events for particular industry segments, the range of competition for exhibitor spending,
sponsorships and attendees is extensive. The trade show business in the Netherlands faces
competition from RAI International Communications Group. Trade associations, with strong industry
ties, also provide significant competition. The principal competitive factors in Business Information
include the quality of information, quality and breadth of services, as well as level of customer
support, level of technical expertise and price.
Regulation
Data Protection
Our operations are subject to and affected by data protection laws in many countries. The
number of countries in key business jurisdictions with data protection laws has been slowly
increasing. Compliance with these laws can impose administrative and operational burdens and
other costs, and these are more significant where the data is considered to be sensitive. The
consequences of a compliance failure can include civil and criminal sanctions, negative publicity,
data being blocked from use, and liability under contractual warranties of compliance.
Data protection laws constrain whether and how personal data may be collected, how it may
be used, how it must be stored, and whether and to whom and where it may be transferred. While
the laws on personal data vary from country to country, certain basic principles are common to
most data protection laws, regardless of region or subject matter. For example, the data subject
should receive notice of certain details of what information is being collected, and of its planned
use, storage and transfer. Data protection laws usually contemplate some degree of choice on the
part of the data subject over the collection and use of personal data. Future uses of personal data
generally must conform to the disclosures in the notice that was the basis for consent. Personal
data should be maintained in accurate form, and the data subject should have some level of
access to the information to ensure accuracy. Finally, these laws generally require sufficient security
around the personal data.
In many countries, ‘‘personal data’’ means information relating to an identifiable individual. Data
protection laws do not apply to anonymous data, and usually do not apply to information about
115
corporations. Personal data may be characterized as ‘‘sensitive’’ when it reveals information about a
person’s health, religion and/or philosophy, politics, race and/or ethnicity, sexual preferences and/or
practices, union membership, criminal records, finances, or location. All personal data may be
subject to the data protection laws, but ‘‘sensitive’’ personal data typically is more highly regulated
than non-sensitive data. Generally this means that for sensitive data the data subject’s consent
should be more explicit and more fully informed, and that security measures should be more
rigorous.
Our products and services capture both non-sensitive and sensitive personal data. Sensitive
personal data may be revealed by certain demographic data that is collected and by several of the
consumption preferences that are tracked. These preferences include those concerning such items
as books, magazines, music, videos, healthcare products and services, religious products and
services such as kosher or vegetarian items, Internet activity, and cable/satellite television.
Greater constraints on the use of highly regulated data can have several consequences for us.
For example, for panel management the more rigorous consent measures may significantly depress
cooperation from panel recruits and increase the administrative and operational burden and costs
of panel recruitment and management. That and the more rigorous security measures required can
significantly increase costs as compared to those for non-sensitive data. Also affected are products
that incorporate data from or enhance the databases of third parties, especially such highly
regulated entities as financial, telecommunications, and healthcare institutions. Regulation of data
from these sources can either eliminate their availability or increase cost due to the larger
administrative and operational burden and expense associated with the required compliance
measures. There also is a greater enforcement focus on highly regulated personal data as
compared to non-sensitive data. In the event of a compliance failure there is a relatively higher risk
of sanctions, civil and criminal liability, and negative publicity.
In certain cases, regulation of third-party sources of data may offer us a competitive advantage
where we are not covered by the regulation. For example, the value of our data on subjects such
as video and cable or satellite viewing in the U.S. may be higher due to the fact that U.S. law
prohibits the suppliers of those services from disclosing such personal data.
Certain means of data collection are more highly regulated than others. There is a greater
regulatory focus on data collection methods that may not always be obvious to the data subject or
that otherwise present a higher risk of abuse. Examples include: collecting data online, especially
by means of cookies or similar technologies, or directly from children; collecting information by
means of radio frequency identification tags; and tracking location, for example by using global
positioning satellites or RFID tags. The increased compliance costs associated with these means of
data collection may reduce their cost-effectiveness or other advantages. Our product development
plans contemplate certain of these data collection methods.
Transfer of data outside the country where it is collected is constrained by many data
protection laws, and most significantly by the European Union. This has an impact on how data can
be most efficiently managed. For example, these constraints have a bearing on centralized
database management, because multinational access to a central database may constitute a
transfer of data to the point of access. Cross-border transfers are not flatly prohibited, but the
compliance measures that must be implemented before such transfers are permitted impose
significant operational burdens and costs. Most of the available compliance measures also increase
our exposure to liability in the event of a compliance failure.
116
Employees
On March 31, 2006, we had approximately 40,000 full and part-time employees worldwide with
approximately 13,000 of those being located in the U.S. Of our worldwide employees, over 29,000
full and part-time employees were in Marketing Information, 9,000 in Media Measurement &
Information and over 2,000 in Business Information. Outside of the U.S. a number of our employees
are members of Workers Councils or other similar organizations. We believe that our success
depends partly on our continuing ability to retain and attract highly qualified technical, sales and
management personnel. Although qualified personnel are in high demand and competition exists
for their services, we believe that we have been able to retain and attract highly qualified personnel.
We believe our relationships with our employees are good. See ‘‘Risk Factors—If we are unable to
attract, retain and motivate employees, we will not be able to compete effectively and will not be
able to expand our business.’’
Intellectual Property
We own registered marks for ‘‘Nielsen,’’ ‘‘ACNielsen’’ and several other Nielsen brands and
own or have applied for trademark registrations in the U.S. and in several jurisdictions outside the
U.S. for many of our services and software products. We also have numerous trade secrets relating
to data processing that are of material importance to our business. We have a number of
registrations of our copyrights and a number of patents and patent applications pending including
patents relating to audience measurement systems, broadcast encoding Internet content monitor
systems, and automated data collection for consumer driving.
To protect our proprietary services and software, we rely on a combination of contractual
provisions, confidentiality procedures and patent, copyright, trademark, service mark and trade
secret laws. We also have established policies requiring our personnel and representatives to
maintain the confidentiality of our proprietary property. We will continue to apply for software and
business method patents on a case-by-case basis and will continue to monitor ongoing
developments in the evolving software and business method patent field. See ‘‘Risk Factors—Our
success will depend upon our ability to protect our intellectual property rights.’’
Technology and Operations
Our businesses are supported by an infrastructure that features advanced data processing
technologies and services. We use leading technologies to support our proprietary data collection
and warehousing systems. Examples include, in-home point-of-sale scanning solutions, Internetenabled retailer point-of-sale uploads, mobile handheld devices for our retail store auditing teams,
proprietary in-home television monitoring capabilities (Set Meter, People Meter, Active/Passive
Meter) and Internet-based survey delivery and data capture. Scalable, networked, midrange and
mainframe processors manage, manipulate and store this information in highly structured
databases. Our delivery and data analysis software platforms enable access to our information
products, as well as the ability to download information to the customer’s desktop for use in
common spreadsheet and presentation software. We provide these capabilities to our customers
and other businesses via consistent, secure and convenient access through Internet-based or
dedicated telecommunication links. These technologies and services are supported by data center
networks including the Nielsen Media Research Global Technology and Information Center (‘‘GTIC’’)
in Oldsmar, Florida. The GTIC campus includes our 70,000 square foot data center and network
operations facility. This facility is designed for high-availability, high-performance delivery of
information products to our customers and other businesses on a 365 day per year, 24 hour per
day, continuous schedule. The GTIC is also designed for high-capacity database operations and is
equipped with full Internet backbone networking capability for connectivity to our customers and
our other business locations.
117
Properties and Facilities
We lease property in more than 600 locations worldwide. We also own seven properties
worldwide, including ACNielsen’s offices in Oxford, United Kingdom, Mexico City, Mexico and Sao
Paulo, Brazil. Our leased property includes offices in New York, New York, Oldsmar, Florida, and
Markham, Canada. Nielsen Media Research leases property in Oldsmar, Florida which we use as
our Global Technology and Information Center. The obligations of Nielsen Media Research under
this lease are guaranteed by VNU. In addition, VNU is subject to certain covenants including the
requirement that it meet certain conditions in the event it consolidates with, merges into or conveys,
leases, transfers or sells its properties or assets as an entirety or substantially as an entirety to, any
person or persons, in one or a series of transactions.
Legal Proceedings
In addition to the legal proceedings described below, we are presently a party to certain
lawsuits arising in the ordinary course of our business. We believe that none of our current legal
proceedings will have a material adverse effect on our business, financial condition or results of
operations.
On June 16, 2005, erinMedia, LLC filed a lawsuit in federal district court in Tampa, Florida. The
lawsuit alleges that Nielsen Media Research violated federal and Florida state antitrust laws by
attempting to maintain a monopoly in the market for producing national television audience
measurement data. The complaint does not specify the amount of damages sought, but does
request that the court terminate Nielsen Media Research’s contracts with the four major national
broadcast television networks. On November 17, 2005, the court granted Nielsen Media Research’s
motion to dismiss in part, and dismissed erinMedia’s affiliated company, ReacTV, and its claims.
The case is now in discovery on the remaining claims by erinMedia. On January 11, 2006,
erinMedia filed a related action against Nielsen alleging violations of federal and state false
advertising and unfair competition law. We believe both actions are without merit.
118
MANAGEMENT
The Executive Officers set forth below are responsible for achieving VNU’s goals, strategy,
policies and results. Rob A. Ruijter, the Chief Financial Officer and interim Chief Executive Officer of
VNU, is currently the sole member of VNU’s Executive Board. The supervision of VNU’s
management and its Executive Board and the general course of its affairs and business operations
is entrusted to the Supervisory Board, which currently consists of twelve members. The Supervisory
Board is a separate body and fully independent from the Executive Board. The officers and
directors of the Company are expected to be as follows, following the closing of this offering:
Name
Age
Position(s)
Executive Officers
Rob A. Ruijter . . . . . . . . . . . . . . . . . . .
54
Earl Doppelt . . . . . . . . . . . . . . . . . . . .
Thomas Mastrelli . . . . . . . . . . . . . . . .
Greg Anderson . . . . . . . . . . . . . . . . . .
53
58
51
Steve Schmidt . . . . . . . . . . . . . . . . . .
52
Susan Whiting . . . . . . . . . . . . . . . . . .
49
Michael Marchesano . . . . . . . . . . . . . .
49
Ruud Bakker . . . . . . . . . . . . . . . . . . .
56
Chief Financial Officer, Interim Chief Executive
Officer and Executive Board Member
Executive Vice President and Chief Legal Officer
Executive Vice President, Corporate Development
Executive Vice President, Human Resources &
Communications
President and Chief Executive Officer, Marketing
Information
President and Chief Executive Officer, Media
Measurement & Information
President and Chief Executive Officer, Business
Media
Chief Executive Officer, Business Media Europe
Supervisory Board Members
Iain Leigh . . . . . . . . . . . . . . . .
James A. Quella . . . . . . . . . . .
Michael S. Chae . . . . . . . . . . .
Daniel F. Akerson . . . . . . . . . .
James A. Attwood, Jr. . . . . . . .
Patrick Healy . . . . . . . . . . . . .
Lord Clive Hollick . . . . . . . . . .
Alexander Navab . . . . . . . . . .
Scott A. Schoen . . . . . . . . . . .
Richard J. Bressler . . . . . . . . .
Dudley G. Eustace . . . . . . . . .
Gerald S. Hobbs . . . . . . . . . .
50
56
37
57
48
39
60
40
47
48
70
65
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
119
Rob A. Ruijter. Mr. Ruijter serves as Chief Financial Officer and interim Chief Executive Officer
of VNU. In this role he is responsible for a number of key corporate functions including Corporate
Controlling, Information & Communication Technology, Corporate Pensions, Treasury & Insurance,
and Operational Audit. As interim CEO he has overall responsibility for the performance and
strategic direction of VNU. Mr. Ruijter joined VNU in 2004 as CFO and a member of the Executive
Board. Prior to joining VNU, Mr. Ruijter held a number of positions at various multinationals. In 2001
Mr. Ruijter became CFO and Managing Director of KLM Royal Dutch Airlines. In 2000, he was
named Executive Vice President & CFO of Baan Company N.V. after spending seven years with
Philips as Director of Finance and Executive Vice President & CFO of Philips Lighting. Before
Philips, Mr. Ruijter worked at British Petroleum, PLC in a variety of roles including Managing
Director & CEO of BP Sweden. He began his career as a public accountant with Ernst & Young
Accountants, and is a Dutch (RA) Chartered Accountant, a U.S. CPA and is a member of the
Association of Corporate Treasurers in the United Kingdom.
Earl Doppelt. Mr. Doppelt serves as Executive Vice President and Chief Legal Officer of VNU,
a position he has held since 2002. In this role he is responsible for all legal matters and resources
pertaining to VNU. Prior to his current position he served as Executive Vice President and General
Counsel for ACNielsen, which was acquired by VNU in 2001. He has held a number of important
roles throughout his career, including Senior Vice President and General Counsel of The Dun &
Bradstreet Corporation and Senior Vice President and Deputy General Counsel of Paramount
Communications. Before joining Paramount he was a litigator specializing in antitrust and securities
matters with the law firm of Paul, Weiss, Rifkind, Wharton and Garrison. Mr. Doppelt holds a
bachelor’s degree from the University of Rochester and a JD from Cornell Law School.
Thomas Mastrelli. Mr. Mastrelli serves as Executive Vice President, Corporate Development of
VNU. Since joining the company in 1998, he has held a number of executive level positions at VNU,
including Chief Operating Officer of VNU’s U.S. operations and of its largest business unit, VNU
Marketing Information. Prior to joining VNU, Mr. Mastrelli was a partner in the accounting and
consulting firm of Leslie Sufrin & Company and prior to that was a principal at Arthur Young &
Company. He serves as a member of several Boards of Directors in which VNU has an ownership
interest including NetRatings, Inc., Solucient (Chairman), BuzzMetrics and Sports One Source.
Mr. Mastrelli is a CPA and holds a BBA from Pace University and an MBA from Fordham University.
Greg Anderson. Mr. Anderson serves as Executive Vice President, Human Resources &
Communications of VNU, a position he has held since August 2004. In this role he is responsible
for all aspects of human resources and employee communications worldwide. Mr. Anderson has
held senior leadership positions at a number of major global companies. Before joining VNU he
served as Vice President of Human Resources and Workforce Development at Hewlett Packard
(HP) for the Enterprise Systems Business Group. Prior to the HP merger with Compaq, he held the
post of Vice President for Compaq’s Sales, Servicing and Marketing organizations. He also held a
number of senior-level HR positions at PepsiCo and managed regional operations for Morrison
Healthcare. Mr. Anderson holds a Bachelor of Science degree in Management from Virginia Tech
University.
Steve Schmidt. Mr. Schmidt serves as President and Chief Executive Officer of VNU
Marketing Information and ACNielsen. In this role he has overall strategic responsibility for all VNU
MI businesses worldwide including ACNielsen, the group’s largest unit, as well as ACNielsen
Advisory Services. Previously, he served as Executive Vice President of VNU MI and President &
CEO, ACNielsen and President, Americas for VNU MI. Mr. Schmidt joined ACNielsen in 1995 as
President, U.S. and was later named President, North America. Mr. Schmidt joined ACNielsen from
Pillsbury Foods, where he served as President of the company’s Canadian operations, with
additional responsibility for Australia and New Zealand. He also served as Vice President of the
120
Frozen Foods division and Vice President, Sales Development. Earlier in his career he held
leadership positions with Pepsi Cola and Procter & Gamble. Mr. Schmidt received a Bachelor of
Science degree in Industrial Management from Purdue University.
Susan Whiting. Ms. Whiting serves as President and Chief Executive Officer of Media
Measurement & Information and Nielsen Media Research. In this role she has overall strategic
responsibility for all VNU MMI businesses worldwide. Ms. Whiting joined Nielsen Media Research in
1978 as part of the company’s management training program. Since then she has worked in every
aspect of the business. In 1997 she was appointed General Manager of National Services and
Emerging Markets. In 2001, she was named President and Chief Operating Officer, and nine
months later was named CEO. Ms. Whiting serves on the Board of Directors of NetRatings, Inc.
(approximately 60% owned by VNU) and Wilmington Trust Corporation. She graduated from
Denison University with a Bachelor of Arts degree (cum laude) in Economics.
Michael Marchesano. Mr. Marchesano serves as President and Chief Executive Officer of
VNU Business Media which is comprised of VNU Business Publications (USA), VNU Expositions
and VNU eMedia and Information Marketing, a position he has held since 2001. He also recently
took on executive responsibility for Nielsen Entertainment, which remains a division of MMI.
Mr. Marchesano joined the company in 1999, shortly after VNU acquired Bill Communications,
where he served as President. Prior to this, he was named President and Chief Executive Officer in
1994 of BPA International, the primary world auditor of business publications and provider of
audited data to marketing professionals and media/information companies. Mr. Marchesano held a
number of executive positions during his 22-year career with BPA. He holds a Bachelor of Arts
degree in Political Science from Marist College and has also completed the University of Virginia’s
Darden Graduate School of Business Administration Executive Program.
Ruud Bakker. Mr. Bakker serves as Chief Executive Officer of VNU Business Media Europe
and interim UK Managing Director, VNU Business Publications Ltd. In this role, he is responsible for
driving international business development across BME’s seven European territories together with
launching publishing and exhibitions businesses in China and Hong Kong. Mr. Bakker also serves
as a Vice President of Nielsen Finance Co. and Nielsen Finance LLC. His particular focus is the
growth of European online activities and exploiting opportunities presented by the convergence of
events, print and online media. Mr. Bakker has worked for VNU on two occasions. Firstly, from 1985
to 1989 when he was Deputy Managing Director of VNU Business Publications Holland, which
publishes Intermediair, the largest circulation publication in VNU’s portfolio. From 1990 to 1996, Mr.
Bakker held a variety of leadership positions for several international media houses in technology
and medical publishing. He rejoined VNU in 1996 as Managing Director of VNU Business
Publications UK before his appointment as Chairman and CEO of VNU Business Media Europe in
1999. Mr. Bakker earned a Masters Degree from Free University Amsterdam in 1974.
Iain Leigh. Mr. Leigh has been a member of VNU’s Supervisory Board since June 13, 2006.
Mr. Leigh is a Managing Partner and Head of the U.S. office of AlpInvest Partners. Prior to joining
AlpInvest Partners in 2000, Mr. Leigh was Managing Investment Partner of Dresdner Kleinwort
Benson Private Equity and a member of the Executive Committee of the firm’s global private equity
business. Prior to that, he led the Restructuring Department within Kleinwort Benson’s Investment
Banking division focusing on U.S. leveraged buy-outs and venture capital investments. Before
moving to the U.S., Mr. Leigh held a number of senior operating positions in Kleinwort Benson in
Western Europe and Asia. Mr. Leigh is a Fellow of the Chartered Association of Certified
Accountants, U.K., and holds a Master’s degree in Business Administration from Brunel University,
England.
James A. Quella. Mr. Quella will become a member of VNU’s Supervisory Board prior to the
closing of this offering. Mr. Quella is a Senior Managing Director and Senior Operating Partner of
121
the Private Equity Group of The Blackstone Group. Prior to joining The Blackstone Group,
Mr. Quella was a Managing Director and Senior Operating Partner with DLJ Merchant Banking
Partners—CSFB Private Equity. Prior to that, Mr. Quella was Vice-Chairman of Mercer Management
Consulting and Strategic Planning Associates, its predecessor firm. Mr. Quella is currently a director
of Allied Waste, Celanese, Graham Packaging, and Houghton-Mifflin. Mr. Quella received a B.A.
from the University of Chicago/University of Wisconsin-Madison and an M.B.A. with Dean’s Honors
from the University of Chicago Graduate School of Business.
Michael S. Chae. Mr. Chae has been a member of VNU’s Supervisory Board since June 13,
2006. Mr. Chae is a Senior Managing Director of the Private Equity Group of The Blackstone Group.
Prior to joining The Blackstone Group in 1997, Mr. Chae worked as an Associate at The Carlyle
Group and prior to that he was with Dillon, Read & Co. Mr. Chae is currently a director of Extended
Stay America and Universal Orlando and a member of the Board of Trustees of the Lawrenceville
School. Mr. Chae graduated magna cum laude from Harvard College, received an M.Phil from
Cambridge University and received a J.D. from Yale Law School.
Daniel F. Akerson. Mr. Akerson will become a member of VNU’s Supervisory Board prior to
the closing of this offering. Mr. Akerson is a Managing Director of The Carlyle Group and is CoHead of the U.S. Buyout fund. Prior to joining Carlyle, Mr. Akerson served as Chairman and Chief
Executive Officer of General Instrument Company, Nextel Communications, Inc., and XO
Communications, Inc. Mr. Akerson also served in several key roles at MCI Communications
Corporation, including Chief Financial Officer, Chief Operating Officer and President, and was a
General Partner at Forstmann Little & Company. Mr. Akerson is a member of the Board of Directors
of the American Express Company, WILLCOM, Inc., and Hawaiian Telcom where he serves as
Chairman of the Board of Directors. He also serves as a member of the Board of Directors of the
U.S. Naval Academy Foundation. Mr. Akerson earned his B.S. in engineering from the U.S. Naval
Academy and his M.Sc. in economics from the London School of Economics.
James A. Attwood, Jr. Mr. Attwood will become a member of VNU’s Supervisory Board prior
to the closing of this offering. Mr. Attwood is a Managing Director of The Carlyle Group and Head of
the Global Telecommunications and Media group. Prior to joining Carlyle, Mr. Attwood was with
Verizon Communications, Inc. and GTE Corporation. Prior to GTE, he was with Goldman, Sachs &
Co. Mr. Attwood serves as a member of the Boards of Directors of Hawaiian Telcom, Insight
Communications, R.H. Donnelley and WILLCOM, Inc. Mr. Attwood graduated summa cum laude
from Yale University with a B.A. in applied mathematics and an M.A. in statistics and received both
J.D. and M.B.A. degrees from Harvard University.
Patrick Healy. Mr. Healy has been a member of our Supervisory Board since June 13, 2006
prior to the closing of this offering. Mr. Healy is a Managing Director of Hellman & Friedman and
leads the firm’s London office. Mr. Healy’s primary areas of focus are the media, financial and
professional services industries and the firm’s European activities. Mr. Healy currently oversees the
firm’s investments in Axel Springer and the Nasdaq Stock Market. Prior to joining Hellman &
Friedman in 1994, Mr. Healy was with James D. Wolfensohn Incorporated and Consolidated Press
Holdings in Australia. Mr. Healy is currently a director of DoubleClick, Inc., Mondrian Investment
Partners, the Nasdaq Stock Market, Inc., and ProSeibenSat.1, and oversees the firm’s investments
in Axel Springer AG and Gartmore Investment plc.
Lord Clive Hollick. Lord Hollick will become a member of VNU’s Supervisory Board prior to
the closing of this offering. Lord Hollick is a Member at Kohlberg Kravis Roberts & Co., where he
heads the Media industry team in Europe. Prior to joining Kohlberg Kravis Roberts & Co. in 2005,
Lord Hollick was CEO of United Business Media. Lord Hollick is currently the Chairman of SBS
Broadcasting, a senior director of Diageo plc and a director of Honeywell Inc. Lord Hollick received
a B.A. from Nottingham University.
122
Alexander Navab. Mr. Navab has been a member of VNU’s Supervisory Board since June 13,
2006 prior to the closing of this offering. Mr. Navab is a Member at Kohlberg Kravis Roberts & Co.,
where he heads the Media and Communications industry team. Prior to joining Kohlberg Kravis
Roberts & Co. in 1993, Mr. Navab was with James D. Wolfensohn Incorporated and prior to that he
was with Goldman, Sachs & Co. Mr. Navab is currently a director of Visant. Mr. Navab received a
B.A. with Honors, Phi Beta Kappa, from Columbia College and an M.B.A. with High Distinction from
the Harvard Graduate School of Business Administration.
Scott A. Schoen. Mr. Schoen has been a member of VNU’s Supervisory Board since
June 13, 2006 prior to the closing of this offering. Mr. Schoen is a Co-President of Thomas H. Lee
Partners. Prior to joining Thomas H. Lee Partners in 1986, Mr. Schoen was with the Private Finance
Department of Goldman, Sachs & Co. Mr. Schoen is currently a director of Simmons Company and
Spectrum Brands, Inc. He is a member of the Board of Trustees of Spaulding Rehabilitation
Hospital Network. He is also a member of the Board of Advisors of the Yale School of Management
and a member of the Yale Development Board. Mr. Schoen received a B.A. in History from Yale
University, a J.D. from the Harvard Law School and an M.B.A. from Harvard Graduate School of
Business Administration. Mr. Schoen is a member of the New York Bar.
Richard J. Bressler. Mr. Bressler will become a member of VNU’s Supervisory Board prior to
the closing of this offering. Mr. Bressler joined Thomas H. Lee Partners as a Managing Director in
2006. From May 2001 through 2005, Mr. Bressler was the Senior Executive Vice President and Chief
Financial Officer of Viacom Inc. Before joining Viacom, Mr. Bressler was Executive Vice President of
AOL Time Warner Inc. and Chief Executive Officer of AOL Time Warner Investments. Prior to that,
Mr. Bressler served in various capacities with Time Warner Inc., including as Chairman and Chief
Executive Officer of Time Warner Digital Media, and Executive Vice President and Chief Financial
Officer of Time Warner Inc. Before joining Time Inc., Mr. Bressler was a partner with Ernst & Young.
Mr. Bressler serves on the Boards of Warner Music Group, Gartner, Inc. and American Media, Inc.
In addition, he serves as Chairman for the Center for Communication Board, the Duke University
Fuqua School of Business’s Board of Visitors, New School University’s Board of Trustees, the J.P.
Morgan Chase National Advisory Board and the Columbia University School of the Arts Deans’
Council. Mr. Bressler holds a B.B.A. in Accounting from Adelphia University.
Dudley G. Eustace. Mr. Eustace has been a member of VNU’s Supervisory Board since
June 13, 2006. Mr. Eustace currently serves as the chairman of the supervisory board of Smith &
Nephew Plc., vice chairman of the supervisory board of Royal KPN N.V., chairman of the
supervisory board of Aegon N.V., vice chairman of the supervisory board of Hagemeyer N.V. and a
member of the European Advisory Council of NM Rothschild & Sons.
Gerald S. Hobbs. Mr. Hobbs has been a member of VNU’s Supervisory Board since January
2004. Mr. Hobbs was formerly a Vice-Chairman of VNU’s Executive Board from 1999 until 2003.
Mr. Hobbs is a Managing Director at Boston Ventures, Inc., which he joined in January 2005 as a
partner. In addition, Mr. Hobbs is currently a director of The Bureau of National Affairs, Inc., Medley
Global Advisors, LLC, New Track Media and the Advertising Council.
Management Equity Arrangements
In connection with the Transactions, the existing 2002, 2003 and 2004 share option plans were
terminated, and all outstanding awards thereunder were cashed out. The 2005 share option plan
was unvested at the time of the tender offer. The vesting was accelerated and the plan was
cancelled and paid out.
123
We expect to adopt a new stock incentive plan in connection with the completion of the
Transactions, which will provide for the sale of shares to our executive officers and other key
employees as well as the grant of stock options to those individuals.
Termination Protection Agreements
Each of our current executive officers and certain other officers are party to termination
protection agreements. Under each of the termination protection agreements, upon a change of
control, any time periods, conditions or contingencies relating to the exercise or realization of, or
lapse of restrictions under, any outstanding equity incentive award would be automatically
accelerated or waived. In addition, if the officer’s employment is terminated by us without ‘‘cause’’
or by the officer for ‘‘good reason’’ (which includes in most cases, among other things, a reduction
in the officer’s base salary or total bonus, a relocation greater than 35 miles from the officer’s
current principal place of business or a diminution in the officer’s title or primary reporting
relationship or substantial diminution in duties or responsibilities, as those terms are defined in the
agreement, within two years following a change of control, the officer will be entitled to receive
severance benefits including a lump sum amount equal to (a) the sum of two times, or, in certain
cases, three times, (1) the officer’s annual base salary at the rate in effect for the year of the
termination (or, if higher, the rate in effect immediately prior to the change of control and (2) his or
her average annual bonus earned for the two calendar years prior to the year in which the
termination date occurs (or, if higher, the year in which the change of control occurred) and (b) the
officer’s target annual bonus and any outstanding long-term incentive awards (at target), in each
case prorated for the portion of the performance period elapsed through the date of termination.
‘‘Good reason’’ for purposes of the agreements with Messrs. Ruijter, Anderson, Doppelt, Berger and
Mastrelli, includes any reason during the thirteenth month following a change in control.
Each agreement also contains a tax gross-up provision whereby if the officer incurs any excise
tax by reason of his or her receipt of any payment that constitutes an excess parachute payment as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), the
officer will receive a gross-up payment in an amount that would place the officer in the same
after-tax position that he or she would have been in if no excise tax had applied. However, under
certain conditions, rather than receive a gross-up payment, the payments payable to the officer will
be reduced so that no excise tax is imposed. As a condition to receiving any payments or benefits
under the agreements, the officers must execute a release of claims in respect of their employment
with us.
Retirement Benefit Agreement for Steve Schmidt
A letter agreement, dated September 23, 2004, provides supplemental retirement benefits for
Mr. Schmidt. A life annuity will be provided to Mr. Schmidt upon normal retirement (age 60) in an
amount such that benefits under the agreement plus benefits from other retirement plans (including
(i) the VNU Retirement Plan, (ii) the VNU Excess Plan and (iii) Social Security retirement benefits,
but excluding the old ACNielsen supplemental executive retirement plan) equal a target retirement
benefit. The maximum target retirement benefit (which increases for each year of employment on or
after July 1, 2003 with partial years granted for each full month of employment) is 25% of
Mr. Schmidt’s highest average annual base salary plus regular incentives paid during the five
consecutive calendar years in the last ten years of his credited service. Mr. Schmidt’s benefits under
the agreement vest in full on July 1, 2008. An early retirement benefit will be provided to
Mr. Schmidt at or after attaining age 55 in an amount equal to the benefit amount that would
otherwise be available at normal retirement reduced by 6% for each year or fraction thereof that his
retirement precedes the attainment of age 60. If Mr. Schmidt dies before retiring, Mr. Schmidt’s
spouse is entitled to a survivor benefit payable as an annuity in an amount that equals 50% of the
124
then-vested target retirement benefit offset by other death and survivor benefits under other
retirement plans. Mr. Schmidt may elect to have 100% of the benefit paid in a lump sum, but such
election is effective only if he remains employed for twelve months following the date of the
election. If Mr. Schmidt’s employment is terminated before he attains age 55, he will receive a
termination benefit that is equal to the target retirement benefit offset by benefits under other
retirement plans and further reduced by 30% (6% for each year benefit commences prior to age
60). This benefit is payable as an annuity commencing on the first day of the calendar month
coinciding with or next following the date Mr. Schmidt attains age 55 and ending on the first day of
the calendar month coinciding with or next following his death unless a lump sum payment is
elected. No benefit is payable if Mr. Schmidt is terminated for ‘‘cause’’ (as defined).
VNU Career Transition Plan
We have adopted a severance plan that generally provides severance benefits to all full-time
salaried and regular part-time salaried employees on the U.S. payroll of VNU and certain of its
subsidiaries and affiliates whose employment is terminated under certain circumstances. Unless an
employee is terminated for unsatisfactory performance, the employee’s salary will continue to be
paid at normal payroll intervals for a period calculated based upon salary at termination and years
of service. Medical and dental benefits continue throughout the salary continuation period at the
levels in effect prior to the employee’s termination, which may be adjusted to the extent that the
terms of benefit coverage are changed for an active employee. The participant’s contribution rate
will be equal to the after-tax payroll deduction contribution rate of an active employee. COBRA
continuation coverage runs concurrently with the salary continuation period. If the employee was
employed for 6 months or more during the annual incentive period, he is entitled to the pro rata
amount that would have been payable if the termination had not occurred. This does not apply for
employees terminated for unsatisfactory performance. If the employee was employed for half of the
period of a performance cycle greater than one year, he is entitled to receive cash equal to the pro
rata amount that would have been payable if the termination had not occurred. This does not apply
for employees terminated for unsatisfactory performance.
VNU Executive Transition Plan
We have adopted an executive transition plan which provides for severance benefits to a select
group of the executive officers of VNU and its affiliates as selected by the CEO. Participants may
not participate in any other severance plan of an affiliated company. A participant is eligible for
severance benefits if his employment is terminated under certain circumstances. The eligible
executive would receive 104 weeks of salary continuation for the year of termination, which includes
base salary and, if applicable, annual incentive opportunity and would be paid at normal payroll
intervals. This would not apply in the case of terminations for unsatisfactory performance. The
executive may elect to continue medical and dental insurance throughout the salary continuation
period, which may be adjusted to the extent that the terms of benefit coverage are changed for an
active employee. The participant’s contribution rate will be equal to the after-tax payroll deduction
contribution rate of an active employee. COBRA continuation coverage runs concurrently with the
salary continuation period. Except in the case of termination for unsatisfactory performance, the
executive is entitled to receive cash equal to the pro rata amount of the annual incentive that would
have been received if the termination had not occurred. If the executive was employed for half of
the period of a performance cycle greater than one year, he is entitled to receive cash equal to the
pro rata amount that would have been payable if the termination had not occurred. This does not
apply for employees terminated for unsatisfactory performance. Fringe benefits, club dues, and
financial planning assistance continue at the same level during the salary continuation period.
125
VNU Retirement Plan
The Company sponsors the VNU Retirement Plan, a cash-balance pension plan that covers
U.S. employees who have completed at least one year of service. The Company adds monthly
basic and investment credits to each participant’s account. The basic credit equals 3% of a
participant’s eligible monthly compensation. Participants become fully vested in their accrued
benefits after the earlier of five years of service or when the participant reaches normal retirement
age (which is the later of age 65 or the fifth anniversary of the date the participant first became
eligible to participate in the plan). Unmarried participants receive retirement benefits as a single-life
annuity, and married participants receive retirement benefits as a qualified joint-and-survivor annuity.
Participants can elect an alternate form of payment such as a straight-life annuity, a
joint-and-survivor annuity, years-certain-and-life income annuity or a level-income annuity option.
Lump sum payment of accrued benefits is only available if the benefits do not exceed $5000.
Payment of benefits begins at the later of the participant’s termination of employment with the
Company or reaching age 40.
VNU Excess Plan
We also maintain a non-qualified retirement plan (the ‘‘VNU Excess Plan’’) for certain of our
management and highly compensated employees. The VNU Excess Plan provides supplemental
benefits to individuals whose benefits under the Cash Balance Plan are limited by the provisions of
Section 415 and/or Section 401(a)(17) of the Code. The benefit payable to a participant under the
VNU Excess Plan is equal to the difference between the benefit actually paid under the Cash
Balance Plan and the amount that would have been payable had the applicable Code limitations
not applied. Although the VNU Excess Plan is considered an unfunded plan and there is no current
trust agreement for the plan, assets have been set aside in a ‘‘rabbi trust’’ fund held by Frank
Russell Trust Company for assets under the former ACNielsen Corporation Supplemental Executive
Retirement Plan and Retirement Benefit Excess Plan. It is intended that benefits due under the VNU
Excess Plan will be paid from this rabbi trust or from the general assets of the VNU entity that
employs the participants in the VNU Excess Plan.
VNU Pension Plans in the Netherlands, the United Kingdom, Switzerland, Belgium and
Germany
VNU maintains a defined benefit pension scheme in the Netherlands. Benefits under the
pension scheme are based on a participant’s years of service and pensionable salary. The
pensionable salary is the annual base salary including fixed allowances and holiday allowance less
a threshold of approximately e16,500 over which no pension is accrued. The final pension amounts
are determined based upon an annual pension accrual of: 1.75% of the pensionable salary up to
e54,500 (amounts as per 1 July 2003); 1.5% of the pensionable salary between e54,500 and
e109,000; and 1.25% of the pensionable salary exceeding e109,000. Matching employee
contributions of 6%, 5.1% and 4.3% respectively are also required. The minimum age for
participation in the pension scheme is 25 and the retirement age is 65.
AC Nielsen also maintains a defined benefit pension scheme in the Netherlands. Benefits under
the pension scheme are based on a participant’s years of service and pensionable salary. The
pensionable salary is the annual base salary including fixed allowances and holiday allowance less
a threshold of approximately e20,000 over which no pension is accrued. The final pension amounts
are determined based upon accrue an annual pension accrual of 2% of the pensionable salary
together with matching employee contributions of 6% of pensionable salary. The minimum age for
participation in the pension scheme is 25 and the retirement age is 65.
126
Nielsen Book Services Ltd. (former J. Whitaker and Son Ltd) and VNU Entertainment Media
UK Ltd. maintained a pension scheme which is closed to new participants.
In the United Kingdom AC Nielsen Limited maintains a retirement plan with both a final salary
(defined benefit) and a money purchase section. The defined benefit section provides for 2% final
pensionable salary for each year of service. The employee contribution for the final salary section is
5% of pensionable salary and the contribution for the money purchase section is 3% of pensionable
salary. This pension scheme has been amended per January 1, 2005. As a result, new employees
from January 1, 2004 are only entitled to membership of the money purchase section. The final
salary section is closed with effect from January 1, 2005 and since that date existing participants
can elect to stay on 2% pension accrual with a contribution of 9% of pensionable salary or they can
elect for 1.67% accrual and continue the employee contribution of 5% of pensionable salary.
Participants aged 50 years and older as at January 1, 2005 will retain a pensionable age of
60 years. Younger participants will incur a cost neutral early retirement reduction on retirement
below 65. From 1 January 2005 new employees can only participate in a new defined contribution
scheme.
In Belgium AC Nielsen Company maintains a pension scheme which provides 0.6% of final
salary below the social security ceiling and 2% of final salary above the social security ceiling for
each year of service with a maximum of 35 years. The pension contributions are made by the
employer without employee contributions. Early retirement is possible from the age of 60.
In Switzerland Nielsen-Firmen maintains a pension plan which provides 2% of final pensionable
earnings (annual base salary less 10⁄7 of the maximum annual social security old age pension for a
single person) per year of service, maximum of 35 years. The normal retirement age is 63 years.
The employee contribution is 6% to 8% of earnings, depending on age. Pension payments will be
increased 1% every two years. The early retirement age is 60.
In Germany each of AC Nielsen Germany GmbH and AC Nielsen Werbeforschung S&P GmbH
and ACN Marketing Research Holding GmbH maintain defined benefit pension plans which are
closed to new participants. Under the AC Nielsen Germany plan the accrual is 0.06% of earnings
up to the social security contribution ceiling and 1.8% of earnings above such ceiling for each year
of pensionable service. The pensionable salary is 13⁄12 of monthly gross income. The retirement age
is 65 for men and 60 for women. Early retirement is possible at 55 with approval of AC Nielsen
Germany. Each employer is responsible for all of the costs of its plan.
127
PRINCIPAL SHAREHOLDERS
As of July 5, 2006, Valcon owned approximately 99.2% of VNU’s issued and outstanding share
capital. Following the consummation of the statutory squeeze-out, all of VNU’s issued and
outstanding share capital will be held by Valcon. Investment funds associated with or designated by
the Sponsors, together with the Co-Investors, indirectly through their holdings in Valcon own
approximately 99.2% of VNU’s share capital and will own substantially all of the share capital of
VNU following consummation of the statutory squeeze-out. Investment funds associated with or
designated by the Sponsors and the Co-Investors beneficially own, in the aggregate, approximately
100% of the share capital of Valcon on a fully diluted basis. All members of our board of directors
affiliated with each of the Sponsors may be deemed to beneficially own shares owned by such
entities or their associated investment funds. Each such individual disclaims beneficial ownership of
any such shares in which such individual does not have a pecuniary interest. We also expect to
offer certain members of management the opportunity to invest in our company in connection with
the completion of the Transactions and expect that a number of them may do so.
128
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Shareholders’ Agreement
In connection with the Transactions, investment funds associated with or designated by the
Sponsors acquired, indirectly, shares of VNU. Investment funds associated with or designated by
the Sponsors entered into an interim investors agreement in connection with the tender offer. The
interim investors agreement contains agreements among the parties with respect to, among other
matters, the election of the managing directors of Valcon Acquisition Holding B.V., Valcon
Acquisition Holding (Luxembourg) Sarl and Valcon, restrictions on the issuance or transfer of
securities and other special corporate governance provisions (including the right to approve various
corporate actions).
In addition, investment funds associated with or designated by the Sponsors and Valcon
Acquisition Holding B.V., Valcon Acquisition Holding (Luxembourg) Sarl and Valcon intend to enter
into a shareholders’ agreement, which will replace the interim investors agreement. The
shareholders’ agreement will contain agreements among the parties with respect to, among other
matters, the election of the members of VNU’s supervisory board, restrictions on the issuance or
transfer of securities (including tag-along rights, drag-along rights and public offering rights) and
other special corporate governance provisions (including the right to approve various corporate
actions and control committee composition). The shareholders agreement will also provide for
customary registration rights.
Advisory Agreements
Prior to the closing of this offering, VNU, Inc. will enter into an advisory agreement with Valcon
pursuant to which affiliates of the Sponsors will provide management services on behalf of Valcon.
Pursuant to such agreement Valcon will receive a quarterly management fee equal to
(i) $1.625 million per fiscal quarter for our fiscal year 2006 and (ii) for each fiscal year after 2006, an
amount per fiscal quarter equal to 105% of the quarterly fee for the immediately preceding fiscal
year, and reimbursement for reasonable travel and other out-of-pocket expenses incurred by Valcon
and the affiliates of the Sponsors in connection with the provision of services under the advisory
agreement. The advisory agreement also provides that Valcon may be entitled to receive fees in
connection with certain financing, acquisition, disposition and change in control transactions based
on terms and conditions customary for transactions of similar size and scope. The advisory
agreement includes customary exculpation and indemnification provisions in favor of Valcon and
the affiliates of the Sponsors. The advisory services referred to in the advisory agreement will be
provided by affiliates of the Sponsors and accordingly the fees received by Valcon that are
described above will be paid to such affiliates of the Sponsors under the terms of a similar advisory
agreement among the affiliates of the Sponsors and Valcon.
Prior to the closing of this offering, ACN Holdings, Inc. will enter into an advisory agreement
with Valcon pursuant to which the affiliates of the Sponsors will provide management services on
behalf of Valcon. Pursuant to such agreement Valcon will receive a quarterly management fee equal
to (i) $0.875 million per fiscal quarter for our fiscal year 2006 and (ii) for each fiscal year after 2006,
an amount per fiscal quarter equal to 105% of the quarterly fee for the immediately preceding fiscal
year, and reimbursement for reasonable travel and other out-of-pocket expenses incurred by Valcon
and the affiliates of the Sponsors in connection with the provision of services under the advisory
agreement. In addition, pursuant to such agreement. The advisory agreement also provides that
Valcon may be entitled to receive fees in connection with certain financing, acquisition, disposition
and change in control transactions based on terms and conditions customary for transactions of
similar size and scope. The advisory agreement includes customary exculpation and indemnification
provisions in favor of Valcon and the affiliates of the Sponsors. The advisory services referred to in
129
the advisory agreement will be provided by the Sponsors and accordingly the fees received by
Valcon that are described above will be paid to such affiliates of the Sponsors under the terms of a
similar advisory agreement among the affiliates of the Sponsors and Valcon.
Transaction fees
In connection with services provided by affiliates of the Sponsors on behalf of Valcon, related
to the Transactions, Valcon may receive at a future date aggregate transaction fees of
approximately e65 million and e35 million from VNU, Inc. and ACN Holdings, Inc., respectively.
