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8-K/A - FORM 8-K/A - Nielsen CO B.V.ncbv-8ka_20130930.htm
EX-99 - EX-99.1 - Nielsen CO B.V.ncbv-ex99_201309306.htm
EX-99 - EX-99.3 - Nielsen CO B.V.ncbv-ex99_201309308.htm

   

EXHIBIT 99.2

ARBITRON INC.

Consolidated Balance Sheets

(In thousands, except par value data)

   

 

   

June 30,
2013

   

   

December 31,
2012

   

   

(Unaudited)

   

   

(Audited)

   

Assets

   

   

   

   

   

   

   

Current assets

   

   

   

   

   

   

   

Cash and cash equivalents

$

95,065

   

   

$

66,469

   

Trade accounts receivable, net of allowance for doubtful accounts of $4,477 as of June 30, 2013, and $4,856 as of December 31, 2012

   

61,919

   

   

   

59,185

   

Prepaid expenses and other current assets

   

10,648

   

   

   

6,516

   

Deferred tax assets

   

4,911

   

   

   

5,513

   

Total current assets

   

172,543

   

   

   

137,683

   

Equity and other investments

   

13,934

   

   

   

12,501

   

Property and equipment, net

   

58,028

   

   

   

61,669

   

Goodwill, net

   

45,461

   

   

   

45,540

   

Other intangibles, net

   

6,893

   

   

   

8,177

   

Noncurrent deferred tax assets

   

2,473

   

   

   

2,384

   

Other noncurrent assets

   

757

   

   

   

1,138

   

Total assets

$

300,089

   

   

$

269,092

   

Liabilities and Stockholders’ Equity

   

   

   

   

   

   

   

Current liabilities

   

   

   

   

   

   

   

Accounts payable

$

14,700

   

   

$

11,407

   

Accrued expenses and other current liabilities

   

24,141

   

   

   

33,879

   

Deferred revenue

   

50,996

   

   

   

38,497

   

Total current liabilities

   

89,837

   

   

   

83,783

   

Noncurrent liabilities

   

29,352

   

   

   

31,900

   

Total liabilities

   

119,189

   

   

   

115,683

   

Stockholders’ equity

   

   

   

   

   

   

   

Preferred stock, $100.00 par value, 750 shares authorized, no shares issued

   

—  

   

   

   

—  

   

Common stock, $0.50 par value, 500,000 shares authorized, 32,338 shares issued as of June 30, 2013, and December 31, 2012

   

16,169

   

   

   

16,169

   

Retained earnings

   

183,417

   

   

   

156,530

   

Common stock held in treasury, 5,416 shares as of June 30, 2013, and 5,714 shares as of December 31, 2012

   

(2,708

)

   

   

(2,857

)

Accumulated other comprehensive loss

   

(15,978

)

   

   

(16,433

)

Total stockholders’ equity

   

180,900

   

   

   

153,409

   

Total liabilities and stockholders’ equity

$

300,089

   

   

$

269,092

   

See accompanying notes to consolidated financial statements.

   

   

                       

 

 1 

   


   

ARBITRON INC.

Consolidated Statements of Income

(In thousands, except per share data)

(unaudited)

   

 

   

Three Months Ended
June 30,

   

   

   

   

2013

   

      

2012

   

Revenue

$

107,410

      

      

$

104,407

      

Costs and expenses

   

   

   

      

   

   

   

Cost of revenue

   

65,323

      

      

   

63,205

      

Selling, general and administrative

   

24,547

      

      

   

20,701

      

Research and development

   

10,117

      

      

   

9,896

      

Total costs and expenses

   

99,987

      

      

   

93,802

      

Operating income

   

7,423

      

      

   

10,605

      

Equity in net income of affiliate

   

5,495

      

      

   

5,391

      

Income before interest and income tax expense

   

12,918

      

      

   

15,996

      

Interest income

   

20

      

      

   

11

      

Interest expense

   

131

      

      

   

132

      

Income before income tax expense

   

12,807

      

      

   

15,875

      

Income tax expense

   