Scarborough Research
We and Scarborough Research, a joint venture with Arbitron, entered into various related party
transactions in the ordinary course of business. We and our subsidiaries provide various services to
Scarborough Research, including data collection, accounting, insurance administration, and the
rental of real estate. We pay royalties to Scarborough Research for the right to include Scarborough
Research data in our products sold directly to our customers. Additionally, we sell various
Scarborough Research products directly to our clients, for which we receive a commission from
Scarborough Research. The net cash payments from Scarborough Research to us as a result of
these transactions were e9 million and e11 million in 2005 and 2004, respectively. Obligations
between our company and Scarborough Research are net settled in cash on a monthly basis in the
ordinary course of business; at December 31, 2005 and 2004 the related amounts outstanding were
not significant.
130
DESCRIPTION OF OTHER INDEBTEDNESS
New Senior Secured Credit Facilities
General
Our new senior secured credit facilities provide for senior secured financing of up to
e4,861 million ($5,820 million), consisting of:
• a term loan facility in an aggregate principal amount of up to e4,287 million ($5,133 million)
and (the ‘‘Term Facility’’) with a maturity of seven years, most of which will be denominated
in U.S. dollars, with the balance denominated in Euros; and
• a senior secured revolving credit facility in an aggregate principal amount of e574 million
($688 million) (the ‘‘Revolving Facility’’) with a maturity of six years, including both a letter of
credit sub-facility and a swingline loan sub-facility.
In addition, we may request one or more incremental term loan facilities and/or increase
commitments under our Revolving Facility in an aggregate amount of up to $688 million, subject to
certain conditions and receipt of commitments by existing or additional financial institutions or
institutional lenders.
All borrowings under our Revolving Facility following the date the Term Facility is initially drawn
are subject to the satisfaction of customary conditions, including the absence of a default and the
accuracy of representations and warranties. Loans under our Revolving Facility will be available in
multiple currencies and to multiple borrowers.
Proceeds of the term loans and, if applicable, the revolving loans, together with other sources
of funds described under ‘‘Use of Proceeds,’’ will be used to repay existing debt and finance the
Transactions. Proceeds of the revolving loans borrowed after the closing date of the Transactions,
swingline loans and letters of credit will be used for working capital and general corporate
purposes. See ‘‘Use of Proceeds.’’
Interest and Fees
The interest rates per annum applicable to loans denominated in U.S. dollars or Euros, other
than swingline loans, under our new senior secured credit facilities are, at our option, equal to
either an alternate base rate (in the case of U.S. dollar loans) or an adjusted EURIBOR rate for a
one-, two-, three- or six-month interest period, or a nine- or twelve-month period, if agreed to by our
lenders, in each case, plus an applicable margin. The alternate base rate will be the greater of
(1) Citigroup’s Prime Rate and (2) one-half of 1% over the weighted average of rates on overnight
Federal Funds as published by the Federal Reserve Bank of New York. The Adjusted EURIBOR rate
will be determined by reference to settlement rates established for deposits in the applicable
currencies in the London interbank market for a period equal to the interest period of the loan and
the maximum reserve percentages established by banking regulations to which our lenders are
subject. Interest rates on loans denominated in other currencies will be based on rates common for
such currencies plus an applicable margin.
Swingline loans will bear interest at the interest rate applicable to alternate base rate revolving
loans.
In addition, on the last day of each calendar quarter we are required to pay each lender (i) a
commitment fee in respect of any unused commitments under the Revolving Facility and the
delayed draw portion of the term facility and (ii) a letter of credit fee in respect of the aggregate
face amount of outstanding letters of credit under the Revolving Facility.
131
Prepayments
Subject to exceptions, our new senior secured credit facilities require mandatory prepayments
of term loans in amounts equal to:
• 50% (as may be reduced based on our ratio of consolidated total net debt to consolidated
EBITDA) of our annual excess cash flow (as defined in the credit agreement governing our
new senior secured credit facilities);
• except as set forth below, 100% (as may be reduced based on our ratio of consolidated total
net debt to consolidated EBITDA) of the net cash proceeds of all non-ordinary course asset
sales or other dispositions of property, subject to reinvestment rights and certain other
exceptions;
• (x) 100% of the net cash proceeds of the sale, in whole or in part from time to time, of BME
that, when applied to repay term loans, would not change our ratio of consolidated total net
debt to consolidated EBITDA and (y) 50% of any remaining amount of such net cash
proceeds from such sale of BME; and
• 100% of the net cash proceeds from certain incurrences of debt.
Amortization of Principal
Our new senior secured credit facilities require scheduled quarterly payments on the term loans
each equal to 0.25% of the original principal amount of the term loans for the first six years and
three quarters, with the balance paid at maturity.
Collateral and Guarantors
Our new senior secured credit facilities are guaranteed by VNU, VNU Intermediate Holding B.V.,
VNU Holding and Finance B.V., VNU International B.V., VNU Holdings B.V., ACN Holdings, Inc., VNU
Services B.V. and VNU, Inc., and certain of their material existing and subsequently acquired or
organized wholly-owned subsidiaries (other than non-U.S. subsidiaries of ACN Holdings, Inc.,
VNU, Inc. or other U.S. subsidiaries), and is secured by substantially all of the existing and future
property and assets (other than cash) of our U.S. subsidiaries and by a pledge of the capital stock
of the guarantors specified above, the capital stock of our U.S. subsidiaries and the guarantors and
up to 65% of the capital stock of certain of our non-U.S. subsidiaries.
Restrictive Covenants and Other Matters
Our new senior secured credit facilities require that we, after an initial grace period, comply on
a quarterly basis with a maximum consolidated leverage ratio test and minimum interest coverage
ratio test. In addition, our new senior secured credit facilities include negative covenants, subject to
significant exceptions, restricting or limiting our ability and the ability of certain of our subsidiaries
to, among other things:
• incur, assume or permit to exist additional indebtedness or guarantees;
• incur liens and engage in sale and leaseback transactions;
• make loans and investments;
• declare dividends, make payments or redeem or repurchase capital stock;
• engage in mergers, acquisitions and other business combinations;
• prepay, redeem or purchase certain indebtedness, including the notes offered hereby;
• amend or otherwise alter terms of certain indebtedness, including the senior subordinated
discount notes offered hereby;
• sell assets;
132
• transact with affiliates;
• enter into agreements limiting subsidiary distributions; and
• alter the business that we conduct.
VNU will not be bound by any financial or negative covenants contained in the credit agreement.
The new senior secured credit facilities will also contain certain customary affirmative covenants
and events of default.
Senior Notes
General
In connection with the Transactions, Nielsen Finance LLC and Nielsen Finance Co., special
purpose entities wholly owned by us, will issue $650 million of U.S. dollar-denominated unsecured
senior notes and e150 million of euro-denominated unsecured senior notes. The Senior Notes
mature on August 1, 2014. The U.S. dollar-denominated Senior Notes will accrue interest at 10%
per annum, and the euro-denominated Senior Notes will accrue interest at 9% per annum. Interest
will be payable semiannually on February 1 and August 1 of each year, commencing February 1,
2007.
Covenants
Nielsen Finance LLC, Nielsen Finance Co., VNU Holdings & Finance B.V., VNU International
B.V. and certain subsidiaries of VNU are subject to numerous restrictive covenants under the
indenture governing the Senior Notes, including restrictive covenants with respect to liens,
indebtedness, mergers, disposition of assets, acquisition of assets, dividends, transactions with
affiliates, investments, agreements, and other customary covenants.
Events of Default
The Senior Notes will be subject to customary events of default, including non-payment of
principal or interest, violation of covenants, cross accelerations under other indebtedness and
insolvency or certain bankruptcy events. The occurrence of an event of default could result in the
acceleration of principal of the Senior Notes.
Senior Subordinated Discount Notes
General
In connection with the Transactions, Nielsen Finance LLC and Nielsen Finance Co., special
purpose entities wholly owned by us, will issue $1,070 million principal amount at maturity of
unsecured senior subordinated discount notes. The Senior Subordinated Discount Notes mature on
August 1, 2016. The Senior Subordinated Discount Notes are being issued at a significant discount
from their principal amount at maturity. The accreted value of the Senior Subordinated Discount
Notes will increase in value from the date of issuance until August 1, 2011 at a rate of 121⁄2% per
annum, compounded semiannually. No cash interest will accrue on the Senior Subordinated
Discount Notes until August 1, 2011. Cash interest will accrue at a rate of 121⁄2% per annum from
August 1, 2011 and will be payable semiannually on February 1 and August 1 of each year
commencing on February 1, 2012.
Covenants
Nielsen Finance LLC, Nielsen Finance Co., VNU Holdings & Finance B.V., VNU International
B.V. and certain subsidiaries of VNU are subject to numerous restrictive covenants under the
indenture governing the Senior Subordinated Discount Notes, including restrictive covenants with
133
respect to liens, indebtedness, mergers, disposition of assets, acquisition of assets, dividends,
transactions with affiliates, investments, agreements, and other customary covenants.
Events of Default
The Senior Subordinated Discount Notes will be subject to customary events of default,
including non-payment of principal or interest, violation of covenants, cross accelerations under
other indebtedness and insolvency or certain bankruptcy events. The occurrence of an event of
default could result in the acceleration of principal of the Senior Subordinated Discount Notes.
Euro Medium Term Note Program
In October 2001, we established a e2,000 million Euro Medium Term Note (‘‘EMTN’’) program.
Under this program, debenture loans and private placements can be issued up to the program
amount, both on a long-term and short-term basis. Debenture loans and private placements issued
under this program can be quoted on the Luxembourg Stock Exchange. In fact, all debenture loans
and most private placements are quoted. In October 2003, the program amount was increased to
e2,500 million. At December 31, 2005 and 2004, e712 million and e1,294 million, respectively, was
outstanding under the EMTN program. Upon consummation of the Transactions e518 will remain
outstanding under this program. The securities issued under the program contain covenants which
generally restrict the creation of security over indebtedness with a principal amount greater than
e15 million, a maturity greater than twelve months and which are in the form of securities that are
or are intended to be listed on a stock market. As of July 5, 2006 the following are the amounts of
the medium term notes we expect to remain outstanding under the EMTN program, after the
consummation of the Transactions:
Amount
¥4,000,000,000
e 30,000,000
e 25,000,000
e 25,000,000
e 50,000,000
£ 250,000,000
Outstanding VNU Euro Medium Term Note Program Securities
Interest Rate
2.50%
6.75%
Floating
Floating
Floating
5.625%
Maturity
2011
2012
2012
2012
2010
2010/2017
In 2003, a £250 million debenture loan was issued under the EMTN program. After seven
years, the interest rate on the debenture loan will be reset for the remaining seven years to 5.50%
plus the then applicable market credit spread for our company. As a feature of the loan, after the
seven years, we had a right to acquire the debentures from the holders at par. At the issuance date
of the loan, we have assigned this right to two investment banks. If the acquisition right is
exercised, the interest rate will be reset as aforementioned. If the acquisition right is not exercised,
we will redeem the debenture loan at par.
134
DESCRIPTION OF SENIOR DISCOUNT NOTES
General
Certain terms used in this description are defined under the subheading ‘‘Certain Definitions.’’
In this description, the terms ‘‘Issuer’’ and ‘‘VNU’’ refer to VNU N.V.
The Issuer will issue the Senior Discount Notes under an indenture to be dated August 9, 2006
(the ‘‘Indenture’’) between VNU and Law Debenture Trust Company of New York, as trustee (the
‘‘Trustee’’). The Senior Discount Notes will be issued in a private transaction that is not subject to
the registration requirements of the Securities Act. See ‘‘Notice to Investors.’’ Except as set forth
herein, the terms of the Senior Discount Notes will be substantially identical and include those
stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture
Act.
The following description is only a summary of the material provisions of the Indenture and
Registration Rights Agreement and does not purport to be complete and is qualified in its entirety
by reference to the provisions of those agreements, including the definitions therein of certain terms
used below. We urge you to read the Indenture and the Registration Rights Agreement because
those agreements, not this description, define your rights as Holders of the Senior Discount Notes.
You may request copies of the Indenture and Registration Rights Agreement at our address set
forth under the heading ‘‘Offering Memorandum Summary’’ in the preliminary offering
memorandum.
Brief Description of Senior Discount Notes
The Senior Discount Notes:
• will be unsecured senior obligations of the Issuer;
• will be pari passu in right of payment to all existing and future senior indebtedness of the
Issuer (including its guarantee of the Senior Notes);
• will be effectively subordinated to all secured indebtedness of the Issuer (including its
guarantee of the new senior secured credit facility);
• will be structurally subordinated to all indebtedness of the Issuer’s subsidiaries;
• will be senior in right of payment to any future Subordinated Indebtedness of the Issuer
(including its guarantee of the Senior Subordinated Discount Notes); and
• will be subject to registration with the SEC pursuant to a Registration Rights Agreement.
Holding Company Structure and Ranking
The Issuer is a holding company and does not have any material assets or operations other
than ownership of the Capital Stock of VNU Intermediate Holding B.V. All of the Issuer’s operations
are conducted through its Subsidiaries and therefore the Issuer will be dependent upon the cash
flow of its Subsidiaries to meet its obligations, including its obligations on the Senior Discount
Notes. The new senior secured credit facility and the indentures governing the Senior Notes and
the Senior Subordinated Discount Notes will restrict the ability of the Issuer’s Subsidiaries to pay
dividends or make other distributions to the Issuer. In addition, certain laws restrict the ability of the
Issuer’s subsidiaries to pay dividends and make loans and advances to the Issuer. The Issuer also
only has a shareholder’s claim on the assets of its Subsidiaries. This shareholder’s claim is junior to
135
the claims that creditors and holders of preferred stock of the Subsidiaries have against those
Subsidiaries.
The Senior Discount Notes are general unsecured obligations of the Issuer that rank senior in
right of payment to all existing and future Subordinated Indebtedness of the Issuer. The Senior
Discount Notes rank equally in right of payment with all existing and future liabilities of the Issuer
that are not so subordinated and are effectively subordinated to all of the Issuer’s secured
indebtedness, including the guarantee of indebtedness under the new senior secured credit facility,
to the extent of the value of the assets that secure such indebtedness, and structurally
subordinated to all of the existing and future indebtedness and liabilities of the Issuer’s Subsidiaries
(including trade debt and indebtedness under the Senior Notes, the Senior Subordinated Discount
Notes and the new senior secured credit facility). Any right of the Issuer and its creditors, including
the holders of the Senior Discount Notes, to participate in the assets of any of its Subsidiaries upon
such Subsidiary’s liquidation or reorganization will be effectively subordinated to the claims of that
Subsidiary’s creditors. In addition, in the event of bankruptcy, liquidation, reorganization or other
winding up of the Issuer, or upon a default in payment with respect to, or the acceleration of, any
indebtedness under the new senior secured credit facility or other secured indebtedness, the assets
of the Issuer that secure secured indebtedness will be available to pay obligations on the notes
only after all indebtedness under the new senior secured credit facility and other secured
indebtedness has been repaid in full from such assets.
As of March 31, 2006, after giving pro forma effect to the Transactions, the Issuer would have
had e6,322 million ($7,570 million) of indebtedness, consisting of the Senior Discount Notes, the
existing indebtedness of the Issuer that will survive the Transactions, and the Issuer’s guarantee of
the new senior secured credit facility, the Senior Notes and the Senior Subordinated Discount
Notes. As of March 31, 2006, after giving pro forma effect to the Transactions, the Issuer’s
Subsidiaries would have had e8,125 million ($9,729 million) of indebtedness and other liabilities, to
which the Senior Discount Notes are structurally subordinated. The Indenture, the new senior
secured credit facility and the indentures governing the Senior Notes and Senior Subordinated
Discount Notes permit the Issuer and its Subsidiaries to incur additional indebtedness. See ‘‘Risk
Factors—Risks Related to Our Notes and This Offering—Despite current indebtedness levels, we
and out subsidiaries may still be able to incur substantially more debt. This could further exacerbate
the risks associated with our substantial leverage’’ in the preliminary offering memorandum.
Paying Agent and Registrar for the Senior Discount Notes
The Issuer will maintain one or more paying agents for the Senior Discount Notes in London,
England and Luxembourg. The principal paying agent is Deutsche Bank AG, London Branch and
the paying agent and transfer agent in Luxembourg is Deutsche Bank Luxembourg, S.A.
The Issuer will also maintain a registrar with offices in the Borough of Manhattan, City of New
York. The initial registrar will be the Trustee. The registrar will maintain a register reflecting
ownership of the Senior Discount Notes outstanding from time to time and will make payments on
and facilitate transfer of Senior Discount Notes on behalf of the Issuer.
The Issuer may change the paying agents or the registrars without prior notice to the Holders.
The Issuer, a Material Subsidiary or any Subsidiaries of a Material Subsidiary may act as a paying
agent or registrar.
Transfer and Exchange
A Holder may transfer or exchange Senior Discount Notes in accordance with the Indenture.
The registrar and the Trustee may require a Holder to furnish appropriate endorsements and
136
transfer documents in connection with a transfer of Senior Discount Notes. Holders will be required
to pay all taxes due on transfer. The Issuer is not required to transfer or exchange any Senior
Discount Note selected for redemption. Also, the Issuer is not required to transfer or exchange any
Senior Discount Note for a period of 15 days before a selection of Senior Discount Notes to be
redeemed. The Senior Discount Notes will be issued in minimum denominations of e2,000 and
integral multiples of e1,000 in excess of e2,000, in each case in principal amount at maturity of the
Senior Discount Notes.
Principal, Maturity and Interest
The Issuer will issue e343,000,000 in an aggregate principal amount at maturity of Senior
Discount Notes in this offering. The Senior Discount Notes will mature on August 1, 2016. The
Senior Discount Notes will be issued at a significant discount from their principal amount at
maturity. The Senior Discount Notes will have an initial Accreted Value of e583.37 per $1,000
principal amount at maturity to generate aggregate gross proceeds of e200,095,910 of the Senior
Discount Notes. The Accreted Value of each Senior Discount Note will increase from the date of
issuance until August 1, 2011, at a rate of 111⁄8% per annum, compounded semiannually using a
360-day year comprised of twelve 30-day months, such that the accreted value will equal the
principal amount at maturity on such date. The Issuer may issue additional Senior Discount Notes
from time to time after this offering under the Indenture (‘‘Additional Senior Discount Notes’’). Each
the Senior Discount Notes offered by the Issuer and any Additional Senior Discount Notes
subsequently issued under the Indenture will be treated as a single class for all purposes under the
Indenture, including waivers, amendments, redemptions and offers to purchase. Unless the context
requires otherwise, references to ‘‘Senior Discount Notes’’ for all purposes of the Indenture and this
‘‘Description of Senior Discount Notes’’ include any Additional Senior Discount Notes that are
actually issued.
No cash interest will accrue on the Senior Discount Notes prior to August 1, 2011 although for
U.S. federal income tax purposes a significant amount of original issue discount, taxable as ordinary
income, will be recognized by a Holder as such discount accretes. Consequently, you will be
required to include amounts in your gross income for U.S. federal income tax purposes in advance
of your receipt of the cash payments to which the income is attributable. See ‘‘Material United
States Federal Tax Considerations’’ below for a discussion regarding the taxation of such original
issue discount. Cash interest will accrue on the Senior Discount Notes at the rate per annum shown
on the front cover of this offering memorandum from August 1, 2011, or from the most recent date
to which interest has been paid or provided for. Interest will be payable semiannually using a
360-day year comprised of twelve 30-day months in cash to Holders of record at the close of
business on the January 15 or July 15 immediately preceding the interest payment date, on
February 1 and August 1 of each year, commencing February 1, 2012.
Additional Interest
Additional Interest may accrue on the Senior Discount Notes in certain circumstances pursuant
to the Registration Rights Agreement. All references in the Indenture, in any context, to any interest
or ether amount payable on or with respect to the Senior Discount Notes shall be deemed to
include any Additional Interest pursuant to the Registration Rights Agreement. Principal (including
any accretion) of, premium, if any, and interest on the Senior Discount Notes will be payable at the
office or agency of the Issuer maintained for such purpose within Luxembourg or, at the option of
the Issuer, payment of interest may be made by check mailed to the Holders of the Senior Discount
Notes at their respective addresses set forth in the register of Holders; provided that all payments of
principal (including any accretion), premium, if any, and interest with respect to the Senior Discount
Notes represented by one or more global notes registered in the name of or held by Euroclear or
137
Clearstream or their nominee will be made by wire transfer of immediately available funds to the
accounts specified by the Holder or Holders thereof. Until otherwise designated by the Issuer, the
Issuer’s office or agency in Luxembourg will be the office of the Trustee maintained for such
purpose.
Mandatory Redemption; Offers to Purchase; Open Market Purchases
The Issuer is not required to make any mandatory redemption or sinking fund payments with
respect to the Senior Discount Notes. We may at any time and from time to time purchase Senior
Discount Notes in the open market or otherwise.
Optional Redemption
Except as set forth below and under ‘‘—Optional Redemption for Tax Reasons,’’ the Issuer will
not be entitled to redeem the Senior Discount Notes at its option prior to August 1, 2011.
At any time prior to August 1, 2011 the Issuer may redeem all or a part of the Senior Discount
Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the
registered address of each Holder, at a redemption price equal to 100% of the Accreted Value of
the Senior Discount Notes redeemed plus the Applicable Premium as of the date of redemption
(the ‘‘Redemption Date’’), and, without duplication, accrued and unpaid interest and Additional
Interest, if any, to the Redemption Date, subject to the rights of Holders on the relevant record date
to receive interest due on the relevant interest payment date.
On and after August 1, 2011 the Issuer may redeem the Senior Discount Notes, in whole or in
part, upon notice as described under the heading ‘‘Repurchase at the Option of Holders—Selection
and Notice’’ at the redemption prices (expressed as percentages of principal amount at maturity of
the Senior Discount Notes to be redeemed) set forth below, plus accrued and unpaid interest
thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of
Holders of record on the relevant record date to receive interest due on the relevant interest
payment date, if redeemed during the twelve-month period beginning on August 1 of each of the
years indicated below:
Year
2011 . . . . . . . . . . .
2012 . . . . . . . . . . .
2013 . . . . . . . . . . .
2014 and thereafter
Percentage
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
105.563%
103.708%
101.854%
100.000%
The Trustee shall select the Senior Discount Notes to be purchased in the manner described
under ‘‘Selection and Notice.’’
Payment of Additional Amounts
All payments of principal and interest by or on behalf of the Issuer in respect of the Senior
Discount Notes shall be made free and clear of, and without withholding or deduction for, any
taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected,
withheld or assessed by or within the Netherlands or any authority therein or thereof having power
to tax, unless such withholding or deduction is required by law. In that event, the Issuer shall pay
such additional amounts as shall result in receipt by the Holders of such amounts as would have
138
been received by them had no such withholding or deduction been required, except that no such
additional amounts shall be payable with respect to any Senior Discount Note:
(i)
to, or to a third party on behalf of, a Holder who is liable to such taxes, duties, assessments or
governmental charges in respect of such Senior Discount Note by reason of his having some
connection with the Netherlands other than the mere holding of the Senior Discount Note; or
(ii) to, or to a third party on behalf of, a Holder who could lawfully avoid (but has not so avoided)
such deduction or withholding by complying or procuring that any third party complies with
any statutory requirements or by making or procuring that any third party makes a declaration
of non-residence or other similar claim for exemption to any tax authority in the place where
the relevant Senior Discount Note is presented for payment; or
(iii) presented for payment more than 30 days after the Relevant Date except to the extent that the
Holder of it would have been entitled to such additional amounts on presenting it for payment
on the thirtieth day; or
(iv) where such withholding or deduction is imposed on a payment to an individual and is required
to be made pursuant to any European Union Directive on the taxation of savings implementing
the conclusions of the ECOFIN Council meeting of November 26-27, 2000 or any law
implementing or complying with, or introduced in order to conform to, such Directive; or
(v) presented for payment by or on behalf of a Holder who would have been able to avoid such
withholding or deduction by presenting the relevant Senior Discount Note to another paying
agent in a member state of the European Union.
As used in herein, ‘‘Relevant Date’’ in respect of any Senior Discount Note means the date on
which payment in respect of it first becomes due or (if any amount of the money payable is
improperly withheld or refused) the date on which payment in full of the amount outstanding is
made or (if earlier) the date seven days after that on which notice is duly given to the Holder that,
upon further presentation of the Senior Discount Note, such payment will be made, provided that
payment is in fact made upon such presentation.
Optional Redemption for Tax Reasons
The Senior Discount Notes may be redeemed at the option of the Issuer in whole, but not in
part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Holders (which
notice shall be irrevocable) at a redemption price equal to 100% of the Accreted Value of the Senior
Discount Notes redeemed plus accrued and unpaid interest and Additional Interest, if any, and
including all additional amounts, if any, that will become due as a result of the redemption or
otherwise, if (i) the Issuer satisfies the Trustee immediately before the giving of such notice that it
has or will become obliged to pay additional amounts as described under ‘‘Payment of Additional
Amounts,’’ as a result of any change in, or amendment to, the laws or regulations of the
Netherlands or any political subdivision or any authority thereof or therein having the power to tax,
or any change in the application or official interpretation of such laws or regulations, which change
or amendment becomes effective on or after the Issue Date (but before August 1, 2016), and
(ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest
date on which the Issuer would be obliged to pay such additional amounts were a payment in
respect of the Notes then due. Before the publication of any notice of redemption pursuant to this
paragraph, the Issuer shall deliver to the Trustee an Officer’s Certificate stating that the obligation
referred to in (i) above cannot be avoided by the Issuer taking reasonable measures available to it
and the Trustee shall be entitled to accept such certificate as sufficient evidence of the satisfaction
139
of the condition precedent set out in (ii) above in which event it shall be conclusive and binding on
Holders. A copy of such notice of redemption will be sent to the Luxembourg Stock Exchange prior
to the date for such redemption.
Selection and Notice
If the Issuer is redeeming less than all of the Senior Discount Notes at any time, the Trustee will
select the Senior Discount Notes of such series to be redeemed (a) if such Senior Discount Notes
are listed on any national securities exchange, in compliance with the requirements of the principal
national securities exchange on which such series of Senior Discount Notes are listed or (b) on a
pro rata basis to the extent practicable.
Notices of purchase or redemption shall be mailed by first-class mail, postage prepaid, at least
30 but not more than 60 days before the purchase or redemption date to each Holder of Senior
Discount Notes at such Holder’s registered address, except that redemption notices may be mailed
more than 60 days prior to a redemption date if the notice is issued in connection with a
defeasance of the Senior Discount Notes or a satisfaction and discharge of the Indenture. If any
Senior Discount Note is to be purchased or redeemed in part only, any notice of purchase or
redemption that relates to such Senior Discount Note shall state the portion of the principal amount
at maturity thereof that has been or is to be purchased or redeemed.
The Issuer will issue a new Senior Discount Note in a principal amount at maturity equal to the
unredeemed portion of the original Senior Discount Note in the name of the Holder upon
cancellation of the original Senior Discount Note. Senior Discount Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date, the Accreted
Value ceases to increase and cash interest ceases to accrue, as the case may be, on Senior
Discount Notes or portions of them called for redemption.
Negative Pledge
So long as any of the Senior Discount Notes remain outstanding, neither the Issuer nor any of
its Material Subsidiaries will secure any Indebtedness by any lien, pledge, charge, or other security
device upon any of its assets or revenues unless it shall, simultaneously with or prior to the creation
of such security, take any and all action necessary to secure the obligations of the Issuer under the
Senior Discount Notes and the Indenture equally and rateably with such Indebtedness to the
satisfaction of the Trustee or provide such other security for the Senior Discount Notes and the
Indenture as the Trustee in its absolute discretion shall deem to be not materially less beneficial to
the relevant Holders or as shall be approved by the Holders of a majority in principal amount at
maturity of the Senior Discount Notes of the relevant Holders, except for any Permitted
Encumbrance.
Events of Default and Remedies
The Trustee at its discretion may, and if so requested in writing by holders of at least one-fifth
in Accreted Value of the Senior Discount Notes then outstanding shall, give notice to the Issuer that
the outstanding Senior Discount Notes are and they shall immediately become, due and payable at
their Accreted Value, together with accrued interest and costs:
(i)
in the event of default in any payment on the Senior Discount Notes, if such default shall
remain unremedied for a period of 15 Business Days after notice in writing thereof is given by
the Trustee to the Issuer; or
140
(ii) in the event of default in the due performance of any other provision of the Senior Discount
Notes or the Indenture, if such default shall remain unremedied for a period of 30 Business
Days after written notice thereof is given by the Trustee to the Issuer; or
(iii) in the event of bankruptcy (faillissement) of the Issuer or any Material Subsidiary or in the event
that the Issuer or any Material Subsidiary files a petition for a moratorium (suréance van
betaling); or
(iv) in the event of dissolution (ontbinding) of the Issuer or any Material Subsidiary prior to the
payment of the Senior Discount Notes in full (except for (a) in any such case, a dissolution for
the purpose of and followed by a reconstruction, reorganization or amalgamation the terms of
which have previously been approved in writing by the Trustee or by the Holders of a majority
in principal amount at maturity of the Senior Discount Notes, (b) in the case of the Issuer, the
substitution in the place of the Issuer of a Substituted Obligor the terms of which have
previously been approved as aforesaid, or (c) in the case of a Material Subsidiary, whereby the
undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the
Issuer or another of its subsidiaries); or
(v) in the event of default of the Issuer or any Material Subsidiary as to due and punctual payment
of principal, premium (if any) or interest on any Indebtedness of the Issuer or any Material
Subsidiary, as and when the same shall become due and payable, if such default shall
continue for more than the longer of (i) fifteen days or (ii) the period of grace (if any) specified
in the terms thereof, and the time for payment of such principal, premium (if any) and interest
has not been validly extended,
provided that in the case of the happening of any of the events mentioned in paragraph (ii) above,
only if the Trustee shall have certified in writing that such event is, in its opinion, materially
prejudicial to the interests of the Holders.
If any Event of Default (other than of a type specified in clause (iii) above) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 30% in principal amount at
maturity of the then total outstanding Senior Discount Notes may declare the principal (or Accreted
Value), premium, if any, (without duplication) interest and any other monetary obligations on all the
then outstanding Senior Discount Notes to be due and payable immediately; provided, however,
that so long as any indebtedness under the new senior secured credit facilities (or successor
facilities) shall be outstanding, no such acceleration shall be effective until the earlier of:
(1) acceleration of any such Indebtedness under the new senior secured credit facilities (or
successor facilities); or
(2) five Business Days after the giving of written notice of such acceleration to the Issuer and
the administrative agent under the new senior secured credit facilities (or successor
facilities).
Upon the effectiveness of such declaration, such principal (or Accreted Value) and interest will
be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising under clause (iii) of the first paragraph of this section, all outstanding Senior Discount Notes
will become due and payable without further action or notice. The Indenture will provide that the
Trustee may withhold from the Holders notice of any continuing Default, except a Default relating to
the payment of principal (or Accreted Value), premium, if any, or interest, if it determines that
withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate
the Senior Discount Notes if in the best judgment of the Trustee acceleration is not in the best
interest of the Holders of the Senior Discount Notes.
141
The Indenture will provide that the Holders of a majority in aggregate principal amount at
maturity of the then outstanding Senior Discount Notes by notice to the Trustee may on behalf of
the Holders of all of the Senior Discount Notes waive any existing Default and its consequences
under the Indenture except a continuing Default in the payment of interest on, premium, if any, or
the principal (or Accreted Value) of any Senior Discount Note held by a non-consenting Holder. In
the event of any Event of Default specified in clause (v) above, such Event of Default and all
consequences thereof (excluding any resulting payment default, other than as a result of
acceleration of the Senior Discount Notes) shall be annulled, waived and rescinded, automatically
and without any action by the Trustee or the Holders, if within 20 days after such, Event of Default
arose:
(1) the Indebtedness or guarantee that is the basis for such Event of Default has been
discharged; or
(2) holders thereof have rescinded or waived the acceleration, notice or action (as the case
may be) giving rise to such Event of Default; or
(3) the default that is the basis for such Event of Default has been cured.
Subject to the provisions of the Indenture relating to the duties of the Trustee thereunder, in
case an Event of Default occurs and is continuing, the Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or direction of any of the
Holders of the Senior Discount Notes unless the Holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce the right to receive
payment of principal (or Accreted Value), premium (if any) or interest when due, no Holder of a
Senior Discount Note may pursue any remedy with respect to the Indenture or the Senior Discount
Notes unless:
(1) such Holder has previously given the Trustee notice that an Event of Default is continuing;
(2) Holders of at least 30% in principal amount at maturity of the total outstanding Senior
Discount Notes have requested the Trustee to pursue the remedy;
(3) Holders of the Senior Discount Notes have offered the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and
the offer of security or indemnity; and
(5) Holders of a majority in principal amount at maturity of the total outstanding Senior
Discount Notes have not given the Trustee a direction inconsistent with such request within
such 60-day period.
Subject to certain restrictions, under the Indenture the Holders of a majority in principal amount
at maturity of the total outstanding Senior Discount Notes are given the right to direct the time,
method and place of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow
any direction that conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder of a Senior Discount Note or that would involve the
Trustee in personal liability.
The Indenture will provide that the Issuer is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Issuer is required, within five Business
Days after becoming aware of any Default, to deliver to the Trustee a statement specifying such
Default.
142
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Issuer or any of its parent
companies shall have any liability for any obligations of the Issuer under the Senior Discount Notes
or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder by accepting Senior Discount Notes waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Senior Discount Notes. Such
waiver may not be effective to waive liabilities under the federal securities laws and it is the view of
the SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The obligations of the Issuer under the Indenture will terminate (other than certain obligations)
and will be released upon payment in full of all of the Senior Discount Notes. The Issuer may, at its
option and at any time, elect to have all of its obligations discharged with respect to the Senior
Discount Notes (‘‘Legal Defeasance’’) and cure all then existing Events of Default except for:
(1) the rights of Holders of Senior Discount Notes to receive payments in respect of the
principal (or Accreted Value) of, premium, if any, and interest on the Senior Discount Notes when
such payments are due solely out of the trust created pursuant to the Indenture;
(2) the Issuer’s obligations with respect to Senior Discount Notes concerning issuing
temporary Senior Discount Notes, registration of such Senior Discount Notes, mutilated, destroyed,
lost or stolen Senior Discount Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s obligations
in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have its obligations released
with respect to substantially all of the restrictive covenants in the Indenture (‘‘Covenant
Defeasance’’) and thereafter any omission to comply with such obligations shall not constitute a
Default with respect to the Senior Discount Notes. In the event Covenant Defeasance occurs,
certain events (not including bankruptcy, receivership, rehabilitation and insolvency events
pertaining to the Issuer) described under ‘‘Events of Default and Remedies’’ will no longer
constitute an Event of Default with respect to the Senior Discount Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the
Senior Discount Notes:
(1) the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders
of the Senior Discount Notes, Euro or non-callable government obligations of any member nation of
the European Union whose official currency is the Euro, rated AAA or better by S&P and Aaa or
better by Moody’s, in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the Accreted Value of, premium, if any, and, without
duplication, interest due on the Senior Discount Notes on the stated maturity date or on the
redemption date, as the case may be, of such Accreted Value, premium, if any, or interest on such
Senior Discount Notes and the Issuer must specify whether such Senior Discount Notes are being
defeased to maturity or to a particular redemption date;
143
(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee (i) an
Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions,
(a) the Issuer has received from, or there has been published by, the United States Internal
Revenue Service a ruling, or
(b) since the issuance of the Senior Discount Notes, there has been a change in the
applicable U.S. federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that,
subject to customary assumptions and exclusions, the Holders of the Senior Discount Notes will not
recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of
such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal Defeasance had
not occurred and (ii) an opinion of counsel in the Netherlands reasonably acceptable to the Trustee
to the effect that (a) the Holders of the outstanding Senior Discount Notes will not recognize
income, gain or loss for Dutch income tax purposes as a result of such Legal Defeasance and will
be subject Dutch income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred and (b) payments from the
defeasance trust will be free and exempt from any and all withholding and other income taxes of
whatever nature imposed or levied by or on behalf of the Netherlands or any political subdivision
thereof or therein having the power to tax;
(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee (i) an
Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary
assumptions and exclusions, the Holders of the Senior Discount Notes will not recognize income,
gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will
be subject to such tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred and (ii) an opinion of counsel
in the Netherlands reasonably acceptable to the Trustee to the effect that (a) the Holders of the
outstanding Senior Discount Notes will not recognize income, gain or loss for Dutch income tax
purposes as a result of such Covenant Defeasance and will be subject to Dutch income tax on the
same amounts, in the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred and (b) payments from the defeasance trust will be free
and exempt from any and all withholding and other income taxes of whatever nature imposed or
levied by or on behalf of the Netherlands or any political subdivision thereof or therein having the
power to tax;
(4) no Default (other than that resulting from borrowing funds to be applied to make such
deposit and the granting of Liens in connection therewith) shall have occurred and be continuing
on the date of such deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than the Indenture) to
which the Issuer is a party or by which the Issuer is bound;
(6) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of
the date of such opinion and subject to customary assumptions and exclusions following the
deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United
States Code;
144
(7) the Issuer shall have delivered to the Trustee an Officer’s Certificate stating that the deposit
was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any
creditors of the Issuer or others; and
(8) the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of
Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions)
each stating that all conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as to all Senior Discount
Notes, when either:
(1) all Senior Discount Notes theretofore authenticated and delivered, except lost, stolen or
destroyed Senior Discount Notes which have been replaced or paid and Senior Discount Notes for
whose payment money has theretofore been deposited in trust, have been delivered to the Trustee
for cancellation; or
(2) (a) all Senior Discount Notes not theretofore delivered to the Trustee for cancellation have
become due and payable by reason of the making of a notice of redemption or otherwise, will
become due and payable within one year or are to be called for redemption and redeemed within
one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by
the Trustee in the name, and at the expense, of the Issuer, and the Issuer has irrevocably deposited
or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the
Holders of the Senior Discount Notes, Euro or non-callable government obligations of any member
nation of the European Union whose official currency is the Euro, rated AAA or better by S&P and
Aaa or better by Moody’s, in such amounts as will be sufficient without consideration of any
reinvestment of interest to pay and discharge the entire indebtedness on the Senior Discount Notes
not theretofore delivered to the Trustee for cancellation for principal (or Accreted Value), premium, if
any, and, without duplication, accrued interest to the date of maturity or redemption;
(b) no Default (other than that resulting from borrowing funds to be applied to make such
deposit) with respect to the Indenture or the Senior Discount Notes shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such deposit and such deposit
will not result in a breach or violation of, or constitute a default under any material agreement or
instrument governing Indebtedness (other than the Indenture) to which the Issuer is a party or by
which the Issuer is bound;
(c) the Issuer has paid or caused to be paid all sums payable by it under the Indenture; and
(d) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited
money toward the payment of the Senior Discount Notes at maturity or the redemption date, as the
case may be.
In addition, the Issuer must deliver an Officer’s Certificate and an Opinion of Counsel to the
Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture, and the Senior
Discount Notes may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount at maturity of the Senior Discount Notes then outstanding, including
consents obtained in connection with a purchase of, or tender offer or exchange offer for Senior
145
Discount Notes, and any existing Default or compliance with any provision of the Indenture or the
Senior Discount Notes issued thereunder may be waived with the consent of the Holders of a
majority in principal amount at maturity of the then outstanding Senior Discount Notes, other than
Senior Discount Notes beneficially owned by the Issuer or its Affiliates (including consents obtained
in connection with a purchase of or tender offer or exchange offer for the Senior Discount Notes).
The Indenture will provide that, without the consent of each affected Holder of Senior Discount
Notes, an amendment or waiver may not, with respect to any Senior Discount Notes held by a
non-consenting Holder:
(1) reduce the Accreted Value of such Senior Discount Notes whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the Accreted Value of or change the fixed final maturity of any such Senior
Discount Note or alter or waive the provisions with respect to the redemption of such Senior
Discount Notes;
(3) reduce the rate of or change the time for payment of interest on any Senior Discount Note;
(4) waive a Default in the payment of principal (or Accreted Value) of or premium, if any, or
(without duplication) interest on the Senior Discount Notes, except a rescission of acceleration of
the Senior Discount Notes by the Holders of at least a majority in aggregate principal amount at
maturity of the Senior Discount Notes and a waiver of the payment default that resulted from such
acceleration, or in respect of a covenant or provision contained in the Indenture or any Guarantee
which cannot be amended or modified without the consent of all Holders;
(5) make any Senior Discount Note payable in money other than that stated therein;
(6) make any change in the provisions of the Indenture relating to waivers of past Defaults or
the rights of Holders to receive payments of principal (or Accreted Value) of or premium, if any, or,
without duplication, interest on the Senior Discount Notes;
(7) make any change in these amendment and waiver provisions;
(8) impair the right of any Holder to receive payment of principal (or Accreted Value) of, or
interest on such Holder’s Senior Discount Notes on or after the due dates therefor or to institute
suit for the enforcement of any payment on or with respect to such Holder’s Senior Discount Notes;
(9) make any change to the ranking of the Senior Discount Notes that would adversely affect
the Holders; or
(10) change the method of calculating Accreted Value.
Notwithstanding the foregoing, the Issuer and the Trustee may amend or supplement the
Indenture or Senior Discount Notes without the consent of any Holder;
(1) to cure any ambiguity, omission, mistake, defect or inconsistency;
(2) to provide for uncertificated Senior Discount Notes of such series in addition to or in place
of certificated Senior Discount Notes;
(3) to comply with the covenant relating to mergers, consolidations and sales of assets;
(4) to provide the assumption of the Issuer’s obligations to the Holders;
(5) to make any change that would provide any additional rights or benefits to the Holders or
that does not adversely affect the legal rights under the Indenture of any such Holder;
146
(6) to add covenants for the benefit of the Holders or to surrender any right or power
conferred upon the Issuer;
(7) to comply with requirements of the SEC in order to effect or maintain the qualification of
the Indenture under the Trust Indenture Act;
(8) to evidence and provide for the acceptance and appointment under the Indenture of a
successor Trustee thereunder pursuant to the requirements thereof;
(9) to provide for the issuance of exchange notes or private exchange notes, which are
identical to exchange notes except that they are not freely transferable;
(10) to add a guarantor under the Indenture;
(11) to conform the text of the Indenture, or the Senior Discount Notes to any provision of this
‘‘Description of Senior Discount Notes’’ to the extent that such provision in this ‘‘Description of
Senior Discount Notes’’ was intended to be a verbatim recitation of a provision of the Indenture,
Guarantee or Senior Discount Notes; or
(12) making any amendment to the provisions of the Indenture relating to the transfer and
legending of Senior Discount Notes as permitted by the Indenture, including, without limitation to
facilitate the issuance and administration of the Senior Discount Notes; provided, however, that
(i) compliance with the Indenture as so amended would not result in Senior Discount Notes being
transferred in violation of the Securities Act or any applicable securities law and (ii) such
amendment does not materially and adversely affect the rights of Holders to transfer Senior
Discount Notes.
The consent of the Holders is not necessary under the Indenture to approve the particular form
of any proposed amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
Notices
Notices given by publication will be deemed given on the first date on which publication is
made and notices given by first-class mail, postage prepaid, will be deemed given five calendar
days after mailing.
Concerning the Trustee
The Indenture will contain certain limitations on the rights of the Trustee thereunder, should it
become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.