5,754

      

      

   

5,912

      

Net income

$

7,053

      

      

$

9,963

      

Income per weighted-average common share

   

   

   

      

   

   

   

Basic

$

0.26

      

      

$

0.38

      

Diluted

$

0.26

      

      

$

0.37

      

Weighted-average common shares used in calculations

   

   

   

      

   

   

   

Basic

   

26,878

      

      

   

26,318

      

Potentially dilutive securities

   

567

      

      

   

486

      

Diluted

   

27,445

      

      

   

26,804

      

Dividends declared per common share outstanding

$

0.10

      

      

$

0.10

      

See accompanying notes to consolidated financial statements.

   

   

 

 2 

   


   

ARBITRON INC.

Consolidated Statements of Income

(In thousands, except per share data)

(unaudited)

   

 

   

Six Months Ended
June 30,

   

   

   

   

2013

   

      

2012

   

Revenue

$

219,194

      

      

$

210,801

      

Costs and expenses

   

   

   

      

   

   

   

Cost of revenue

   

114,924

      

      

   

110,653

      

Selling, general and administrative

   

47,045

      

      

   

38,704

      

Research and development

   

19,431

      

      

   

19,614

      

Total costs and expenses

   

181,400

      

      

   

168,971

      

Operating income

   

37,794

      

      

   

41,830

      

Equity in net income of affiliate

   

3,108

      

      

   

3,035

      

Income before interest and income tax expense

   

40,902

      

      

   

44,865

      

Interest income

   

42

      

      

   

31

      

Interest expense

   

296

      

      

   

261

      

Income before income tax expense

   

40,648

      

      

   

44,635

      

Income tax expense

   

17,305

      

      

   

16,865

      

Net income

$

23,343

      

      

$

27,770

      

Income per weighted-average common share

   

   

   

      

   

   

   

Basic

$

0.87

      

      

$

1.04

      

Diluted

$

0.85

      

      

$

1.02

      

Weighted-average common shares used in calculations

   

   

   

      

   

   

   

Basic

   

26,786

      

      

   

26,782

      

Potentially dilutive securities

   

580

      

      

   

491

      

Diluted

   

27,366

      

      

   

27,273

      

Dividends declared per common share outstanding

$

0.20

      

      

$

0.20

      

See accompanying notes to consolidated financial statements.

   

   

 

 3 

   


   

ARBITRON INC.

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)

   

 

   

Three Months Ended
June 30,

   

   

Six Months Ended
June 30,

   

   

2013

   

   

2012

   

   

2013

   

   

2012

   

Net income

$

7,053

      

   

$

9,963

      

   

$

23,343

      

   

$

27,770

      

Other comprehensive income (loss)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Foreign currency translation adjustment

   

(367

   

   

(664

   

   

(297

   

   

(271

Retirement liabilities:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Amortization of net actuarial loss included in net periodic cost

   

622

      

   

   

523

      

   

   

1,245

      

   

   

1,050

      

Retirement liabilities—before tax

   

622

      

   

   

523

      

   

   

1,245

      

   

   

1,050

      

Income tax expense

   

(246

   

   

(205

   

   

(493

   

   

(410

Retirement liabilities—after tax

   

376

      

   

   

318

      

   

   

752

      

   

   

640

      

Other comprehensive income (loss), net of tax

   

9

      

   

   

(346

   

   

455

      

   

   

369

      

Comprehensive income

$

7,062

      

   

$

9,617

      

   

$

23,798

      

   

$

28,139

      

See accompanying notes to consolidated financial statements.

   

   

 

 4 

   


   

ARBITRON INC.