The Indenture will provide that the Holders of a majority in principal amount at maturity of the
outstanding Senior Discount Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture will provide that in case an Event of Default shall occur (which shall not
be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a
prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture at the request of any
Holder of the Senior Discount Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
147
Governing Law
The Indenture and the Senior Discount Notes will be governed by and construed in accordance
with the laws of the State of New York.
Currency Indemnity and Calculation of Euro-denominated Restrictions
The Euro is the sole currency of account and payment for all sums payable by the Issuer
under or in connection with the Senior Discount Notes and the Indenture including damages. Any
amount received or recovered in a currency other than Euro, whether as a result of, or the
enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution
of the Issuer or otherwise, by any Holder of a Senior Discount Note or by the Trustee in respect of
any sum expressed to be due to it from the Issuer will only constitute a discharge of the Issuer to
the extent of the Euro amount which the recipient is able to purchase with the amount so received
or recovered that other ordinary currency on the date of that receipt or recovery (or, if it is not
practicable to make that purchase on that date, on the first date on which it is practicable to do so).
If that Euro amount is less than the Euro amount expressed to be due to the recipient under
any Senior Discount Note or the Trustee, the Issuer will indemnify them against any loss sustained
by such recipient as a result. In any event, the Issuer will indemnify the recipient against the cost of
making any such purchase. For the purposes of this currency indemnity provision, it will be
sufficient for the Holder or the Trustee to certify in a satisfactory manner (indicating the sources of
information used) that it would have suffered a loss had an actual purchase of Euro been made
with the amount so received in that other currency on the date of receipt or recovery (or, if a
purchase of Euro on such date had not been practicable, on the first date on which it would have
been practicable, it being required that the need for a change of date be certified in the manner
mentioned above). These indemnities constitute a separate and independent obligation from the
Issuer’s other obligations, will give rise to a separate and independent cause of action, will apply
irrespective of any indulgence granted by any Holder or the Trustee and will continue in full force
and effect despite any other judgment, order, claim or proof for a liquidated amount in respect to
any sum due under any Senior Discount Note or to the Trustee.
Except as otherwise specifically set forth herein, for purposes of determining compliance with
any Euro-denominated restriction herein, the Euro-equivalent amount for purposes hereof that is
denominated in a non-Euro currency shall be calculated based on the relevant currency exchange
rate in effect on the date such non-Euro amount is incurred or made, as the case may be.
Consent to Jurisdiction and Service
In relation to any legal action or proceedings arising out of or in connection with the Indenture
and the notes, the Issuer will in the Indenture irrevocably submit to the non-exclusive jurisdiction of
the federal and state courts in the Borough of Manhattan in the City of New York, County and State
of New York, United States of America.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
148
‘‘Accreted Value’’ means, as of any date (the ‘‘Specified Date’’): the amount provided below for
each e1,000 principal amount at maturity of Senior Discount Notes:
(a) if the Specified Date occurs on one of the following dates (each, a ‘‘Semi-Annual Accrual
Date’’), the Accreted Value will equal the amount set forth below for such Semi-Annual Accrual
Date:
Semi-Annual Accrual Date
February 1, 2007
August 1, 2007 . .
February 1, 2008
August 1, 2008 . .
February 1, 2009
August 1, 2009 . .
February 1, 2010
August 1, 2010 . .
February 1, 2011
August 1, 2011 . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Accreted Value
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e 614.35
e 648.52
e 684.59
e 722.67
e 762.87
e 805.31
e 850.10
e 897.39
e 947.31
e1,000.00
The foregoing Accreted Values shall be increased, if necessary, to reflect any accretion of
Additional Interest;
(b) if the Specified Date occurs before the first Semi-Annual Accrual Date, the Accreted Value
will equal the sum of (A) the original issue (for each e1,000 principal amount at maturity) price of a
Senior Discount Note and (B) the amount equal to the product of (x) the Accreted Value for the first
Semi-Annual Accrual Date less such original issue price multiplied by (y) a fraction, the numerator
of which is the number of days from the Issue Date to the Specified Date, using a 360-day year of
twelve 30-day months, and the denominator of which is the number of days from the Issue Date to
the first Semi-Annual Accrual Date, using a 360-day year of twelve 30-day months.
(c) if the Specified Date occurs between two Semi-Annual Accrual Dates, the Accreted Value
will equal the sum of (A) the Accreted Value for the Semi-Annual Accrual Date immediately
preceding such Specified Date and (B) an amount equal to the product of (x) the Accreted Value
for the immediately following Semi-Annual Accrual Date less the Accreted Value for the Semi-Annual
Accrual Date immediately preceding such Specified Date multiplied by (y) a fraction, the numerator
of which is the number of days from the immediately preceding Semi-Annual Accrual Date to the
Specified Date, using a 360-day year of twelve 30-day months, and the denominator of which is
180; or
(d) if the Specified Date occurs on or after August 1, 2011, the Accreted Value will equal
e1,000.
‘‘Additional Interest’’ means all additional interest then owing pursuant to the Registration Rights
Agreement.
‘‘Affiliate’’ of any specified Person means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such specified Person. For purposes
of this definition, ‘‘control’’ (including, with correlative meanings, the terms ‘‘controlling,’’ ‘‘controlled
by’’ and ‘‘under common control with’’), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities, by agreement or
otherwise.
149
‘‘Applicable Premium’’ means, the greater of:
(a) 1.0% of the Accreted Value of such Senior Discount Note on such Redemption Date; and
(b) the excess, if any, of (i) the present value at such Redemption Date of the redemption
price of such Senior Discount Note at August 1, 2011 (each such redemption price being set forth
in the table appearing above under the caption ‘‘Optional Redemption’’), computed using a
discount rate equal to the Bund Rate as of such Redemption Date plus 50 basis points; over (ii) the
Accreted Value of such Senior Discount Note.
‘‘Bund Rate’’ means, as of any Redemption Date, the yield to maturity as of such Redemption
Date of direct obligations of the Federal Republic of Germany (Bunds or Bundesanleihen) with a
constant maturity (as compiled and published in the most recent financial statistics) that has
become publicly available at least two Business Days prior to the Redemption Date (or, if such
financial statistics are no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to August 1, 2011; provided, however,
that if the period from the Redemption Date to August 1, 2011 is less than one year, the weekly
average yield on actually traded direct obligations of the Federal Republic of German adjusted to a
constant maturity of one year will be used.
‘‘Business Day’’ means each day which is not a Legal Holiday.
‘‘Capital Stock’’ means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or membership
interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share of
the profits and losses of, or distributions of assets of, the issuing Person.
‘‘Default’’ means any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.
‘‘Disqualified Stock’’ means, with respect to any Person, any Capital Stock of such Person
which, by its terms, or by the terms of any security into which it is convertible or for which it is
putable or exchangeable, or upon the happening of any event, matures or is mandatorily
redeemable (other than solely as a result of a change of control or asset sale) pursuant to a sinking
fund obligation or otherwise, or is redeemable at the option of the holder thereof (other than solely
as a result of a change of control or asset sale), in whole or in part, in each case prior to the date
91 days after the earlier of the maturity date of the Senior Discount Notes or the date the Senior
Discount Notes are no longer outstanding; provided, however, that if such Capital Stock is issued to
any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be
required to be repurchased in order to satisfy applicable statutory or regulatory obligations.
‘‘Equity Interests’’ means Capital Stock and all warrants, options or other rights to acquire
Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital
Stock.
‘‘Equity Offering’’ means any public or private sale of common stock or Preferred Stock of the
Issuer or of a direct or indirect parent of the Issuer (excluding Disqualified Stock), other than:
(1) public offerings with respect to any such Person’s common stock registered on Form S-8;
and
150
(2) issuances to the Issuer or any Subsidiary of the Issuer.
‘‘GAAP’’ means generally accepted accounting principles in the United States which are in
effect on the Issue Date.
‘‘Group’’ means the Issuer and its consolidated Subsidiaries.
‘‘guarantee’’ means a guarantee (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or indirect, in any manner (including letters of
credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or
other obligations.
‘‘Holder’’ means the Person in whose name a Senior Discount Note is registered on the
registrar’s books.
‘‘Indebtedness’’ means any present or future indebtedness with a remaining maturity of more
than twelve months and with a principal amount of more than e15,000,000 (including any liability,
whether conditional or unconditional, actual or contingent, under any guarantee or indemnity or any
other legally binding assurance against financial loss) in respect of any notes, bonds, or other debt
securities that are, or are intended to be, from time to time quoted, listed or ordinarily dealt in on
any stock exchange, automated trading system, over the counter or other securities market.
‘‘Issue Date’’ means August 9, 2006.
‘‘Issuer’’ has the meaning set forth in the first paragraph under ‘‘General.’’
‘‘Legal Holiday’’ means a Saturday, a Sunday or a day on which commercial banking
institutions are not required to be open in Luxembourg.
‘‘Lien’’ means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge,
hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction;
provided that in no event shall an operating lease be deemed to constitute a Lien.
‘‘Material Subsidiary’’ means, at any particular time, a Subsidiary whose total revenues
(consolidated if such Subsidiary has Subsidiaries and excluding intercompany revenues from other
Subsidiaries in the Group) attributable to the Issuer (having regard to its direct and/or indirect
beneficial interest in the shares, or the like, of such Subsidiary) represents at least 15% of the
consolidated total revenues of the Group. A report of the auditors for the Issuer or an Officer’s
Certificate whether or not addressed to the Trustee that in their opinion a Subsidiary is or is not a
Material Subsidiary may be relied upon by the Trustee without further enquiry or evidence and, if
relied upon by the Trustee, shall, in the absence of manifest error, be conclusive and binding. Any
certificate or report of the auditors for the Issuer or an Officer’s Certificate called for by or provided
to the Trustee in accordance with or for the purposes of these presents, may be relied upon by the
Trustee as sufficient evidence of the facts stated therein notwithstanding that such certificate or
report and/or any engagement letter or other document entered into by the Trustee in connection
therewith contains a monetary or other limit on the liability of the auditors for the Issuer thereof.
‘‘Moody’s’’ means Moody’s Investors Service, Inc. and any successor to its rating agency
business.
‘‘Net Income’’ means, with respect to any Person, the net income (loss) of such Person and its
Subsidiaries, determined in accordance with GAAP and before any reduction in respect of Preferred
Stock dividends.
151
‘‘Officer’’ means the Chairman of the Board, the Chief Executive Officer, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of
the Issuer.
‘‘Officer’s Certificate’’ means a certificate signed on behalf of the Issuer by an Officer of the
Issuer, who must be the principal executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Issuer, that meets the requirements set forth in the Indenture.
‘‘Opinion of Counsel’’ means a written opinion from legal counsel who is acceptable to the
Trustee. The counsel may be an employee of or counsel to the Issuer or the Trustee.
‘‘Permitted Encumbrance’’ means:
(i) an encumbrance on any asset securing Indebtedness incurred for the purpose of financing
the acquisition of such asset (provided the amount secured thereby is not subsequently
increased) or
(ii) an encumbrance existing on any asset prior to its acquisition (through shares or through
assets) and not created in contemplation of such event (provided the amount secured thereby
is not subsequently increased) or
(iii) an encumbrance not otherwise permitted by the above securing Indebtedness in an
aggregate amount not exceeding e25,000,000.
‘‘Person’’ means any individual, corporation, limited liability company, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
‘‘Preferred Stock’’ means any Equity Interest with preferential rights of payment of dividends or
upon liquidation, dissolution, or winding up.
‘‘Registration Rights Agreement’’ means the Registration Rights Agreement with respect to the
Senior Discount Notes dated as of the Issue Date, among the Issuer and the Initial Purchasers.
‘‘S&P’’ means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any
successor to its rating agency business.
‘‘SEC’’ means the U.S. Securities and Exchange Commission.
‘‘Securities Act’’ means the Securities Act of 1933, as amended, and the rules and regulations
of the SEC promulgated thereunder.
‘‘Subordinated Indebtedness’’ means any Indebtedness of the Issuer which is by its terms
subordinated in right of payment to the Senior Discount Notes.
‘‘Subsidiary’’ means at any particular time, any company which is then directly or indirectly
controlled or more than one half of whose issued equity share capital (or equivalent) is then
beneficially owned by the Issuer and/or one or more of its Subsidiaries.
‘‘Trust Indenture Act’’ means the Trust Indenture Act of 1939, as amended (15 U.S.C §§
77aaa-77bbbb).
152
EXCHANGE OFFER; REGISTRATION RIGHTS
VNU and the initial purchasers will enter into registration rights agreements on the original
issue date of the notes. In the registration rights agreements, VNU will agree that it will, at its
expense, for the benefit of the holders of the Senior Discount Notes, (i) file one or more registration
statements on an appropriate registration form (each, an ‘‘exchange offer registration statement’’)
with respect to a registered offer (each, an ‘‘exchange offer’’) to exchange the Senior Discount
Notes for new Senior Discount Notes, with terms substantially identical in all material respects to
the Senior Discount Notes (the notes so exchanged, the ‘‘exchange notes’’), (except that the
exchange notes will not contain terms with respect to transfer restrictions) and (ii) use their
reasonable best efforts to cause each exchange offer registration statement to be declared effective
under the Securities Act. Upon an exchange offer registration statement being declared effective,
we will offer the applicable exchange notes (and the related guarantees) in exchange for surrender
of the Senior Discount Notes. We will keep each exchange offer open for not less than 20 business
days (or longer if required by applicable law) after the date notice of the applicable exchange offer
is mailed to the holders. For each of the Senior Discount Notes surrendered to us pursuant to an
exchange offer, the holder who surrendered such note will receive a related exchange note having
a principal amount equal to that of the surrendered note. Interest on each exchange note will
accrue (A) from the later of (i) the last interest payment date on which interest was paid on the note
surrendered in exchange therefor or (ii) if the note is surrendered for exchange on a date in a
period that includes the record date for an interest payment date to occur on or after the date of
such exchange and as to which interest will be paid, the date of such interest payment date or
(B) if no interest has been paid on such note, from the original issue date of the notes.
Under existing interpretations of the SEC contained in several no-action letters to third parties,
the exchange notes and the related guarantees will be freely transferable by holders thereof (other
than our affiliates) after the applicable exchange offer without further registration under the
Securities Act; provided, however, that each holder that wishes to exchange its notes for exchange
notes will be required to represent (i) that any exchange notes to be received by it will be acquired
in the ordinary course of its business, (ii) that, at the time of the commencement of the applicable
exchange offer, it has no arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the applicable exchange notes in violation of
the Securities Act, (iii) that it is not an ‘‘affiliate’’ (as defined in Rule 405 promulgated under
Securities Act) of ours, (iv) if such holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of applicable exchange notes and (v) if such holder is a
broker-dealer (a ‘‘participating broker-dealer’’) that will receive exchange notes for its own account
in exchange for notes that were acquired as a result of market-making or other trading activities,
that it will deliver a prospectus in connection with any resale of such exchange notes. We will agree
to make available, during the period required by the Securities Act, a prospectus meeting the
requirements of the Securities Act for use by participating broker-dealers and other persons, if any,
with similar prospectus delivery requirements for use in connection with any resale of exchange
notes.
If (i) because of any change in law or in currently prevailing interpretations of the Staff of the
SEC, we are not permitted to effect an exchange offer, (ii) an exchange offer is not consummated
within 375 days of the original issue date of the notes, (iii) in certain circumstances, certain holders
of unregistered exchange notes so request, or (iv) in the case of any holder that participates in an
exchange offer, such holder does not receive exchange notes on the date of the exchange that may
be sold without restriction under state and federal securities laws (other than due solely to the
status of such holder as an affiliate of ours within the meaning of the Securities Act), then, in each
case, we will (x) promptly deliver to the holders and the trustee written notice thereof and (y) at our
sole expense, (a) promptly file a shelf registration statement covering resales of the Senior Discount
153
Notes and (b) use our reasonable best efforts to keep effective such shelf registration statement
until the earliest of (i) two years after the original issue date of the notes, (ii) such time as all of the
applicable Senior Discount Notes have been sold thereunder or (iii) the date upon which all Senior
Discount Notes covered by such shelf registration statement become eligible for resale, without
regard to volume, manner of sale or other restrictions contained in Rule 144 (the ‘‘shelf registration
period’’). We will, in the event that a shelf registration statement is filed, provide to each holder
whose Senior Discount Notes are registered under such shelf registration statement copies of the
prospectus that is a part of such shelf registration statement, notify each such holder when such
shelf registration statement has become effective and take certain other actions as are required to
permit unrestricted resales of the Senior Discount Notes. A holder that sells Senior Discount Notes
pursuant to a shelf registration statement will be required to be named as a selling security holder
in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions under Securities Act in connection with such sales and will be bound by the
provisions of the applicable registration rights agreement that are applicable to such a holder
(including certain indemnification rights and obligations).
If (A) we have not exchanged exchange notes for all Senior Discount Notes validly tendered in
accordance with the terms of an exchange offer on or prior to the 375th day after the original issue
date of the notes or (B) if applicable, a shelf registration statement covering resales of the Senior
Discount Notes has been declared effective and such shelf registration statement ceases to be
effective at any time during the shelf registration period (subject to certain exceptions), then
additional interest shall accrue on the principal amount of the Senior Discount Notes at a rate of
0.25% per annum (which rate will be increased by an additional 0.25% per annum for each
subsequent 90-day period that such additional interest continues to accrue, provided that the rate
at which such additional interest accrues may in no event exceed 1.00% per annum) commencing
on (x) the 376th day after the original issue date of the notes, in the case of (A) above, or (y) the
day such shelf registration statement ceases to be effective, in the case of (B) above; provided,
however, that upon the exchange of exchange notes for all Senior Discount Notes tendered (in the
case of clause (A) above), or upon the effectiveness of a shelf registration statement that had
ceased to remain effective (in the case of clause (B) above), additional interest on such Senior
Discount Notes as a result of such clause (or the relevant sub-clause thereof), as the case may be,
shall cease to accrue.
Any amounts of additional interest due will be payable in cash on the same original interest
payment dates as interest on the Senior Discount Notes is payable.
The exchange notes will be accepted for clearance through The Depository Trust Company.
This summary of the provisions of the registration rights agreements does not purport to be
complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the
registration rights agreements, copies of which will be available from us upon request.
154
BOOK ENTRY; DELIVERY AND FORM
Each issue of notes sold to qualified institutional buyers in reliance on Rule 144A (the ‘‘Rule
144A Notes’’) under the Securities Act will be represented by one or more global notes in
registered form without interest coupons attached (collectively, the ‘‘144A Global Notes’’). The 144A
Global Notes will be deposited with, or on behalf of, a common depositary (the ‘‘Common
Depositary’’) for the accounts of Euroclear Bank S.A./N.V., as operator of the Euroclear system
(‘‘Euroclear’’) and Clearstream Banking, Société Anonyme (‘‘Clearstream’’) and registered in the
name of the nominee of the Common Depositary.
The notes sold in reliance on Regulation S (the ‘‘Regulation S Notes’’) under the Securities Act
will be represented by one or more global notes in registered form without interest coupons
attached (collectively, the ‘‘Regulation S Global Notes’’ and, together with the Rule 144A Global
Notes, the ‘‘Global Notes’’). The Regulation S Global Notes will be deposited with, or on behalf of,
the Common Depositary and registered in the name of the nominee of the Common Depositary.
The Global Notes will be issued in registered global form in minimum denominations of e2,000
and integral multiples of e1,000 in excess of e2,000. Notes will be issued at the closing of this
offering only against payment in immediately available funds.
Through and including the 40th day after the later of the commencement of this offering and
the closing of this offering (such period through and including such 40th day, the ‘‘Restricted
Period’’), beneficial interests in the Regulation S Global Notes may be held only through Euroclear
and Clearstream unless transferred to a person that takes delivery through a Rule 144A Global Note
in accordance with the certification requirements described under ‘‘—Exchanges Between
Regulation S Notes and Rule 144A Notes’’ below. Beneficial interests in the 144A Global Notes may
not be exchanged for beneficial interests in the Regulation S Global Notes at any time except in the
limited circumstances described under ‘‘—Exchanges Between Regulation S Notes and Rule 144A
Notes’’ below.
Except as set forth below, the Global Notes may be transferred, in whole and not in part, only
to another nominee of Euroclear or Clearstream, or to a successor of Euroclear or Clearstream, or
their nominees. Beneficial interests in the Global Notes may not be exchanged for definitive notes in
registered certificated form (‘‘Certificated Notes’’) except in the limited circumstances described
below. See ‘‘—Exchange of Global Notes for Certificated Notes.’’ Except in the limited
circumstances described below, owners of beneficial interests in the Global Notes will not be
entitled to receive physical delivery of notes in certificated form.
Rule 144A Notes (including beneficial interests in the Rule 144A Global Notes) will be subject
to certain restrictions on transfer and will bear a restrictive legend as described under ‘‘Notice to
Investors.’’ Regulation S Notes will also be subject to certain restrictions on transfer and will also
bear the legend as described under ‘‘Notice to Investors.’’ In addition, transfers of beneficial
interests in the Global Notes will be subject to the applicable rules and procedures of Euroclear or
Clearstream, and their direct or indirect participants, which may change from time to time.
Depository Procedures
The following description of the operations and procedures of Euroclear and Clearstream are
provided solely as a matter of convenience. These operations and procedures are solely within the
control of the relevant settlement systems and are subject to changes by them. We take no
responsibility for these operations and procedures and urge investors to contact the systems or
their participants directly to discuss these matters.
We understands as follows with respect to Euroclear and Clearstream.
155
Euroclear and Clearstream hold securities for participating organizations. They also facilitate the
clearance and settlement of securities transactions between their respective participants through
electronic book-entry changes in the accounts of such participants. Euroclear and Clearstream
provide various services to their participants, including the safekeeping, administration, clearance,
settlement, lending and borrowing of internationally traded securities. Euroclear and Clearstream
interface with domestic securities markets. Euroclear and Clearstream participants are financial
institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain
other organizations. Indirect access to Euroclear or Clearstream is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship
with a Euroclear or Clearstream participant, either directly or indirectly.
Investors in the 144A Global Notes who are participants must hold their interests therein
directly through Euroclear or Clearstream. Investors in the 144A Global Notes who are not
participants may hold their interests therein indirectly through organizations that are participants.
Investors in the Regulation S Global Notes must initially hold their interests therein through
Euroclear or Clearstream, if they are participants in such systems, or indirectly through
organizations that are participants. Euroclear and Clearstream will hold interests in the Regulation S
Global Notes on behalf of their participants through customers’ securities accounts in their
respective names on the books of their respective depositories. Citibank, N.A. acts as depositary for
Clearstream and JPMorgan Chase Bank acts as depositary for Euroclear. Those interests held
through Euroclear or Clearstream will be subject to the procedures and requirements of such
systems. The laws of some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global
Note to such persons will be limited to that extent. Because Euroclear and Clearstream can act only
on behalf of Participants, which in turn act on behalf of indirect participants, the ability of a person
having beneficial interests in a Global Note to pledge such interests to persons that do not
participate in such system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global Notes will not have notes
registered in their names, will not receive physical delivery of notes in certificated form and
will not be considered the registered owners or ‘‘holders’’ thereof under the indenture for any
purpose.
Payments in respect of the principal of, and interest and premium, if any, and Additional
Interest, if any, on a Global Note registered in the name of the Common Depository will be payable
to such person in its capacity as the registered holder under the indenture. Under the terms of the
indenture, we and the trustee will treat the persons in whose names the notes, including the Global
Notes, are registered as the owners of the notes for the purpose of receiving payments and for all
other purposes. Consequently, neither we, the trustees nor any agent of ours or either trustee has
or will have any responsibility or liability for:
(1) any aspect of the records of Euroclear or Clearstream (or their respective nominees) or
any participant or indirect participant relating to, or payments made on account of,
beneficial ownership interests in the Global Notes or for maintaining, supervising or
reviewing the records of Euroclear or Clearstream (or their respective nominees) or any
participant or indirect participant relating to the beneficial ownership interests in the Global
Notes; or
(2) any other matter relating to the actions and practices of Euroclear or Clearstream (or their
respective nominees) or any participants or indirect participant.
Payments by the participants and the indirect participants to the beneficial owners of notes will
be governed by standing instructions and customary practices and will be the responsibility of the
156
participants or the indirect participants and will not be our responsibility or the responsibility of
Euroclear or Clearstream or the trustee. Neither we nor the trustee will be liable for any delay by
Euroclear or Clearstream or any of the participants or the indirect participants in identifying the
beneficial owners of the notes, and we and the trustee may conclusively rely on and will be
protected in relying on instructions from Euroclear or Clearstream or its nominee for all purposes.
Currency of Payment for the Global Notes
Except as may otherwise be agreed between Euroclear and/or Clearstream and any holder, the
principal of, premium, if any, and interest on, and all other amounts payable in respect of, the
Global Notes will be paid to holders of interests in such notes through Euroclear and/or
Clearstream in Euros.
Euroclear and Clearstream have advised us that they will take any action permitted to be taken
by a holder of notes only at the direction of one or more participants to whose account the book
entry interests in the Global Notes have been credited and only in respect of such portion of the
aggregate principal amount of the notes as to which such participant or participants has or have
given such direction. Euroclear and Clearstream will not exercise any discretion in the granting of
consents waivers or the taking of any other action in respect of the Global Notes. However, if there
is an event of default under the notes, each of Euroclear and Clearstream reserves the right to
exchange the Global Notes for legended notes in certificated form, and to distribute such notes to
its participants.
Although Euroclear and Clearstream have agreed to the foregoing procedures to facilitate
transfers of interests in the Rule 144A Global Notes and the Regulation S Global Notes among
participants in Euroclear and Clearstream, they are under no obligation to perform or to continue to
perform such procedures, and may discontinue such procedures at any time. Neither we nor the
trustee nor any of our or their respective agents will have any responsibility for the performance by
Euroclear or Clearstream, or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
(1) Euroclear or Clearstream notifies us that it is unwilling or unable to continue as depository
for the Global Note, and we have failed to appoint a qualified successor; or
(2) there has occurred and is continuing a default or event of default with respect to the notes.
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes upon
prior written notice given to the trustee by or on behalf of Euroclear or Clearstream, in accordance
with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or
beneficial interests in Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend referred to in ‘‘Notice to Investors,’’
unless that legend is not required by applicable law.
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the
transferor first delivers to the applicable trustee a written certificate (in the form provided in the
indenture) to the effect that such transfer will comply with the appropriate transfer restrictions
applicable to such notes. See ‘‘Notice to Investors.’’
157
Exchanges Between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, beneficial interests in the Regulation S Global
Notes may be exchanged for beneficial interests in the Rule 144A Global Notes only if:
(1) such exchange occurs in connection with a transfer of the notes pursuant to Rule 144A;
and
(2) the transferor first delivers to the applicable trustee a written certificate (in the form
provided in the applicable indenture) to the effect that the notes are being transferred to a
person:
(a) who the transferor reasonably believes to be a qualified institutional buyer within the
meaning of Rule 144A;
(b) purchasing for its own account or the account of a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A; and
(c) in accordance with all applicable securities laws of the states of the U.S. and other
jurisdictions.
Beneficial interests in a Rule 144A Global Note may be transferred to a person who takes
delivery in the form of an interest in the Regulation S Global Notes, whether before or after the
expiration of the Restricted Period, only if the transferor first delivers to the applicable trustee a
written certificate (in the form provided in the applicable indenture) to the effect that such transfer is
being made in accordance with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that,
if such transfer occurs prior to the expiration of the Restricted Period, the interest transferred will be
held immediately thereafter through Euroclear or Clearstream.
Same Day Settlement and Payment
We will make payments in respect of the notes represented by the Global Notes (including
principal, premium, if any, interest and Additional Interest, if any) by wire transfer of immediately
available funds to the Common Depository or its nominee. We will make all payments of principal,
interest and premium, if any, and Additional Interest, if any, with respect to Certificated Notes by
wire transfer of immediately available funds to the accounts specified by the holders of the
Certificated Notes or, if no such account is specified, by mailing a check to each such holder’s
registered address. We expect that secondary trading in any certificated notes will also be settled in
immediately available funds.
158
NOTICE TO INVESTORS
Because the following restrictions will apply to each series of notes unless we complete an
exchange offer for such notes or otherwise cause a registration statement with respect to the resale
of such notes to be declared effective under the Securities Act, purchasers are advised to consult
legal counsel prior to making any offer, resale, pledge or transfer of any of the notes. See
‘‘Description of Senior Notes’’ and ‘‘Description of Senior Subordinated Discount Notes.’’
None of the notes has been registered under the Securities Act and they may not be offered or
sold within the U.S. or to, or for the account or benefit of, U.S. persons except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities
Act. Accordingly, the notes are being offered and sold only:
(A) to ‘‘qualified institutional buyers’’ (as defined in Rule 144A promulgated under the
Securities Act (‘‘Rule 144A’’)) (‘‘QIBs’’) in compliance with Rule 144A; and
(B) outside the U.S. to persons other than U.S. persons (‘‘non-U.S. purchasers,’’ which term
shall include dealers or other professional fiduciaries in the U.S. acting on a discretionary
basis for non-U.S. beneficial owners (other than an estate or trust)) in reliance upon
Regulation S under the Securities Act (‘‘Regulation S’’). As used herein, the terms ‘‘U.S.’’
and ‘‘U.S. person’’ have the meanings given to them in Regulation S.
Each purchaser of notes will be deemed to have represented and agreed as follows:
1.
It is purchasing the notes for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is either (A) a QIB,
and is aware that the sale to it is being made in reliance on Rule 144A or (B) a non-U.S.
purchaser that is outside the U.S. (or a non-U.S. purchaser that is a dealer or other
fiduciary as referred to above).
2.
It acknowledges that the notes have not been registered under the Securities Act and may
not be offered or sold within the U.S. or to, or for the account or benefit of, U.S. persons
except as set forth below.
3.
It shall not resell or otherwise transfer any of such notes within two years after the original
issuance of the notes except (A) to us or any of our subsidiaries, (B) inside the U.S. to a
QIB in a transaction complying with Rule 144A, (C) outside the U.S. in compliance with
Rule 904 under the Securities Act, (D) pursuant to the exemption from registration provided
by Rule 144 under the Securities Act (if available), (E) in accordance with another
exemption from the registration requirements of the Securities Act (and based upon an
opinion of counsel if we so request), or (F) pursuant to an effective registration statement
under the Securities Act.
4.
It agrees that it will give to each person to whom it transfers the notes notice of any
restrictions on transfer of such notes.
5.
It acknowledges that prior to any proposed transfer of notes in certificated form or of
beneficial interests in a note in global form (a ‘‘Global Note’’) (in each case other than
pursuant to an effective registration statement) the holder of notes or the holder of
beneficial interests in a Global Note, as the case may be, may be required to provide
certifications and other documentation relating to the manner of such transfer and submit
such certifications and other documentation as provided in the applicable indenture.
159
6.
It understands that all of the notes will bear a legend substantially to the following effect
unless otherwise agreed by us and the holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A ‘‘QUALIFIED INSTITUTIONAL
BUYER’’ (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL
OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE),
(D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), (E) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS), OR
(F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS ‘‘OFFSHORE TRANSACTION,’’ ‘‘UNITED STATES’’ AND ‘‘U.S.
PERSON’’ HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
7.
No part of the assets to be used by such purchaser to acquire and hold the notes or any
interest therein constitutes assets of any (1) employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(‘‘ERISA’’)) that is subject to Title I of ERISA, (2) plan, individual retirement accounts and
other arrangements that are subject to Section 4975 of the Internal Revenue Code of 1986,
as amended (the ‘‘Code’’) or provisions under federal, state, local non-U.S. or other laws,
rules or regulations that are similar to such provisions of ERISA or the Code (collectively,
‘‘Similar Laws’’), or (3) other entity deemed to be investing ‘‘plan assets’’ (within the
meaning of 29 C.F.R. Section 2510.3-101 or otherwise under ERISA) of any such employee
benefit plan or plan, including without limitation, as applicable, an insurance company
general account; or the acquisition and holding of the notes or any interest therein (and
the exchange of notes for exchange notes) by such purchaser will not constitute a
non-exempt prohibited transaction within the meaning of Sections 406 and 407 of ERISA or
Section 4975 of the Code or similar violation under any applicable Similar Laws.
8.
It acknowledges that the trustee will not be required to accept for registration of transfer
any notes acquired by it, except upon presentation of evidence satisfactory to us and the
trustee that the restrictions set forth herein have been complied with.
9.
It acknowledges that we, the initial purchasers and others will rely upon the truth and
accuracy of the foregoing acknowledgments, representations and agreements and agrees
that if any of the acknowledgments, representations or agreements deemed to have been
made by its purchase of the notes are no longer accurate, it shall promptly notify us and
the initial purchasers. If it is acquiring the notes as a fiduciary or agent for one or more
investor accounts, it represents that it has sole investment discretion with respect to each
such account and it has full power to make the foregoing acknowledgments,
representations, and agreements on behalf of each account.
160
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
To ensure compliance with treasury department circular 230, holders are hereby notified that:
(a) any discussion of federal tax issues in this offering memorandum supplement is not
intended or written to be relied upon, and cannot be relied upon, by holders for the purpose
of avoiding penalties that may be imposed on holders under the Internal Revenue Code;
(b) such discussion is included herein by the issuer in connection with the promotion or
marketing (within the meaning of circular 230) by the issuer of the transactions or matters
addressed herein; and (c) holders should seek advice based on their particular circumstances
from an independent tax advisor.
The following is a summary of certain material U.S. federal income tax consequences of the
acquisition, ownership and disposition of the notes, but does not purport to be a complete analysis
of all the potential tax considerations. This summary is based upon the Internal Revenue Code of
1986, as amended, or the Code, the Treasury Regulations promulgated or proposed thereunder
and administrative and judicial interpretations thereof, all as of the date hereof and all of which are
subject to change, possibly on a retroactive basis. This summary is limited to the tax consequences
of those persons who are original beneficial owners of the notes, who purchase notes at their initial
issue price, set forth on the cover of this offering circular for cash and who hold such notes as
capital assets within the meaning of Section 1221 of the Code, which we refer to as ‘‘Holders.’’ This
summary does not purport to deal with all aspects of U.S. federal income taxation that might be
relevant to particular Holders in light of their particular investment circumstances or status, nor does
it address specific tax consequences that may be relevant to particular persons (including, for
example, financial institutions, broker-dealers, insurance companies, partnerships or other
pass-through entities, expatriates, tax-exempt organizations and persons that have a functional
currency other than the U.S. dollar or persons in special situations, such as those who have elected
to mark securities to market or those who hold notes as part of a straddle, hedge, conversion
transaction or other integrated investment). In addition, this summary does not address U.S. federal
alternative minimum tax consequences or consequences under the tax laws of any state, local or
foreign jurisdiction. We have not sought any ruling from the Internal Revenue Service (the ‘‘IRS’’),
with respect to the statements made and the conclusions reached in this summary, and we cannot
assure you that the IRS will agree with such statements and conclusions.
This summary is for general information only. Prospective purchasers of the notes are urged to
consult their independent tax advisors concerning the U.S. federal income taxation and other tax
consequences to them of acquiring, owning and disposing of the notes, as well as the application
of state, local and foreign income and other tax laws.
For purposes of the following summary, ‘‘U.S. Holder’’ is a Holder that is, for U.S. federal
income tax purposes (i) a citizen or individual resident of the U.S.; (ii) a corporation or other entity
taxable as a corporation created or organized under the laws of the U.S. or any political subdivision
thereof; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of the
source; or (iv) a trust, if a court within the U.S. is able to exercise primary supervision over the
trust’s administration and one or more U.S. persons have the authority to control all its substantial
decisions or if a valid election to be treated as a U.S. person is in effect with respect to such trust.
A ‘‘Non-U.S. Holder’’ is a Holder that is neither a U.S. Holder nor a partnership for U.S federal
income tax purposes.
A partnership for U.S. federal income tax purposes is not subject to income tax on income
derived from holding the notes. A partner of the partnership may be subject to tax on such income
under rules similar to the rules for U.S. Holders or Non-U.S. Holders depending on whether (i) the
partner is a U.S. or a Non-U.S. person, and (ii) the partnership is or is not engaged in a U.S. trade
or business to which income or gain from the notes is effectively connected. If you are a partner of
161
a partnership acquiring the notes, you should consult your tax advisor about the U.S. tax
consequences of holding and disposing of the notes.
U.S. Federal Income Taxation of U.S. Holders
Payment of interest
Payments of interest on the Senior Discount Notes will generally be treated as ‘‘qualified stated
interest’’ for U.S. federal income tax purposes taxable as ordinary interest income at the time it
accrues or is received by a U.S. Holder in accordance with the U.S. Holder’s regular method of
accounting for U.S. federal income tax purposes.
The interest on the notes will be paid in Euros rather than in United States dollars. In general, a
U.S. Holder that uses the cash method of accounting will be required to include in income the
United States dollar value of the amount of interest income received, whether or not the payment is
received in United States dollars or converted into United States dollars. The United States dollar
value of the amount of interest received is the amount of foreign currency interest paid, translated
at the spot rate on the date of receipt. The U.S. Holder will not have exchange gain or loss on the
interest payment, but may have exchange gain or loss when the U.S. Holder disposes of any
foreign currency received.
A U.S. Holder that uses the accrual method of accounting is generally required to include in
income the United States dollar value of interest accrued during the accrual period. Accrual basis
U.S. Holders may determine the amount of income recognized with respect to such interest in
accordance with either of two methods. Under the first method, the U.S. dollar value of accrued
interest is translated at the average rate for the interest accrual period (or, with respect to an
accrual period that spans two taxable years, the average rate for the partial period within the
taxable year). For this purpose, the average rate is the simple average of spot rates of exchange for
each business day of such period or other average exchange rate for the period reasonably derived
and consistently applied by the U.S. Holder. Under the second method, a U.S. Holder can elect to
accrue interest at the spot rate on the last day of an interest accrual period (in the case of a partial
accrual period, the last day of the taxable year) or, if the last day of an interest accrual period is
within five business days of the receipt or payment, the spot rate on the date of receipt or payment.
Any such election will apply to all debt instruments held by the U.S. Holder at the beginning of the
first taxable year to which the election applies and thereafter acquired, and may not be revoked
without the consent of the IRS. An accrual basis U.S. Holder will recognize exchange gain or loss
on the receipt of a foreign currency interest payment if the exchange rate on the date payment is
received differs from the rate applicable to the previous accrual of that interest income. The foreign
currency gain or loss of a U.S. Holder will generally be treated as United States sourced ordinary
income or loss.
Original Issue Discount
The Senior Discount Notes will be issued with original issue discount (‘‘OID’’) equal to the sum
of all payments to be made on the notes minus the issue price of the notes, as set forth on the
cover of this offering circular. As a result, U.S. Holders of the Senior Discount Notes will have to
include OID in income irrespective of their receipt of the corresponding cash.
Holders of the Senior Discount Notes will be required to include OID in income for U.S. federal
income tax purposes on a constant yield basis, which ordinarily will result in the inclusion of
increasing amounts of OID in income in successive accrual periods.
We will furnish annually to the IRS and to holders of the Senior Discount Notes, information
with respect to the OID accruing while the Senior Discount Notes are held by such holders. The
162
Senior Discount Notes will bear a legend setting forth information about OID, or a name and
telephone number for our employee who can provide this information.
Additional Interest
We are obligated to pay additional interest on the notes under certain circumstances described
under ‘‘Description of Senior Discount Notes—Principal, Maturity and Interest—Additional Interest.’’
According to the applicable Treasury Regulations, the possibility of a change in the interest rate on
the notes will not affect the amount or timing of interest recognized by a U.S. Holder of a note if the
likelihood of the change, as of the date the notes are issued, is remote. We intend to take the
position that the likelihood of the payment of additional interest with respect to the notes is remote.
Although the matter is not free from doubt, such additional interest should be taxable as ordinary
interest income at the time it accrues or is received in accordance with the U.S. Holder’s regular
method of accounting for U.S. federal income tax purposes. It is possible, however, that the IRS
may take a different position, in which case the timing and amount of income inclusion may be
different from that described above. U.S. Holders should consult their own independent tax advisors
about payment of additional interest.
Impact of Applicable High Yield Discount Obligation Rules
The Senior Discount Notes may be considered applicable high yield discount obligations for
U.S. federal income tax purposes, or so-called ‘‘AHYDO bonds.’’ In such case, we will not be
permitted to deduct for U.S. federal income tax purposes OID accrued on the Senior Discount
Notes until such time as we actually pay such OID in cash or in property other than our stock or
our debt (or stock or debt of a person related to us). Moreover, if the amount of the OID exceeds a
certain threshold amount, such amount will not be deductible at any time by us for U.S. federal
income tax purposes (regardless of whether we actually pay such amount in cash or other
property) subject to limitations, a corporate U.S. holder would be eligible for the dividends received
deduction for the portion of such amount that would have been treated as a dividend had it been
distributed by us with respect to our stock.
Disposition of Notes
Upon the sale, exchange, redemption or other taxable disposition of a note, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference between (i) the sum of cash
plus the fair market value of all other property received on such disposition (except to the extent
such cash or property is attributable to accrued but unpaid interest, which is treated as interest as
described above) and (ii) such Holder’s adjusted tax basis in the note. A U.S. Holder’s adjusted tax
basis in a note generally equals the cost of the note to such Holder increased by any OID included
in gross income with respect to the note and decreased by any payments (other than payments of
qualified stated interest) received by such holder with respect to the note.
Except as described below with respect to currency exchange gain or loss, gain or loss
recognized on the disposition of a note generally will be capital gain or loss, and will be long-term
capital gain or loss if, at the time of such disposition, the U.S. Holder’s holding period for the note
is more than twelve months. Certain U.S. Holders (including individuals) may be eligible for
preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility
of capital losses by U.S. Holders is subject to limitations under the Code.
With respect to the sale or other disposition (including a retirement) of a note denominated in
Euros, the amount realized in Euros will be considered to be (1) first, the payment of accrued but
unpaid interest (on which exchange gain or loss will be recognized as described under ‘‘U.S.
Federal Income Taxation of U.S. Holders—Payment of interest’’), and (2) second, a payment of
163
principal. For purposes of determining gain or loss (as discussed above), the amount realized in
Euros will be translated on the date of sale or other disposition. Additionally, exchange gain or loss
will be separately computed in Euros on the amount of principal to the extent that the rate of
exchange on the date of sale or other disposition differs from the rate of exchange on the date the
note was acquired. Exchange gain or loss computed on accrued interest and principal will be
recognized, however, only to the extent of total gain or loss realized on the transaction.
In the case of a note denominated in Euros, the cost of the note to the U.S. Holder will be the
United States dollar value of the purchase price in Euros translated at the spot rate for the date of
purchase. The conversion of United States dollars into Euros and the immediate use of that
currency to purchase a note generally will not result in a taxable gain or loss for a U.S. Holder.
Disposition of Euros
A U.S. Holder will have a tax basis in any Euros received as interest on a note, or received on
the sale or other disposition of a note, equal to the United States dollar value of such Euros on the
date of receipt. Any gain or loss realized by a U.S. Holder on a sale or other disposition of such
Euros will be ordinary income or loss.
Exchange of Notes
The exchange of notes for registered notes in the exchange offer described herein should not
constitute a material modification of the terms of the notes and thus should not constitute a taxable
event for U.S. Holders. Consequently, a U.S. Holder should not recognize gain upon receipt of
registered notes in exchange for notes in the exchange offer, the U.S. Holder’s basis in the
registered note received in the exchange offer should be the same as its basis in the corresponding
notes immediately before the exchange and the U.S. Holder’s holding period in the registered notes
should include its holding period in the original notes.