Consolidated Statements of Cash Flows

(In thousands and unaudited)

   

 

   

Six Months Ended June 30,

   

   

2013

   

   

2012

   

Cash flows from operating activities

   

   

   

   

   

   

   

Net income

$

23,343

      

   

$

27,770

      

Adjustments to reconcile net income to net cash provided by operating activities

   

   

   

   

   

   

   

Depreciation and amortization of property and equipment

   

12,242

      

   

   

14,137

      

Amortization of other intangible assets

   

1,224

      

   

   

1,220

      

Loss on asset disposals and impairments of property and equipment

   

956

      

   

   

733

      

Deferred income taxes

   

513

      

   

   

(1,687

Equity in net income of affiliate

   

(3,108

   

   

(3,035

Distributions from affiliate

   

1,675

      

   

   

4,300

      

Bad debt expense

   

557

      

   

   

860

      

Non-cash share-based compensation

   

3,903

      

   

   

4,377

      

Changes in operating assets and liabilities

   

   

   

   

   

   

   

Trade accounts receivable

   

(3,308

   

   

722

      

Prepaid expenses and other assets

   

(4,604

   

   

(548

Accounts payable

   

3,428

      

   

   

(1,319

Accrued expenses and other current liabilities

   

(15,015

   

   

(10,770

Deferred revenue

   

12,499

      

   

   

15,227

      

Noncurrent liabilities

   

420

      

   

   

1,667

      

Net cash provided by operating activities

   

34,725

      

   

   

53,654

      

Cash flows from investing activities

   

   

   

   

   

   

   

Additions to property and equipment

   

(9,790

   

   

(10,627

Net cash used in investing activities

   

(9,790

   

   

(10,627

Cash flows from financing activities

   

   

   

   

   

   

   

Proceeds from stock option exercises and stock purchase plan

   

5,187

      

   

   

3,311

      

Stock repurchases

   

—  

      

   

   

(50,025

Dividends paid to stockholders

   

(2,676

   

   

(5,454

Excess tax benefits realized from share-based awards

   

1,261

      

   

   

554

      

Net cash provided by (used in) financing activities

   

3,772

      

   

   

(51,614

Effect of exchange rate changes on cash and cash equivalents

   

(111

   

   

(55

Net change in cash and cash equivalents

   

28,596

      

   

   

(8,642

Cash and cash equivalents at beginning of period

   

66,469

      

   

   

19,715

      

Cash and cash equivalents at end of period

$

95,065

      

   

$

11,073

      

See accompanying notes to consolidated financial statements.

   

   

 

 5 

   


   

ARBITRON INC.

Notes to Consolidated Financial Statements

June 30, 2013

(unaudited)

   

 

1.

Basis of Presentation and Consolidation

Presentation

The accompanying unaudited consolidated financial statements of Arbitron Inc. (the “Company” or “Arbitron”) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included and are of a normal recurring nature. The consolidated balance sheet as of December 31, 2012 was audited as of that date, but all of the information and notes as of December 31, 2012 required by GAAP have not been included in this Form 10-Q. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform to the current period’s presentation.

Consolidation

The consolidated financial statements of Arbitron for the six-month period ended June 30, 2013, reflect the consolidated financial position, results of operations and cash flows of the Company and its wholly-owned subsidiaries: Arbitron Holdings Inc., Arbitron Mobile Oy, Astro West LLC, Cardinal North LLC, Ceridian Infotech (India) Private Limited, Arbitron International, LLC, and Arbitron Technology Services India Private Limited. All significant intercompany balances and transactions have been eliminated in consolidation. The Company has one segment which meets the quantitative thresholds for being a reportable segment.

   

 

2.

New Accounting Pronouncements

Testing Other Intangibles for Impairment In July 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2012-02, Intangibles — Goodwill and Other (Topic 350) — Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”), to allow entities to use a qualitative approach to test indefinite-lived assets for impairment. ASU 2012-02 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to calculate the fair value of the intangible asset and perform the quantitative impairment test. Otherwise, the entity need not perform the quantitative impairment test. ASU 2012-02 is effective for the Company for interim and annual periods ended during 2013. The adoption of this guidance had no impact on the Company’s consolidated financial statements.

Comprehensive Income Presentation. In February 2013, the FASB issued Accounting Standards Update No. 2013-02, Comprehensive Income (Topic 220) Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”), to require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. ASU 2013-02 is effective for the Company beginning with interim and annual periods ended during 2013. The Company has adopted this guidance and disclosed the appropriate information within the consolidated financial statements and notes to the financial statements for the periods presented.