U.S. Federal Income Taxation of Non-U.S. Holders
Payment of Interest
Subject to the discussion of backup withholding below, payments of interest (including OID) on
the notes by us or any of our agents to a Non-U.S. Holder will not be subject to U.S. federal
withholding tax under the ‘‘portfolio interest exemption,’’ provided that such payments are not
effectively connected with the conduct of a U.S. trade or business conducted by the Non-U.S.
Holder, and in the case of a treaty resident, attributable to a U.S. permanent establishment (or, in
the case of an individual, a fixed base) maintained by the Non-U.S. Holder in the U.S. and:
(1) the Non-U.S. Holder does not, directly or indirectly, actually or constructively own 10% or
more of the total combined voting power of all classes entitled to vote;
(2) the Non-U.S. Holder is not a controlled foreign corporation for U.S. federal income tax
purposes that is related to us (within the meaning of Section 864(d)(4) of the Code);
(3) the Non-U.S. Holder is not a bank described in Section 881(c)(3)(A) of the Code; and
(4) either (a) the beneficial owner of the notes certifies to us or our agent on IRS
Form W-8BEN (or a suitable substitute form or successor form), under penalties of perjury, that it is
not a ‘‘U.S. person’’ (as defined in the Code) and provides its name and address, or (b) a securities
clearing organization, bank or other financial institution that holds customers’ securities in the
ordinary course of its trade or business (a ‘‘financial institution’’) and holds the notes on behalf of
the beneficial owner certifies to us or our agent, under penalties of perjury, that such a certification
164
has been received from the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes us with a copy thereof.
If a Non-U.S. Holder cannot satisfy the requirements of the ‘‘portfolio interest exemption,’’
payments of interest (including OID) made to such Non-U.S. Holder will be subject to a 30% U.S.
federal withholding tax unless the beneficial owner of the note provides us or our agent, as the
case may be, with a properly executed:
(1) IRS Form W-8BEN (or successor form) claiming, under penalties of perjury, an exemption
from, or reduction in, withholding tax under an applicable treaty (a ‘‘Treaty Exemption’’), or
(2) IRS Form W-8ECI (or successor form) stating that interest paid on the note is not subject
to withholding tax because it is effectively connected with a U.S. trade or business of the beneficial
owner (in which case such interest will be subject to regular graduated U.S. tax rates as described
below).
The certification requirement described above may require a Non-U.S. Holder that provides an
IRS form to also provide its U.S. taxpayer identification number.
We suggest that you consult your tax advisor about the specific methods for satisfying these
requirements. A claim for exemption will not be valid if the person receiving the applicable form has
actual knowledge or reason to know that the statements on the form are false.
If interest on the note is effectively connected with a U.S. trade or business of the beneficial
owner, the Non-U.S. Holder, although exempt from the withholding tax described above, will be
subject to U.S. federal income tax on such interest on a net income basis in the same manner as if
it were a U.S. Holder. In addition, if such Holder is a foreign corporation and, if required by an
applicable treaty, interest is attributable to a U.S. permanent establishment or fixed base, it may be
subject to a branch profits tax equal to 30% (or lesser rate under an applicable income tax treaty)
of its effectively connected earnings and profits for the taxable year, subject to adjustments. For this
purpose, interest on a note which is effectively connected with a U.S. trade or business will be
included in such foreign corporation’s earnings and profits.
Disposition of Notes
No withholding of U.S. federal income tax will be required with respect to any gain or income
realized by a Non-U.S. Holder upon the sale, exchange or disposition of a note.
A Non-U.S. Holder will not be subject to U.S. federal income tax on gain realized on the sale,
exchange or other disposition of a note unless the Non-U.S. Holder is an individual who is present
in the U.S. for a period or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met or such gain or income is effectively connected
with a U.S. trade or business conducted by the Non-U.S. Holder (and, if required by an applicable
treaty, is attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S.
Holder).
Exchange of Notes
The exchange of notes for registered notes in the exchange offer should not constitute a
taxable event for a Non-U.S. Holder. Consequently, a Non-U.S. Holder should be treated similarly to
a U.S. Holder as described under ‘‘—U.S. Federal Income Taxation of U.S. Holders—Exchange of
Notes.’’
165
Information Reporting and Backup Withholding
U.S. Holders
For each calendar year in which the notes are outstanding, we are required to provide the IRS
with certain information, including the beneficial owner’s name, address and taxpayer identification
number, the aggregate amount of interest (including OID) paid to that beneficial owner during the
calendar year and the amount of tax withheld, if any.
In the event that a U.S. Holder subject to the reporting requirements described above fails to
supply its correct taxpayer identification number in the manner required by applicable law, is
notified by the IRS that it has failed to properly report payments of interest (including OID) or
dividends or fails to certify, under penalties of perjury, that it has furnished the correct taxpayer
identification number and that it has not been notified by the IRS that it is not subject to backup
withholding, we, our agent or paying agents, or a broker may be required to withhold tax at a rate
of 28% of each payment of interest (including OID) and principal (and premium or additional
interest, if any) on the notes and on the proceeds from a sale of the notes. The backup withholding
obligation, however, does not apply with respect to certain payments to U.S. Holders, including
corporations and tax-exempt organizations, provided that they establish entitlement to an
exemption. This backup withholding is not an additional tax and may be refunded or credited
against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is
furnished to the IRS.
Non-U.S. Holders
U.S. backup withholding tax will not apply to payments on a note or proceeds from the sale of
a note payable to a Non-U.S. Holder if the certification described in ‘‘U.S. Federal Income Taxation
of Non-U.S. Holders—Payment of interest’’ is duly provided by such Non-U.S. Holder or the
Non-U.S. Holder otherwise establishes an exemption, provided that the payor does not have actual
knowledge that the Holder is a U.S. person or that the conditions of any claimed exemption are not
satisfied. Certain information reporting may still apply to interest (including OID) payments even if
an exemption from backup withholding is established. Copies of any information returns reporting
interest (including OID) payments and any withholding may also be made available to the tax
authorities in the country in which a Non-U.S. Holders resides under the provisions of an applicable
treaty.
Any amounts withheld under the backup withholding tax rules from a payment to a Non-U.S.
Holder will be allowed as a refund, or a credit against such Non-U.S. Holder’s U.S. federal income
tax liability, provided that the requisite procedures are followed.
166
DUTCH TAXATION
This is a general summary and the tax consequences as described here may not apply to a
holder of Senior Discount Notes. Any potential investor should consult his own tax adviser for
more information about the tax consequences of acquiring, owning and disposing of Senior
Discount Notes in his particular circumstances.
This taxation summary solely addresses the principal Dutch tax consequences of the
acquisition, the ownership and disposition of Senior Discount Notes. It does not consider every
aspect of taxation that may be relevant to a particular holder of Senior Discount Notes under
special circumstances or who is subject to special treatment under applicable law. Where in this
summary English terms and expressions are used to refer to Dutch concepts, the meaning to be
attributed to such terms and expressions shall be the meaning to be attributed to the equivalent
Dutch concepts under Dutch tax law.
This summary is based on the tax laws of The Netherlands as they are in force and in effect on
the date of this offering memorandum supplement. The laws upon which this summary is based are
subject to change, possibly with retroactive effect. A change to such laws may invalidate the
contents of this summary, which will not be updated to reflect any such change. This summary
assumes that each transaction with respect to Senior Discount Notes is at arm’s length.
Withholding tax
All payments under the Senior Discount Notes may be made free from withholding or
deduction of or for any taxes of whatever nature imposed, levied, withheld or assessed by The
Netherlands or any political subdivision or taxing authority thereof or therein, except where the
Senior Discount Notes are issued under such terms and conditions that such Senior Discount
Notes are capable of being classified as equity of the Issuer for Dutch tax purposes or actually
function as equity of the Issuer within the meaning of article 10, paragraph 1, letter d, of the Dutch
Corporation Tax Act 1969 (Wet op de vennootschapsbelasting 1969) and where the Senior Discount
Notes are issued that are redeemable in exchange for, convertible into or linked to shares or other
equity instruments issued or to be issued by the Issuer or by any entity related to the Issuer.
Taxes on income and capital gains
Resident holders of Senior Discount Notes
The summary set out in this section ‘‘Dutch Taxation—Taxes on income and capital gains—
Resident holders of Senior Discount Notes’’ only applies to a holder of Senior Discount Notes who
is a ‘‘Dutch Individual’’ or a ‘‘Dutch Corporate Entity.’’
A holder of Senior Discount Notes is a ‘‘Dutch Individual’’ if:
• he is an individual; and
• he is resident, or deemed to be resident, in The Netherlands for Dutch income tax purposes,
or has elected to be treated as a resident of The Netherlands for Dutch income tax purposes.
A holder of Senior Discount Notes is a ‘‘Dutch Corporate Entity’’ if:
• it is a corporate entity (including an association that is taxable as a corporate entity) that is
subject to Dutch corporation tax;
• it is resident, or deemed to be resident, in The Netherlands for Dutch corporation tax
purposes;
• it is not an entity that, although in principle subject to Dutch corporation tax, is, in whole or in
part, specifically exempt from that tax; and
167
• it is not an investment institution (beleggingsinstelling) as defined in the Dutch Corporation
Tax Act 1969 (Wet op de vennootschapsbelasting 1969).
If a holder of Senior Discount Notes is not an individual and if it does not satisfy any one or
more of these tests, with the exception of the second test, its Dutch tax position is not discussed in
this offering memorandum supplement.
Dutch Individuals deriving profits or deemed to be deriving profits from an enterprise
Any benefits derived or deemed to be derived from Senior Discount Notes, including any gain
realised on the disposal thereof, by a Dutch Individual that are attributable to an enterprise from
which such Dutch Individual derives profits, whether as an entrepreneur (ondernemer) or pursuant
to a co-entitlement to the net value of an enterprise (other than as an entrepreneur or a
shareholder), are generally subject to Dutch income tax at progressive rates.
Dutch Individuals deriving benefits from miscellaneous activities
Any benefits derived or deemed to be derived from Senior Discount Notes, including any gain
realised on the disposal thereof, by a Dutch Individual that constitute benefits from miscellaneous
activities (resultaat uit overige werkzaamheden) are generally subject to Dutch income tax at
progressive rates.
Benefits derived from Senior Discount Notes by a Dutch Individual are taxable as benefits from
miscellaneous activities if he, or an individual who is a connected person in relation to him as
meant in article 3.91, paragraph 2, letter b, or letter c, of the Dutch Income Tax Act 2001 (Wet
inkomstenbelasting 2001), has a substantial interest (aanmerkelijk belang) in the Issuer.
A person has a substantial interest in the Issuer if such person—either alone or, in the case of
an individual, together with his partner (partner), if any—has, directly or indirectly, either the
ownership of shares representing five per cent. or more of the total issued and outstanding capital
(or the issued and outstanding capital of any class of shares) of the Issuer, or rights to acquire,
directly or indirectly, shares, whether or not already issued, that represent five per cent. or more of
the total issued and outstanding capital (or the issued and outstanding capital of any class of
shares) of the Issuer, or the ownership of profit participating certificates (winstbewijzen) that relate to
five per cent. or more of the annual profits of the Issuer or to five per cent. or more of the
liquidation proceeds of the Issuer.
A person who is entitled to the benefits from shares or profit participating certificates (for
instance a holder of a right of usufruct) is deemed to be a holder of shares or profit participating
certificates, as the case may be, and such person’s entitlement to such benefits is considered a
share or a profit participating certificate, as the case may be.
Furthermore, a Dutch Individual may, inter alia, derive benefits from Senior Discount Notes that
are taxable as benefits from miscellaneous activities in the following circumstances:
a.
if his investment activities go beyond the activities of an active portfolio investor, for
instance in the case of the use of insider knowledge (voorkennis) or comparable forms of
special knowledge; or
b.
if he makes Senior Discount Notes available or is deemed to make Senior Discount Notes
available, legally or in fact, directly or indirectly, to certain parties as meant in the articles
3.91 and 3.92 of the Dutch Income Tax Act 2001 under circumstances described there.
Other Dutch Individuals
If a holder of Senior Discount Notes is a Dutch Individual whose situation has not been
discussed before in this section ‘‘Dutch taxation—Taxes on income and capital gains—Resident
168
holders of Senior Discount Notes’’, benefits from his Senior Discount Notes are taxed as a benefit
from savings and investments (voordeel uit sparen en beleggen). Such benefit is deemed to be four
per cent. per annum of the average of his ‘‘yield basis’’ (rendementsgrondslag) at the beginning
and at the end of the year, insofar as that average exceeds the ‘‘exempt net asset amount’’
(heffingvrij vermogen). The benefit is taxed at the rate of thirty per cent. The value of his Senior
Discount Notes forms part of his yield basis. Actual benefits derived from his Senior Discount
Notes, including any gain realised on the disposal thereof, are not as such subject to Dutch income
tax.
Dutch Corporate Entities
Any benefits derived or deemed to be derived from Senior Discount Notes, including any gain
realised on the disposal thereof, that are held by a Dutch Corporate Entity are generally subject to
Dutch corporation tax.
Non-resident holders of Senior Discount Notes
The summary set out in this section ‘‘Dutch Taxation—Taxes on income and capital gains—
Non-resident holders of Senior Discount Notes’’ only applies to a holder of Senior Discount Notes
who is a Non-Resident holder of Senior Discount Notes.
A holder of Senior Discount Notes will be considered a ‘‘Non-Resident holder of Senior
Discount Notes’’ if he is neither resident, nor deemed to be resident, in The Netherlands for
purposes of Dutch income tax or corporation tax, as the case may be, and, in the case of an
individual, has not elected to be treated as a resident of The Netherlands for Dutch income tax
purposes.
Individuals
A Non-Resident holder of Senior Discount Notes who is an individual will not be subject to any
Dutch taxes on income or capital gains in respect of any benefit derived or deemed to be derived
from Senior Discount Notes, including any payment under Senior Discount Notes and any gain
realised on the disposal of Senior Discount Notes, provided that both of the following conditions are
satisfied.
1.
If he derives profits from an enterprise, whether as an entrepreneur (ondernemer) or
pursuant to a co-entitlement to the net value of such enterprise, other than as an
entrepreneur or a shareholder, which enterprise is either managed in The Netherlands or
carried on, in whole or in part, through a permanent establishment or a permanent
representative in The Netherlands, as the case may be, his Senior Discount Notes are not
attributable to such enterprise.
2.
He does not derive benefits from Senior Discount Notes that are taxable as benefits from
miscellaneous activities in The Netherlands (resultaat uit overige werkzaamheden in
Nederland).
See the section ‘‘Dutch Taxation—Taxes on income and capital gains—Resident holders of
Senior Discount Notes—Dutch Individuals deriving benefits from miscellaneous activities’’ for a
description of the circumstances under which the benefits derived from Senior Discount Notes may
be taxable as benefits from miscellaneous activities, on the understanding that such benefits will be
taxable in The Netherlands only if such activities are performed or deemed to be performed in The
Netherlands.
169
Entities
A Non-Resident holder of Senior Discount Notes other than an individual will not be subject to
any Dutch taxes on income or capital gains in respect of benefit derived or deemed to be derived
from Senior Discount Notes, including any payment under Senior Discount Notes or any gain
realised on the disposal of Senior Discount Notes, provided that (a) if such Non-Resident holder of
Senior Discount Notes derives profits from an enterprise that is either managed in The Netherlands
or carried on, in whole or in part, through a permanent establishment or a permanent representative
in The Netherlands, whether as an entrepreneur (ondernemer) or pursuant to a co-entitlement to the
net value of such enterprise (other than as an entrepreneur or as a holder of securities), its Senior
Discount Notes are not attributable to such enterprise, and (b) such Non-Resident holder of Senior
Discount Notes does not have a substantial interest in the Issuer.
A person other than an individual has a substantial interest in the Issuer, (x) if it has a
substantial interest in the Issuer as described in the section ‘‘Dutch taxation—Taxes on income and
capital gains—Resident holders of Senior Discount Notes—Dutch Individuals deriving benefits from
miscellaneous activities’’ or (y) if it has a deemed substantial interest in the Issuer. A deemed
substantial interest may be present if its shares, profit participating certificates or rights to acquire
shares or profit participating certificates in the Issuer have been acquired by such person or are
deemed to have been acquired by such person on a non-recognition basis.
General
Subject to the above, a Non-Resident holder of Senior Discount Notes will not be subject to
income taxation in The Netherlands by reason only of the execution (ondertekening), delivery
(overhandiging) and/or enforcement of the documents relating to the issue of the Senior Discount
Notes or the performance by the Issuer of its obligations thereunder or under the Senior Discount
Notes.
Gift and inheritance taxes
A person who acquires Senior Discount Notes as a gift, in form or in substance, or who
acquires or is deemed to acquire Senior Discount Notes on the death of an individual, will not be
subject to Dutch gift tax or to Dutch inheritance tax, as the case may be, unless:
(i) the donor is, or the deceased was resident or deemed to be resident in The Netherlands
for purposes of gift or inheritance tax, as the case may be; or
(ii) the Senior Discount Notes are or were attributable to an enterprise or part of an enterprise
that the donor or the deceased carried on through a permanent establishment or a
permanent representative in The Netherlands at the time of the gift or of the death of the
deceased; or
(iii) the donor made a gift of Senior Discount Notes, then became a resident or deemed
resident of The Netherlands, and died as a resident or deemed resident of The
Netherlands within 180 days after the date of the gift.
Other taxes and duties
No Dutch registration tax, transfer tax, stamp duty or any other similar documentary tax or duty,
other than court fees, will be payable by a holder of Senior Discount Notes in The Netherlands in
respect of or in connection with the execution, delivery and/or enforcement by legal proceedings
(including the enforcement of any foreign judgment in the courts of The Netherlands) of the
documents relating to the issue of Senior Discount Notes or the performance by the Issuer of its
obligations thereunder or under the Senior Discount Notes.
170
PRIVATE PLACEMENT
Subject to the terms and conditions set forth in the Purchase Agreement (the ‘‘Purchase
Agreement’’) among the Issuer and the Initial Purchasers, the Issuer has agreed to sell to the Initial
Purchasers, and the Initial Purchasers have agreed, severally, to purchase from the Issuer, all of the
notes.
The Purchase Agreement provides that the obligations of the Initial Purchasers to pay for and
accept delivery of the notes are subject to, among other conditions, the delivery of certain legal
opinions by their counsel.
The Initial Purchasers have agreed to resell the notes (i) to qualified institutional buyers in
reliance on Rule 144A and (ii) to persons outside the United States in compliance with Regulation S
under the Securities Act. In connection with sales outside the United States, each Initial Purchaser
has agreed that, except as permitted by the purchase agreement, and set forth in the ‘‘Notice to
Investors,’’ they will not offer or sell the notes within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of its distribution at any time or (ii) otherwise until 40 days after
the later of the commencement of this offering and the closing date, and each will have sent to
each dealer to which each sells notes during the 40-day distribution compliance period a
confirmation or other notice setting forth the restrictions on offers and sales of the notes within the
United States or to, or for the account of benefit of, U.S. persons.
In addition, until 40 days after the commencement of this offering, an offer or sale within the
United States by a dealer that is not participating in this offering may violate the registration
requirements of the Securities Act if that offer or sale is made otherwise than in accordance with
Rule 144A.
In relation to each Member State of the European Economic Area that has implemented the
Prospectus Directive (each, a ‘‘Relevant Member State’’), each Initial Purchaser has represented
and agreed that with effect from and including the date on which the Prospectus Directive is
implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’) it has not made
and will not make an offer of notes to the public in that Relevant Member State prior to the
publication of a prospectus in relation to the notes that has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in another Relevant
Member State and notified to the competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that it may, with effect from and including the
Relevant Implementation Date, make an offer of notes to the public in that Relevant Member State
at any time:
• to legal entities which are authorized or regulated to operate in the financial markets or, if not
so authorized or regulated, whose corporate purpose is solely to invest in securities;
• to any legal entity which has two or more of (1) an average of at least 250 employees during
the last financial year; (2) a total balance sheet of more than e43,000,000 and (3) an annual
net turnover of more than e50,000,000, as shown in its last annual or consolidated accounts;
or
• in any other circumstances which do not require the publication by us of a prospectus
pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an ‘‘offer of notes to the public’’ in relation to
any notes in any Relevant Member State means the communication in any form and by any means
of sufficient information on the terms of the offer and the notes to be offered so as to enable an
investor to decide to purchase or subscribe the notes, as the same may be varied in that Member
State by any measure implementing the Prospectus Directive in that Member State and the
171
expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC and includes any relevant
implementing measure in each Relevant Member State.
Each Initial Purchaser has represented and agreed that:
• it has only communicated or caused to be communicated and will only communicate or
cause to be communicated an invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the Financial Services and Markets Act 2000 (‘‘FSMA’’))
received by it in connection with the issue or sale of the notes in circumstances in which
Section 21(1) of the FSMA does not apply to us; and
• it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the notes in, from or otherwise involving the United
Kingdom.
In France, the notes may not be directly or indirectly offered or sold to the public, and offers
and sales of the notes will only be made in France to qualified investors acting for their own
account, in accordance with Article L.411-2 of the Code Monetaire et Financier, and Decree
No. 98-880, dated October 1, 1998. This offering memorandum has not been submitted to the
Autorité des Marche’s Financiers. Neither this offering memorandum nor any other offering material
may be distributed to the public in France.
The offering of the notes is not a public offering in the Federal Republic of Germany. The notes
may only be acquired in accordance with the provisions of the Securities Sales Prospectus Act
(Wertpapierverkaufsprospektgesetz), as amended, and any other applicable German laws. The
notes are not admitted to trading on a German Stock Exchange. This offering memorandum is not
a sales offering memorandum that has been published with regard to the public offering of the
notes in Germany. Accordingly the notes may not be, and are not being, offered or advertised
publicly or by public promotion in Germany and this offering memorandum has not and will not be
submitted for approval to the German Federal Financial Supervisory Authority (Bundesanstalt für
Finanzdienstleistungsaufsicht). Therefore, the offer in this offering memorandum is strictly for private
use and the offer is only being made to recipients to whom the document is personally addressed
and does not constitute an offer or advertisement to the public. Neither this offering memorandum,
nor any other document issued in connection with this offering, may be issued or distributed to any
person in Germany except under circumstances which do not constitute an offer to the public
pursuant to the Securities Sales Prospectus Act. In Germany the notes will only be available to
persons who, by profession or business, buy or sell notes for their own or a third-party’s account
within the meaning of Section 2 No. 1 of the Securities Sales Prospectus Act.
Each series of notes will initially be offered at the price indicated on the cover page hereof.
After the initial offering of the notes, the offering prices and other selling terms of the notes may
from time to time be varied by the Initial Purchasers.
The Purchase Agreement provides that the Issuer will indemnify the Initial Purchasers against
certain liabilities, including liabilities under the Securities Act, and will contribute to payments that
the Initial Purchasers may be required to make in respect thereof.
Prior to the offering, there has been no active market for the notes. The Initial Purchasers have
advised the Issuer that they currently intend to make a market in the Notes as permitted by
applicable laws and regulations. The Initial Purchasers are not obligated, however, to make a
market in the notes and any such market making may be discontinued at any time at the sole
discretion of the Initial Purchasers. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the notes.
172
In connection with the offering, certain persons participating in the offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the notes. Specifically, the Initial
Purchasers may bid for and purchase Notes in the open markets to stabilize the price of the notes.
The Initial Purchasers may also overallot the offering, creating a syndicate short position, and may
bid for and purchase notes in the open market to cover the syndicate short position. In addition,
the Initial Purchasers may bid for and purchase notes in market making transactions and impose
penalty bids. These activities may stabilize or maintain the respective market price of the notes
above market levels that may otherwise prevail. The Initial Purchasers are not required to engage in
these activities, and may end these activities at any time and such activities must be brought to an
end in such activities after a limited period.
The Initial Purchasers or their respective affiliates from time to time have provided in the past
and may provide in the future investment banking, commercial lending and financial advisory
services to Valcon, VNU and their respective affiliates in the ordinary course of business. Affiliates of
one or more of the Initial Purchasers are expected to act as lenders and/or agents under, and as
consideration therefor will receive customary fees and expenses in connection with, the new senior
secured credit facilities. See ‘‘Description of Other Indebtedness—New Senior Secured Credit
Facilities.’’ Each of the Initial Purchasers or one or more of their respective affiliates is a lender and/
or agent under the senior secured bridge facility. The proceeds of this offering will be used in part
to repay in full the senior secured bridge facility and the Initial Purchasers will thereby receive
proceeds of this offer. Certain of the Initial Purchasers and their affiliates acted as financial advisors
to the Sponsors in connection with the Transactions, for which they received customary fees.
We expect that delivery of the notes will be made against payment therefor on or about
August 9, 2006, which will be the sixth business day following the date of pricing of the notes (such
settlement cycle being herein referred to as ‘‘T+6’’). Under Rule 15c6-1 under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, purchasers who wish to trade notes on the date of pricing or the next two
succeeding business days will be required, by virtue of the fact that the notes initially will settle
T+6, to specify an alternate settlement cycle at the time of any such trade to prevent a failed
settlement. Purchasers of notes who wish to trade notes on the date of pricing or the next two
succeeding business days should consult their own advisor.
173
LISTING INFORMATION
Listing
Application will be made to list the Senior Notes on the Luxembourg Stock Exchange and for
trading on the Euro MTF, the alternative market of the Luxembourg Stock Exchange, in accordance
with the rules of the Luxembourg Stock Exchange. Prior to the listing, a legal notice relating to the
issue of the Senior Discount Notes and our certified organizational documents will be deposited
with the Registre de Commerce et des Societes in Luxembourg, where such documents may be
examined and copies obtained. Notice of any optional redemption, change of control or any
change in the rate of interest payable on the Senior Discount Notes will be published in a leading
Luxembourg newspaper of general circulation (which is expected to be the d’Wort).
For so long as the Senior Discount Notes are listed on the Luxembourg Stock Exchange and
the rules of that exchange require, copies of the following documents may be inspected and
obtained at the specified office of the paying agent in Luxembourg during normal business hours
on any weekday:
• our Articles of Association;
• our most recent audited financial statements, and any interim quarterly financial statements
published by us;
• the purchase agreement relating to the Senior Discount Notes; and
• the Indenture relating to the Senior Discount Notes (which includes the form of the Senior
Discount Notes).
We will maintain a paying and transfer agent in Luxembourg for as long as any of the Senior
Notes are listed on the Luxembourg Stock Exchange and so long as the rules of such stock
exchange require. We reserve the right to vary such appointment and will publish notice of such
change of appointment in a leading newspaper having a general circulation in Luxembourg (which
is expected to be the d’Wort).
Pursuant to Chapter VI, Article 3, clause A/11/2 of the Rules and Regulations of the
Luxembourg Stock Exchange, the Senior Notes are freely transferable except as described in
‘‘Notices to Investors’’ in the preliminary offering memorandum and, therefore, no transaction
involving the Senior Notes made on the Euro MTF may be cancelled.
As of the date of this offering memorandum, our most recent audited financial statements
available were as of and for the year ended December 31, 2005.
LEGAL MATTERS
Certain legal matters in connection with the offering will be passed upon for us by O’Melveny &
Myers LLP, New York, New York, and Clifford Chance LLP, Amsterdam, the Netherlands. Certain
legal matters in connection with the offering will be passed upon for the initial purchasers by Cahill
Gordon & Reindel LLP, New York, New York.
INDEPENDENT AUDITORS
The Consolidated Financial Statements of VNU as of December 31, 2004 and 2005 and for
each of the three years in the period ended December 31, 2005, included in this offering
memorandum, have been audited by Ernst & Young Accountants, independent auditors, as stated
in their report appearing herein.
174
AVAILABLE INFORMATION
We are not subject to the informational requirements of the Exchange Act. If at any time during
the two-year period following the later of the date of original issue of the notes and the date of
issue with respect to additional notes, if any, we are not subject to the informational requirements of
Section 13 or 15(d) of the Exchange Act, we will furnish to holders of notes and prospective
purchasers thereof the information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act in order to permit compliance with Rule 144A in connection with resales of such
notes.
You should rely only upon the information provided in this offering memorandum. We have not
authorized anyone to provide you with different information. You should not assume that the
information in this offering memorandum is accurate as of any date other than the date of this
offering memorandum.
This offering memorandum contains summaries of certain agreements that we have entered
into or will enter into in connection with the Transactions, such as the indentures and the
registration rights agreement for the notes, our senior credit facilities and certain agreements
described under ‘‘Offering Memorandum Summary—The Transactions,’’ ‘‘Certain Relationships and
Related Party Transactions’’ and ‘‘Management.’’ The descriptions contained in this offering
memorandum of these agreements do not purport to be complete and are subject to, or qualified in
their entirety by reference to, the definitive agreements. Copies of the definitive agreements will be
made available without charge to you in response to a written or oral request to us.
175
(This page has been left blank intentionally.)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements for the years ended December 31, 2005,
2004 and 2003
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . .
Consolidated Statement of Changes in Shareholders’ Equity
Notes to Consolidated Financial Statements . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
F-2
F-3
F-4
F-5
F-6
F-8
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
F-76
F-77
F-78
F-79
Unaudited Condensed Consolidated Financial Statements as of and for the three
months ended March 31, 2006 and 2005
Condensed Consolidated Balance Sheets . . . . . . . . . .
Condensed Consolidated Statements of Income . . . . . .
Condensed Consolidated Statements of Cash Flows . . .
Notes to Condensed Consolidated Financial Statements
F-1
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Report of Independent Auditors
The Board of Directors and Shareholders of VNU nv
We have audited the accompanying consolidated balance sheets of VNU nv as of
December 31, 2005 and 2004, and the related consolidated statements of income, cash flows, and
changes in shareholders’ equity for each of the three years in the period ended December 31,
2005. These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company’s internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of VNU nv at December 31, 2005 and 2004, and the
consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 2005, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young Accountants
Amsterdam, the Netherlands
May 5, 2006,
except for Note 23, as to which the date is
May 26, 2006
F-2
VNU nv
CONSOLIDATED BALANCE SHEETS
December 31,
2005
2004
(EUR IN MILLIONS, EXCEPT SHARE AND
PER SHARE DATA)
Assets:
Current assets
Cash and cash equivalents . . . . .
Marketable securities . . . . . . . . .
Trade and other receivables, net . .
Prepaid expenses and other current
. . . . .
. . . . .
. . . . .
assets
.
.
.
.
862
128
645
368
2,688
121
549
201
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,003
3,559
Non-current assets
Goodwill . . . . . . . . . . . . . . . . . . .
Trade names and trademarks, net . . .
Customer-related intangible assets, net
Other intangible assets, net . . . . . . .
Property, plant and equipment, net . . .
Derivative financial instruments . . . . .
Deferred tax assets . . . . . . . . . . . .
Other non-current assets . . . . . . . . .
.
.
.
.
.
.
.
.
4,248
575
635
451
426
220
65
394
3,803
513
628
415
370
586
54
250
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,017
10,178
.
.
.
.
.
80
699
369
208
539
643
687
334
339
167
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Liabilities, minority interests and shareholders’ equity:
Current liabilities
Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other current liabilities . . . . . . . . . . .
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt and capital lease obligations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,895
2,170
Non-current liabilities
Long-term debt and capital lease obligations . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,691
516
315
3,281
426
328
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,417
6,205
88
84
—
—
1
1
—
—
2
2
Commitments and contingencies (Note 19)
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity:
Priority stock, EUR8.00 par value, 500 shares authorized, issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7% preferred stock, EUR8.00 par value, 150,000 shares authorized, issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock, EUR8.00 par value, 13,750,000 shares
authorized, none issued or outstanding . . . . . . . . . . . . . . . . . . . . .
Series B cumulative preferred stock, EUR0.20 par value, 25,000,000
shares authorized; 7,200,000 shares issued and outstanding . . . . . . . .
Common stock, EUR0.20 par value, 550,000,000 shares authorized;
257,073,932 shares and 253,757,620 shares issued at December 31,
2005 and 2004, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss, net of tax . . . . . . . . . . . . . . . .
51
2,790
2,443
(775)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,512
3,889
Total liabilities, minority interests and shareholders’ equity . . . . . . . .
9,017
10,178
50
2,700
2,446
(1,310)
The accompanying notes are an integral part of these consolidated financial statements.
F-3
VNU nv
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
2005
2004
2003
(EUR IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Operating revenues . . . . . . . . . . . . . . . . .
3,457
3,319
3,292
Cost of revenues, exclusive of depreciation
and amortization . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses
Depreciation and amortization . . . . . . . . . .
Goodwill impairment charges . . . . . . . . . . .
Restructuring costs . . . . . . . . . . . . . . . . . .
1,661
1,234
253
—
5
1,595
1,129
244
104
28
1,583
1,154
254
—
17
Operating income . . . . . . . . . . . . . . . . . .
304
219
284
17
(105)
10
6
(62)
13
(115)
137
6
3
14
(109)
327
8
(67)
Income from continuing operations before
income taxes and minority interests . . . . .
170
263
457
Provision for income taxes . . . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . . . .
(32)
—
(42)
4
(175)
6
Income from continuing operations . . . . . . .
138
225
288
Discontinued operations:
Income from discontinued operations, net
of tax . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sales of discontinued
operations, net of tax . . . . . . . . . . . . .
—
87
128
6
167
(40)
Net income . . . . . . . . . . . . . . . . . . . . . . .
144
479
376
Interest income . . . . . . . . . . .
Interest expense . . . . . . . . . . .
Gain on derivative instruments .
Equity in net income of affiliates
Other (expense) income, net . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Preferred stock dividends . . . . . . . . . . . . .
(6)
(6)
(6)
Net income available to common
shareholders . . . . . . . . . . . . . . . . . . . .
138
473
370
Net income per common share, basic
Income from continuing operations . . . . .
Discontinued operations . . . . . . . . . . . . .
0.52
0.02
0.87
1.01
1.13
0.35
Net income per common share . . . . . . . .
0.54
1.88
1.48
Net income per common share, diluted
Income from continuing operations . . . . .
Discontinued operations . . . . . . . . . . . . .
0.52
0.02
0.87
1.01
1.12
0.33
Net income per common share . . . . . . . .
0.54
1.88
1.45
255,795,495
252,272,732
249,221,849
255,902,777
252,273,679
267,139,151
Weighted average common shares
outstanding, basic . . . . . . . . . . . . . . . . .
Weighted average common shares
outstanding, diluted . . . . . . . . . . . . . . . .
The accompanying notes are an integral part of these consolidated financial statements.
F-4
VNU nv
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2005
2004
2003
(EUR IN MILLIONS)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
activities:
Share-based payments expense . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sale of discontinued operations, net of tax . . . . . . . . .
Currency exchange rate differences on financial transactions and other
(gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on early extinguishment of debt . . . . . . . . . . . . . . . . . .
Gain on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income from affiliates . . . . . . . . . . . . . . . . . . . . . . .
Dividends received from affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest in net income of consolidated subsidiaries . . . . . . . .
Gain on sale of fixed assets, subsidiaries and affiliates . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of effect of businesses
acquired:
Trade and other receivables, net . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . .
Accounts payable and other current liabilities and deferred revenues
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
. . .
. . .
144
479
376
18
(6)
27
(167)
34
40
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(13)
75
(10)
(6)
9
—
(14)
253
—
(38)
(2)
(1)
(137)
(26)
30
(4)
(10)
261
104
58
70
(3)
(327)
(33)
33
(6)
(1)
272
—
(147)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(53)
21
23
(5)
12
(7)
19
(61)
(4)
19
30
3
(18)
(102)
5
32
28
63
6
13
230
422
479
685
.
.
.
.
.
.
.
.
(142)
(19)
(131)
(59)
(97)
113
6
(19)
(83)
2,058
(147)
(70)
(132)
128
5
96
(104)
17
(191)
(84)
(333)
329
7
(32)
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . .
(348)
1,855
(391)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities
Acquisition of subsidiaries and affiliates, net of cash acquired
Proceeds from sale of subsidiaries and affiliates, net . . . . . .
Additions to property, plant and equipment and other assets
Additions to intangible assets . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . .
Sales of marketable securities . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities
Proceeds from issuances of debt . . . .
Repayments of debt . . . . . . . . . . . .
Stock activity of subsidiaries, net . . . .
(Decrease) increase in bank overdrafts
Cash dividends paid to shareholders .
Other financing activities . . . . . . . . .
Activity under stock plans . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
(1,332)
(9)
(563)
(78)
52
6
83
(667)
16
78
(66)
(1)
—
414
(656)
3
(45)
(75)
35
—
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,924)
(557)
(324)
(6)
(29)
Effect of exchange-rate changes on cash and cash equivalents . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . .
24
(1,826)
2,688
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . .
862
Supplemental Cash Flow Information
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for interest, net of amounts capitalized . . . . . . . . . . . . . . . . . . .
(51)
(112)
1,771
917
(59)
976
2,688
917
(113)
(170)
(89)
(144)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
VNU nv
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Accumulated Other Comprehensive Loss, Net
Net
Unrealized
Total
Additional
Cumulative (Losses) Cash Flow Minimum
Total
Preferred Common
Paid-in
Retained Translation Gains on
Hedges,
Pension Shareholders’
Stock
Stock
Capital Earnings Adjustment Securities
Net
Liability
Equity
(EUR IN MILLIONS, EXCEPT PER SHARE DATA)
F-6
Balance, January 1, 2003 . . . . . . . . . . . . . . . .
Comprehensive income (loss):
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:
Currency translation adjustments . . . . . . .
Net unrealized gain on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability, net of tax of EUR
1. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive loss . . . . . . . . . . . .
Total comprehensive loss . . . . . . . . . . . . . . . .
Dividend to preferred shareholders . . . . . . . . .
Dividend to common shareholders . . . . . . . . .
Share-based payments expense . . . . . . . . . . .
Balance, December 31, 2003 . . . . . . . . . . . . .
Comprehensive income (loss):
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:
Currency translation adjustments . . . . .
Net unrealized gain on available-for- sale
securities . . . . . . . . . . . . . . . . . . . .
Minimum pension liability . . . . . . . . . . .
Total other comprehensive loss . . . . . . . . . .
Total comprehensive income . . . . . . . . . . .
Dividend to preferred shareholders . . . . . . .
Dividend to common shareholders . . . . . . .
Share-based payments expense . . . . . . . . .
Dilution on stock issuance of subsidiary . . . .
Balance, December 31, 2004 . . . . . . . . . . .
.
3
49
2,495
1,878
.
—
—
—
376
.
—
—
—
—
.
—
—
—
—
.
.
.
.
.
.
.
—
—
—
—
—
—
—
3
—
—
—
49
—
67
34
2,596
...
—
—
—
479
...
—
—
—
—
.
.
.
.
.
.
.
.
.
—
—
—
—
—
—
—
—
—
—
—
—
3
—
1
—
—
50
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
78
27
(1)
2,700
(6)
(136)
—
2,112
(6)
(139)
—
—
2,446
(171)
(4)
—
(78)
—
—
—
376
—
—
—
(755)
—
3
—
—
—
—
—
(16)
—
—
—
(1)
—
—
—
—
—
—
—
(94)
(16)
(768)
(392)
(6)
(69)
34
3,739
—
—
—
479
—
—
—
(295)
4
—
—
—
—
2
—
—
—
—
3
—
—
—
—
—
—
—
—
—
(92)
4
2
(289)
190
(6)
(60)
27
(1)
3,889
—
(755)
—
—
—
(926)
—
(295)
—
—
—
—
—
—
(1,221)
4,172
3
(continued on next page)
VNU nv
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued)
(EUR IN MILLIONS, EXCEPT PER SHARE DATA)
F-7
Balance, January 1, 2005 . . . . . . . . . . . . . .
Comprehensive income (loss):
Net income . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss:
Currency translation adjustments, net of
tax of EUR 71 . . . . . . . . . . . . . . . . . .
Net unrealized gain on available-for- sale
securities . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . .
Minimum pension liability, net of tax of
EUR 4 . . . . . . . . . . . . . . . . . . . . . . .
Total other comprehensive income . . . . . . . .
Total comprehensive income . . . . . . . . . . . .
Dividend to preferred shareholders . . . . . . . .
Dividend to common shareholders . . . . . . . .
Activity under stock plans . . . . . . . . . . . . . .
Share-based payments expense . . . . . . . . .
Dilution on stock issuance of subsidiary . . . .
Balance, December 31, 2005 . . . . . . . . . . . .
Accumulated Other Comprehensive
Net
Unrealized
Total
Additional
Cumulative (Losses) Cash Flow
Preferred Common
Paid-in
Retained Translation Gains on
Hedges,
Stock
Stock
Capital Earnings Adjustment Securities
net
3
50
2,700
2,446
—
—
—
144
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
1
—
—
—
51
Minimum
Total
Pension Shareholders’
Liability
Equity
3
—
(92)
—
—
—
—
144
—
530
—
—
—
530
—
—
—
—
—
—
5
—
—
2
—
—
5
2
—
—
—
—
—
(2)
—
—
—
—
—
8
—
—
—
—
—
2
—
—
—
—
—
(94)
—
68
6
18
(2)
2,790
(6)
(141)
—
—
—
2,443
(1,221)
Loss, Net
—
—
—
—
—
(691)
The accompanying notes are an integral part of these consolidated financial statements.
3,889
(2)
535
679
(6)
(72)
6
18
(2)
4,512
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business
VNU nv (‘‘VNU’’) is a global information and media company with leading market positions and
recognized brands. Until November 2004, VNU was organized into four segments: Marketing
Information (e.g. ACNielsen), Media Measurement & Information (e.g. Nielsen Media Research),
Business Information (e.g. Billboard, The Hollywood Reporter, Computing, Intermediair, Expositions)
and Directories (e.g. Golden Pages). In November 2004, VNU completed the sale of the Directories
group (see Note 5). VNU is active in more than 100 countries, with its headquarters located in
Haarlem, the Netherlands and New York, USA. VNU has approximately 40,000 full-time employees.
VNU is listed on the Amsterdam Euronext Stock Exchange (ASE: VNU), and VNU is part of the AEX
index of leading Netherlands-based stocks.
2.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of VNU have been prepared in accordance with
accounting principles generally accepted in the United States (‘‘U.S. GAAP’’) and all amounts are
presented in Euros (‘‘EUR’’), except share data or where expressly stated as being in US Dollars
(‘‘USD’’).
Consolidation
The consolidated financial statements include the accounts of VNU and all subsidiaries and
other controlled entities. Intercompany accounts and transactions between consolidated companies
have been eliminated in consolidation. The financial statements of certain subsidiaries outside the
United States and Canada are consolidated using their statutory fiscal years ending November 30
to facilitate timely reporting of VNU’s financial results. There have been no significant intervening
events which materially affect the consolidated financial position and results of operations of VNU
after November 30, 2005, 2004 and 2003 related to these subsidiaries. If VNU is a primary
beneficiary of a variable interest entity that does not effectively disperse risks among parties
involved, the assets, liabilities and results of operations of the variable interest entity are
consolidated. VNU is not a primary beneficiary of any entity for any of the years presented.