 

 6 

   


   

   

3.

Pending Merger with Nielsen Holdings N.V.

On December 17, 2012, the Company entered into an Agreement and Plan of Merger, as amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of January 25, 2013, with Nielsen Holdings N.V. (“Nielsen”) and TNC Sub I Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Nielsen (“Merger Sub”), pursuant to which, subject to satisfaction or waiver of the conditions therein, Merger Sub will merge with and into the Company (the “Merger”) with Arbitron surviving as an indirect wholly-owned subsidiary of Nielsen. The transaction has been approved by the boards of both companies. On April 16, 2013, the Company’s shareholders approved the adoption of the Merger. The Merger remains subject to certain regulatory approvals, including expiration of the Hart-Scott-Rodino antitrust waiting period, and customary closing conditions. The Company recognized $9.4 million in selling, general, and administrative expense for consulting and legal services received in association with the Merger during the six-month period ended June 30, 2013. For additional information regarding the business risks associated with pursuing the Merger, see Item 1A. Risk Factors — Risk Factors Relating to the Merger, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC.

   

 

4.

Stockholders’ Equity

Changes in stockholders’ equity for the six-month period ended June 30, 2013, were as follows (in thousands):

 

 

   

Shares
Outstanding

   

   

Common
Stoc
k

   

   

Treasury
Stock

   

   

Retained
Earnin
gs

   

   

Accumulated
Other
Comprehensive
Loss

   

   

Total
Stockholders’
Equity

   

Balance as of December 31, 2012

   

26,624

      

      

$

16,169

      

      

$

(2,857

   

$

156,530

      

   

$

(16,433

   

$

153,409

      

Net income

   

—  

      

      

   

—  

      

      

   

—  

      

   

   

23,343

      

   

   

—  

      

   

   

23,343

      

Common stock issued from treasury stock

   

298

      

      

   

—  

      

      

   

149

      

   

   

3,747

      

   

   

—  

      

   

   

3,896

      

Excess tax benefits from share-based awards

   

—  

      

      

   

—  

      

      

   

—  

      

   

   

1,261

      

   

   

—  

      

   

   

1,261

      

Non-cash share-based compensation

   

—  

      

      

   

—  

      

      

   

—  

      

   

   

3,903

      

   

   

—  

      

   

   

3,903

      

Dividends declared

   

—  

      

      

   

—  

      

      

   

—  

      

   

   

(5,367

   

   

—  

      

   

   

(5,367

Other comprehensive income

   

—  

      

      

   

—  

      

      

   

—  

      

   

   

—  

      

   

   

455

      

   

   

455

      

Balance as of June 30, 2013

   

26,922

      

      

$

16,169

      

      

$

(2,708

   

$

183,417

      

   

$

(15,978

   

$

180,900

      

A quarterly cash dividend of $0.10 per common share was paid to stockholders on July 1, 2013.

   

 

5.

Net Income per Weighted-Average Common Share

The computations of basic and diluted net income per weighted-average common share for the six-month periods ended June 30, 2013, and 2012, are based on the Company’s weighted-average shares of common stock and potentially dilutive securities outstanding. Potentially dilutive securities are calculated in accordance with the treasury stock method, which assumes the proceeds from the exercise of all dilutive stock options are used to repurchase the Company’s common stock at the average market price for the period.

As of June 30, 2013, and 2012, there were stock options to purchase 1,469,890 shares, and 2,012,378 shares of the Company’s common stock outstanding, respectively, of which stock options to purchase 148,426 shares, and 1,295,172 shares of the Company’s common stock, respectively, were excluded from the computation of the diluted net income per weighted-average common share for the six-month periods ended June 30, 2013, and 2012, respectively, either because the stock options’ exercise prices were greater than the average market price of the Company’s common shares or assumed repurchases from proceeds from the stock options’ exercise were antidilutive.

 

 7 

   


   

   

 

6.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss for the three- and six-month periods ended June 30, 2013, and 2012, were as follows (in thousands):

 

 

   

Three Months Ended June 30, 2013

   

   

Three Months Ended June 30, 2012

   

   

Foreign
currency
items

   

   

Retirement
plan items

   

   

Total

   

   

Foreign
currency
items

   

   

Retirement
plan items

   

   

Total

   

Beginning balance

$

(2,168

)

   

$

(13,819

)

   

$

(15,987

)

   

$

(1,755

)

   

$

(13,131

)

   

$

(14,886

)

Other comprehensive income before reclassification adjustments

   

(367

)

   

   

—  

   

   

   

(367

)

   

   

(664

)

   

   

—  

   

   

   

(664

)

Amounts reclassified from accumulated other comprehensive loss

   

—  

   

   

   

376

{a}

   

   

376

   

   

   

—  

   

   

   

318

{a}

   

   

318

   

Net current period other comprehensive income

   

(367

)

   

   

376

   

   

   

9

   

   

   

(664

)

   

   

318

   

   

   

(346

)

Ending balance

$

(2,535

)

   

$

(13,443

   

$

(15,978

)

   

$

(2,419

)

   

$

(12,813

)

   

$

(15,232

)

 

 

   

Six Months Ended June 30, 2013

   

   

Six Months Ended June 30, 2012

   

   

Foreign
currency
items

   

   

Retirement
plan items

   

   

Total

   

   

Foreign
currency
items

   

   

Retirement
plan items

   

   

Total

   

Beginning balance

$

(2,238

)

   

$

(14,195

)

   

$

(16,433

)

   

$

(2,148

)

   

$

(13,453

)

   

$

(15,601

)

Other comprehensive income before reclassification adjustments

   

(297

)

   

   

—  

   

   

   

(297

)

   

   

(271

)

   

   

—  

   

   

   

(271

)

Amounts reclassified from accumulated other comprehensive loss

   

—  

   

   

   

752

{a}

   

   

752

   

   

   

—  

   

   

   

640

{a}

   

   

640

   

Net current period other comprehensive income

   

(297

)

   

   

752

   

   

   

455

   

   

   

(271

)

   

   

640

   

   

   

369

   

Ending balance

$

(2,535

)

   

$

(13,443

)

   

$

(15,978

)

   

$

(2,419

)

   

$

(12,813

)

   

$

(15,232

)

All amounts are net of tax. Amounts in parentheses indicate debits.

 

{a}

These components were reclassified, gross of tax, as part of net periodic cost associated with the amortization of the actuarial loss related to the Company’s benefit plan obligations. See Note 7 for additional details.

 

7.

Retirement Plans

Certain of the Company’s United States employees participate in a defined-benefit pension plan that closed to new participants effective January 1, 1995. The Company has a nonqualified, unfunded supplemental retirement plan, as well as a postretirement healthcare plan for eligible retired employees who participate in the pension plan and were hired before January 1, 1992. The components of periodic benefit costs for the defined-benefit pension, postretirement healthcare and supplemental retirement plans were as follows for the three- and six-month periods ended June 30, 2013, and 2012 (in thousands):

 

 

   

Defined-Benefit
Pension Plan
Three Months
Ended June 30,

   

   

Postretirement Healthcare
Plan
Three Months
Ended June 30,

   

   

Supplemental
Retirement Plan
Three Months
Ended June 30,

   

   

2013

   

   

2012

   

   

2013

   

      

2012

   

      

2013

   

      

2012

   

Service cost

$

254

      

   

$

216

      

   

$

10

      

      

$

10

      

      

$

13

      

      

$

8

      

Interest cost

   

471

      

   

   

477

      

   

   

14

      

      

   

18

      

      

   

40

      

      

   

40

      

Expected return on plan assets

   

(559

   

   

(509

   

   

—  

      

      

   

—  

      

      

   

—  

      

      

   

—  

      

Amortization of net actuarial loss {a}

   

564

      

   

   

470

      

   

   

2

      

      

   

5

      

      

   

56

      

      

   

48

      

Net periodic benefit cost

$

730

      