Subsidiary Stock Transactions
VNU owns approximately 60% of NetRatings, Inc (‘‘NetRatings’’), a public company that
provides internet audience measurement services. VNU’s ownership percentage in NetRatings’
stock is impacted by VNU’s purchase of additional subsidiary stock, as well as subsidiary stock
transactions, including the subsidiary’s stock repurchase and stock issuance. VNU records all gains
and losses related to subsidiary stock transactions in shareholders’ equity in additional paid-in
capital. For details related to NetRatings’ stock option exercises, see Note 15 to the consolidated
financial statements. During 2005, NetRatings repurchased 1.1 million shares for approximately USD
13.40 per share in cash.
Investments in Affiliates and Joint Ventures
Affiliates and joint ventures are entities over which VNU has significant influence but not control,
usually supported by a shareholding of between 20% and 50% of the voting rights. These
investments are accounted for by the equity method of accounting, which involves recognition in
F-8
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
the Consolidated Statements of Income of VNU’s proportionate share of the affiliate’s profit or loss
for the year as determined under U.S. GAAP.
Investments in which VNU owns less than 20% are accounted for either as available-for-sale
securities if the shares are publicly traded or at cost.
Accounting for Acquisitions
VNU uses the purchase method of accounting to account for the acquisitions of subsidiaries.
The cost of an acquisition is measured at the fair value of the assets given, equity instruments
issued and liabilities incurred to fund the purchase at the date of acquisition, plus costs directly
attributable to the acquisition. The excess of the cost of acquisition over the fair value of VNU’s
share of identifiable net assets acquired is recorded as goodwill.
VNU accounts for contingent payments that are based on maintaining or achieving specified
earnings levels upon the resolution of a contingency at fair value of the consideration issued or
paid as an additional cost of the acquisition. If the substance of such contingent consideration is to
provide compensation, the additional consideration is recognized as an expense of the appropriate
period.
Foreign Currency Translation
VNU has significant investments in non-euro-zone countries, primarily the United States and the
United Kingdom. Therefore, changes in the value of foreign currencies affect the consolidated
financial statements when translated into Euros. For all operations outside the euro-zone where
VNU has designated the local currency as the functional currency, assets and liabilities are
translated using end-of-period exchange rates; revenues, expenses and cash flows are translated
using monthly average rates of exchange. For these countries, currency translation adjustments are
recognized in shareholders’ equity as a component of accumulated other comprehensive income
(loss), whereas transaction gains and losses are recognized in other (expense) income, net. For
operations in non-euro-zone countries that are considered to be highly inflationary or where the
Euro is designated as the functional currency, monetary assets and liabilities are re-measured using
end-of-period exchange rates, whereas non-monetary accounts are remeasured using historical
exchange rates, and all transaction gains and losses are recognized in other (expense) income, net.
For the years ended December 31, 2005, 2004 and 2003, other (expense) income, net includes
EUR 9 million, (EUR 1) million and (EUR 65) million, respectively, of exchange gains/(losses).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amount of revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of commercial paper and other investments that are readily
convertible into cash, and have original maturities of three months or less.
F-9
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
Investments
Investments include available-for-sale securities carried at fair value, and cost, if not publicly
traded, investments in affiliates, and a trading asset portfolio maintained to generate returns to
offset changes in certain liabilities related to deferred compensation arrangements. For the
available-for-sale securities, any unrealized holding gains and losses, net of deferred income taxes,
are excluded from operating results and are recognized in shareholders’ equity as a component of
accumulated other comprehensive income (loss) until realized. For trading securities, both realized
and unrealized gains and losses are included in other (expense) income, net. The fair values of the
securities are determined based on prevailing market prices. VNU assesses declines in the value of
individual investments to determine whether such decline is other-than-temporary and thus the
investment is impaired. This assessment is made by considering available evidence, including
changes in general market conditions, specific industry and individual company data, the length of
time and the extent to which the market value has been less than cost, the financial condition and
near-term prospects of the individual company, and VNU’s intent and ability to hold the investment.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are stated at historical cost less
accumulated impairment losses. In accordance with Statement of Financial Accounting Standards
(‘‘SFAS’’) No. 142, ‘‘Goodwill and Other Intangible Assets,’’ VNU does not amortize goodwill and
indefinite-lived intangible assets.
Goodwill and other indefinite-lived intangible assets, consisting of certain trade names and
trademarks, are tested for impairment on an annual basis as of December 31 and whenever events
or circumstances indicate that the carrying amount of assets may not be recoverable. VNU reviews
the recoverability of its goodwill by comparing the estimated fair values of reporting units with their
respective carrying amounts. The estimates of fair value of a reporting unit, which is generally one
level below VNU’s operating segments, are determined using a combination of valuation
techniques, including a discounted cash flow analysis and market-based approaches. A discounted
cash flow analysis requires various judgmental assumptions, including assumptions about future
cash flows, growth rates and discount rates. The assumptions about future cash flows and growth
rates are based on VNU’s budget and business plans. Discount rate assumptions are based on an
assessment of the risk inherent in the respective reporting units.
In estimating the fair values of its reporting units, VNU also uses market comparisons and
recent comparable transactions. If the fair value of a reporting unit exceeds its carrying amount,
goodwill of the reporting unit is not deemed impaired and the impairment test is not performed. If
the carrying amount of a reporting unit exceeds its fair value, the goodwill impairment test is
performed to measure the amount of impairment loss, if any. The goodwill impairment test
compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that
goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of
that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair
value of goodwill is determined in the same manner as the amount of goodwill recognized in a
business combination. That is, the fair value of the reporting unit is allocated to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been
acquired in a business combination and the fair value of the reporting unit was the purchase price
paid to acquire the reporting unit.
F-10
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
As of December 31, 2005, 2004 and 2003, VNU performed its annual impairment review for
goodwill, and recorded a non-cash impairment charge of EUR 104 million in 2004, based on the
methodology described above, reducing the carrying value of goodwill in the Entertainment
reporting unit within Media Measurement & Information. The charge reflects the impact of increased
competition and client consolidation in the film sector and deterioration of the music market
resulting from increased piracy, including the illegal duplication of compact disks.
The impairment test for other indefinite-lived intangible assets consists of a comparison of the
fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible
asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
The estimates of fair value of trade names and trademarks are determined using a ‘‘relief from
royalty’’ discounted cash flow valuation methodology. Significant assumptions inherent in this
methodology include estimates of royalty rates and discount rates. Discount rate assumptions are
based on an assessment of the risk inherent in the respective intangible assets. Assumptions about
royalty rates are based on the rates at which comparable trade names and trademarks are being
licensed in the marketplace. The annual impairment test for indefinite-lived trade names and
trademarks did not result in any impairment charge in 2005, 2004 or 2003.
Software and Other Amortized Intangible Assets
Intangible assets with finite lives are stated at historical cost, less accumulated amortization and
impairment losses. These intangible assets are amortized on a straight-line basis over the following
estimated useful lives, which are reviewed annually:
Weighted
Average
Trade names and trademarks (with finite lives)
Customer-related intangibles . . . . . . . . . . . . .
Tradeshows and related publications . . . . . . .
Covenants not to compete . . . . . . . . . . . . . .
Databases . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . . . . . . . . .
Patents and other . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5–30
4–30
5–20
2– 7
3– 7
3–10
3–14
years
years
years
years
years
years
years
6
20
20
7
3
5
5
VNU has purchased and internally developed software to facilitate its global information
processing, financial reporting and access needs. These costs and related software implementation
costs are capitalized in accordance with the American Institute of Certified Public Accountants’
(‘‘AICPA’’) Statement of Position No. 98-1, ‘‘Accounting for the Cost of Internal Use Software,’’ and
amortized over the estimated useful life. Computer software amortization totaled EUR 50 million,
EUR 47 million and EUR 50 million in 2005, 2004 and 2003, respectively.
Property, Plant and Equipment
Property, plant and equipment is carried at historical cost less accumulated depreciation and
impairment losses. Property, plant and equipment is depreciated on a straight-line basis over the
following estimated useful lives:
Office buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information and communications equipment . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-11
25–50 years
3– 5 years
3–10 years
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
Additional costs which extend the useful life of property, plant and equipment are capitalized.
Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed
of, the cost and accumulated depreciation are written off and any related gain or loss is recognized
in the Consolidated Statements of Income.
Impairment of Long-Lived Assets
Long-lived assets held and used by VNU, including property, plant and equipment and
amortized intangible assets, are reviewed for impairment in accordance with SFAS No. 144,
‘‘Accounting for the Impairment or Disposal of Long-Lived Assets,’’ whenever events or changes in
circumstances indicate that the carrying amount of assets may not be recoverable. VNU evaluates
recoverability of assets to be held and used by comparing the carrying amount of an asset to the
future net undiscounted cash flows to be generated by the asset. If such asset is considered to be
impaired, the impairment loss is measured as the amount by which the carrying amount of the
asset exceeds its fair value.
Debt Issuance Costs
Expenses associated with the issuance of long-term debt are capitalized and amortized over
the term of the debt instrument using the effective interest rate method. These costs are included in
other non-current assets in the Consolidated Balance Sheets. Amortization of the debt issuance
costs were EUR 7 million, EUR 6 million and EUR 6 million, for the years ended 2005, 2004 and
2003, respectively.
Accounting for Pension Plans
Employee pension plans have been established in many countries in which VNU operates in
accordance with local policy and legal requirements. Approximately 25% of VNU employees
participate in defined benefit plans. Certain employees of VNU are eligible to participate in VNU’s
defined contribution plans. In certain countries, in addition to providing pension benefits, VNU
provides other post-retirement benefits, primarily retiree healthcare benefits. VNU accounts for these
plans in accordance with SFAS No. 87, ‘‘Employers’ Accounting for Pensions’’ and SFAS No. 106,
‘‘Employers’ Accounting for Postretirement Benefits Other Than Pensions,’’ and related guidance.
The determination of benefit obligations and expense is based on actuarial calculations. In
order to measure benefit costs and obligations using these models, certain assumptions are made
with regard to the discount rate, expected return on plan assets and the assumed rate of
compensation increases. In addition, retiree medical care cost trend rates are a key assumption
used in determining costs under SFAS No. 106. Management reviews these assumptions at least
annually. Other assumptions involve demographic factors such as turnover, retirement and mortality
rates. Management reviews these assumptions periodically and updates them as necessary.
The discount rate is the rate at which the benefit obligations could be effectively settled. For
U.S. plans, the discount rate is based on a bond portfolio that includes only long-term bonds with
an Aa rating, or equivalent, from a major rating agency. Based on historical experience, VNU
believes the timing and amount of cash flows related to the bonds in this portfolio is expected to
match the estimated benefit payment streams of the U.S. plans. For the Dutch and other non-U.S.
plans, the discount rate is set by reference to market yields on high quality corporate bonds.
Additional information on pension and other post-retirement benefit plans is contained in
Note 12.
F-12
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
Revenue Recognition
General
VNU recognizes revenue for the sale of products when significant risks and rewards of
ownership have been transferred to the customer, VNU is no longer involved with ownership or
control of the goods sold, the amount of revenue can be measured reliably, it is probable that the
economic benefits associated with the transaction will flow to VNU and the costs incurred or to be
incurred in respect of the transaction can be measured reliably.
Services revenue is recognized over the contractual service period in a manner reflecting
delivery of the related services.
In cases where VNU delivers multiple products or services within the same contractual
arrangement (a ‘‘multiple element arrangement’’), the individual deliverables within the contract are
separated and recognized upon delivery based upon their fair values relative to the total contract
value, to the extent that the fair values are readily determinable and to the extent that the
deliverables have stand-alone value to the customer (the ‘‘relative fair value method’’). In cases
where the fair value is not determinable, or the deliverables do not have stand-alone value to the
customer, the individual elements are considered to be one unit of accounting, and revenue is
recognized when all of the revenue recognition criteria have been met for the particular contract.
VNU enters into transactions that exchange advertising for advertising, advertising for other
products and services, data for data, or data for other products and services. Revenue from barter
transactions is recognized based on the fair value of the goods or services received or the fair
value of the goods or services provided to customers, whichever is more clearly evident. If the fair
values are not determinable, no recognition is given to such barter transactions. VNU recognizes
revenue from barter transactions as its products are delivered or services are performed. The
related barter expense is recognized as the products or services are utilized by VNU. Revenue from
barter transactions was EUR 41 million, EUR 37 million and EUR 35 million in 2005, 2004 and 2003,
respectively.
A discussion of VNU’s revenue recognition policies, by segment, follows:
Marketing Information
Revenue from retail measurement services and consumer panel services is recognized on a
straight-line basis over the period during which the services are performed and information is
delivered to the customer. Software sold as part of these arrangements is considered to be
incidental to the arrangements and is not recognized as a separate element.
Revenue from customized research projects is recognized as value is delivered to the
customer. The pattern of revenue recognition for these contracts varies depending on the terms of
the individual contracts, and may be recognized proportionally or deferred until the end of the
contract term and recognized when the final report has been delivered to the customer.
Media Measurement & Information
Television audience measurement revenue is recognized on a straight-line basis over the
contract period, as the information is delivered to the customer. Software sold as part of these
F-13
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
arrangements is considered to be incidental to the arrangements and is not recognized as a
separate element.
Internet measurement revenue is recognized ratably over the term of the related contract as
services are provided (recurring services) or in the period in which the product is delivered
(non-recurring services).
Revenue from customized research projects is recognized as value is delivered to the
customer. The pattern of revenue recognition for these contracts varies depending on the terms of
the individual contracts, and may be recognized proportionally or deferred until the end of the
contract term and recognized when the final report has been delivered to the customer.
Business Information
Single copy revenue for publications, sold via newsstands and/or dealers, is recognized in the
month of the magazine cover date. Revenue from printed circulation and advertisements included
therein is recognized on the cover date. Revenue from electronic circulation and advertising is
recognized over the period during which both are electronically available. The unearned portion of
paid magazine subscriptions is deferred and realized on a straight-line basis with monthly amounts
recognized on the magazines’ cover date.
In transactions involving intermediaries or agents, revenue is recorded on a gross or net basis
depending on whether VNU is acting as a principal or an agent in the transaction. VNU serves as
the principal in transactions in which it has substantial risks and rewards of ownership and,
accordingly, records revenue on a gross basis. To the extent that revenues are recorded on a gross
basis, any commissions or other payments to third parties are recorded as cost of revenues.
For products (such as magazines and books) sold to customers with the right to return unsold
items, revenues are recognized when the products are shipped, based on gross sales less an
allowance for future estimated returns.
Revenue from trade shows and related costs are recognized upon completion of the event.
Directories
Revenue from printed advertisements is recognized on the date that the directories, in which
these advertisements are included, are published. Revenue from electronic advertisements is
recognized on a straight-line basis over the period in which the advertisement is electronically
available. The Directories business was disposed of in 2004 and is included in discontinued
operations for all years presented. See Note 5.
Deferred Costs
Incremental direct costs incurred related to initial customer set-up costs, primarily costs to
establish an electronic metered sample/panel in a market, are deferred. Deferred metered market
assets are amortized over the original contract period, generally five years, beginning when the
electronic metered sample/panel is adequate in terms of size and composition and therefore ready
for its intended use.
F-14
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
Research and Development
Research and development costs mainly consist of software development costs and other
costs of developing new products and services that do not meet the criteria for capitalization. Such
costs are expensed as incurred. Research and development expenses were EUR 16 million, EUR
21 million and EUR 17 million in 2005, 2004 and 2003, respectively.
Advertising and Marketing Costs
Advertising and marketing costs are recorded to expense as incurred and are reflected as
selling, general and administrative expenses in the Consolidated Statements of Income. These
costs include all brand advertising, telemarketing, direct mail and other sales promotion associated
with VNU’s publications, exhibitions, and marketing/media research services and products.
Advertising and marketing costs for 2005, 2004 and 2003 totaled EUR 64 million, EUR 58 million
and EUR 51 million, respectively.
Restructuring Activities
Costs to consolidate or close facilities and relocate employees are expensed as incurred. Costs
to terminate a contract without economic benefit to VNU are expensed at the time the contract is
terminated. One-time termination benefits that are not subject to contractual arrangements provided
to employees who are involuntarily terminated are recorded when management commits to a
detailed plan of termination, the plan is communicated to employees, and actions required to
complete the plan indicate that significant changes are not likely. If employees are required to
render service until they are terminated in order to earn the termination benefit, the benefits are
recognized ratably over the future service period.
Financial Instruments
VNU’s financial instruments include cash and cash equivalents, accounts receivable,
investments, accounts payable, accrued liabilities, long-term debt and derivative financial
instruments. The carrying value of VNU’s financial instruments approximate fair value, except for
differences with respect to long-term, fixed-rate debt and certain differences relating to investments
accounted for at cost and other financial instruments. The fair value of financial instruments is
generally determined by reference to market values resulting from trading on a national securities
exchange or in an over-the-counter market. In cases where quoted market prices are not available,
fair value is based on estimates using present value or other valuation techniques.
These financial instruments potentially subject VNU to concentrations of credit risk. Cash
equivalents and marketable securities consist primarily of highly liquid securities held with
acknowledged financial institutions. Accounts receivable are not collateralized. The Marketing
Information and Media Measurement Information segments service high quality clients dispersed
across many geographic areas, and Business Information’s customer base consists of a large
number of diverse customers. VNU maintains reserves for estimated credit losses and these losses
have generally been within management’s expectations. See Note 10 for discussion of
concentration and counterparty risk of VNU’s derivative financial instruments.
F-15
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
Derivative Financial Instruments / Hedge Accounting
VNU uses derivative instruments principally to manage the risk associated with movements in
foreign currency exchange rates and the risk that changes in interest rates will affect the fair value
or cash flows of its debt obligations. See Note 10 for additional information regarding derivative
instruments held by VNU and risk management strategies. All derivative instruments are recognized
in the Consolidated Balance Sheets at fair value. For derivative instruments that qualify for hedge
accounting, changes in the fair value are either offset against the change in fair value of the hedged
assets, liabilities or firm commitments through earnings or recognized in shareholders’ equity as a
component of accumulated other comprehensive income (loss) until the hedged item is recognized
in earnings, depending on whether the derivative is being used to hedge changes in fair value,
cash flows or net investments in foreign operations. The ineffective portion of a derivative’s change
in fair value is immediately recognized in earnings. The purpose of hedge accounting is to match
the impact of the hedged item and the hedging instrument in the Consolidated Statements of
Income. 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. As such documentation was not in place during 2003 and 2004, no derivative
instruments outstanding qualified for hedge accounting and all changes in fair value were
recognized immediately in earnings.
At the inception of transactions entered into on or after January 1, 2005, VNU documents the
relationship between hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions. This process includes linking all
derivatives designated as hedges to specific assets and liabilities or to net investments in foreign
entities or to specific firm commitments or forecasted transactions. VNU also documents its
assessment, both at the hedge inception and on an ongoing basis, as to whether the derivatives
that are used in hedging transactions are highly effective, both prospectively and retrospectively, in
offsetting foreign currency exposures in net foreign investments or changes in fair values or cash
flows of hedged items.
Changes in the fair value of derivatives designated as fair value hedges are recorded in the
Consolidated Statements of Income, together with the changes in the fair value of the hedged asset
or liability for the particular risk(s) being hedged. Changes in the fair value of hedges of net
investments in foreign entities are recognized in equity. Changes in the fair value of derivatives
designated as cash flow hedges are also recognized in other comprehensive income (loss).
However, amounts deferred in equity, related to cash flow hedges, are transferred to the
Consolidated Statements of Income at the time the hedged forecast transaction affects earnings.
When a hedging instrument expires or is sold, when a hedge no longer meets the criteria for
hedge accounting, or when the hedge designation is removed, any cumulative gain or loss existing
in equity at that time remains in equity until such time as the committed or forecasted transaction is
ultimately recognized in the Consolidated Statements of Income. However, if it is subsequently
determined that a forecasted or committed transaction is previously designated in a hedging
relationship is probable of not occurring, the cumulative gain or loss that was recognized in equity
is immediately transferred to the Consolidated Statements of Income.
VNU also evaluates contracts for embedded derivatives, and considers whether any embedded
derivatives have to be bifurcated, or separated, from the host contracts. As of December 31, 2005
F-16
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
Summary of Significant Accounting Policies (continued)
and 2004, VNU has no embedded derivatives that have been accounted for separately from the
host contract as derivatives.
Share-Based Payments
VNU adopted SFAS No. 123(R), ‘‘Share-Based Payment,’’ effective January 1, 2003, using the
modified prospective method described in the Statement. This standard requires the cost of all
share-based payments, including stock options, to be measured at fair value on the grant date and
recognized in the Consolidated Statements of Income; however, no expense is recognized for
options that do not ultimately vest. VNU recognizes the expense of its options that cliff vest using
the straight-line method. For those that vest in tranches, an accelerated graded vesting is used.
Income Taxes
VNU provides for income taxes utilizing the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recorded to reflect the tax consequences in
future years of differences between the tax basis of assets and liabilities and their financial reporting
amounts at each balance sheet date, based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable income. If it is determined that
it is more likely than not that future tax benefits associated with a deferred tax asset will not be
realized, a valuation allowance is provided. The effect on deferred tax assets and liabilities of a
change in the tax rates is recognized in the Consolidated Statements of Income as an adjustment
to income tax expense in the period that includes the enactment date.
Net Income Per Common Share
Basic net income per common share is computed by dividing the net income available to
common shareholders by the weighted average number of common shares outstanding during the
period. Diluted net income per common share adjusts basic net income per common share for the
effects of convertible securities, stock options, restricted stock units and other potentially dilutive
financial instruments, only in the periods in which such effect is dilutive. See Note 17 for the
calculation.
Comprehensive Income (Loss)
Comprehensive income (loss) is reported in the accompanying Consolidated Statements of
Changes in Shareholders’ Equity and consists of net income and other gains and losses affecting
shareholders’ equity that, under U.S. GAAP, are excluded from net income.
3.
Summary of Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 153,
‘‘Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29.’’ SFAS No. 153
amends APB Opinion No. 29, ‘‘Accounting for Nonmonetary Transactions,’’ to eliminate the
exception from fair value measurement for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result of
F-17
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
Summary of Recent Accounting Pronouncements (continued)
the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal years
beginning after June 15, 2005. The adoption of SFAS No. 153 is not expected to have a material
impact on VNU’s consolidated financial position, results of operations or cash flows.
In March 2005, the FASB issued FIN 47, ‘‘Accounting for Conditional Asset Retirement
Obligations,’’ which clarifies how the term conditional asset retirement obligation is used in SFAS
No. 143, ‘‘Accounting for Asset Retirement Obligations.’’ SFAS No. 143 applies to a legal obligation
to perform an asset retirement activity in which the timing and/or method of settlement are
conditional on a future event that may or may not be within the control of the entity. FIN 47 clarifies
that an entity is required to recognize a liability for the fair value of a conditional asset retirement
obligation when incurred if the liability’s fair value can be reasonably estimated. FIN 47 is effective
for fiscal years ending after December 15, 2005. The adoption of FIN 47 did not have a material
impact on VNU’s consolidated financial position, results of operations or cash flows.
In November 2005, the FASB issued Staff Position FAS No. 115-1 and FAS 124-1, ‘‘The
Meaning of Other Than Temporary Impairment and its Application to Certain Investments’’ (‘‘FSP’’).
FSP provides accounting guidance for determining and measuring other-than-temporary
impairments of debt and equity securities, and confirms the disclosure for investments in unrealized
loss positions as outlined in EITF 03-01, ‘‘The Meaning of Other-Than-Temporary Impairments and
its Application to Certain Investments’’. These amendments are effective for all reporting periods
beginning after December 15, 2005. The adoption of FSP is not expected to have a material impact
on VNU’s consolidated financial position, results of operations or cash flows.
In February 2006, the FASB issued SFAS No. 155, ‘‘Accounting for Certain Hybrid Financial
Instruments.’’ This Statement amends FASB Statements No. 133, ‘‘Accounting for Derivative
Instruments and Hedging Activities’’ and No. 140, ‘‘Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities’’. It resolves issues addressed in Statement 133
Implementation Issue No. D1, ‘‘Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets.’’ SFAS No. 155 permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require bifurcation, and
clarifies which interest-only strips and principal-only strips are not subject to the requirements of
Statement No. 133. This Statement is effective for all financial instruments acquired or issued after
the beginning of an entity’s first fiscal year that begins after September 15, 2006. VNU is evaluating
the impact of SFAS No. 155 to its consolidated financial statements.
4.
Business Acquisitions
2005 Acquisitions
During the year ended December 31, 2005, VNU completed several acquisitions, for an
aggregate cost of EUR 133 million. VNU’s largest acquisitions in 2005 are discussed below.
The shares of BBC De Media en Reclame Bank bv, doing business as Nielsen Media Research
bv (‘‘BBC’’), were acquired by VNU by Nielsen Media Research International. BBC offers
intelligence covering most of the Dutch advertising market such as Internet, newspapers,
magazines, television and radio. Other Media Measurement & Information (‘‘MMI’’) acquisitions
include Korea Advanced Digital Data inc (‘‘KADD’’) and its subsidiary, BasisNet inc, a South Korea
based advertising monitoring and intelligence company and, in June 2005, AudioAudit, a provider
of broadcast verification technology services for the advertising industry based in New Jersey, USA.
F-18
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
Business Acquisitions (continued)
In November 2005, the remaining 49% of the activities in Chile were acquired by Marketing
Information (‘‘MI’’). The activities were already fully consolidated in prior periods as VNU owned
51%. In December 2005, the MI group acquired all shares in Decisions Made Easy, a company
dedicated to helping suppliers of consumer packaged goods manage, analyze, present and action
their sales and supply chain data.
The consolidated financial statements include the results of these acquired companies
subsequent to the closing of the acquisitions. Had each of these acquisitions occurred as of
January 1, 2005 or 2004, the impact on VNU’s consolidated results of operations would have been
immaterial. The acquisitions resulted in goodwill of EUR 32 million, none of which is deductible for
tax purposes, EUR 3 million of customer-related intangibles, EUR 2 million in databases and EUR
2 million in other intangibles. The intangible assets are being amortized on the straight-line basis
over their estimated useful lives, which range from five to ten years.
2004 Acquisitions
During the year ended December 31, 2004, VNU completed several acquisitions for an
aggregate cost of approximately EUR 78 million, exclusive of cash acquired of EUR 2 million. No
individual acquisition was material. The most notable acquisitions were the purchase of Nationale
Vacaturebank.nl, an online job search company, by VNU Business Media Europe; the remaining
interests of Music Control and Aircheck, radio airplay-monitoring businesses, acquired by Nielsen
Entertainment, a division of MMI; RedSheriff, a site-centric-based Internet audience measurement
company, acquired in 2004 and 2003 by VNU’s subsidiary NetRatings, Inc., part of MMI; and the
remaining interest in AMER Research Ltd., a company that provides marketing information services
to the Middle East, acquired by MI. The consolidated financial statements include the results of
these acquired companies subsequent to the closing of the acquisitions. Had each of these
acquisitions occurred as of January 1, 2004 or 2003, the impact on VNU’s consolidated results of
operations would have been immaterial. The acquisitions resulted in goodwill of EUR 69 million,
none of which is deductible for tax purposes, EUR 5 million of customer-related intangibles and
EUR 5 million of trade names. The intangible assets are being amortized on a straight-line basis
over their estimated useful lives, which range from five to fifteen years.
2003 Acquisitions
During the year ended December 31, 2003, VNU completed several acquisitions for an
aggregate cost of approximately EUR 33 million. The most significant acquisition was the purchase
of an additional 56% ownership in Pagini Aurii, the Romanian directories company, bringing VNU’s
total interest to 84%. This interest was later divested in 2004 as part of the sale of VNU’s Directories
business. The consolidated financial statements include the results of these acquired companies
subsequent to the closing of the acquisitions. Had these acquisitions occurred as of January 1,
2003, the impact on VNU’s consolidated results of operations would have been immaterial. VNU
also made EUR 71 million in payments related to acquisitions completed in prior years. The largest
payments were made for contingencies resulting from the Nielsen Media Research and Directories
acquisitions. The 2003 acquisitions resulted in goodwill of EUR 34 million, none of which is
F-19
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
Business Acquisitions (continued)
deductible for tax purposes, and no other intangible assets. Additional payments made on prior
year acquisitions resulted in goodwill of EUR 30 million.
5.
Business Divestitures
Directories
In November 2004, VNU completed the sale of Directories to World Directories Acquisition
Corp., a legal entity owned by funds advised by Apax Partners Worldwide LLP and Cinven Limited,
for EUR 2,075 million in cash. After deductions for net indebtedness, working capital and
transaction costs, VNU received EUR 2,003 million in net cash proceeds. The sale resulted in a gain
of EUR 167 million, net of income taxes; EUR 1,170 million of the proceeds was used to repay debt
in 2005. EUR 32 million of fees related to the disposition were paid in 2005.
In connection with the sale of Directories, VNU has an exposure under a tax indemnity
guarantee with the acquirer, pursuant to which VNU has agreed to pay any tax obligations relating
to past years (see Note 16). Additionally, the sale price is subject to adjustment based on final
agreement on working capital and net indebtedness. VNU expects to reach an agreement with the
buyers in the first half of 2006. In 2005, VNU recorded an additional gain of EUR 7 million to reflect
the continued resolution of final settlement amounts.
Claritas Europe
In December 2003, VNU entered into an agreement to sell its Claritas Europe business to
Acxiom Corporation. Claritas Europe was a component of the MI segment, but it operated with little
synergy with the rest of the MI business in the European marketplace. In January 2003, VNU began
exploring strategic options for Claritas Europe, including a possible sale of the business. The sale
was effective in December 2003, for net proceeds of EUR 33 million in cash, which were received in
2004. The sale resulted in a loss of EUR 40 million, net of income taxes.
VNU recorded the results of Directories and Claritas Europe through the disposition date, and
the corresponding gain and loss on disposal, as income (loss) from discontinued operations, net of
income taxes, in the Consolidated Statements of Income for 2003, 2004 and 2005.
Summarized results of operations for discontinued operations are as follows:
Year ended December 31, 2005
Total
Discontinued
Directories Other Operations
(EUR IN MILLIONS)
Operating revenues . . . . . . .
Operating income . . . . . . . .
Income (loss) before income
taxes . . . . . . . . . . . . . .
Income tax (provision), benefit
Equity in net income of
affiliates . . . . . . . . . . . .
Year ended December 31, 2004
Total
Discontinued
Directories
Operations
Year ended December 31, 2003
Total
Claritas Discontinued
Directories Europe Operations
—
—
—
—
—
—
408
131
408
131
439
150
80
(4)
519
146
—
—
—
—
—
—
95
(28)
95
(28)
106
—
(6)
3
100
3
—
—
—
20
20
25
—
25
Income (loss) . . . . . . . . . .
Gain (loss) on sale, net of tax . .
—
7
—
(1)
—
6
87
167
87
167
131
—
(3)
(40)
128
(40)
Income (loss) from
discontinued operations . . .
7
(1)
6
254
254
131
(43)
88
F-20
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
Business Divestitures (continued)
VNU allocated interest to discontinued operations in accordance with EITF Issue No. 87-24,
‘‘Allocation of Interest to Discontinued Operations.’’ The interest charges allocated to discontinued
operations were comprised of interest expense on debt that was assumed by the acquirers of
VNU’s discontinued operations and a portion of interest expense that could not be specifically
attributed to other operations of VNU, which was based on the ratio of net assets sold as a
proportion of consolidated net assets. For the years ended December 31, 2004 and 2003, VNU
allocated interest expense of EUR 36 million and EUR 42 million, respectively, to Directories for a
portion of the consolidated VNU interest expense, including interest on the EUR 42 million of debt
that was assumed by Apax Partners Worldwide LLP and Cinven Limited. For the year ended
December 31, 2003, VNU allocated interest expense of EUR 1 million to Claritas Europe.
VNU fully disposed of its net assets of Claritas Europe and Directories as of December 31,
2003 and 2004, respectively.
Following are the major categories of cash flows from discontinued operations, net of tax, as
included in VNU’s Consolidated Statements of Cash Flows:
Year ended December 31
2005
2004
2003
(EUR IN MILLIONS)
Net cash provided by operating activities . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . .
—
—
—
—
166
(26)
1
141
199
(75)
—
124
In addition to the divestiture of Directories, during the year ended December 31, 2004, VNU
divested several businesses for an aggregate price of EUR 15 million, resulting in a gain of EUR
8 million, reflected in the Consolidated Statements of Income.
Also, in addition to the divestiture of Claritas Europe discussed above, during the first half of
2003, VNU divested its 35% interest in Independent Media Holding bv, the largest publisher of
consumer magazines in Russia, which was part of VNU’s former Consumer Information group, to
the remaining shareholders resulting in cash proceeds of EUR 15 million and a gain of EUR
2 million. Divestitures of several other businesses during 2003 were immaterial.
F-21
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6.
Marketable Securities
The following is a summary of estimated fair values of investments based on quoted market
prices:
December 31
2005
2004
(EUR IN MILLIONS)
Marketable securities:
Auction rate securities . . . . . . . . . . . . .
Corporate notes . . . . . . . . . . . . . . . . .
Commercial paper . . . . . . . . . . . . . . .
Euro dollar bonds . . . . . . . . . . . . . . . .
Floating rate bonds . . . . . . . . . . . . . . .
U.S. government and agency securities
Other . . . . . . . . . . . . . . . . . . . . . . . . .
Total marketable securities . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
46
22
2
20
2
31
5
128
36
14
1
31
—
39
—
121
Long-term investments:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
75
96
15
57
72
Short-term marketable securities are held by NetRatings, and may not be available for VNU’s
general corporate financial purposes. All marketable securities have maturities of less than
twenty-four months and are classified as available-for-sale. At December 31, 2005, the fair market
value, cost and net unrealized losses of marketable securities totaled EUR 128 million, EUR
129 million and EUR 1 million, respectively. At December 31, 2004, the fair market value, cost and
net unrealized losses of marketable securities totaled EUR 121 million, EUR 122 million and EUR
1 million, respectively.
VNU’s long-term equity securities are classified as available-for-sale. The available-for-sale
financial assets include investments in two publicly traded companies, RSDB nv and CMGI, inc. At
December 31, 2005, the cost and net unrealized gains of VNU’s long-term marketable securities
totaled EUR 13 million and EUR 8 million, respectively. At December 31, 2004, the cost and net
unrealized gains of VNU’s long-term marketable securities totaled EUR 12 million and EUR
3 million, respectively.
During the years ended December 31, 2005, 2004 and 2003, VNU received cash proceeds of
EUR 113 million, EUR 128 million and EUR 329 million, respectively, from sales of available-for-sale
securities. VNU uses the specific identification method to compute realized gains and losses on its
available-for-sale securities. For the years ended December 31, 2005, 2004 and 2003, realized gains
and losses were immaterial. These investments are stated at fair value with any unrealized holding
gains or losses, net of tax, included as a component of accumulated other comprehensive income
(loss) until realized.
VNU’s investments in mutual funds are intended to fund liabilities arising from its deferred
compensation plan. These investments are classified as trading securities, and any gains or losses
from changes in fair value are included in other (expense) income, net, which are offset in their
F-22
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6.
Marketable Securities (continued)
entirety by the changes in liabilities to participants in the deferred compensation plan. Net gains
were EUR 5 million, EUR 5 million and EUR 6 million in 2005, 2004 and 2003, respectively.
7.
Trade and Other Receivables
December 31
2005
2004
(EUR IN MILLIONS)
Trade receivables . . . . . . . . . . . . . . . . . . . .
Less: Allowance for doubtful accounts . . . . .
Less: Reserve for returns on product/reworks
Trade receivables, net . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total trade and other receivables, net . . . . . . . . . . . . . . . . . .
554
(21)
(9)
524
488
(22)
(8)
458
69
52
645
58
33
549
Other receivables include value added tax and sales tax receivables, loans to third parties and
personnel and collectible interest from third parties in 2005 and 2004, and a receivable from the
divestiture of Directories.
8.
Goodwill and Other Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill, by reportable
segment during the years ended December 31, 2004 and 2005:
Marketing
Information
Media
Measurement &
Information
Business
Information
Discontinued
Operations
Total
1,549
(5)
—
—
(1,544)
—
—
5,658
(270)
69
(104)
(1,544)
(6)
3,803
(EUR IN MILLIONS)
Balance, January 1, 2004 . . . . . . . .
Effect of foreign currency translation
Additions (a) . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . .
Sale of Directories (b) . . . . . . . . . .
Other divestiture . . . . . . . . . . . . . .
Balance, December 31, 2004 . . . . .
.
.
.
.
.
.
.
1,653
(96)
11
—
—
—
1,568
1,799
(128)
35
(104)
—
(6)
1,596
657
(41)
23
—
—
—
639
Effect of foreign currency translation
Additions (a) . . . . . . . . . . . . . . . . .
Divestitures . . . . . . . . . . . . . . . . . .
Other (c) . . . . . . . . . . . . . . . . . . . .
Balance, December 31, 2005 . . . . .
.
.
.
.
.
150
20
—
(3)
1,735
233
12
(20)
(24)
1,797
77
—
—
—
716
—
—
—
—
—
460
32
(20)
(27)
4,248
(a) Refer to Note 4, Business Acquisitions.
(b) Refer to Note 5, Business Divestitures, for a discussion of the sale of Directories.
(c) For MMI, the reversal of liabilities associated with the resolution of D&B Legacy Tax matters and IRI action. See
Note 19.
F-23
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8.
Goodwill and Other Intangible Assets (continued)
Intangible Assets
The following tables summarize the changes in the carrying amounts of intangible assets other
than goodwill during the years ended December 31, 2004 and 2005:
Effect of
Balance,
Foreign
Balance,
January 1, Currency
Sale of Disposition December 31,
(1)
2004
Translation Additions Amortization
Directories and Other
2004
(EUR IN MILLIONS)
Indefinite-lived intangibles:
Trade names and
trademarks . . . . . . . . . .
Amortized intangibles:
Trade names and
trademarks . . . . . . . . . .
Customer-related intangibles
Tradeshows and related
publications . . . . . . . . .
Covenants not to compete .
Databases . . . . . . . . . . . .
Computer software . . . . . .
Patents and other . . . . . . .
Gross carrying amount . . . . .
Accumulated amortization:
Trade names and
trademarks . . . . . . . . . .
Customer-related intangibles
Tradeshows and related
publications . . . . . . . . .
Covenants not to compete .
Databases . . . . . . . . . . . .
Computer software . . . . . .
Patents and other . . . . . . .
586
(26)
—
—
(54)
—
506
5
1,434
—
(59)
5
5
—
—
—
(438)
—
—
10
942
287
54
32
448
24
(24)
(4)
(3)
(24)
(1)
—
—
—
67
3
—
—
—
—
—
—
—
—
(39)
—
—
1
—
(6)
1
263
51
29
446
27
2,284
(115)
80
—
(477)
(4)
1,768
(2)
(671)
—
17
—
—
(1)
(85)
—
424
—
1
(3)
(314)
(48)
(25)
(29)
(262)
(14)
5
3
2
17
1
—
—
—
—
—
(14)
(7)
(1)
(55)
(1)
—
—
—
21
—
—
(2)
—
8
—
(57)
(31)
(28)
(271)
(14)
Total accumulated amortization
(1,051)
45
—
(164)
445
7
Net amortized intangibles . . . .
1,233
(70)
80
(164)
(32)
3
1,050
(718)
Total intangible assets . . . . . .
1,819
(96)
80
(164)
(86)
3
1,556
(1) Amortization includes EUR 16 million relating to Directories classified as discontinued operations in the Consolidated
Statements of Income.
F-24
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8.
Goodwill and Other Intangible Assets (continued)
Effect of
Balance,
Foreign
Balance,
January 1, Currency
December 31,
2005
Translation Additions Amortization Other
2005
(EUR IN MILLIONS)
Indefinite-lived intangibles:
Trade names and trademarks . . . . . .
506
64
—
—
—
Amortized intangibles:
Trade names and trademarks . . . . . .
Customer-related intangibles . . . . . .
Tradeshows and related publications
Covenants not to compete . . . . . . . .
Databases . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . .
Patents and other . . . . . . . . . . . . . .
10
942
263
51
29
446
27
1
115
39
7
2
37
3
—
3
—
—
2
59
2
—
—
—
—
—
—
—
—
—
—
—
—
(1)
—
11
1,060
302
58
33
541
32
Gross carrying amount . . . . . . . . . . . .
1,768
204
66
—
(1)
2,037
570
Accumulated amortization:
Trade names and trademarks . . . . . .
Customer-related intangibles . . . . . .
Tradeshows and related publications
Covenants not to compete . . . . . . . .
Databases . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . .
Patents and other . . . . . . . . . . . . . .
(3)
(314)
(57)
(31)
(28)
(271)
(14)
(2)
(35)
(12)
(5)
(3)
(18)
(2)
—
—
—
—
—
—
—
(1)
(76)
(14)
(8)
(1)
(50)
(2)
—
—
—
—
—
1
—
(6)
(425)
(83)
(44)
(32)
(338)
(18)
Total accumulated amortization . . . . . .
(718)
(77)
—
(152)
1
(946)
Net amortized intangibles . . . . . . . . . .
1,050
127
66
(152)
—
1,091
Total intangible assets . . . . . . . . . . . . .
1,556
191
66
(152)
—
1,661
The trade names associated with the acquisitions of Nielsen Media Research and ACNielsen
were deemed indefinite-lived intangible assets, as their associated brand awareness and recognition
has existed for over 50 years and VNU intends to continue to utilize these trade names. There are
also no legal, regulatory, contractual, competitive, economic or other factors that may limit their
estimated useful lives. VNU reconsiders the remaining estimated useful life of indefinite-lived
intangible assets each reporting period.
An impairment charge was recorded in 2003 to reduce the carrying value to net realizable
value of VNU’s Category Business Planner software which was replaced by an enhanced version.
The impairment charge of EUR 8 million is included in depreciation and amortization in the
Consolidated Statements of Income and was recorded in the MI segment.
F-25
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8.
Goodwill and Other Intangible Assets (continued)
All other intangible assets are subject to amortization. Future amortization expense is estimated
to be as follows:
(EUR IN MILLIONS)
For the year ending December 31,
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
159
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
134
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
530
1,091
9.
Property, Plant and Equipment
December 31,
2005
2004
(EUR IN MILLIONS)
Cost:
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information and communication equipment . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
334
525
177
283
456
159
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . .
1,036
(610)
898
(528)
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
426
370
Depreciation expense from continuing operations was EUR 90 million, EUR 89 million and EUR
93 million for the years ended December 31, 2005, 2004 and 2003, respectively. Other primarily
consists of office furniture and other equipment.
F-26
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
Property, Plant and Equipment (continued)
Assets Under Capital Lease
Assets under capital lease included in property, plant and equipment and related accumulated
depreciation are as follows:
December 31,
2005
2004
(EUR IN MILLIONS)
Cost:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information and communication equipment . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128
5
7
117
10
5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . .
140
(22)
132
(17)
Net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118
115
Depreciation expense for 2005, 2004 and 2003 includes amortization of EUR 6 million, EUR
6 million and EUR 3 million, respectively, on assets under capital lease.
10.
Derivative Financial Instruments
The following tables show the contract or underlying principal amounts and fair values of
derivative financial instruments by type of contract at December 31, 2005 and 2004. Contract or
underlying principal amounts indicate the volume of transactions outstanding at the balance sheet
date and do not represent amounts at risk. The fair values are determined using market prices and
standard pricing models at December 31, 2005 and 2004.