   

$

654

      

   

$

26

      

      

$

33

      

      

$

109

      

      

$

96

      

 

 8 

   


   

 

 

   

Defined-Benefit
Pension Plan
Six Months
Ended June 30

   

   

Postretirement Healthcare
Plan
Six Months
Ended June 30

   

   

Supplemental
Retirement Plan
Six Months
Ended June 30

   

   

2013

   

   

2012

   

   

2013

   

      

2012

   

      

2013

   

      

2012

   

Service cost

$

508

      

   

$

431

      

   

$

19

      

      

$

18

      

      

$

25

      

      

$

15

      

Interest cost

   

941

      

   

   

953

      

   

   

29

      

      

   

36

      

      

   

79

      

      

   

80

      

Expected return on plan assets

   

(1,118

   

   

(1,018

   

   

—  

      

      

   

—  

      

      

   

—  

      

      

   

—  

      

Amortization of net actuarial loss {a}

   

1,128

      

   

   

943

      

   

   

4

      

      

   

11

      

      

   

113

      

      

   

96

      

Net periodic benefit cost

$

1,459

      

   

$

1,309

      

   

$

52

      

      

$

65

      

      

$

217

      

      

$

191

      

   

{a}

The total amount of amortization of net actuarial loss for all retirement plans was $622 and $523 for the three-month periods ended June 30, 2013, and 2012, respectively, and $1,245 and $1,050 for the six-month periods ended June 30, 2013, and 2012, respectively.

 

8.

Arbitron Mobile Contingent Consideration

On July 28, 2011, a wholly-owned subsidiary of the Company acquired Zokem Oy, which is now being consolidated as Arbitron Mobile. The purchase price was $10.6 million in cash plus a contingent consideration arrangement. The contingent consideration arrangement provides for possible additional cash payments to be made by the Company to the former Zokem Oy shareholders through 2015 of up to $12.0 million, which are contingent upon Arbitron Mobile reaching certain financial performance targets in the future. The Company periodically reassesses the fair value of the contingent consideration by applying the income approach method. The key assumptions used in the fair value valuation include a probability-weighted range of performance targets for the four-year measurement period of 2012 through 2015 and an adjusted discount rate. As of both June 30, 2013 and December 31, 2012, the Company’s fair value estimate of the contingent consideration was $0.6 million, which is recorded as a portion of noncurrent liabilities on the Company’s consolidated balance sheet.

   

 

9.

Taxes

The effective tax rate increased to 42.6% for the six-month period ended June 30, 2013, from 37.8% for the six-month period ended June 30, 2012. This increase for the six-month period ended June 30, 2013, as compared to the same period of 2012, resulted primarily from certain nondeductible transaction costs anticipated during 2013 in relation to the pending Merger.

During the six-month period ended June 30, 2013, the Company’s unrecognized tax benefits for certain tax contingencies decreased from $1.3 million as of December 31, 2012, to $1.2 million as of June 30, 2013. The decrease is primarily attributable to the settlement of various state income tax audits. If recognized, the $1.2 million in unrecognized tax benefits would reduce the Company’s effective tax rate in future periods. Income taxes paid for the six-month periods ended June 30, 2013 and 2012, were $21.7 million and $19.0 million, respectively.

 

10.

Share-Based Compensation

The following table sets forth information with regard to the income statement recognition of share-based compensation for the three- and six-month periods ended June 30, 2013, and 2012 (in thousands):

 

 

   

   

Three Months
Ended June 30,
2013

   

      

Three Months
Ended June 30
2012

   

      

Six Months
Ended June 30,
2013

   

      

Six Months
Ended June 30,
2012

   

Cost of revenue

   

$

194

      

      

$

97

      

      

$

249

      

      

$

243

      

Selling, general and administrative

   

   

1,345

      

      

   

2,018

      

      

   

3,464

      

      

   

3,940

      

Research and development

   

   

115

      

      

   

94

      

      

   

190

      

      

   

194

      

Share-based compensation

   

$

1,654

      

      

$

2,209

      

      

$

3,903

      

      

$

4,377

      

No share-based compensation cost was capitalized during the six-month periods ended June 30, 2013, and 2012.