Contract or Underlying
Principal Amount
(EUR IN MILLIONS)
Fair Value 2005
Fair Value 2004
Positive Negative Positive Negative
December 31, December 31, Value
Value
Value
Value
2005
2004
(Assets) (Liabilities) (Assets) (Liabilities)
Currency related instruments
EUR/USD cross-currency swaps . . . . . .
GBP/EUR cross-currency swaps . . . . . .
Forward foreign exchange contracts . . .
1,533
211
160
1,783
211
100
333
5
—
—
—
1
530
—
—
—
4
1
Total currency related instruments . . . . .
1,904
2,094
338
1
530
5
Interest related Instruments
Fixed-to-floating interest rate swaps . . .
Floating-to-fixed interest rate swaps . . .
583
—
1,250
215
18
—
—
—
56
—
—
2
Total interest related instruments . . . . .
583
1,465
18
—
56
2
Total derivative financial instruments . . .
2,487
3,559
356
1
586
7
Current derivative financial instruments .
1,143
315
136
1
—
3
Non-current derivative financial
instruments . . . . . . . . . . . . . . . . . .
1,344
3,244
220
—
586
4
F-27
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10.
Derivative Financial Instruments (continued)
Currency Related Instruments
VNU uses the Euro as its reporting currency and is therefore exposed to foreign exchange rate
movements, primarily in the U.S., the U.K. and Japan. Consequently, VNU enters into various
contracts which change in value as foreign exchange rates change, to preserve the value in Euro of
certain assets, liabilities, commitments and anticipated transactions. VNU enters into forward foreign
exchange contracts and cross-currency swaps to hedge certain anticipated foreign currency cash
flows, revenues and costs and the net investment in certain foreign entities.
At December 31, 2005 and 2004, VNU had entered into cross-currency swaps with notional
amounts aggregating EUR 1,744 million and EUR 1,994 million, respectively, to hedge its net
investments in foreign entities. For the year ended December 31, 2005, a cross-currency swap with
a notional amount of EUR 250 million designated as a net investment in foreign entity hedge was
terminated.
At December 31, 2005 and 2004, VNU had also entered into several forward foreign exchange
contracts with notional amounts aggregating EUR 160 million and EUR 100 million, respectively, to
hedge exposure to fluctuations in various foreign currencies. These contracts expire ratably over the
subsequent year. Based on quoted market prices, for contracts with similar terms and maturity
dates, in 2005, VNU recorded a net gain of EUR 15 million to adjust forward foreign exchange
contracts to their fair market value. In 2004, no net gain or loss was recorded.
Interest Related Instruments
VNU is exposed to cash flow interest rate risk on floating-rate borrowings and has used
floating-to-fixed interest rate swaps to hedge this exposure. As of December 31, 2005, no
floating-to-fixed interest rate swaps were outstanding; as of December 31, 2004, floating-to-fixed
interest rate swaps with notional amounts aggregating EUR 215 million were outstanding.
VNU is also exposed to fair value interest rate risk on fixed-rate borrowings and uses
fixed-to-floating interest rate swaps to hedge this exposure. As of December 31, 2005 and 2004,
fixed-to-floating interest rate swaps with aggregate notional amounts of EUR 583 million and EUR
1,250 million, respectively, were outstanding. Changes in the fair value of these interest rate swaps
are recorded in net earnings in the line item gain on derivative instruments in the Consolidated
Statements of Income.
In the year ended December 31, 2005, interest rate swaps with notional amounts aggregating
EUR 215 million designated as cash flow hedges matured. Additionally, interest rate swaps with
notional amounts aggregating EUR 417 million designated as fair value hedges and an interest rate
swap with a notional amount of EUR 250 million with no hedge designation were terminated.
F-28
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10.
Derivative Financial Instruments (continued)
Hedge Accounting
Effective January 1, 2005, VNU documented its hedging relationships and conducted an
analysis of hedge effectiveness for derivative financial instruments already outstanding at January 1,
2005. As a result of documenting its risk-management objective and strategy for entering into a
derivative transaction as well as performing and documenting a hedge effectiveness analysis
assessing whether the relationship between the hedging instrument and the hedged item is highly
effective, all but one of the derivative financial instruments held by VNU at January 1, 2005 qualified
for hedge accounting and were determined to be highly effective.
On January 1, 2005, VNU designated derivative financial instruments which qualify as hedges
for accounting purposes as cash flow hedges, fair value hedges or net investment in foreign entity
hedges.
Net Investment Hedges
VNU uses cross-currency swaps and foreign-currency-denominated debt to hedge its net
investments in foreign entities against adverse movements in foreign exchange rates. VNU
measures ineffectiveness based upon the change in spot rates in the case of floating-to-floating
cross-currency swaps and forward rates in the case of fixed-to-fixed cross-currency swaps. For the
year ended December 31, 2005, EUR 157 million of net losses related to these derivative financial
instruments and foreign-currency denominated debt were included in the cumulative translation
adjustment. For the same year, no net gains or losses were recorded in earnings representing the
amount of the hedges’ ineffectiveness.
Cash Flow Hedges
Cash flow hedges are hedges that use derivative financial instruments to offset the variability of
expected future cash flows. VNU uses cross-currency swaps to convert certain debt denominated in
a foreign currency to Euro-denominated debt. Furthermore, as part of its interest rate risk
management policy, VNU uses interest rate swaps to convert floating-rate debt into fixed-rate debt.
If, as would be expected, the derivative financial instrument is highly effective in offsetting variability
in the hedged item, changes in its fair value are recorded in accumulated other comprehensive
income (loss) and reclassified to earnings in the same line item in which the hedged item is
recorded contemporaneously with the earnings effects of the hedged item.
As of December 31, 2005, and excluding hedges related to the payment of variable interest on
existing financial instruments, VNU had cash flow hedges in place with maturity dates up to 2010.
For the year ended December 31, 2005, amounts related to derivative financial instruments
qualifying as cash flow hedges resulted in an increase of accumulated other comprehensive income
of EUR 2 million. Nothing is expected to be transferred from accumulated other comprehensive
income (loss) to earnings in the next 12 months as the derivative financial instruments and their
underlying hedged items expire or mature according to their original terms, along with the earnings
effects of the related forecast transactions in the next 12 months. For the year ended December 31,
2005, no amount has been reclassified to earnings as a result of cash flow hedges being
terminated or sold. For the same year, no net gains or losses were recorded in earnings
representing the amount of the hedges’ ineffectiveness.
F-29
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10.
Derivative Financial Instruments (continued)
Fair Value Hedges
Fair value hedges are hedges that eliminate the risk of changes in the fair values of assets,
liabilities and certain types of firm commitments. VNU uses fixed-to-floating interest rate swaps to
convert certain fixed-rate long-term debt into floating-rate debt as part of its interest rate risk
management policy. Changes in fair value of derivative financial instruments designated and
effective as fair value hedges are recorded in net earnings in the line item gain on derivative
instruments and are offset by corresponding changes in the fair value of the hedged item
attributable to the risk being hedged. For the year ended December 31, 2005, no net gains or
losses were recorded in earnings representing the amount of the hedges’ ineffectiveness.
Counterparty Risk
VNU manages exposure to possible defaults on derivative financial instruments by monitoring
the concentration of risk that VNU has with any one bank and through the use of minimum credit
quality standards for all counterparties. VNU does not require, nor is required to provide, collateral
or other security in relation to derivative financial instruments. Since it is VNU’s policy to only enter
into derivative contracts with banks of internationally acknowledged standing, VNU considers the
counterparty risk to be remote.
It is VNU’s policy to enter into an ISDA Master Agreement with a bank prior to entering into any
derivative contract with that bank. Under each of these ISDA Master Agreements, VNU 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. As at December 31, 2005 and 2004,
VNU’s maximum economic exposure to loss due to credit risk on derivative financial instruments
was EUR 355 million and EUR 579 million, respectively, if all bank counterparties were to default.
F-30
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11.
Restructuring Activities
During 2004 and 2003, VNU initiated restructuring plans that primarily resulted in the
involuntary termination of certain employees. A summary of the changes in the accrual balance for
restructuring activities and a discussion of each of VNU’s restructuring plans is as follows:
Marketing
Information
Europe
Corporate
Headquarters
Project Atlas
Directories
Total
Balance at January 1, 2003 . . . . . . . . . . . . .
—
—
—
—
—
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . . . . . . .
—
—
—
—
—
—
17
(5)
(1)
10
—
—
27
(5)
(1)
Balance as of December 31, 2003 . .
Accruals . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . .
Sale of Directories . . . . . . . . . . . . .
Effect of foreign currency translation
.
.
.
.
.
—
11
—
—
—
—
9
—
—
—
11
8
(10)
—
(1)
10
—
(8)
(2)
—
21
28
(18)
(2)
(1)
Balance at December 31, 2004 . . . . . . . . . . .
11
9
8
—
28
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . . . . . . .
—
(7)
—
—
(5)
—
5
(9)
2
—
—
—
5
(21)
2
Balance at December 31, 2005 . . . . . . . . . . .
4
4
6
—
14
(EUR IN MILLIONS)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Marketing Information Europe Restructuring
In December 2004, VNU initiated a restructuring plan within MI to improve the competitiveness
of the European retail measurement business. The 2004 charge of EUR 11 million was entirely for
severance benefits associated with headcount reductions of 81 employees in Europe. Cash
payments related to this plan totaled EUR 7 million in 2005 and are expected to be approximately
EUR 4 million in 2006.
Corporate Headquarters Restructuring
In November 2004, VNU initiated a restructuring plan in conjunction with the transfer of a
portion of Corporate Headquarters’ responsibilities from Haarlem, the Netherlands to New York. The
transfer of responsibilities is the consequence of the recent changes in VNU’s business portfolio
(including the sale of Directories) and the fact that the majority of operations are now managed
from New York. This plan will result in a headcount reduction of approximately 40 employees in
Haarlem. The 2004 charge of EUR 9 million consisted of EUR 8 million for severance benefits and
EUR 1 million for lease termination costs. Cash payments related to this plan were EUR 5 million in
2005 and are expected to be approximately EUR 2 million in 2006 and EUR 2 million thereafter.
Project Atlas Restructuring
In December 2003, VNU launched Project Atlas, a multi-year business improvement program in
MI. This program was designed to enable MI to better meet client needs, improve operational
efficiency, accelerate revenue growth through the introduction of new products and services and
increase operating margins. Primarily concentrated in MI’s North American operations, Project Atlas
F-31
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11.
Restructuring Activities (continued)
activities are expected to streamline key operational practices to enhance quality and lower
production costs, create a more streamlined and state-of-the-art technology platform and use global
purchasing power to achieve cost efficiencies.
Project Atlas began in 2003 and is expected to be completed by 2007 and result in headcount
reductions in excess of 700 employees, primarily in North America. The initial charge of EUR
17 million in 2003 consisted of EUR 13 million for severance benefits and EUR 4 million for related
consulting expenses incurred in 2003. An additional charge of EUR 5 million and EUR 8 million in
2005 and 2004, respectively, was entirely for severance benefits. Additional expected charges for
the plan are EUR 1 million in 2006. VNU estimates that cash outlays will be EUR 6 million in 2006
and EUR 1 million in 2007.
Directories Restructuring
During 2003, Directories launched an operational improvement program to realign the
organization and the staffing levels in certain parts of the organization with the levels of business
activity and to adjust the staffing levels to new business processes. The restructuring began in
December 2003 and was still in process at the time of the Directories divestiture. The original plan
anticipated headcount reductions of 66 employees in Europe. The 2003 charge of EUR 10 million
was included in income from discontinued operations in the Consolidated Statements of Income.
During 2004, payments of EUR 8 million were made prior to the divestiture of Directories in
November 2004.
In connection with all of the restructuring actions discussed above, severance benefits were
computed pursuant to the terms of local statutory minimum requirements in labor contracts or
similar employment agreements.
12.
Pensions and Other Post-Retirement Benefits
VNU sponsors both funded and unfunded non-contributory defined benefit pension plans and
other post-retirement benefit plans for some of its employees in the Netherlands, the United States
and other international locations. The post-retirement benefit plans primarily relate to healthcare
benefits for retirees who meet the eligibility requirements. All of these plans provide benefits to the
employees based on various criteria, including years of service and compensation during the
service period, that are dependent on the terms and legal requirements of the respective plans and
jurisdictions. VNU uses a measurement date of December 31 for its primary Netherlands, Canada
and United States pension and post-retirement benefit plans and November 30 for other
international plans.
F-32
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
A summary of the activity for VNU’s defined benefit pension plans and other post-retirement
benefit plans follows:
Pension Benefits 2005
The
United
Netherlands
States
Other
(EUR IN MILLIONS)
Change in projected benefit obligation
Benefit obligation at beginning of year
Service cost . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . .
Plan amendments . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . .
Curtailment . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
446
5
20
2
—
30
2
(22)
(3)
2
—
149
10
10
—
—
9
—
(4)
—
—
24
324
10
16
2
1
22
—
(15)
—
(1)
12
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
482
198
371
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . . . . . .
483
52
6
2
2
(22)
2
—
103
7
20
—
—
(4)
—
17
224
37
20
2
—
(15)
(1)
9
810
96
46
4
2
(41)
1
26
525
143
276
944
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total
.
.
.
.
.
.
.
.
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . .
919
25
46
4
1
61
2
(41)
(3)
1
36
1,051
Funded status
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service (credit) cost . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
(1)
1
(55)
(2)
78
(95)
5
122
(107)
2
201
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
21
32
96
Amounts recognized in the Consolidated Balance Sheets
Pension assets under other non-current assets . . . . . . . . . . . . . . . .
Prepaid pension assets under other current assets . . . . . . . . . . . . .
Accrued benefit liability(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (minimum pension liability)
.
.
.
.
36
7
—
—
—
—
(45)
66
17
4
(58)
69
53
11
(103)
135
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
21
32
96
(1) Included in other non-current liabilities. See Note 21.
F-33
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
Pension Benefits 2004
The
United
Netherlands
States
Other
(EUR IN MILLIONS)
Change in projected benefit obligation
Benefit obligation at beginning of year .
Service cost . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . .
Plan amendments . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . .
Divestitures . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
483
7
25
2
—
46
(94)
(23)
—
138
10
9
—
—
6
2
(3)
(13)
334
12
18
2
2
27
(53)
(16)
(2)
955
29
52
4
2
79
(145)
(42)
(15)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
446
149
324
919
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . .
Divestitures . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . . . . . .
510
40
23
2
(69)
(23)
—
105
10
—
—
—
(3)
(9)
240
24
13
2
(38)
(16)
(1)
855
74
36
4
(107)
(42)
(10)
483
103
224
810
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total
.
.
.
.
.
.
.
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . .
Funded status
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service (credit) cost . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
(2)
—
(46)
(2)
62
(100)
5
120
(109)
1
182
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
14
25
74
Amounts recognized in the Consolidated Balance Sheets
Pension assets under other non-current assets . . . . . . . . . . . . . . . . .
Prepaid pension assets under other current assets . . . . . . . . . . . . . .
Accrued benefit liability(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (Minimum pension liability) .
.
.
.
.
35
—
—
—
—
—
(38)
52
12
2
(66)
77
47
2
(104)
129
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
14
25
74
(1) Included in other non-current liabilities. See Note 21.
SFAS No. 87 requires recognition of a minimum liability for those pension plans with
accumulated benefit obligations in excess of the fair value of plan assets at the end of the year. The
F-34
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
total accumulated benefit obligation and minimum liability changes for all defined benefit pension
plans as of December 31, 2005 and 2004 is:
2005
2004
2003
981
858
879
(EUR IN MILLIONS)
Accumulated benefit obligation . . . . . . . . . . . . . . . . . .
(Decrease) increase to other comprehensive income for
liability:
– before income taxes . . . . . . . . . . . . . . . . . . . . .
– after income taxes . . . . . . . . . . . . . . . . . . . . . .
..................
minimum pension
..................
..................
(6)
(2)
2
2
Pension Plans with Accumulated Benefit Obligation
in Excess of Plan Assets at December 31, 2005
The
United
Netherlands
States
Other
Total
(EUR IN MILLIONS)
Projected benefit obligation . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . .
—
—
—
198
186
143
301
273
215
499
459
358
Pension Plans with Projected Benefit Obligation in
Excess of Plan Assets at December 31, 2005
The
United
Netherlands
States
Other
Total
(EUR IN MILLIONS)
Projected benefit obligation . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . .
40
33
34
198
186
143
365
323
269
603
542
446
Pension Plans with Accumulated Benefit Obligation
in Excess of Plan Assets at December 31, 2004
The
United
Netherlands
States
Other
Total
(EUR IN MILLIONS)
Projected benefit obligation . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . .
—
—
—
149
141
103
277
248
181
426
389
284
Pension Plans with Projected Benefit Obligation
in Excess of Plan Assets at December 31, 2004
The
United
Netherlands
States
Other
Total
(EUR IN MILLIONS)
Projected benefit obligation . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . .
36
30
31
F-35
149
141
103
325
286
224
510
457
358
(15)
(16)
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
Net Periodic Pension Cost
The Netherlands United States
Other
Total
(EUR IN MILLIONS)
Year Ended December 31, 2005
Service cost . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . .
Expected return on plan assets .
Amortization of net loss . . . . . .
Curtailment gain . . . . . . . . . . . .
.
.
.
.
.
5
20
(24)
1
(3)
10
10
(11)
5
—
10
16
(17)
7
—
25
46
(52)
13
(3)
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . .
(1)
14
16
29
7
25
(26)
—
10
9
(10)
4
12
18
(19)
4
29
52
(55)
8
6
13
15
34
7
25
(26)
—
9
8
(11)
3
11
17
(19)
1
27
50
(56)
4
6
9
10
25
Year Ended December 31, 2004
Service cost . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . .
Expected return on plan assets .
Amortization of net loss . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31, 2003
Service cost . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . .
Expected return on plan assets .
Amortization of net loss . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . .
The weighted average assumptions underlying the pension computations were as follows:
The Netherlands
2005
Pension benefit obligation:
– discount rate . . . . . . . . . . . . . . . . . . . . .
– rate of compensation increase . . . . . . . . .
Net periodic pension costs:
– discount rate . . . . . . . . . . . . . . . . . . . . .
– rate of compensation increase . . . . . . . . .
– expected long-term return on plan assets .
2004
Pension benefit obligation:
– discount rate . . . . . . . . . . . . . . . . . . . . .
– rate of compensation increase . . . . . . . . .
Net periodic pension costs:
– discount rate . . . . . . . . . . . . . . . . . . . . .
– rate of compensation increase . . . . . . . . .
– expected long-term return on plan assets .
United States
Other
Total
.......
.......
4.0%
3.0
5.8%
4.0
4.7% 4.6%
3.0
3.2
.......
.......
.......
4.5
3.0
5.2
5.9
4.0
8.3
5.1
3.1
6.9
4.9
3.2
6.1
.......
.......
4.5
3.0
5.9
4.0
5.1
3.1
4.9
3.2
.......
.......
.......
5.3
2.9
5.2
6.3
4.0
8.3
5.3
2.9
6.8
5.4
3.0
6.0
F-36
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
The Netherlands
2003
Pension benefit obligation:
– discount rate . . . . . . . . . . . . . . . . . . . . .
– rate of compensation increase . . . . . . . . .
Net periodic pension costs:
– discount rate . . . . . . . . . . . . . . . . . . . . .
– rate of compensation increase . . . . . . . . .
– expected long-term return on plan assets .
United States
Other
Total
.......
.......
5.3%
2.9
6.3%
4.0
5.3% 5.4%
2.9
3.0
.......
.......
.......
5.1
3.1
5.3
6.8
4.0
8.8
5.7
2.9
7.0
5.5
3.2
6.2
VNU’s pension plans’ weighted average asset allocations by asset category are as follows:
The Netherlands
United States
At December 31, 2005
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25%
74
1
70%
30
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
December 31, 2004
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income securities . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20%
80
—
68%
32
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
Other
Total
62%
36
2
43%
56
1
100% 100%
62%
36
2
38%
61
1
100% 100%
No VNU shares are held by the pension plans.
The overall target asset allocation among all plans for 2005 was 40% equity securities and 60%
long-term interest-earning investments (debt or fixed income securities).
The assumptions for the expected return on plan assets for pension plans were based on a
review of the historical returns of the asset classes in which the assets of the pension plans are
invested. The historical returns on these asset classes were weighted based on the expected
long-term allocation of the assets of the pension plans.
VNU’s primary objective with regard to the investment of pension plan assets is to ensure that
in each individual plan, sufficient funds are available to satisfy future benefit obligations. For this
purpose, asset and liability management (ALM) studies are made periodically at each pension fund.
For each of the pension plans, an appropriate mix is determined on the basis of the outcome of
these ALM studies, taking into account the national rules and regulations.
Contributions to the pension plans in 2006 are expected to be none for United States plans,
EUR 8 million for the Netherlands plans and EUR 16 million for other plans.
F-37
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
The following pension benefit payments, which reflect expected future service, are expected to
be paid:
The
Netherlands
United States
Other
Total
22
23
23
24
25
131
4
4
5
6
6
43
13
14
15
15
16
96
39
41
43
45
47
270
(EUR IN MILLIONS)
For the years ending December 31,
2006 . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Other Post-retirement Benefits 2005
The Netherlands United States
Total
(EUR IN MILLIONS)
Change in benefit obligation
Benefit obligation at beginning of year
Interest cost . . . . . . . . . . . . . . . . . . .
Negative plan amendment . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
10
—
(8)
(1)
—
12
1
—
(1)
2
22
1
(8)
(2)
2
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . .
1
14
15
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1
(1)
—
1
(1)
—
2
(2)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . .
—
—
—
Funded status
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
(1)
(8)
2
(14)
(2)
—
(15)
(10)
2
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
(16)
(23)
Prior to December 31, 2005, in the United States and in the Netherlands, VNU provided other
post-retirement benefits, primarily retiree healthcare benefits. As a result of changes in Dutch health
care laws in 2005, VNU ceased to provide retiree health care benefits to certain of its Dutch
retirees. This plan change was recognized as a negative plan amendment that reduced the
F-38
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
December 31, 2005 benefit obligation by EUR 8 million, which will be amortized to income over a
period of five years.
Other Post-retirement Benefits 2004
The Netherlands United States
Total
(EUR IN MILLIONS)
Change in benefit obligation
Benefit obligation at beginning of year
Interest cost . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
10
—
—
1
(1)
—
12
1
1
—
(1)
(1)
22
1
1
1
(2)
(1)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . .
10
12
22
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1
(1)
—
1
(1)
—
2
(2)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . .
—
—
—
Funded status
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . .
(10)
—
3
(12)
(3)
—
(22)
(3)
3
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)
(15)
(22)
The components of other post-retirement benefit cost for the year ended December 31, 2005
were as follows:
The Netherlands
United States
Total
(EUR IN MILLIONS)
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Amortization of prior service credit . . . . . . . . . . . . . . . . . . . .
—
—
1
(1)
1
(1)
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
The components of other post-retirement benefit cost for the year ended December 31, 2004
were as follows:
The Netherlands
United States
Total
(EUR IN MILLIONS)
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Amortization of prior service credit . . . . . . . . . . . . . . . . . . . .
—
—
1
(1)
1
(1)
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
F-39
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
The components of other post-retirement benefit cost for the year ended December 31, 2003
were as follows:
The Netherlands
United States
Total
(EUR IN MILLIONS)
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Amortization of prior service credit . . . . . . . . . . . . . . . . . . . .
—
—
1
(1)
1
(1)
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
The weighted average assumptions for the post-retirement benefits were as follows:
2005
Discount rate for net periodic other post-retirement benefit costs . . . . . . . . . .
Discount rate for other post-retirement benefit obligations at December 31 . . .
Assumed healthcare cost trend rates at December 31: . . . . . . . . . . . . . . . . .
– healthcare cost trend assumed for next year
– rate to which the cost trend is assumed to decline (the ultimate trend
rate) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– year in which rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . .
2004
2003
5.3%
5.6%
5.8%
5.3%
6.0%
5.8%
11.0%
7.6%
8.4%
5.0% 3.8% 3.8%
2011 2011 2011
Assumed health care cost trend rates may have a significant effect on the amounts reported for
the health care plans.
A one percentage point change in the assumed healthcare cost trend rates would have the
following effects:
1%
Increase
1%
Decrease
—
1
—
(1)
(EUR IN MILLIONS)
Effect on total of service and interest costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect on other post-retirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . .
Contributions to the post-retirement benefit plans in 2006 are expected to be EUR 1 million for
United States plans.
F-40
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Pensions and Other Post-Retirement Benefits (continued)
The following post-retirement benefit payments, which reflect expected future service, are
expected to be paid:
The Netherlands
United States
Total
(EUR IN MILLIONS)
For the years ending
2006 . . . . . . . . . .
2007 . . . . . . . . . .
2008 . . . . . . . . . .
2009 . . . . . . . . . .
2010 . . . . . . . . . .
Thereafter . . . . . .
December
........
........
........
........
........
........
31,
...
...
...
...
...
...
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
—
—
—
—
—
1
1
1
1
1
4
1
1
1
1
1
4
In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of
2003 (the ‘‘Act’’) was enacted in the U.S. VNU calculated the subsidy in accordance with FASB Staff
Position No. 106-2, ‘‘Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug Improvement and Modernization Act of 2003,’’ and determined that the Act did not have a
material impact on VNU’s post-retirement benefit obligation or related benefit costs.
Defined Contribution Plans
VNU also offers defined contribution plans to certain participants primarily in the United States.
VNU’s expense related to these plans was EUR 19 million, EUR 18 million and EUR 22 million for
the years ended December 31, 2005, 2004 and 2003, respectively. In the United States, VNU
contributes cash to each employee’s account in an amount up to 3% of compensation (subject to
IRS limitations). No contributions are made in VNU stock.
F-41
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.
Long-term Debt and Other Financing Arrangements
December 31, 2005
Carrying
Fair
Amount
Value(1)
(EUR IN MILLIONS)
EUR 15 million private placement debenture loan (EMTN) (3-month
EURIBOR based variable rate) due 2005 . . . . . . . . . . . . . . . . . . . . . .
EUR 150 million private placement debenture loan (EMTN) (3-month
EURIBOR based variable rate of 3.344%) due 2005-2012 . . . . . . . . . . . .
EUR 10 million private placement debenture loan (EMTN) (3-month
EURIBOR based variable rate) due 2005 . . . . . . . . . . . . . . . . . . . . . .
NLG 2,750 million syndicated bank loan (6-month EURIBOR based variable
rate) due 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EUR 1,150 million 1.75% convertible debenture loan due 2006 . . . . . . . . .
EUR 500 million 6.625% debenture loan due 2007 (effective rate 6.75%) . . .
NLG 500 million 5.55% subordinated private placement loan due 2004-2008 .
NLG 600 million 5.50% debenture loan due 2008 (effective rate 5.37%) . . . .
EUR 600 million 6.75% debenture loan (EMTN) due 2008 (effective rate
6.87%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
USD 150 million 7.60% debenture loan due 2009 . . . . . . . . . . . . . . . . . .
EUR 50 million private placement debenture loan (EMTN) (3-month
EURIBOR based variable rate of 3.75%) due 2010 . . . . . . . . . . . . . . . .
GBP 250 million 5.625% debenture loan (EMTN) due 2010 or 2017 (effective
rate 5.76%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JPY 4,000 million 2.50% private placement debenture loan (EMTN) due 2011
(effective rate 2.68%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EUR 30 million 6.75% private placement debenture loan (EMTN) due 2012
(effective rate 6.86%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EUR 50 million private placement debenture loan (EMTN) (3-month
EURIBOR based variable rate of 3.585%) due 2012 . . . . . . . . . . . . . . .
December 31, 2004
Carrying
Fair
Amount
Value(1)
—
—
15
15
148
149
150
151
—
—
10
10
—
340
500
136
273
—
331
524
140
278
89
883
499
181
273
90
871
541
190
292
49
127
53
136
599
110
672
124
50
50
50
50
367
375
359
364
29
31
29
31
31
35
32
35
50
50
50
50
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,100
130
2,152
3,329
119
3,486
Total long-term debt and capital lease obligations . . . . . . . . . . . . . . . . . .
Less: Current portion of long term debt and capital lease obligations . . . . .
2,230
539
3,448
167
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,691
3,281
Unamortized discounts and premiums—long-term debt . . . . . . . . . . . . . .
Weighted average rate of interest—long-term debt . . . . . . . . . . . . . . . . .
Weighted average rate of interest—current portion of long-term debt . . . . . .
1
5.95%
2.53%
3
4.77%
3.38%
(1) The fair values of the convertible debenture loan and of the quoted debenture loans have been derived from the quoted
market price on December 31, 2005 and 2004, respectively. In determining the fair values of other loans, the credit
ratings of VNU by Standard & Poor’s (BBB and BBB+, respectively for 2005 and 2004), Moody’s Investors Service
(Baa2 and Baa1, respectively, for 2005 and 2004) and future cash flows have been utilized.
F-42
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.
Long-term Debt and Other Financing Arrangements (continued)
The carrying amounts of VNU’s long-term debt are denominated in the following currencies:
December 31,
2005
2004
(EUR IN MILLIONS)
Euro . . . . . . . .
British Pounds .
Japanese Yen .
U.S. Dollars . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
1,577
367
29
127
2,831
359
29
110
2,100
3,329
Annual maturities of VNU’s long-term debt are as follows:
December 31,
2005
(EUR IN MILLIONS)
2006 . . . .
2007 . . . .
2008 . . . .
2009 . . . .
2010 . . . .
Thereafter
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
532
548
367
127
418
108
2,100
All long-term debt is senior debt unless stated otherwise, and is not secured.
See Notes 2 and 10 for a discussion of VNU’s policies with respect to foreign currency
exchange risk, interest rate risk, credit risk and liquidity risk.
Euro Medium Term Note Program
In October 2001, a EUR 2,000 million Euro Medium Term Note program (‘‘EMTN’’) was
established. Under this program, debenture loans and private placements can be issued up to the
program amount, both on a long-term and short-term basis. All debenture loans and most private
placements are quoted on the Luxembourg Stock Exchange. In October 2003, the program amount
was increased to EUR 2,500 million. At December 31, 2005 and 2004, EUR 712 million and EUR
1,294 million, respectively, of the program amount was issued under the EMTN program.
The EUR 150 million private placement debenture loan originally due 2005 is automatically
extended in 18 month increments to 2012 at the option of the holder. During 2005, the maturity of
EUR 148 million was extended through September 2006.
In 2003, a GBP 250 million debenture loan was issued under the EMTN program. After 7 years,
the interest rate on the debenture loan will be reset for the remaining 7 years to 5.50% plus the
then applicable market credit spread for VNU. As a feature of the loan, after the 7 years, VNU had a
right to acquire the debentures from the holders at par. At the issuance date of the loan, VNU has
assigned this right to two investment banks. If the acquisition right is exercised, the interest rate will
F-43
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.
Long-term Debt and Other Financing Arrangements (continued)
be reset as aforementioned. If the acquisition right is not exercised, VNU will redeem the debenture
loan at par.
In January 2005, VNU made a tender offer for the EUR 600 million debenture loan due 2008.
Of the debentures tendered, VNU accepted and cancelled a nominal amount of EUR 551 million for
which VNU paid cash of EUR 625 million, excluding accrued interest, resulting in a loss of EUR
76 million which is recorded in other (expense) income, net in the Consolidated Statements of
Income.
Convertible Debenture Loan
The holders have the right to convert the convertible debenture loan, issued in 2001 in the
amount of EUR 1,150 million, into shares of VNU common stock at a conversion price of EUR 59.50
(5,597,345 shares and 14,840,337 shares, at December 31, 2005 and 2004, respectively). When
debentures are offered for conversion, VNU is entitled in lieu of delivery of shares of common stock
to pay a cash amount in Euros based on the market price of the common stock. As of
December 31, 2005, no conversion rights have been exercised.
During 2004 and 2003, debentures with a nominal value of EUR 87 million and EUR
180 million, respectively, were repurchased in various open market transactions and subsequently
cancelled, resulting in a gain of EUR 1 million and 3 million, respectively. In January 2005, VNU
made a tender offer for the remainder of the convertible debenture loan. Of the convertible
debentures tendered, VNU accepted and cancelled a nominal amount of EUR 550 million for which
it paid cash of EUR 546 million, excluding accrued interest, resulting in a gain of EUR 1 million. The
gains are recorded in other (expense) income, net in the Consolidated Statements of Income.
VNU has the right to redeem the outstanding debentures if the closing price of the common
shares for 20 trading days within a period of 30 consecutive trading days ending within 5 days
before the date on which VNU notifies the trustee of the early redemption, has been at least 130%
of the conversion price.
Syndicated Bank Loan
The syndicated bank loan was originally issued in 1998 in the amount of NLG 2,750 million
(EUR 1,248 million) which was payable in 14 semi-annual payments, commencing December 15,
1998 with the final payment made on June 15, 2005 in final settlement.
Other Financing Arrangements
On December 31, 2005, VNU had a committed credit facility available of EUR 1,000 million.
This 5-7 year committed revolving credit facility for liquidity back-stop, acquisitions, working capital
financing and general corporate purposes was entered into in October 2004 with a syndicate of 23
banks. The facility is unsecured and requires that VNU comply with certain covenants, the most
significant of which is the interest coverage ratio described below.
Amounts drawn under the committed revolving credit facility carry a variable interest rate plus a
credit spread that is linked to VNU’s credit rating. At December 31, 2005, the credit spread was
0.35%. Effective January 17, 2006, this credit spread is 0.45%. On the unused amount of the facility,
VNU pays a quarterly commitment fee of 35% per annum of the applicable credit spread. Before
F-44
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.
Long-term Debt and Other Financing Arrangements (continued)
the first and second anniversaries of the facility, VNU is entitled to request an extension of the final
maturity date of one year. Subject to the approval of each syndicate bank for its share in the
commitment, the facility amount will be extended in full or pro rata. If both extension requests are
granted, the final maturity date of the facility will be extended from 5 to 7 years.
In September 2005, the first one-year extension of the facility until 2010 was requested by VNU
and granted by all of the banks.
At December 31, 2005 and 2004, no amounts were outstanding under the committed revolving
credit facility.
VNU is required to maintain a minimum interest coverage ratio of 3.0 under the terms of the
EUR 1,000 million committed revolving credit facility. This interest coverage ratio is defined in the
agreements as total operating income as defined, before goodwill amortization, impairment charges
and depreciation of property, plant and equipment divided by interest expense net of interest
income. Additionally, in the calculation of the interest coverage ratio, VNU’s share of operating
income of associates is limited to 10% of operating income of subsidiaries.
Capital Lease Obligations
VNU leases computer equipment and automobiles under capital leases. Additionally, VNU
entered into leasing transactions for buildings in Oldsmar, Florida and Markham, Ontario. Due to
significant continuing involvement, as defined in SFAS No. 98, ‘‘Accounting for Leases’’, the
transactions did not qualify for sale-leaseback accounting and have been accounted for as
financings. The proceeds received from the buyers-lessors are recorded as capital lease obligations
in the Consolidated Balance Sheets and are included in the table below. Leases under capital lease
do not include terms of renewal, purchase options, or escalation clauses.
Assets under capital lease are recorded within property, plant and equipment (Note 9).
Future minimum capital lease payments under non-cancelable capital leases at December 31,
2005 are as follows:
(EUR IN MILLIONS)
2006 . . . .
2007 . . . .
2008 . . . .
2009 . . . .
2010 . . . .
Thereafter .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
16
13
13
12
12
157
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
223
(93)
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
123
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130
F-45
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.
Long-term Debt and Other Financing Arrangements (continued)
Capital leases have effective interest rates ranging from 4% to 7%. Interest expense recorded
related to capital leases during 2005, 2004 and 2003 was EUR 7 million, EUR 7 million and EUR
5 million, respectively.
14.
Shareholders’ Equity
Each share of priority stock has the right to 40 votes, non-cumulative dividends of EUR 0.45
per share and a liquidation preference equal to the original issuance price of the priority stock, any
capital contributions of the shareholder and any unpaid dividends. VNU declared and paid
dividends of EUR 0.45 per share on priority stock during 2005, 2004 and 2003.
Each share of 7% preferred stock has the right to 40 votes, a non-cumulative dividend of EUR
0.64 per share and a liquidation preference equal to the original issuance price of the 7% preferred
stock, any capital contributions of the shareholder and any unpaid dividends, increased annually by
7% through the date of dissolution. The 7% preferred stock is listed on the stock exchange of
Euronext nv. VNU declared and paid dividends of EUR 0.64 per share on 7% preferred stock during
2005, 2004 and 2003.
Each share of series A preferred stock has the right to 40 votes, a non-cumulative dividend
based on a rate calculated based on the weighted average of the EURIBOR for cash loans with a
maturity of 12 months, increased by 1% and a liquidation preference equal to the par value of EUR
8 per share, any capital contributions by the shareholder and any unpaid dividends. There were no
shares of series A preferred stock outstanding at December 31, 2005, 2004 or 2003.
Each share of series B cumulative preferred stock has the right to one vote, a cumulative
dividend of 6.22% calculated at issuance based on various factors, including an average of the
effective proceeds of certain government loans, and a liquidation preference of EUR 96 million,
equal to the amount paid at issuance, any capital contributions by the shareholder and any
accumulated unpaid dividends. Seven years from the date of issuance of each share of series B
preferred stock, and after every consecutive seven year period, the dividend rate will be adjusted
based on the average of the effective yield on Dutch state loans increased by a maximum of 150
basis points. The sale or transfer of series B cumulative preferred stock is restricted, requiring
approval of the Executive Board. VNU declared and paid dividends of EUR 6 million (EUR 0.78 per
share) on series B preferred stock during 2005, 2004 and 2003. There were cumulative unpaid
dividends on series B cumulative preferred stock of EUR 6 million at December 31, 2005, 2004 and
2003.
The holders of the series B cumulative preferred stock have agreed to exercise a limited
amount of their voting rights, which is calculated as the number of series B cumulative preferred
stock issued and outstanding, multiplied by the issuance price of EUR 12.50 per share, divided by
the highest market quotation of the common stock on the series B cumulative preferred stock
issuance date of EUR 58.80 per share, or 1,530,612 votes at December 31, 2005.
F-46
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14.
Shareholders’ Equity (continued)
Each share of common stock has the right to one vote and a dividend determined at the
general meeting of shareholders, payable in cash or common stock at the option of the
shareholder. The common stock dividend price per share is the average final market price during
the last three days of the period in which shareholders can make the dividend payment election.
VNU declared dividends of EUR 0.55 per share of common stock in 2005, 2004 and 2003.
Beginning with the interim dividend payable on August 23, 2005, VNU pays only a cash dividend.
The issued and outstanding common stock of VNU is listed on the stock exchange of Euronext N.V.
Common stock activity is as follows:
2005
2004
2003
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common share dividend . . . . . . . . . . . . . . . . . . . . . . .
Exercise of management and personnel options . . . . . .
253,757,620
3,088,567
227,745
250,323,801
3,433,819
—
247,753,249
2,570,552
—
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257,073,932
253,757,620
250,323,801
(Actual number of shares)
In the event of an issuance of common stock, each holder of common stock has the first
opportunity to purchase newly issued VNU common stock proportionate to the percentage of
shares already held by the respective holder (‘‘pre-emptive right’’). However, such holder does not
have any pre-emptive right to (i) stock issued against contribution other than in cash, (ii) common
stock issued to employees of VNU or of a group company of VNU and (iii) common stock issued
as a result of merger or legal split-off. Holders of priority stock, 7% preferred stock, series A
preferred stock and series B cumulative preferred stock do not have a pre-emptive right in case of
common stock being issued. No pre-emptive rights exist for the issue of stock other than common
stock. An additional 10% of the outstanding issued capital of the common shares has been
authorized for issuance in connection with a merger or acquisition.
The issued priority stock of VNU is held by Stichting tot Beheer van de Prioriteitsaandelen in
VNU nv (‘‘the Foundation’’), the management of which is composed of all members of the
Supervisory Board and the Executive Board of VNU. As the holder of the priority stock, the
Foundation has the right, amongst others, to determine the number of members of the Executive
Board and the Supervisory Board and nominate for approval members of the Executive Board and
the Supervisory Board, pre-approve various changes in the capital structure of VNU prior to a
proposal to change the capital structure at the general meeting of shareholders and approve
resolutions of the Executive Board. As a protective mechanism to, in the event of a (hostile)
take-over bid, give the Executive Board and the Supervisory Board time to consider all interests
involved, the Foundation has the right to acquire the amount of series A preferred stock necessary
to match the number of votes of issued common, 7% and series B preferred stock outstanding.
VNU holds treasury stock to satisfy an existing obligation under a Dutch employee stock
purchase plan, which is no longer active. Shares of treasury stock held totaled 15,136 at
December 31, 2005 and 2004.
F-47
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments
VNU Option Plans
VNU adopted the provisions of SFAS 123(R) as of January 1, 2003 using the modified
prospective method. The modified prospective method under SFAS 123(R) requires companies to
record share-based payment expense for all the outstanding unvested options beginning in the year
of adoption. Accordingly, the compensation costs that have been charged to the Consolidated
Statements of Income (within selling, general and administrative expenses) were EUR 16 million,
EUR 25 million and EUR 30 million for 2005, 2004 and 2003, respectively. In 2004, EUR 3 million of
the EUR 25 million expensed was included in discontinued operations relating to share-based
payments. Share-based payment expense for VNU’s stock options is recognized on the straight-line
basis over the requisite service period. Total income tax benefits recognized in the Consolidated
Statements of Income for share-based payments were EUR 3 million, EUR 6 million and EUR
7 million for 2005, 2004 and 2003, respectively.
Prior to January 1, 2003, VNU accounted for stock option plans under the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25, ‘‘Accounting for Stock
Issued to Employees’’ (‘‘APB 25’’). Accordingly, no compensation expense had been recognized for
stock options granted because VNU did not grant options at exercise prices below market value at
the grant date.
VNU has several share option plans under which it may grant options to purchase VNU
common shares to employees of VNU and its subsidiaries. The plans include the Management
Option Plan (‘‘MOP’’) and the Personnel Option Plan (‘‘POP’’), which was terminated at the end of
2004. MOP was established for members of the Executive Board and senior management.
Generally, MOP options granted cliff vest after two years. As of 2004, certain MOP options granted
to the Executive Board cliff vest after three years. MOP options granted prior to 2002 have a five or
ten-year life and MOP options granted beginning in 2002 have a seven or ten-year life. MOP
options can lapse when employment has been terminated. Options under the respective plans have
exercise prices equal to fair market value at the date of grant.
POP was established in 1999 and available for participation until 2004, for VNU employees in
the Netherlands, including senior management. POP options vested immediately and have a
five-year life. Options under the respective plans have exercise prices equal to fair market value at
the date of grant.
Generally, VNU’s policy is to issue new shares when options are exercised. The Executive
Board is granted the authority to issue a maximum of 10% of the outstanding issued capital of
common shares for general purposes, including issuance of shares under share option plans in
2005 without further approval of the shareholders. An additional 10% of the outstanding issued
capital of the common shares may be issued in connection with a merger or acquisition. Through
December 31, 2005, VNU did not acquire its own shares for outstanding options but issued new
shares if options were exercised.
At the General Meeting of Shareholders, on April 19, 2005, the Executive Board was granted
the authority to issue 25,375,762 shares of Common Stock under all of VNU’s share plans.
Subsequent exercises of 227,745 options resulted in a balance of 25,148,017 shares reserved for
issuance at December 31, 2005.