Stock Options

 

 9 

   


   

Stock options awarded to employees under the Company’s 2008 Equity Compensation Plan (“2008 Plan”) generally vest annually over a three-year period, have a 10-year term and have an exercise price equal to the fair market value of the Company’s common stock at the date of grant. Compensation expense for stock options is recognized on a straight-line basis over the vesting period using the fair value of each stock option estimated as of the grant date.

For the three-month period ended June 30, 2013, no stock options were granted. For the three-month period ended June 30, 2012, the number of stock options granted was 12,511, and the weighted-average exercise price for those stock options granted was $35.46.

For the six-month period ended June 30, 2013, no stock options were granted. For the six-month period ended June 30, 2012, the number of stock options granted was 106,466, and the weighted-average exercise price for those stock options granted was $34.06.

As of June 30, 2013, there was $2.1 million in total unrecognized compensation cost related to unvested stock options. This aggregate unrecognized cost is expected to be recognized over a weighted-average remaining period of 1.7 years. The weighted-average exercise price and weighted-average remaining contractual term for outstanding stock options as of June 30, 2013, were $33.49 and 5.6 years, respectively.

Service and Performance Award Units

Service award units. The Company granted service award units under the 2008 Plan to certain employees. These employee service award units (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) generally vest in equal annual installments over four years beginning on the first anniversary date of the grant, except for service award units granted to the Company’s executives since December 30, 2012, which vest in 12 equal quarterly installments following the date of the grant for the CEO and 16 equal quarterly installments following the date of grant for the Company’s other executives, and (iii) for any unvested units, expire without vesting if the employee is no longer employed by the Company.

For 2013 and 2012, the Board members had the right to elect to receive all or a portion of their annual compensation as Board service award units. These Board service award units (i) were issued at the fair market value of the Company’s common stock on the date of grant, and (ii) vest completely on the first anniversary date of the grant.

Compensation expense for service award units is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. As of June 30, 2013, there was $7.6 million of total unrecognized compensation cost related to unvested service award units granted to certain Board members and employees. This aggregate unrecognized cost for service award units is expected to be recognized over a weighted-average period of approximately 3.2 years.

Additional information for the three- and six-month periods ended June 30, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):

 

 

Total Service Award Units Granted to Board and Employees

   

Three Months
Ended June 30,
2013

   

   

Three Months
Ended June 30,
2012

   

   

Six Months
Ended June 30,
2013

   

   

Six Months
Ended June 30,
2012

   

Number of service award units granted during the period

   

   

6,408

   

   

   

10,223

   

   

   

121,113

   

   

   

10,223

   

Weighted average grant-date fair value per share granted during the period

   

$

46.82

   

   

$

35.46

   

   

$

46.80

   

   

$

35.46

   

Fair value of service award shares vested during the period

   

$

2,104

   

   

$

1,292

   

   

$

2,497

   

   

$

1,740

   

Performance award units. During the six-month period ended June 30, 2013, the Company did not grant any performance award units. During the six-month period ended June 30, 2012, the Company granted performance award units under the 2008 Plan. These performance award units (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) will vest in four equal annual installments beginning with the first anniversary date of the grant, and (iii) for any unvested units, expire without vesting if the recipient is no longer employed by the Company. The performance goal for these performance award units was met.

Compensation expense for performance award units is recognized (i) using the fair market value of the Company’s common stock on the date of grant, and (ii) on a graded basis, which is accelerated as compared to a straight-line expense attribution method. As of June 30, 2013, there was $0.8 million of total unrecognized compensation cost related to unvested performance award

 

 10 

   


   

units. This aggregate unrecognized cost is expected to be recognized over a weighted-average period of 2.1 years.