F-48
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
Restricted Share Unit Plans
VNU Executive Equity Participation Plan
In 2004, the Supervisory Board approved the Executive Equity Participation Plan (‘‘the Plan’’).
Under the Plan, Executive Board members and certain key employees are permitted to defer a
portion of their annual bonus, and instead, receive VNU Restricted Share Units (‘‘RSUs’’). Each RSU
represents the right to one VNU common share, to be transferred to the employee three years from
the grant date. VNU matches each deferred bonus RSU with an additional RSU. The bonus RSUs
are fully vested when received and the matching RSUs vest three years after the date of grant. In
2004, no RSUs were granted, as the first award was scheduled for 2005. As a result of the link with
the annual bonus plan, the granting of RSUs under the Plan is conditional on the grantees meeting
certain performance criteria in the year prior to the grant.
The cost of the matching RSUs of EUR 2.6 million is amortized on a straight-line basis over a
four-year period and totaled EUR 0.7 million and EUR 0.3 million in 2005 and 2004, respectively.
Executive Board Long Term Incentive Plan
Beginning in April 2005, the Supervisory Board approved the Executive Board Long Term
Incentive Plan (‘‘EB LTIP’’). Under the EB LTIP, each member of the Executive Board is eligible to
receive a number of performance shares, determined over a three-year performance period. The
number of shares awarded at the end of the performance period is based upon earnings before
interest, taxes, depreciation and amortization (EBITDA) growth, total shareholder return (against a
defined peer group), and the achievement of certain personal objectives.
The effect of the market condition contained in the EB LTIP is reflected in the share award’s fair
value on the date of grant. Based on the performance period beginning in 2005, a maximum of
203,762 shares can be settled in 2008 at the end of the performance period related to the 2005
grant.
Share Option Activity
The following table summarizes VNU’s stock option activity in the three-year period ended
December 31, 2005:
Options outstanding, beginning of
Granted . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . .
year .
. . . .
. . . .
. . . .
. . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2005
2004
2003
Weighted
Weighted
Weighted
Average
Average
Average
Number of Exercise Number of Exercise Number of Exercise
Options
Price
Options
Price
Options
Price
EUROS
EUROS
EUROS
15,119,721
31.62
12,141,542
35.11
9,185,029
40.28
3,903,842
22.12
4,284,976
22.47
4,442,288
25.07
(227,745) 24.99
—
—
—
—
(934,506) 62.04
(736,197) 36.61
(573,000) 30.77
(1,698,275) 32.48
(570,600) 31.29
(912,775) 40.92
Options outstanding, end of year . . . . . . . . . . . . 16,163,037
27.57
15,119,721
31.62
12,141,542
The aggregate grant date fair value of options granted in 2005, 2004 and 2003 was EUR
18 million, EUR 21 million and EUR 26 million, respectively.
F-49
35.11
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
The following table summarizes significant ranges of outstanding and exercisable options of
VNU at December 31, 2005:
21.01
26.00
36.15
57.15
to
to
to
to
Exercise Price Ranges
EUROS
24.97 . . . . . . . . . . . . . . .
27.27 . . . . . . . . . . . . . . .
39.29 . . . . . . . . . . . . . . .
64.70 . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Number Exercisable (Fully
Options Outstanding
Vested)
as at December 31, 2005
as at December 31, 2005
Weighted Weighted
Weighted Weighted
Average
Average
Average
Average
Number of Exercise Remaining Number of Exercise Remaining
Options
Price
Life
Options
Price
Life
EUROS
EUROS
10,861,126
23.08
5.33 3,267,834
24.89
4.27
500,211
26.57
3.74
500,211
26.57
3.74
4,721,700
37.46
2.25 4,721,700
37.46
2.25
80,000
59.80
4.42
80,000
59.80
4.42
.
.
.
.
16,163,037
27.57
4.38
8,569,745
32.24
3.13
As of December 31, 2005, 2004 and 2003, the aggregate intrinsic value for outstanding options
is EUR 54 million, EUR 0.2 million and EUR 0.4 million, respectively.
During the year ended December 31, 2005, the aggregate intrinsic value for options exercised
was EUR 0.5 million. There were no exercises in 2004 or 2003. Cash proceeds from the sale of
stock under option plans was EUR 5.7 million in 2005.
As of December 31, 2005, 2004 and 2003, the aggregate intrinsic value of options exercisable
was EUR 11 million, EUR 0 and EUR 0, respectively.
The fair value of the option grants was estimated using the Black-Scholes option pricing model.
The expected volatility estimates were based on the historical volatility of VNU’s stock, over a period
at least commensurate with the expected life of each respective option grant. The expected option
term was estimated based on historical data. The expected dividends were based on VNU’s actual
historical dividend yield. The risk-free interest rate was based on a composite of euro-denominated
government bonds.
The following aggregate assumptions relating to VNU’s stock options were used for the years
ended December 31:
2005
Valuation assumptions:
Expected life (years) . . .
Expected volatility . . . . .
Expected dividend yield
Expected forfeiture . . . .
Risk-free interest rate . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3.52
31.97%
2.51%
7.90%
2.78%
2004
3.51
32.60%
2.59%
6.47%
2.73%
2003
3.51
33.59%
2.45%
6.14%
3.20%
As of December 31, 2005, 2004 and 2003, the fair value per option granted during the year
was EUR 4.70, EUR 4.80 and EUR 5.76, respectively.
F-50
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
A summary of the nonvested VNU shares as of December 31, 2005, and changes during the
year ended December 31, 2005, comprised entirely of RSUs, are presented below:
Number of Units
Nonvested stock
Weighted
Average
Grant-Date
Fair Value
(IN EUROS)
Nonvested at January 1, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
117,130
—
21.92
Nonvested at December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . .
117,130
21.92
Since the first award of RSUs was made in 2005, there were no RSUs released from restriction
or forfeitures during 2005.
As of December 31, 2005, there was EUR 15 million of total unrecognized compensation
expense related to unvested VNU stock options and RSUs. The expenses are expected to be
recognized over a weighted-average period of 0.78 years.
NetRatings Option Plans
NetRatings, a consolidated subsidiary of VNU with publicly traded shares, has stock option
plans that provide for the grant of stock options exercisable into shares of NetRatings common
stock to eligible employees and non-employee directors of NetRatings.
In 1998, NetRatings adopted the 1998 Stock Option Plan (the ‘‘NetRatings Plan’’). Under the
NetRatings Plan, up to 1.2 million shares of NetRatings’ common stock were initially reserved for
issuance. Options may be granted at exercise prices of no less than 85% of the fair value of the
related common stock on the date of the grant (110% of fair value in certain instances), as
determined by the NetRatings’ Board of Directors. In 2002, NetRatings assumed a total of 26,000
options in connection with NetRatings’ purchase of the remaining 80.1% interest in eRatings.
NetRatings’ options generally vest monthly over a four-year period, except for the first year when
25% of the grant vests one year after the option grant. Of the options granted in 2005, 2004 and
2003, substantially all have a 10-year life.
In 1999, NetRatings’ Board of Directors adopted the 1999 Employee Stock Purchase Plan
effective upon the completion of NetRatings’ initial public offering of its common stock. NetRatings
initially reserved a total of 0.3 million shares of common stock for issuance under the plan, which is
cumulatively increased on January 1 of each year through January 1, 2010 by an amount equal to
the lesser of (i) 0.5 million shares, (ii) 2% of the number of shares of common stock that were
issued and outstanding on the preceding December 31, or (iii) a lesser amount determined by the
NetRatings’ Board of Directors. The NetRatings’ Board of Directors approved an increase of 212,297
shares in November 2004. Eligible employees may purchase common stock at 85% of the lesser of
the fair market value of the NetRatings’ common stock on the first day of the applicable offering
period or the date of purchase. All NetRatings’ employees are eligible to participate in the 1999
Employee Stock Purchase Plan except employees who (i) normally work 20 hours or less per week;
(ii) normally work 5 months or less per year; or (iii) are 5% or greater shareholders of NetRatings.
Eligible employees may contribute from 1%-15% of their after-tax compensation from each
F-51
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
paycheck during each 6-month purchase period. However, no person may purchase more than
2,500 shares on a purchase date. Furthermore, pursuant to the Internal Revenue Code, no person
may purchase stock under the plan valued at more than USD 25,000 in any calendar year.
In 2005, NetRatings’ Board of Directors and stockholders approved the Amended and Restated
1998 Stock Plan (the ‘‘Amended Plan’’). Under the Amended Plan, NetRatings is authorized to issue
restricted stock (as well as other equity-based compensation) to NetRatings’ employees and
members of its Board of Directors. In 2005, NetRatings issued, net of forfeitures, approximately
492,000 shares of restricted stock with a fair market value at the time of issuance of approximately
USD 7 million. The restricted stock issued to members of the Board of Directors vests ratably in
equal annual installments over 2 years, while the restricted stock issued to NetRatings’
non-executive employees vests ratably in equal annual installments over 3 years. The restricted
stock issued to NetRatings’ executive officers vests in its entirety on the third anniversary of the
date of grant, but vesting can be accelerated if specific performance criteria are achieved. The
restricted stock has voting rights until canceled. The compensation expense related to these
restricted stock awards is amortized over the term of the restricted stock awards using the gradedvesting method.
In addition, the 15% discount in market value under NetRatings’ Employee Stock Purchase
Plan is treated as compensation expense.
An aggregate of 3,890,000 shares and 5,032,000 shares of NetRatings’ common stock were
reserved for issuance under the NetRatings’ plans in 2005 and 2004, respectively.
In its stand-alone financial statements, NetRatings accounts for stock-based awards to
employees under the intrinsic value method in accordance with APB 25 and discloses the general
and pro forma financial information required by SFAS 123 and SFAS 148, ‘‘Accounting for StockBased Compensation—Transition and Disclosure.’’
For purposes of VNU’s consolidated financial statements, VNU applied SFAS 123(R) and
recorded share-based payment expense from NetRatings’ stock options of EUR 2 million in 2005,
EUR 2 million in 2004 and EUR 3 million in 2003.
The estimated fair value of the NetRatings’ options is amortized to expense over the vesting
period of the options using graded-vesting method.
F-52
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
Information with respect to NetRatings’ stock option activity is summarized as follows:
Available
for Grant
Number of
Restricted
Stock
Awards
Stock Options Outstanding
Number of
Weighted
Stock
Average
Options
Price Per Share
Exercise Price
(IN USD)
Balance at December 31, 2002 .
Authorized . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
1,187,000
1,000,000
(1,692,000)
—
903,000
—
—
—
—
—
4,476,000
—
1,692,000
(232,000)
(903,000)
0.10
—
5.82
0.10
0.10
106.83
—
11.39
10.31
106.83
11.66
—
6.16
4.20
11.03
Balance at December 31, 2003 .
Granted . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
1,398,000
(1,208,000)
—
481,000
—
—
—
—
5,033,000
1,208,000
(1,649,000)
(481,000)
0.10
10.72
0.10
5.40
106.83
20.00
17.13
106.83
10.00
11.29
9.63
10.81
Balance at December 31, 2004 .
Granted . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . .
Released from restriction . . . . .
Forfeited . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
671,000
(647,000)
—
—
575,000
545,000
—
(7,000)
(53,000)
4,111,000
102,000
(581,000)
—
(522,000)
0.10
18.25
0.10
—
5.40
106.83
18.25
15.68
—
106.83
10.43
18.25
8.73
—
12.66
599,000
485,000
3,110,000
0.10
106.83
10.64
Balance at December 31, 2005 . . .
Options exercisable at:
December 31, 2003 . . . . . . . . .
December 31, 2004 . . . . . . . . .
December 31, 2005 . . . . . . . . .
2,023,000
1,618,000
2,176,000
11.62
11.09
11.19
The aggregate grant date fair value of options granted in 2005, 2004 and 2003 was USD
0.8 million, USD 5.2 million and USD 4.7 million, respectively.
F-53
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
The following table summarizes information concerning NetRatings’ options outstanding and
exercisable at December 31, 2005:
Options outstanding
WeightedAverage
WeightedNumber of Remaining
Average
Shares
Life
Exercise Price
Exercise Prices
Ranges
(IN USD)
0.10 to 5.40 . .
5.82 to 5.82 . .
5.84 to 9.15 . .
9.29 to 11.02 . .
11.05 to 11.05 .
11.20 to 12.08 .
12.12 to 12.375
12.51 to 12.51 .
12.60 to 15.86 .
16.29 to 106.83
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Options exercisable
WeightedWeightedAverage
Average
Number of Remaining
Exercise
Shares
Life
Price
.
.
.
.
.
.
.
.
.
.
62,000
548,000
343,000
166,000
684,000
361,000
89,000
456,000
327,000
74,000
5.55
7.19
6.65
6.26
8.24
6.03
5.67
5.83
5.88
6.09
4.37
5.82
7.44
10.39
11.05
11.65
12.32
12.51
13.87
30.32
50,000
273,000
216,000
137,000
255,000
339,000
85,000
456,000
311,000
54,000
5.25
7.19
6.49
5.94
8.25
6.04
5.10
5.83
5.79
5.60
4.13
5.82
7.65
10.49
11.05
11.65
12.33
12.51
13.87
30.34
0.10 to 106.83 . . . . . . . . .
3,110,000
6.74
10.64
2,176,000
6.34
11.19
At December 31, 2005, the aggregate intrinsic value of options outstanding is USD 14.9 million.
During the years ended December 31, 2005, 2004 and 2003, the aggregate intrinsic value for
options exercised was USD 3.9 million, USD 11.1 million and USD 1.0 million, respectively. As of
December 31, 2005, 2004 and 2003, the aggregate intrinsic value of options exercisable was USD
4 million, USD 13 million and USD 3 million, respectively.
The fair value of NetRatings’ option grants was estimated using the Black-Scholes option
pricing model using the following weighted-average assumptions for the years ended December 31:
2005
Valuation assumptions:
Expected life (years) . . .
Expected volatility . . . .
Expected dividend yield
Risk-free interest rate . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2.38
60.00%
0.00%
3.38%
2004
2.32
60.00%
0.00%
2.77%
2003
2.36
74.00%
0.00%
1.31%
As of December 31, 2005, 2004 and 2003, the fair value per option granted during the year
was EUR 7.36, EUR 4.34 and EUR 2.80, respectively.
NetRatings’ stock options are amortized to expense over the vesting period of the life of the
awards using graded vesting. Therefore, the option life is estimated based on the Multiple Option
Approach, calculating the expected life for each option tranche separately. The volatility estimates
are based on a combination of historical NetRatings’ stock and implied market volatility.
F-54
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
Share-Based Payments (continued)
A summary of the nonvested NetRatings’ shares as of December 31, 2005, and changes during
the year ended December 31, 2005, comprised entirely of grants of restricted stock, is presented
below:
Nonvested at January 1, 2005
Granted . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . .
Released from restriction . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Nonvested at December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . .
Number
of
Units
Weighted
Average
Grant-date Fair
Value
(IN USD)
—
545,000
(53,000)
(7,000)
—
14.98
15.02
15.01
485,000
14.98
The total fair value of restricted shares vested during 2005 was USD 0.1 million.
Shares Reserved for Future Issuance
NetRatings has reserved 3,110,000 shares of common stock for future issuances of stock
options outstanding, 599,000 shares for stock options available for grant, and 181,000 shares for
employee stock purchase plans as of December 31, 2005.
Cash Received from Exercises
Cash received from option exercises under all share-based payment arrangements for the
years ended December 31, 2005 and 2004 was USD 5.9 million and USD 16.5 million, respectively.
The actual tax benefit realized for the tax deductions from option exercise of the share-based
payment arrangements totaled USD 1.8 million and USD 3.0 million for the years ended
December 31, 2005 and 2004, respectively. Cash received from options exercised and the related
tax benefits are reflected within cash flows from financing activities in the Consolidated Statements
of Cash Flows.
F-55
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
Income Taxes
The components of income from continuing operations before income taxes, equity in net
income of affiliates and minority interests, were:
Year ended December 31,
2005
2004
2003
(EUR IN MILLIONS)
Income from continuing operations before income taxes and minority
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income of affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
170
6
263
6
457
8
Income from continuing operations before income taxes, equity in net
income of affiliates and minority interests . . . . . . . . . . . . . . . . . . . .
164
257
449
Dutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Dutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(72)
236
142
115
313
136
164
257
449
The above amounts are categorized based on the location of the taxing authorities.
The provision / (benefit) for income taxes attributable to continuing operations consisted of:
Year ended December 31,
2005
2004
2003
(EUR IN MILLIONS)
Current:
Dutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Dutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred:
Dutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Dutch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(54)
48
38
62
(29)
57
(6)
100
28
—
38
(50)
(8)
79
68
38
(58)
147
32
42
175
VNU’s provision for income taxes in 2005, 2004 and 2003 was different from the amount
computed by applying the statutory Dutch federal income tax rate to earnings from continuing
F-56
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
Income Taxes (continued)
operations before income taxes, equity in net income of affiliates and minority interests as a result
of the following:
% of Earnings Before
Income Taxes
2005
2004
2003
(EUR IN MILLIONS)
Earnings from continuing operations before income taxes, equity in net
income of affiliates and minority interests . . . . . . . . . . . . . . . . . . . . . . .
Dutch statutory rate . . . . . . . . . . . . . . . . . . . .
Effect of subpart F income . . . . . . . . . . . . . . .
Effect of operations in non-Dutch jurisdictions .
U.S. state and local taxation . . . . . . . . . . . . . .
U.S. and other non-Dutch valuation allowances
Change of estimates for contingent tax matters
Change of estimates for other tax positions . . .
Effect of Dutch inter-company finance activities
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
164
257
449
31.5% 34.5% 34.5%
2.3
4.3
—
4.7
(2.0)
(2.2)
8.5
5.9
1.6
13.8
(9.0)
15.2
(40.0)
(1.2)
1.8
(13.1)
—
—
7.0
(16.2) (21.2)
4.8
—
9.3
19.5%
16.3%
39.0%
The 2005 effective tax rate was impacted by the release of provisions for tax exposures as a
result of the completion of a tax audit in the Netherlands resulting in a settlement of certain items
affecting the years 2000 through 2006. These issues were primarily related to the Dutch taxation of
VNU’s financing activities. Furthermore, VNU lowered the provision for tax exposures related to
transfer-pricing issues based on the expiration of various jurisdictional statutes of limitation and the
successful defense of the inter-company charges in tax audits in several jurisdictions. The effective
tax rate was also influenced by releases of valuation allowances on deferred tax assets as several
jurisdictions now have a demonstrated ability to realize these assets and by other favorable tax
true-up adjustments upon finalization of the Dutch income tax returns.
Although the Dutch financing activities lowered the effective tax rate in 2004, the 2005 Dutch
inter-company finance activities resulted in an increase of the effective tax rate due to a loss on the
buy-back of convertibles. The tax benefit associated with this buy-back loss was at a lower tax rate
than the statutory tax rate.
The lower effective tax rate in 2004 when compared to 2003 is primarily attributable to a
change in the mix of earnings, as well as the reversal of certain valuation allowances.
F-57
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
Income Taxes (continued)
The components of current and non-current deferred income tax assets (liabilities) were:
December 31,
2005
2004
(EUR IN MILLIONS)
Deferred tax assets (on balance):
Net operating loss carryforwards
Interest expense limitation . . . . .
Deferred compensation . . . . . . .
Deferred revenues / costs . . . . .
Fixed asset depreciation . . . . . .
Employee benefits . . . . . . . . . .
Other assets . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
183
62
25
35
10
51
24
167
53
19
28
25
60
53
390
(182)
405
(150)
Deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . . . . . . .
208
255
Deferred tax liabilities (on balance):
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(538)
(60)
(487)
(58)
(598)
(545)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(390)
(290)
Recognized as:
Deferred income taxes, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes, non-current . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
(451)
82
(372)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(390)
(290)
Deferred tax assets—current and non-current . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities—current and non-current . . . . . . . . . . . . . . . . . . . .
128
(518)
141
(431)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(390)
(290)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31, 2005 and 2004, VNU had net operating loss carryforwards of approximately
EUR 734 million and EUR 497 million, respectively, that will begin to expire in 2009, and tax credit
carryforwards of approximately EUR 20 million and EUR 13 million, respectively, that will begin to
expire in 2014. Due to the uncertainty of achieving sufficient profits to utilize these operating loss
carryforwards and tax credit carryforwards, VNU currently believes it is more likely than not that a
portion of these losses will not be realized. Therefore, VNU has recorded a net valuation allowance
of approximately EUR 113 million and EUR 94 million at December 31, 2005 and 2004, respectively,
related to these net operating loss carryforwards and tax credit carryforwards.In addition, VNU has
established valuation allowances of EUR 69 million and EUR 56 million, at December 31, 2005 and
2004, respectively, on deferred tax assets, related to temporary differences, which VNU currently
believes will not be realized.
F-58
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
Income Taxes (continued)
As of December 31, 2005 and 2004, the portion of the valuation allowances relating to deferred
tax assets and net operating losses, for which subsequently recognized tax benefits will be
allocated to reduce goodwill or other intangible assets of an acquired entity or directly to
contributed capital, is EUR 19 million and EUR 17 million, respectively.
As of December 31, 2005 and 2004, VNU had approximately EUR 607 million and EUR
679 million, respectively, of undistributed earnings of non-US subsidiaries of VNU, inc and ACN
Holdings, inc. Taxes were not provided on these undistributed earnings, as VNU has invested or
expects to invest these undistributed earnings indefinitely offshore. If in the future these earnings
are repatriated to the United States, or if VNU determines such earnings will be remitted in the
foreseeable future, additional tax provisions would be required. Due to complexities in the tax laws
and the assumptions that would have to be made, it is not practicable to estimate the amounts of
income taxes that would have to be provided.
VNU establishes liabilities for possible assessments by taxing authorities resulting from known
tax exposures including, but not limited to, inter-company transfer pricing, and various other tax
matters. Such amounts represent a reasonable provision for taxes ultimately expected to be paid,
and may need to be adjusted over time as more information becomes known.
F-59
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
17.
Net Income Per Common Share
Basic and diluted net income per common share were calculated using the following common
share data:
2005
Year ended December 31,
2004
2003
(EUR IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Income from continuing operations . . . . . . . . . . . . . . .
Less: Preferred stock dividend, net of tax . . . . . . . . .
138
(6)
225
(6)
288
(6)
132
219
282
—
—
18
132
219
300
—
87
128
6
167
(40)
Discontinued operations, net of tax, basic and diluted . .
6
254
88
Net income available to common shareholders, basic . .
138
473
370
Net income available to common shareholders, diluted .
138
473
388
255,795,495
107,282
252,272,732
947
249,221,849
—
—
—
17,917,302
Weighted average number of common shares
outstanding, diluted . . . . . . . . . . . . . . . . . . . . . . . . .
255,902,777
252,273,679
267,139,151
Net income per common share, basic:
Income from continuing operations . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . .
0.52
0.02
0.87
1.01
1.13
0.35
Net income per common share . . . . . . . . . . . . . . . .
0.54
1.88
1.48
Net income per common share, diluted:
Income from continuing operations . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . .
0.52
0.02
0.87
1.01
1.12
0.33
Net income per common share . . . . . . . . . . . . . . . .
0.54
1.88
1.45
Income available to common shareholders from
continuing operations, basic . . . . . . . . . . . . . . . . . . .
Dilutive effect of 1.75% convertible debenture loan due
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income available to common shareholders from
continuing operations, diluted . . . . . . . . . . . . . . . . . .
Discontinued operations:
Income from discontinued operations, net of tax . . . .
Gain (loss) on sale of discontinued operations, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of common shares
outstanding, basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive effect of stock options outstanding . . . . . . . . . .
Dilutive effect of 1.75% convertible debenture loan due
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In the computation of diluted net income per common share from both continuing operations
and on a net income basis for the year ended December 31, 2005, the assumed conversion of the
EUR 1,150 million, 1.75% convertible debenture loan due 2006 (Note 13) and 15,815,653 stock
F-60
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
17.
Net Income Per Common Share (continued)
options (Note 15) were excluded since they would have had an anti-dilutive effect on net income
per share.
In the computation of diluted net income per common share from both continuing operations
and on a net income basis for the year ended December 31, 2004, the assumed conversion of the
EUR 265 million, 1.75% subordinated convertible debenture loan due 2004, EUR 1,150 million,
1.75% convertible debenture loan due 2006 (Note 13) and 15,093,295 stock options (Note 15) were
excluded since they would have had an anti-dilutive effect on net income per share.
In the computation of diluted net income per common share from both continuing operations
and on a net income basis for the year ended December 31, 2003, the assumed conversion of the
EUR 265 million, 1.75% subordinated convertible debenture loan due 2004 and all stock options
(Note 15) were excluded since they would have had an anti-dilutive effect on net income per share.
18.
Investments in Affiliates and Related Party Transactions
As of December 31, 2005 and 2004, VNU had investments in affiliates of EUR 153 million and
EUR 48 million, respectively. Equity income derived from these investments was EUR 6 million, EUR
6 million and EUR 8 million in 2005, 2004 and 2003, respectively.
VNU’s significant investments in affiliates and its percentage of ownership as of December 31,
2005 were comprised of the Scarborough Research (‘‘Scarborough’’) non-controlling interest of
51%, VNU Exhibitions Europe of 50%, Solucient llc of 35% and AGB Nielsen Media Research bv of
50%.
In March 2005, Nielsen Media Research International (‘‘NMR’’), a division of MMI and the AGB
Group, successfully closed a joint venture arrangement, intended to increase MMI’s coverage
internationally, enabling MMI to better serve the needs of media owners with multi-national interests.
The newly formed entity—AGB Nielsen Media Research—of which VNU owns 50% of the
outstanding shares, merged the television audience measurement services of Kantar Media
Research owned AGB Group operations with those of VNU’s wholly-owned subsidiary, Nielsen
Media Research International. In addition to a cash contribution of EUR 51 million by VNU, there
was a contribution in kind by VNU’s international television audience measurement companies of
approximately EUR 26 million, including EUR 18 million of allocated goodwill from MMI. As of
March 1, 2005, VNU deconsolidated its international television audience measurement companies,
and began accounting for the joint venture under the equity method. VNU’s share of the joint
venture’s loss for the year was EUR 3 million, and is recorded net of tax in equity in net income of
affiliates in the Consolidated Statements of Income.
F-61
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
18.
Investments in Affiliates and Related Party Transactions (continued)
During 2004, VNU divested its interest in World Directories inc, and the income from these
investments has been recorded as a component of discontinued operations in 2003, 2004 and
2005. Investments in affiliates held by World Directories inc as of January 1, 2004 in Portugal, South
Africa and Puerto Rico have been divested in connection with VNU’s disposition of the Directories
group in 2004.
Related Party Transactions with Affiliates
VNU and Scarborough, a joint venture partner, enter into various related party transactions in
the ordinary course of business. VNU and its subsidiaries provide various services to Scarborough,
including data collection, accounting, insurance administration, and the rental of real estate. VNU
pays royalties to Scarborough for the right to include Scarborough data in VNU products sold
directly to VNU customers. Additionally, VNU sells various Scarborough products directly to its
clients, for which it receives a commission from Scarborough. The net cash payments from
Scarborough to VNU as a result of these transactions were EUR 9 million, EUR 11 million and EUR
13 million in 2005, 2004 and 2003, respectively.
Obligations between VNU and Scarborough are net settled in cash on a monthly basis in the
ordinary course of business and at December 31, 2005 and 2004 the related amounts outstanding
at December 31, 2005 and 2004 were EUR 1 million.
VNU and its subsidiaries have entered into various related party transactions with AGB Nielsen
Media Research covering services to and from AGB Nielsen Media Research, including the
licensing of the Nielsen trademark, the licensing of patents, software and databases, accounting,
insurance administration, certain office administrative services, the use of real estate in some
countries, and short term financing. These related party transactions resulted in a net receivable of
EUR 4 million at December 31, 2005.
Other Related Party Transactions
In March 2002, with the relocation to the United States of the Chairman of the Executive Board
and his family, the Chairman of the Executive Board received a home mortgage loan from VNU in
the amount of EUR 4.7 million. The loan, which is denominated in United States dollars, accrues
interest at the rate of 6.0% per year and is collateralized by the house. Interest is due at the time
that the loan is repaid, which can be no later than July 1, 2007. If at that time the value of the
house is not sufficient to cover the amount of this loan plus accrued interest, VNU will absorb the
difference on an after-tax basis. The carrying value of the loan receivable, including accrued
interest, was EUR 4.4 million and EUR 3.6 million at December 31, 2005 and 2004, respectively,
and is included in other non-current assets.
VNU has not made or arranged for a loan or guarantee for any other member of the Executive
Board or Supervisory Board.
19.
Commitments and Contingencies
Leases and Other Contractual Arrangements
VNU has entered into operating leases and other contractual obligations to secure real estate
facilities, agreements to purchase data processing services and leases of computers and other
equipment used in the ordinary course of business and various outsourcing contracts. Total
expenses incurred under these operating leases and other contractual arrangements were
F-62
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
19.
Commitments and Contingencies (continued)
EUR 112 million and EUR 317 million, respectively, in 2005, EUR 115 million and EUR 299 million,
respectively, in 2004, and EUR 110 million and EUR 342 million, respectively, in 2003. At
December 31, 2005, the minimum annual payments under these agreements that have initial or
remaining non-cancelable terms in excess of one year are listed in the following table:
2006
For the Years Ending December 31,
2007 2008 2009 2010 Thereafter
Total
(EUR IN MILLIONS)
Operating leases . . . . . . . . . . . . . . . . . . . . . . .
Other contractual obligations(1) . . . . . . . . . . . . . .
Pension fund obligations(2) . . . . . . . . . . . . . . . . .
103
109
24
81
48
—
69
30
—
57
25
—
51
15
—
199
9
—
560
236
24
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
236
129
99
82
66
208
820
(1) Other contractual obligations represent obligations under agreements which are not unilaterally
cancelable by VNU, are legally enforceable and specify fixed or minimum amounts or quantities
of goods or services at fixed or minimum prices. VNU generally requires purchase orders for
vendor and third-party spending. The amounts presented above represent the minimum future
annual services covered by purchase obligations including data processing, building
maintenance, equipment purchasing, photocopiers, land and mobile telephone service,
computer software and hardware maintenance, and outsourcing.
(2) Pension fund obligations relate mainly to pension plans in Europe and are based on actuarial
estimates (see Note 12).
VNU recognized rental income received under subleases of EUR 12 million, EUR 11 million and
EUR 8 million in 2005, 2004 and 2003, respectively. At December 31, 2005, VNU had aggregate
future minimum rental income to be received under non-cancelable subleases of EUR 90 million.
VNU also had minimum commitments under non-cancelable capital leases. See Note 13.
Guarantees and Other Contingent Commitments
The following table summarizes VNU’s contingent commitments for which no liability has been
accrued at December 31, 2005:
(EUR IN MILLIONS)
Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
1
11
FASB Interpretation No. 45, ‘‘Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others’’ (‘‘FIN 45’’), requires certain
guarantees to be recorded at fair value and requires a guarantor to make disclosures, even when
the likelihood of making any payments under the guarantee is remote. For those guarantees and
indemnifications that do not fall within the initial recognition and measurement requirements of FIN
45, VNU must continue to monitor the conditions that are subject to the guarantees and
indemnifications, as required under existing accounting principles generally accepted in the United
States, to identify if a loss has been incurred. If VNU determines that it is probable that a loss has
been incurred, any such estimable loss would be recognized.
F-63
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
19.
Commitments and Contingencies (continued)
Nielsen Media Research International, a subsidiary of VNU, has provided sub-lease guarantees
in accordance with certain real estate sub-lease agreements pursuant to which VNU guarantees all
rental payments upon default of rental payment by the sub-lessee. VNU does not anticipate making
any significant payments under real estate sub-lease guarantees. Accordingly, no liabilities were
recorded with respect to such guarantees.
In connection with the sale of Directories in 2004, VNU has an exposure under a tax indemnity
guarantee with the acquirer, pursuant to which VNU has agreed to pay any tax obligations relating
to periods prior to the sale. VNU has accrued EUR 27 million at December 31, 2005 which is not
included in the table above. See Note 5 for further discussion.
VNU guarantees subsidiary credit facilities with international banks totaling EUR 87 million. At
December 31, 2005, no amounts were outstanding under these facilities.
VNU has no material liabilities for other guarantees arising in the normal course of business at
December 31, 2005.
Letters of Credit
VNU has letters of credit outstanding of EUR 1 million to an international bank in relation to
certain guarantees of real estate leases of VNU subsidiaries, which expire through 2014.
Contingencies
In connection with VNU’s acquisition of Nationale Vacaturebank.nl in 2004, VNU may be
required to pay contingent consideration up to a maximum of EUR 11 million based on the
continued employment and the achievement of certain EBIT targets during 2005 and 2006. Based
on 2005 operating results, an earnout of EUR 3 million was recognized as selling, general and
administrative expenses in 2005.
In connection with VNU’s 16% share in Trendum, VNU has a call option to acquire an
additional 35% at a price based on year 2007 multiples of either EBITA or total revenues. The call
option is exercisable from January 1, 2008 until 30 days after VNU’s receipt of financial statements
containing the information required to make the calculation. Based on current estimates, the value
of the call option is not material.
In connection with VNU’s acquisition of a further 15% share in VNU Business Publications
Espana sa in 2004, VNU had a call option to acquire an additional 10% at a price based on the
higher of an average of 2004 and 2005 multiples of EBITDA or a guaranteed amount of EUR
2 million. The call option was exercised at the end of 2005 for the guaranteed amount.
Termination Agreement VNU—IMS Health
On November 17, 2005, VNU and IMS Health Inc announced their agreement on the
termination of the planned merger of the two companies. Under the terms of the termination
agreement, amongst other things, VNU has agreed to pay an amount of USD 45 million to IMS
Health Inc should VNU be acquired pursuant to any agreement entered into within the 12 months
following the termination. For its part, IMS Health Inc has agreed to pay VNU USD 15 million should
IMS be acquired pursuant to any agreement entered into within the next 12 months.
F-64
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
19.
Commitments and Contingencies (continued)
Legal Proceedings and Contingencies
VNU is subject to litigation and other claims in the ordinary course of business.
In November 1996, D&B, then known as The Dun & Bradstreet Corporation (‘‘Old D&B’’)
separated into three public companies by spinning off the A.C. Nielsen Company (‘‘ACNielsen’’)
and Cognizant Corporation (‘‘Cognizant’’) (the ‘‘1996 Spin-Off’’).
In June 1998, Old D&B changed its name to R.H. Donnelley Corporation (‘‘Donnelley’’) and
spun-off The Dun & Bradstreet Corporation (‘‘New D&B’’) (the ‘‘D&B Spin’’), and Cognizant
changed its name to Nielsen Media Research, Inc (‘‘NMR’’), now part of VNU, and spun-off IMS
Health Inc (‘‘IMS Health’’) (the ‘‘Cognizant Spin’’). In September 2000, New D&B changed its name
to Moody’s Corporation (‘‘Moody’s’’) and spun off a company now called The Dun & Bradstreet
Corporation (‘‘Current D&B’’) (the ‘‘Moody’s spin’’). In November 1999, VNU acquired NMR and in
2001 VNU acquired ACNielsen.
D&B Legacy Tax Matters
Pursuant to the agreements affecting the 1996 Spin-Off, among other things, certain liabilities,
including contingent liabilities relating to the IRI Action (as defined below) and tax liabilities arising
out of certain prior business transactions (the ‘‘D&B Legacy Tax Matters’’), were allocated among
Old D&B, ACNielsen and Cognizant under the Original JDA (as defined below).
As a result of the Cognizant Spin, IMS Health and NMR agreed they would share equally
Cognizant’s share of liability arising out of the D&B Legacy Tax Matters after IMS Health paid the
first USD 0.1 million of such liability. NMR’s aggregate liability for payments related to the D&B
Legacy Tax Matters and legal fees of the IRI Action shall not exceed USD 125 million.
In connection with the acquisition of NMR, VNU recorded a liability of USD 125 million for
NMR’s aggregate liability for payments related to the D&B Legacy Tax Matters and legal fees of the
IRI Action.
IRI
On July 29, 1996, Information Resources Inc (‘‘IRI’’) filed a complaint in the U.S. District Court
for the Southern District of New York (the ‘‘Court’’), subsequently amended in 1997 (the ‘‘IRI
Action’’), naming as defendants Old D&B, ACNielsen, Cognizant and a predecessor of IMS Health.
The amended complaint alleged various violations of United States antitrust laws under
Sections 1 and 2 of the Sherman Act. The amended complaint also alleged a claim of tortuous
interference with a contract and a claim of tortuous interference with a prospective business
relationship. These claims related to the acquisition by defendants of Survey Research Group
Limited (‘‘SRG’’). IRI alleged SRG violated an alleged agreement with IRI when it agreed to be
acquired by defendants and that defendants induced SRG to breach that agreement.
IRI’s amended complaint originally alleged damages in excess of USD 350 million, which IRI
asked to be trebled under antitrust laws. IRI has since filed with the Court the report of its expert
who has opined that IRI suffered damages of between USD 581.6 million and USD 651.7 million
from the defendants’ alleged practices, which amount IRI has requested be trebled under the
antitrust laws. IRI also sought punitive damages in an unspecified amount.
In April 2003, the Court denied a motion for partial summary judgment by defendants seeking
dismissal of certain of IRI’s claims and granted in part a motion by IRI seeking reconsideration of
F-65
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
19.
Commitments and Contingencies (continued)
certain summary judgment rulings the Court had previously made in favor of defendants. The
motion granted by the Court concerns IRI’s claims of injuries from defendants’ alleged conduct in
certain foreign markets.
On June 21, 2004, pursuant to a stipulation between IRI and defendants, the Court ordered
that certain of IRI’s claims be dismissed with prejudice from the lawsuit, including the claim for
tortuous interference with the SRG acquisition. VNU believes that the dismissal of the tortuous
interference claims precludes any claim for punitive damages.
On December 3, 2004, the Court entered In limine Order No. 1, which bars IRI from ‘‘arguing
that Nielsen’s pricing practices or discounts were illegal or anti-competitive unless it can prove they
involved prices below short-run average variable cost, calculated without the inclusion of Nielsen’s
‘‘Fixed Operations’ costs’’. On December 17, 2004, IRI issued a press release, which said, in
relevant part, ‘‘Without this evidence, IRI believes that little would be left of IRI’s case to take to
trial’’ and that IRI had expressed its willingness to have the Court enter a final judgment against it,
for the purpose of taking an immediate appeal to the Second Circuit. Defendants did not object to
IRI’s request and, on January 26, 2005, the parties submitted a stipulation to the Court requesting it
to enter a final judgment dismissing IRI’s claims with prejudice and on the merits.
On February 1, 2005, the Court entered a judgment dismissing IRI’s claims with prejudice and
on the merits. IRI has filed a notice of appeal to the United States Court of Appeals for the Second
Circuit. Oral arguments were held on October 18, 2005.
The parties entered into a settlement agreement effective February 16, 2006. The United States
Court of Appeals for the Second Circuit issued an order dismissing the case on March 7, 2006. The
settlement and the order result in a complete dismissal of all claims in the IRI litigation.
Under the settlement agreement, VNU agreed to a payment of USD 55 million (EUR 47 million),
which, after tax, resulted in a EUR 28 million charge to 2005 earnings, since this settlement
provided evidence of conditions that existed at the balance sheet date. It is VNU’s position that the
settlement and dismissal of the IRI lawsuit renders the amended JDA, as defined below, without any
further force and effect. VNU understands that several of the other parties to the Amended JDA may
disagree with VNU’s position.
The Indemnity and Joint Defense Agreement
In connection with the 1996 distribution described below, Cognizant, ACNielsen and Old D&B
entered into an Indemnity and Joint Defense Agreement (the ‘‘Original JDA’’), pursuant to which
they agreed to:
• allocate potential liabilities that may relate to, arise out of or result from the IRI lawsuit
(referred to in this document as IRI Liabilities); and
• conduct a joint defense of such action.
In particular, the Original JDA provided that:
• ACNielsen would assume exclusive liability for IRI Liabilities up to a maximum amount to be
calculated at such time as such liabilities became payable as a result of a final
non-appealable judgment or any settlement permitted under the Original JDA (referred to in
this document as the ACN Maximum Amount); and
F-66
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
19.
Commitments and Contingencies (continued)
• Old D&B and Cognizant would share liability equally for any amounts in excess of the ACN
Maximum Amount (referred to in this document as the Old D&B Liabilities and the Cognizant
Liabilities).
The ACN Maximum Amount was to be determined by an investment banking firm as the
maximum amount that ACNielsen is able to pay after giving effect to:
• any recapitalization plan submitted by such investment bank that is designed to maximize
the claims-paying ability of ACNielsen without impairing the investment banking firm’s ability
to deliver a viability opinion and without requiring shareholder approval; and
• payment of interest on the ACN Notes and related fees and expenses.
The Original JDA also provided that if it becomes necessary to post any bond pending an
appeal of an adverse judgment, then Cognizant and Old D&B shall obtain the bond required for the
appeal, and each shall pay 50% of the costs of such bond, if any, which cost will be added to IRI
Liabilities.
As contemplated by the terms of a distribution agreement dated as of October 28, 1996 among
ACNielsen, Old D&B and Cognizant, pursuant to which shares of Cognizant and ACNielsen were
distributed to the shareholders of Old D&B (i) New D&B in connection with the D&B Spin, and
Current D&B, in connection with the Moody’s spin, provided undertakings to ACNielsen to be jointly
and severally liable for the Old D&B Liabilities, and (ii) IMS Health, in connection with the Cognizant
Spin, provided an undertaking to ACNielsen to be jointly and severally liable for the Cognizant
Liabilities. Pursuant to a distribution agreement dated as of June 30, 1998, between Nielsen Media
Research and IMS Health, IMS Health and Nielsen Media Research agreed that, as between
themselves, IMS Health will assume 75%, and Nielsen Media Research will assume 25%, of any
payments to be made in respect of the IRI Action under the Original JDA or otherwise, including
any legal fees and expenses related thereto incurred in 1999 or thereafter.
In 2001, ACNielsen was acquired by VNU. VNU assumed ACNielsen’s obligations under the
Original JDA, and pursuant to the Original JDA, VNU, as parent, was to be included with ACNielsen
for purposes of determining the ACN Maximum Amount.
The Amended and Restated JDA
Effective June 30, 2004, VNU entered into an Amended and Restated Indemnity and Joint
Defense Agreement with Donnelley, Current D&B, Moody’s and IMS Health (referred to in this
document as the Amended JDA).
Pursuant to the Amended JDA, any and all IRI Liabilities incurred by Donnelley, Current D&B,
Moody’s or IMS Health relating to a judgment (even if not final) or any settlement being entered
into in the IRI action will be jointly and severally assumed and fully discharged exclusively by VNU.
Under the Amended JDA, VNU has agreed to, jointly and severally, indemnify Donnelley,
Current D&B, Moody’s and IMS Health from and against all IRI Liabilities to which they become
subject. As a result, the concept of the ACN Maximum Amount which used to cap ACNielsen’s
liability for the IRI Liabilities no longer exists and all such liabilities are VNU’s responsibility pursuant
to the Amended JDA. In addition, the Amended JDA provides that if it becomes necessary to post
any bond pending an appeal of an adverse judgment, then VNU shall obtain the bond required for
the appeal and shall pay the full cost of such bond.
F-67
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
19.
Commitments and Contingencies (continued)
In connection with entering into the Amended JDA, the parties agreed to amend certain
covenants of the Original JDA to provide operational flexibility for ACNielsen going forward. In
addition, the Amended JDA includes certain amendments to the covenants of ACNielsen which are
designed to preserve such parties’ claim-paying ability and protect Donnelley, Current D&B,
Moody’s and IMS Health. Among other covenants, ACNielsen agreed that neither they nor any of
their respective subsidiaries will incur any indebtedness to any affiliated person, except
indebtedness which its payment will, after a payment obligation under the Amended JDA comes
due, be conditioned on, and subordinated to, the payment and performance of the obligations of
such parties under the Amended JDA.
It is VNU’s position that the settlement and dismissal of the IRI lawsuit renders the Amended
JDA without any further force and effect. VNU understands that several of the other parties to the
amended JDA may disagree with VNU’s position.
erinMedia
erinMedia, llc (‘‘erinMedia’’) filed a lawsuit in federal district court in Tampa, Florida on June 16,
2005. The suit alleges that Nielsen Media Research (‘‘NMR’’) violated Federal and Florida state
antitrust laws by attempting to maintain a monopoly in the market for producing national television
audience measurement data. The complaint does not specify the amount of damages sought, but
does request that the court terminate NMR’s contracts with the four major national broadcast
television networks. On November 17, 2005, the court granted NMR’s motion to dismiss in part, and
dismissed erinMedia’s affiliated company, ReacTV, and its claims. The case is now in discovery on
the remaining claims by erinMedia.
On January 11, 2006, erinMedia filed a related action against Nielsen alleging violations of
federal and state false advertising and unfair competition law. Nielsen moved to dismiss this related
action on February 22, 2006; that motion is currently pending.
Although it is too early to predict the outcome of either case, VNU believes both actions are
without merit.
Except as described above, there are no other pending actions, suits or proceedings against or
affecting VNU which, if determined adversely to VNU, would in its view, individually or in the
aggregate, have a material effect on VNU’s business, consolidated financial position, results of
operations and prospects.
20.
Segments
VNU classifies its business interests into three reportable segments: Marketing Information,
consisting principally of market research and analysis and marketing and sales advisory services;
Media Measurement and Information, consisting principally of television ratings, television, radio
and Internet audience and advertising measurement and research and analysis in various facets of
the entertainment and media sectors, and Business Information, consisting principally of business
publications, both in print and online, trade shows, events and conferences and information
databases and websites. Corporate consists principally of unallocated, corporate items. Prior to its
sale, VNU considered Directories a reportable segment.
Information as to the operations of VNU in each of its business segments is set forth below
based on the nature of the products and services offered and geographic areas of operations. The
accounting policies of the business segments are the same as those described in Note 2.
Corporate includes the elimination of intersegment revenues.
F-68
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
Segments (continued)
Business Segment Information
2005
(EUR IN MILLIONS)
2004
2003
Operating revenues
Marketing Information(1) . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,874 1,806 1,758
968
900
901
618
614
636
(3)
(1)
(3)
3,457
3,319
3,292
(1) Includes retail measurement service revenues of EUR 1,199, EUR 1,163 and EUR 1,123 for 2005, 2004 and 2003,
respectively.
2005
(EUR IN MILLIONS)
2004
2003
Depreciation and amortization expense
Marketing Information
Media Measurement &
Business Information .
Corporate . . . . . . . . .
.........
Information
.........
.........
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
126
85
29
13
121
80
29
14
130
78
33
13
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
253
244
254
2005
(EUR IN MILLIONS)
2004
2003
Goodwill impairment charges
Marketing Information
Media Measurement &
Business Information .
Corporate . . . . . . . . .
.........
Information
.........
.........
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
—
—
—
—
104
—
—
—
—
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
104
—
2005
(EUR IN MILLIONS)
2004
2003
Restructuring costs
Marketing Information
Media Measurement &
Business Information .
Corporate(1) . . . . . . . .
.........
Information
.........
.........
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5
—
—
—
19
—
—
9
17
—
—
—
Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
28
17
(1) Includes costs of relocation of corporate headquarters from Haarlem to New York of EUR 9 for 2004.
(2) Excludes restructuring costs of EUR 10 in discontinued operations for 2003.
F-69
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
Segments (continued)
2005
(EUR IN MILLIONS)
2004
2003
Operating income (loss)
Marketing Information . . . . . . . . . . .
Media Measurement & Information(1)
Business Information . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147
182
76
(101)
126
43
65
(15)
125
137
59
(37)
304
219
284
(1) Includes goodwill impairment of EUR 104 in the Entertainment reporting unit.
2005
(EUR IN MILLIONS)
2004
2003
Interest income (expense), net
Marketing Information . . . . . . . . . . .
Media Measurement & Information(1)
Business information . . . . . . . . . . .
Corporate(1) . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4
(11)
1
(82)
4
(9)
—
(97)
4
(9)
1
(91)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(88)
(102)
(95)
(1) Includes interest expense on debt instruments.
2005
(EUR IN MILLIONS)
2004
2003
Equity in net income of affiliates
Marketing Information . . . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
5
3
—
(4)
8
2
—
(3)
8
3
—
6
6
8
2005
(EUR IN MILLIONS)
2004
Total assets
Marketing Information . . . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . . .
Corporate(1) . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
3,485
3,237
1,169
1,126
3,295
2,769
1,062
3,052
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,017
10,178
(1) Includes cash of EUR 543 and EUR 2,263 and derivative instruments of EUR 356 and EUR 586 for 2005 and 2004,
respectively.
F-70
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
Segments (continued)
2005
2004
.
.
.
.
1,173
669
258
2,317
1,032
638
228
4,307
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,417
6,205
2005
2004
(EUR IN MILLIONS)
Total liabilities
Marketing Information
Media Measurement &
Business Information .
Corporate(1) . . . . . . . .
.........
Information
.........
.........
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(1) Includes debt instruments of EUR 1,973 and EUR 3,219 for 2005 and 2004, respectively.
(EUR IN MILLIONS)
Investments in affiliates
Marketing Information . . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
24
113
16
—
22
12
14
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
153
48
2005
2004
2003
(EUR IN MILLIONS)
Capital expenditures
Marketing Information
Media Measurement &
Business Information .
Corporate . . . . . . . . .
.........
Information
.........
.........
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
87
94
7
2
82
116
5
9
81
158
3
21
Total(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190
212
263
(1) Excludes capital expenditures of EUR 5 and EUR 12 of discontinued operations for 2004 and 2003, respectively.
F-71
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
Segments (continued)
Geographic Segment Information
Operating
Revenues(1)
Operating
Income
Long-lived
Assets(2)
.
.
.
.
.
1,868
262
119
910
298
223
56
(16)
15
26
4,646
354
94
926
315
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,457
304
6,335
Operating
Revenues(1)
Operating
Income
Long-lived
Assets(2)
.
.
.
.
.
1,770
226
144
886
293
136
39
12
17
15
4,109
280
86
944
310
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,319
219
5,729
Operating
Revenues(1)
Operating
Income
Long-lived
Assets(2)
.
.
.
.
.
1,841
219
135
810
287
135
47
5
62
35
4,548
278
57
1,007
306
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,292
284
6,196
(EUR IN MILLIONS)
2005
United States . . . . . . . . . . . . . . . .
Other Americas . . . . . . . . . . . . . . .
The Netherlands . . . . . . . . . . . . . .
Other Europe, Middle East & Africa
Asia Pacific . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(EUR IN MILLIONS)
2004
United States . . . . . . . . . . . . . . . .
Other Americas . . . . . . . . . . . . . . .
The Netherlands . . . . . . . . . . . . . .
Other Europe, Middle East & Africa
Asia Pacific . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(EUR IN MILLIONS)
2003
United States . . . . . . . . . . . . . . . .
Other Americas . . . . . . . . . . . . . . .
The Netherlands . . . . . . . . . . . . . .
Other Europe, Middle East & Africa
Asia Pacific . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(1) Revenues are attributed to geographic areas based on the location of customers.
(2) Long-lived assets include property, plant and equipment, goodwill and other intangible assets, and do not include EUR
1,657 of assets from discontinued operations for 2003.
F-72
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
Additional Financial Information
Prepaid expenses and other current assets
December 31,
2005
2004
(EUR IN MILLIONS)
Derivative financial instruments
Prepaid expenses . . . . . . . . .
Deferred tax assets . . . . . . . .
Other . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
136
144
63
25
—
92
87
22
Total prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
368
201
Other non-current assets
December 31,
2005
2004
(EUR IN MILLIONS)
Deferred charges . . . . . . . .
Equity securities . . . . . . . .
Mutual funds . . . . . . . . . . .
Equity method investments .
Other . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
59
21
75
153
86
51
15
57
48
79
Total other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
394
250
Accounts payable and other current liabilities
December 31,
2005
2004
(EUR IN MILLIONS)
Trade payables . . . . . . . . . . . .
Personnel costs . . . . . . . . . . . .
Outside services . . . . . . . . . . .
Cooperation payments . . . . . . .
Payroll taxes and social benefits
Interest payable . . . . . . . . . . . .
Other current liabilities . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
101
241
81
40
64
36
136
98
225
95
27
52
52
138
Total accounts payable and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
699
687
Other current liabilities includes, among others, post retirement benefit costs, royalties and
acquisition costs.
F-73
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
Additional Financial Information (continued)
Other non-current liabilities
December 31,
2005
2004
(EUR IN MILLIONS)
Pension and other benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125
87
103
115
66
147
Total other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
315
328
Other primarily consists of liabilities for lease termination costs, other post-retirement benefits,
deferred lease incentives, obligations to deinstall household meters, guarantees associated with
automobile leases, deferred revenue and restructuring charges.
Other (expense) income, net
2005
2004
2003
Foreign currency exchange transaction gains (losses) . . . . . . . . . . . . . . . . . . .
(Loss) gain on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
(75)
4
(1)
1
3
(65)
3
(5)
Total other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(62)
3
(67)
(EUR IN MILLIONS)
22.
Subsequent Events
BuzzMetrics Acquisition
On February 14, 2006, VNU acquired a majority interest (50.1%) in privately held
Buzzmetrics, inc. for total consideration of EUR 13 million.
Agreement to Public Offer
On March 8, 2006, VNU and Valcon Acquisition bv (‘‘Valcon’’) announced that they had agreed
to a public offer for VNU that valued VNU’s equity at EUR 7.5 billion, or EUR 28.75 per common
share. Valcon is controlled by a private-equity group consisting of affiliated funds of AlpInvest
Partners nv, The Blackstone Group lp, The Carlyle Group, Hellman & Friedman llc, Kohlberg Kravis
Roberts & Co. lp and Thomas Lee Partners lp. The Supervisory and Executive Boards of VNU, after
giving due consideration to the strategic, financial and social aspects of the proposed transaction,
unanimously supported the offer and concluded that it is in the best interests of shareholders and
all other stakeholders of VNU, and they unanimously recommended that shareholders accept the
offer.
On May 4, 2006, the offer by Valcon was increased to EUR 29.50 per common share and the
acceptance level threshold for the ordinary shares tendered for acceptance was lowered from 95%
to 80%.
While the intended offer from Valcon is pending, no dividend on common shares will be
declared or paid. Although no decision has been made about future dividend payments, in the
F-74
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
22.
Subsequent Events (continued)
event the Valcon transaction is not completed, VNU expects to propose to the Annual General
Meeting of Shareholders on June 13, 2006, that it will declare a dividend of EUR 0.43 per common
share. Valcon has agreed to pay to VNU a termination fee equal to two percent of the transaction
value if Valcon has willfully and materially breached the merger protocol and the offer conditions
have been satisfied or such willful and material breach is the sole reason that the offer conditions
have not been satisfied. The members of the private equity consortium have guaranteed this
payment on a several basis. VNU has agreed to pay a termination fee to Valcon equal to one
percent of the transaction value in certain circumstances if VNU recommends or pursues an
alternative transaction. VNU has also agreed to reimburse Valcon’s transaction expenses up to EUR
30 million if not at least 95% (80% as of the May 4, 2006 offer) of the ordinary shares have been
tendered into the offer and certain other offer conditions have been satisfied or waived. During
2006, VNU committed to EUR 26 million of fees for financial advisory services relating to the
proposed transaction, of which EUR 16 million were contingent on consummation of the
transaction.
As disclosed in Note 19, a successful consummation of the transaction with Valcon would
result in a USD 45 million termination payment to IMS Health. Following this offer, Standard &
Poor’s on January 17, 2006, lowered its credit rating to BBB- and maintained the CreditWatch with
negative implications. This was reconfirmed on March 8, 2006, following an agreement by VNU and
the private equity consortium on the public offer for VNU. On the same date, Moody’s Investors
Service downgraded VNU from Baa2 to Ba1 and the rating remains under review for further
downgrade.
23.
Update to Valcon Acquisition
On May 21, 2006, Valcon declared its public offer for VNU unconditional after 78.7% of VNU’s
share capital was tendered. On May 24, 2006, due to the consummation of this transaction, VNU
made a termination payment to IMS Health and incurred other contingent fees for certain advisors
and consultants utilized during the acquisition process. See Notes 19 and 22 for an additional
discussion of these contingent fees.
On May 22, 2006, Standard & Poor’s lowered its credit rating on VNU to B+ while maintaining
the ratings on CreditWatch with negative implications. On May 26, 2006, Moody’s downgraded its
debt rating to B1 and stated all of VNU’s debt ratings remain under review for possible further
downgrade.
F-75
VNU nv
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
2006
December 31,
2005
(Unaudited)
(EUR IN MILLIONS, EXCEPT
SHARE AND PER SHARE DATA)
Assets:
Current assets
Cash and cash equivalents . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . .
Trade and other receivables, net . . . . . . . .
Prepaid expenses and other current assets .
.
.
.
.
869
107
596
390
862
128
645
368
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,962
2,003
Non-current assets
Goodwill . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . .
Property, plant and equipment, net
Derivative financial instruments . . .
Deferred tax assets . . . . . . . . . .
Other non-current assets . . . . . . .
.
.
.
.
.
.
4,255
1,626
414
222
62
380
4,248
1,661
426
220
65
394
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,921
9,017
.
.
.
.
.
75
639
375
208
531
80
699
369
208
539
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,828
1,895
Non-current liabilities
Long-term debt and capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,687
508
310
1,691
516
315
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,333
4,417
84
88
—
—
1
1
—
—
2
2
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Liabilities, minority interests and shareholders’ equity:
Current liabilities
Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other current liabilities . . . . . . . . . . .
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt and capital lease obligations
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Commitments and contingencies (Note 13)
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity:
Priority stock, EUR8.00 par value, 500 shares authorized, issued and outstanding
7% preferred stock, EUR8.00 par value, 150,000 shares authorized, issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series A preferred stock, EUR8.00 par value, 13,750,000 shares authorized, none
issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series B cumulative preferred stock, EUR0.20 par value, 25,000,000 shares
authorized; 7,200,000 shares issued and outstanding . . . . . . . . . . . . . . . . .
Common stock, EUR0.20 par value, 550,000,000 shares authorized; 257,520,630
shares and 257,073,932 shares issued at March 31, 2006 and December 31,
2005, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . .
51
2,801
2,440
(791)
51
2,790
2,443
(775)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,504
4,512
Total liabilities, minority interests and shareholders’ equity . . . . . . . . . . . . .
8,921
9,017
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-76
VNU nv
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended March 31,
2006
2005
(EUR IN MILLIONS, EXCEPT
SHARE AND PER SHARE DATA)
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
890
791
Cost of revenues, exclusive of depreciation and amortization
Selling, general and administrative expenses . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
441
310
67
44
1
393
280
59
—
1
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
58
.
.
.
.
.
4
(26)
(6)
1
8
3
(28)
(6)
2
(70)
taxes and
.........
.........
.........
8
(12)
—
(41)
(7)
—
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations:
Gain on sale of discontinued operations, net of tax . . . . . . . . . . .
(4)
(48)
1
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
(1)
(48)
(1)
Net loss available to common shareholders . . . . . . . . . . . . . . . . . .
(4)
(49)
Net loss per common share, basic and diluted
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.02)
—
(0.19)
—
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.02)
(0.19)
Interest income . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . .
Loss on derivative instruments . .
Equity in net income of affiliates .
Other income (expense), net . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Income (loss) from continuing operations
minority interests . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . .
Minority interests . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
before income
...........
...........
...........
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Weighted average common shares outstanding, basic and diluted . .
257,193,232
253,742,484
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-77
VNU nv
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended March 31,
2006
2005
(EUR IN MILLIONS)
Operating Activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash provided by operating
activities:
Share-based payments expense . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of discontinued operations, net of tax . . . . . . . . . . .
Currency exchange rate differences on financial transactions and
other (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . .
Loss on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income from affiliates . . . . . . . . . . . . . . . . . . . . . .
Dividends received from affiliates . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of fixed assets, subsidiaries and affiliates . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of effect of
businesses acquired:
Trade and other receivables, net . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . .
Accounts payable and other current liabilities and deferred
revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .
.
(3)
(48)
.
.
5
(1)
5
—
.
.
.
.
.
.
.
(8)
—
6
(1)
6
—
67
(5)
75
6
(2)
4
(5)
59
.
.
46
(10)
33
(29)
.
.
.
.
.
.
(81)
(7)
2
20
4
45
(20)
(14)
5
8
(4)
68
Investing Activities
Acquisition of subsidiaries and affiliates, net of cash acquired
Proceeds from sale of subsidiaries and affiliates, net . . . . . .
Additions to property, plant and equipment and other assets .
Additions to intangible assets . . . . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . . . .
Sales of marketable securities . . . . . . . . . . . . . . . . . . . . . .
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(30)
—
(17)
(11)
(20)
35
9
(34)
(65)
(13)
(17)
(17)
(14)
15
(2)
(113)
Financing Activities
Repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock activity of subsidiaries, net . . . . . . . . . . . . . . . . . . . .
Decrease in bank overdrafts . . . . . . . . . . . . . . . . . . . . . . .
Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .
Activity under stock plans . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . .
Effect of exchange-rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
—
(7)
(5)
(1)
6
(7)
3
7
862
869
(1,188)
1
(35)
48
—
(1,174)
4
(1,215)
2,688
1,473
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-78
VNU nv
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business and Valcon Acquisition
VNU nv (‘‘VNU’’) is a global information and media company with leading market positions and
recognized brands. VNU is organized into three segments: Marketing Information (e.g. ACNielsen),
Media Measurement & Information (e.g., Nielsen Media Research) and Business Information (e.g.
Billboard, The Hollywood Reporter, Computing, Intermediair, Expositions). VNU is active in more
than 100 countries, with its headquarters located in Haarlem, the Netherlands and New York, USA.
VNU has approximately 40,000 full-time employees. VNU is listed on the Amsterdam Euronext Stock
Exchange (ASE: VNU)
On March 8, 2006, Valcon Acquisition B.V. (‘‘Valcon’’), formed by investment funds associated
with AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg
Kravis Roberts & Co., and Thomas H. Lee Partners (collectively, the ‘‘Sponsors’’), entered into a
merger protocol to acquire VNU. On May 21, 2006, Valcon declared its public offer for VNU
unconditional after 78.7% of VNU’s share capital was tendered during the acceptance period. The
price paid to VNU common shareholders was EUR 29.50 per ordinary share and EUR 21.00 per 7%
preferred share. The initial tender was settled on May 24, 2006 with a combination of investments in
the equity of Valcon through its parent companies by investment funds associated with or
designated by the Sponsors and a senior secured tender facility providing for term loan borrowings
by Valcon. An additional 20.27% of the outstanding VNU shares were tendered in a
post-acceptance period ending June 9, 2006 and were settled with a combination of equity
investments by investment funds associated with or designated by the Sponsors and additional
borrowings under the Valcon senior secured tender facility. Valcon will acquire the remaining
outstanding shares of VNU through a statutory squeeze-out procedure, which is expected to be
completed in calendar year 2006. The common and preferred stock will be delisted from
Amsterdam Euronext on July 11, 2006.
2.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of VNU have been prepared
in accordance with accounting principles generally accepted in the United States of America for
interim financial information. Accordingly, the Condensed Consolidated Financial Statements
(unaudited) do not include all the information and notes normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States of
America and all amounts are presented in Euros (‘‘EUR’’), except share data or where expressly
stated as being in US Dollars (‘‘USD’’). In the opinion of management, all adjustments, which are of
a normal recurring nature, considered necessary for a fair presentation of financial position, results
of operations and cash flows for the periods presented have been included. The results of
operations for interim periods are not necessarily indicative of the results expected for the full year.
The Condensed Consolidated Financial Statements (unaudited) and related notes should be
read in conjunction with the Consolidated Financial Statements and related notes of VNU as of
December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003.
3.
Summary of Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (‘‘FASB’’) issued SFAS No. 153,
‘‘Exchanges of Nonmonetary Assets-An Amendment of APB Opinion No. 29.’’ SFAS No. 153
amends APB Opinion No. 29, ‘‘Accounting for Nonmonetary Transactions,’’ to eliminate the
F-79
VNU nv
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
Summary of Recent Accounting Pronouncements (continued)
exception from fair value measurement for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change significantly as a result of
the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal years
beginning after June 15, 2005. The adoption of SFAS No. 153 did not have a material impact on
VNU’s consolidated financial position, results of operations or cash flows.
In November 2005, the FASB issued Staff Position FAS No. 115-1 and FAS 124-1, ‘‘The
Meaning of Other Than Temporary Impairment and its Application to Certain Investments’’ (‘‘FSP’’).
FSP provides accounting guidance for determining and measuring other-than-temporary
impairments of debt and equity securities, and confirms the disclosure for investments in unrealized
loss positions as outlined in EITF 03-01, ‘‘The Meaning of Other-Than-Temporary Impairments and
its Application to Certain Investments’’. These amendments are effective for all reporting periods
beginning after December 15, 2005. The adoption of FSP did not have to have a material impact on
VNU’s consolidated financial position, results of operations or cash flows.
In February 2006, the FASB issued SFAS No. 155, ‘‘Accounting for Certain Hybrid Financial
Instruments.’’ This Statement amends FASB Statements No. 133, ‘‘Accounting for Derivative
Instruments and Hedging Activities’’ and No. 140, ‘‘Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities’’. It resolves issues addressed in Statement 133
Implementation Issue No. D1, ‘‘Application of Statement 133 to Beneficial Interests in Securitized
Financial Assets.’’ SFAS No. 155 permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require bifurcation, and
clarifies which interest-only strips and principal-only strips are not subject to the requirements of
Statement No. 133. This Statement is effective for all financial instruments acquired or issued after
the beginning of an entity’s first fiscal year that begins after September 15, 2006. VNU is evaluating
the potential impact of SFAS No. 155 on its consolidated financial results.
4.
Business Acquisitions and Investments in Affiliates
During the three months ended March 31, 2006, VNU completed several acquisitions for
aggregate consideration of approximately EUR 39 million net of cash acquired. The most significant
acquisitions were the purchase of an additional 31.9% ownership in BuzzMetrics Inc., formerly
Trendum, (‘‘BuzzMetrics’’), in January 2006, bringing VNU’s total interest to 50.1% and the purchase
of a 100% ownership interest in Beverage Data Networks (‘‘BDN’’), in February 2006, which are
consolidated from the date of acquisition. BuzzMetrics performs tracking and analysis of online
consumer-generated media, and BDN is a supplier of wholesaler sales data to the wines and spirits
industry. Had these acquisitions occurred as of January 1, 2006 and 2005, the impact on VNU’s
consolidated results of operations would have been immaterial. Acquisitions during the three
months ended March 31, 2006, resulted in additional goodwill from the difference in consideration
over net assets acquired of EUR 41 million and additional intangible assets of EUR 8 million. Due to
the timing of the acquisitions, the purchase price allocations for BDN and BuzzMetrics were
performed on a preliminary basis and are subject to change.
Business acquisitions during the three months ended March 31, 2005 were immaterial. In
March 2005, Nielsen Media Research International (‘‘NMR’’), a division of MMI and the AGB Group,
F-80
VNU nv
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
Business Acquisitions and Investments in Affiliates (continued)
successfully closed a joint venture arrangement, intended to increase MMI’s coverage
internationally, enabling MMI to better serve the needs of media owners with multi-national interests.
The newly formed entity—AGB Nielsen Media Research—of which VNU owns 50% of the
outstanding shares, merged the television audience measurement services of Kantar Media
Research owned AGB Group operations with those of VNU’s wholly-owned subsidiary, Nielsen
Media Research International. In addition to a cash contribution of EUR 51 million by VNU, there
was a contribution in kind by VNU’s international television audience measurement companies of
approximately EUR 26 million, including EUR 18 million of allocated goodwill from MMI. As of
March 1, 2005, VNU deconsolidated its international television audience measurement companies,
and began accounting for the joint venture under the equity method.
5.
Goodwill and Other Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill, by reportable
segment during the three months ended March 31, 2006:
Marketing
Information
Media
Measurement &
Information
Business
Information
Total
1,735
(8)
19
—
1,797
(22)
16
3
716
(7)
6
—
4,248
(37)
41
3
1,746
1,794
715
4,255
(EUR IN MILLIONS)
Balance, December 31, 2005 . . . . .
Effect of foreign currency translation
Additions . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Balance, March 31, 2006 . . . . . . . . . . . . . . . . . . .
F-81
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
Goodwill and Other Intangible Assets (continued)
Intangible Assets
The following tables summarize the changes in the carrying amounts of intangible assets other
than goodwill during the three months ended March 31, 2006:
Balance,
December 31,
2005
Effect of
Foreign
Currency
Translation
Additions
Amortization
Balance,
March 31,
2006
(EUR IN MILLIONS)
Indefinite-lived intangibles:
Trade names and trademarks . . . . . .
570
(4)
—
—
566
Amortized intangibles:
Trade names and trademarks . . . . . .
Customer-related intangibles . . . . . .
Tradeshows and related publications
Covenants not to compete . . . . . . . .
Databases . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . .
Patents and other . . . . . . . . . . . . . .
11
1,060
302
58
33
541
32
(1)
(11)
(3)
(1)
—
(5)
—
3
1
—
—
—
15
—
—
—
—
—
—
—
—
13
1,050
299
57
33
551
32
Gross carrying amount . . . . . . . . . . . .
2,037
(21)
19
—
2,035
Accumulated amortization:
Trade names and trademarks . . . . . .
Customer-related intangibles . . . . . .
Tradeshows and related publications
Covenants not to compete . . . . . . . .
Databases . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . .
Patents and other . . . . . . . . . . . . . .
(6)
(425)
(83)
(44)
(32)
(338)
(18)
—
1
2
1
—
5
1
—
—
—
—
—
—
—
—
(19)
(4)
(2)
—
(14)
—
(6)
(443)
(85)
(45)
(32)
(347)
(17)
Total accumulated amortization . . . . . .
(946)
10
—
(39)
(975)
Net amortized intangibles . . . . . . . . . .
1,091
(11)
19
(39)
1,060
Total intangible assets . . . . . . . . . . . .
1,661
(15)
19
(39)
1,626
F-82
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6.
Restructuring Activities
During 2006, 2004 and 2003, VNU initiated restructuring plans that primarily resulted in the
involuntary termination of certain employees. A summary of the changes in the accrual balance for
restructuring activities is as follows:
Marketing
Information
Europe
Corporate
Headquarters
Project Atlas
Project
Forward
Total
Balance at December 31, 2005 . . . . . . . . . .
4
4
6
—
14
Accruals . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign currency translation . . . . . .
—
(1)
—
—
(1)
—
—
(1)
—
1
(1)
—
1
(4)
—
Balance at March 31, 2006 . . . . . . . . . . . . .
3
3
5
—
11
(EUR IN MILLIONS)
In connection with all of the restructuring actions discussed above, severance benefits were
computed pursuant to the terms of local statutory minimum requirements in labor contracts or
similar employment agreements.
Project Forward
In November 2005, VNU announced its intention to expand current cost-saving programs to all
areas of the company worldwide, including some restructuring. The program, Project Forward, is
designed to make fundamental changes in operations and permanently reduce costs by
streamlining corporate functions, centralizing information technology and purchasing, and
expanding the outsourcing or off shoring of certain operational and production processes. As
several initiatives are complex, they will take multiple years to implement. VNU incurred EUR
1 million in consulting fees for Project Forward during the three months ended March 31, 2006.
F-83
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
Pensions and Other Post-Retirement Benefits
The net periodic benefit costs for the three months ended March 31, 2006 and 2005 were as
follows:
Net Periodic Benefit Cost
The
United
Netherlands
States
Other Total
(EUR IN MILLIONS)
Three months ended March 31,
Service cost . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . .
Expected return on plan assets
Amortization of net loss . . . . .
2006
.....
.....
.....
.....
1
5
(6)
—
3
2
(2)
1
3
4
(5)
2
7
11
(13)
3
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
4
4
8
Three months ended March 31,
Service cost . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . .
Expected return on plan assets
Amortization of net loss . . . . .
1
5
(6)
—
2
2
(2)
1
3
4
(4)
1
6
11
(12)
2
—
3
4
7
2005
.....
.....
.....
.....
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
Comprehensive (Loss) Income
The following table sets forth the components of comprehensive (loss) income, net of income
tax expense:
Three months
ended
March 31,
2006
2005
(EUR IN MILLIONS)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income, net of taxes
Unrealized (losses) gains on:
Currency translation adjustments . . . . . . . . . . . . .
Net unrealized gain on available-for-sale securities
Changes in fair value of cash flow hedges . . . . . .
.......................
(3)
(48)
.......................
.......................
.......................
(20)
2
2
142
3
(3)
Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(16)
142
Total comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19)
94
Accumulated other comprehensive (loss) income, net of taxes at March 31, 2006, is comprised
of cumulative translation adjustments of EUR (711) million, unrealized gains on available-for-sale
securities of EUR 10 million, changes in fair value of cash flow hedges of EUR 4 million and
minimum pension liability of EUR (94) million.
F-84
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
Share-Based Payments
Share Option Activity
VNU recognized EUR 5 million of compensation expense related to all outstanding VNU and
NetRatings share-based compensation programs during both the three months ended March 31,
2006 and March 31, 2005. VNU issued 446,698 shares of common stock upon the exercise of
share-based compensation awards during the three months ended March 31, 2006. There were no
shares of common stock issued or stock options exercised during the three months ended
March 31, 2005.
10.
Income Taxes
VNU operates in more than 100 countries around the world and its earnings are taxed at the
applicable income tax rate in each of these countries.
The effective tax rate for the three months ended March 31, 2006 and 2005 was 162.5% and
(16.3%), respectively, which vary significantly from the estimated annual effective tax rates for the
respective years due to one-time charges. During the three months ended March 31, 2006, a EUR
30 million charge was recorded relating to the minimum deal indemnification payable to either the
consortium of private equity firms or IMS Health Inc. (‘‘IMS Health’’) (see Note 19 to the
Consolidated Financial Statements for the year ended December 31, 2005). During the three
months ended March 31, 2005, a EUR 75 million loss was recorded on the retirement of various
debt instruments (see Note 13 to the Consolidated Financial Statements for the year ended
December 31, 2005). The tax benefit associated with the aforementioned items was recorded at a
tax rate lower than the VNU effective tax rate.
11.
Net Loss Per Common Share
Basic and diluted net loss per common share were calculated using the following common
share data:
Three months ended
March 31,
2006
2005
(EUR IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Preferred stock dividends, net of tax . . . . . . . . . . . . . . . . . . .
(4)
(1)
(48)
(1)
Loss available to common shareholders from continuing operations,
basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net of tax, basic and diluted . . . . . . . . . . . .
(5)
1
(49)
—
Net loss available to common shareholders, basic and diluted . . . . . .
(4)
(49)
Weighted average number of common shares outstanding, basic and
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
257,193,232
253,742,484
Net loss per common share, basic and diluted:
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.02)
—
(0.19)
—
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.02)
(0.19)
F-85
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In the computation of diluted earnings per common share from both continuing operations and
on a net loss basis for the three months ended March 31, 2006, the assumed conversions of the
EUR 1,150 million 1.75% convertible debenture loan due 2006 and all stock options were excluded
since they would have had an anti-dilutive effect on net loss per share.
In the computation of diluted earnings per common share from both continuing operations and
on a net loss basis for the three months ended March 31, 2005, the assumed conversion of the
EUR 1,150 million 1.75% convertible debenture loan due 2006 and all stock options were excluded
since they would have had an anti-dilutive effect on net loss per share.
12.
Commitments and Contingencies
In connection with the sale of VNU’s former business segment Directories in 2004, VNU has an
exposure under a tax indemnity guarantee with the acquirer, pursuant to which VNU has agreed to
pay any tax obligations relating to periods prior to the sale. VNU has accrued EUR 27 million at
March 31, 2006 and December 31, 2005.
During the first quarter of 2006, VNU renewed or extended existing lease commitments totaling
approximately EUR 25 million with an average term of 6.7 years.
Termination Agreement VNU—IMS Health
On November 17, 2005, VNU and IMS Health announced their agreement on the termination of
the planned merger of the two companies. Under the terms of the termination agreement, amongst
other things, VNU has agreed to pay an amount of USD 45 million to IMS Health should VNU be
acquired pursuant to any agreement entered into within the 12 months following the termination.
For its part, IMS Health has agreed to pay VNU USD 15 million should IMS Health be acquired
pursuant to any agreement entered into within the 12 months following the termination. On May 24,
2006, due to the consummation of the transaction by Valcon, VNU made the USD 45 million
payment to IMS Health.
Legal Proceedings and Contingencies
VNU is subject to litigation and other claims in the ordinary course of business.
D&B Legacy Tax Matters
In November 1996, D&B, then known as the Dun & Bradstreet Corporation (‘‘Old D&B’’)
separated into three public companies by spinning off the A.C. Nielsen Company (‘‘ACNielsen’’)
and Cognizant Corporation (‘‘Cognizant’’) (the ‘‘1966 Spin-Off’’).
In June 1998, Old D&B changed its name to R.H. Donnelley Corporation (‘‘Donnelley’’) and
spun-off the Dun & Bradstreet Corporation (‘‘New D&B’’) (the ‘‘D&B Spin’’), and Cognizant changed
its name to Nielsen Media Research, Inc. (‘‘NMR’’), now part of VNU, and spun-off IMS Health (the
‘‘Cognizant Spin’’). In September 2000, New D&B changed its name to Moody’s Corporation
(‘‘Moody’s’’) and spun-off a company now called The Dun & Bradstreet Corporation (‘‘Current
D&B’’) (the ‘‘Moody’s spin’’). In November 1999, VNU acquired NMR and in 2001 VNU acquired
ACNielsen.
Pursuant to the agreements affecting the 1996 Spin-Off, among other things, certain liabilities,
including contingent liabilities relating to the IRI Action (as fully discussed in the notes to the
F-86
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
12.
Commitments and Contingencies (continued)
Consolidated Financial Statements for the year ended December 31, 2005) and tax liabilities arising
out of certain prior business transactions (the ‘‘D&B Legacy Tax Matters’’), were allocated among
Old D&B, ACNielsen and Cognizant under the Original Joint Defense Agreement (as fully discussed
in the notes to the Consolidated Financial Statements for the year ended December 31, 2005).
As a result of the Cognizant Spin, IMS Health and NMR agreed they would share equally
Cognizant’s share of liability arising out of the D&B Legacy Tax Matters after IMS Health paid the
first USD 0.1 million of such liability. NMR’s aggregate liability for payments related to the D&B
Legacy Tax Matters and legal fees of the IRI Action shall not exceed USD 125 million.
In connection with the acquisition of NMR, VNU recorded in 1999, a liability for NMR’s
aggregate liability for payments related to the D&B Legacy Tax Matters and legal fees of the IRI
Action. VNU believes it has adequately provided for any remaining liability related to these matters.
erinMedia
erinMedia, llc (‘‘erinMedia’’) filed a lawsuit in federal district court in Tampa, Florida on June 16,
2005. The suit alleges that Nielsen Media Research (‘‘NMR’’), a wholly owned subsidiary, violated
Federal and Florida state antitrust laws by attempting to maintain a monopoly in the market for
producing national television audience measurement data. The complaint does not specify the
amount of damages sought, but does request that the court terminate NMR’s contracts with the
four major national broadcast television networks. On November 17, 2005, the court granted NMR’s
motion to dismiss in part, and dismissed erinMedia’s affiliated company, ReacTV, and its claims.
The case is now in discovery on the remaining claims by erinMedia.
On January 11, 2006, erinMedia filed a related action against Nielsen alleging violations of
federal and state false advertising and unfair competition law. Nielsen moved to dismiss this related
action on February 22, 2006; that motion is currently pending.
Although it is too early to predict the outcome of either case, VNU believes both actions are
without merit.
Except as described above, there are no other pending actions, suits or proceedings against or
affecting VNU which, if determined adversely to VNU, would in its view, individually or in the
aggregate, have a material effect on VNU’s business, consolidated financial position, results of
operations and prospects.
13.
Segments
Information as to the operations of VNU in each of its business segments is set forth below
based on the nature of the products and services offered. The accounting policies of the business
segments are the same as those described in the notes to the Consolidated Financial Statements
for the year ended December 31, 2005. Corporate includes the elimination of intersegment
revenues.
F-87
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.
Segments (continued)
Business Segment Information
Three months ended
March 31,
2006
2005
(EUR IN MILLIONS)
Operating revenues
Marketing Information(1) . . . . . . . . .
Media Measurement & Information .
Business Information . . . . . . . . . . .
Corporate . . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
466
264
161
(1)
423
217
151
—
890
791
(1) Includes retail measurement services revenue of EUR 310 and EUR 280 for March 31, 2006 and March 31, 2005,
respectively.
Three months ended
March 31,
2006
2005
(EUR IN MILLIONS)
Operating income
Marketing Information . . . . . . . . . .
Media Measurement & Information .
Business Information . . . . . . . . . . .
Corporate(1) . . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
46
24
(49)
5
36
23
(6)
27
58
(1) Includes EUR 44 of transaction costs associated with the Valcon Acquisition in the three months ended March 31, 2006.
March 31,
2006
December 31,
2005
.
.
.
.
3,467
3,205
1,151
1,098
3,485
3,237
1,169
1,126
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,921
9,017
(EUR IN MILLIONS)
Total assets
Marketing Information . . . . . . . . .
Media Measurement & Information
Business Information . . . . . . . . . .
Corporate(1) . . . . . . . . . . . . . . . .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
(1) Includes cash of EUR 512 and EUR 543 and derivative financial instruments of EUR 365 and EUR 355 for March 31,
2006 and December 31, 2005, respectively.
14.
Valcon Acquisition Costs and Related Payments
On March 8, 2006, VNU and Valcon announced that they had agreed to a public offer for VNU.
VNU also agreed to reimburse Valcon’s transaction expenses up to EUR 30 million if the transaction
F-88
VNU nv
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
14.
Valcon Acquisition Costs and Related Payments (continued)
were terminated. In November 2005, in connection with the agreement on the termination of the
planned merger of VNU and IMS Health, VNU agreed to pay USD 45 million to IMS Health should
VNU be acquired within 12 months following the termination. Based on the facts and circumstances
that existed as of March 31, 2006, VNU was unable to determine whether the public offer for VNU
by Valcon would be successful. Therefore, VNU has accrued EUR 30 million, representing VNU’s
estimate of the minimum amount that would be required to be paid to either IMS Health, in the
event the Valcon acquisition was successful or to the investors in Valcon, if the acquisition was not
successful. On May 24, 2006, due to the consummation of the transaction by Valcon, VNU made
the USD 45 million payment to IMS Health. During the three months ended March 31, 2006 VNU
also recorded EUR 14 million of transaction expenses, primarily for investment advisory services.
15.
Subsequent Events
Financing Transactions
In connection with the acquisition of VNU by Valcon, VNU has entered into the following
transactions:
• the termination of VNU’s EUR 1 billion revolving credit facility
• the prepayment of the remaining EUR 91 million principal amount of the NLG 500 million
subordinated private placement loan, and related prepayment penalty of EUR 3 million.
Valcon launched a tender offer for VNU debt issuances, as follows:
• EUR 150 million private placement debenture loan due 2006
• EUR 500 million 6.625% debenture loan due 2007
• NLG 600 million 5.50% debenture loan due 2008
• EUR 600 million 6.75% debenture loan due 2008, and
• USD 150 million 7.60% debenture loan due 2009
In May 2006, VNU redeemed the remaining EUR 333 million principal amount of the EUR
1,150 million 1.75% convertible debenture loan due 2006, as scheduled. An interest rate swap with
a notional amount of EUR 333 million and a EUR/USD cross currency swap with a notional amount
of EUR 650 million matured.
On May 22, 2006 Standard & Poor’s lowered its credit rating from BBB- to B+/B following a
declaration by Valcon Acquisition B.V. calling its bid for VNU unconditional after acceptance of
78.7% of its offer. The rating remains on CreditWatch with negative implications. On May 26, 2006,
Moody’s Investors Service downgraded VNU from Ba1 to B1. The rating remains under review for
further downgrade.
Acquisitions
On April 7, 2006, ACNielsen announced that it had agreed to acquire 100% of the retail
measurement business unit of Datos Information Resources, a leading Venezuelan marketing
information company for approximately EUR 16 million.
F-89
(This page has been left blank intentionally.)
(This page has been left blank intentionally.)
(This page has been left blank intentionally.)
607055a2.qxd
7/7/06
10:20 PM
Page 1
®
intermediair
contract
D rC
JURIST
COMPANY Q1
212 243-8008 Q2
3
607055a2
07.07.06
CMY K
175sc
We have not authorized any dealer,
salesperson or other person to give any
information or represent anything to you other
than the information contained in this offering
memorandum. You must not rely on unauthorized
information or representations.
This offering memorandum does not offer to
sell or ask for offers to buy any of the securities
in any jurisdiction where it is unlawful, where the
person making the offer is not qualified to do so,
or to any person who cannot legally be offered
the securities.
OFFERING MEMORANDUM
The information in this offering
memorandum is current only as of the date on its
cover, and may change after that date. For any
time after the cover date of this offering
memorandum, we do not represent that our
affairs are the same as described or that the
information in this offering memorandum is
correct—nor do we imply those things by
delivering this offering memorandum or selling
securities to you.
g343,000,000
11 ⁄ % Senior Discount Notes due
2016
18
TABLE OF CONTENTS
Offering Memorandum Summary . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . .
Exchange Rate Information . . . . . . . . . . . . . .
Unaudited Pro Forma Condensed Consolidated
Financial Information . . . . . . . . . . . . . . . .
Selected Historical Consolidated Financial
Information . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . .
Principal Shareholders . . . . . . . . . . . . . . . . .
Certain Relationships and Related Party
Transactions . . . . . . . . . . . . . . . . . . . . . .
Description of Other Indebtedness . . . . . . . . .
Description of Senior Discount Notes . . . . . . .
Exchange Offer; Registration Rights . . . . . . . .
Book Entry; Delivery and Form . . . . . . . . . . .
Notice to Investors . . . . . . . . . . . . . . . . . . .
Material United States Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . .
Dutch Taxation . . . . . . . . . . . . . . . . . . . . . .
Private Placement . . . . . . . . . . . . . . . . . . . .
Listing Information . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . .
Independent Auditors . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . .
Index to Consolidated Financial Statements . . .
VNU Group B.V.
1
27
41
43
44
45
59
62
101
119
128
129
131
135
153
155
159
161
167
171
174
174
174
175
F-1
Deutsche Bank Securities
Citigroup
JPMorgan
ABN AMRO Incorporated
ING Wholesale Banking
August 1, 2006