Additional information for the three- and six-month periods ended June 30, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):

 

 

Total Performance Award Units Granted

   

Three Months
Ended June 30,
2013

   

      

Three Months
Ended June 30,
2012

   

      

Six Months
Ended June 30,
2013

   

   

Six Months
Ended June 30,
2012

   

Number of performance award units granted during the period

   

   

—  

   

   

   

—  

   

   

   

—  

   

   

   

34,229

   

Weighted average grant-date fair value per share granted during the period

   

   

—  

   

   

   

—  

   

   

   

—  

   

   

$

33.87

   

Fair value of performance award shares vested during the period

   

$

422

   

   

$

325

   

   

$

1,508

   

   

$

847

   

Deferred Stock Units

Board DSUs . The Company issues deferred stock units to its Board of Directors (“Board DSUs”) under the 2008 Plan. These Board DSUs (i) were issued at the fair market value of the Company’s common stock on the date of grant and (ii) if vested, will be convertible to shares of the Company’s common stock subsequent to termination of service as a director. For 2013 and 2012, the Board members had the right to elect to receive all or a portion of their annual compensation as Board DSUs that vest completely on the first anniversary date of the grant. For 2011 and 2010, annual grants were issued to the Board as Board DSUs that vest annually in three equal installments over three-year periods.

During the six-month period ended June 30, 2012, the Board members had the right to elect to receive all or a portion of their retainer and meeting attendance fees as Board DSUs, which vest immediately. Board DSUs are only granted to nonemployee Directors. Board DSUs also include dividend equivalent DSUs, which vest immediately upon the date of grant.

Compensation expense for Board DSUs is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. As of June 30, 2013, there was $0.9 million of total unrecognized compensation cost related to Board DSUs granted to nonemployee directors. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of less than 1.0 year.

Former CEO DSUs. Prior to 2013, the Company granted deferred stock unit awards under the 2008 Plan to its then current CEO (“Former CEO DSUs”), whose employment with the Company ended during the first quarter of 2013. These Former CEO DSUs (i) were granted at the fair market value of the Company’s stock on the date of grant, (ii) generally vest annually over a four-year period on each anniversary date of the grant, (iii) provide for accelerated vesting upon termination without cause or the former CEO’s retirement as defined in his employment agreement, and (iv) are convertible into shares of the Company’s common stock, following the holder’s termination of employment, in accordance with the former CEO’s employment agreement. As of June 30, 2013, there was no unrecognized compensation cost related to these Former CEO DSUs.

Additional information related to both Board DSUs and Former CEO DSUs for the three- and six-month periods ended June 30, 2013, and 2012, is noted in the following table (dollars in thousands, except per share amounts):

 

 

Board DSUs and Former CEO DSUs

   

Three Months
Ended June 30,
2013

   

      

Three Months
Ended June 30,
2012

   

      

Six Months
Ended June 30,
2013

   

      

Six Months
Ended June 30,
2012

   

Number of shares granted during the period

   

   

15,410

   

   

   

21,179

   

   

   

16,181

   

   

   

82,798

   

Number of DSUs converted to common stock shares during the period

   

   

—  

   

   

   

—  

   

   

   

47,189

   

   

   

—  

   

Weighted-average grant date fair value per share granted during the period

   

$

46.82

   

   

$

35.41

   

   

$

46.83

   

   

$

34.31

   

Fair value of shares vested during the period

   

$

1,221

   

   

$

554

   

   

$

1,328

   

   

$

1,624

   

 

 11 

   


   

   

 

11.

Concentration Risk

Arbitron is a leading media and marketing information services firm primarily serving radio, advertisers, advertising agencies, cable and broadcast television, retailers, out-of-home media, online media, mobile media, telecommunications providers, and print media. The Company’s quantitative radio audience ratings service and related software licensing revenue accounted for the following percentages, in the aggregate, of total Company revenue:

 

 

   

   

Three Months
Ended June 30,
2013

   

   

Three Months
Ended June 30,
2012

   

   

Six Months
Ended June 30,
2013

   

   

Six Months
Ended June 30,
2012

   

Quantitative radio audience ratings service and related software licensing revenue

   

   

81

%

   

   

82

%

   

   

88

%

   

   

89

%

The Company had one customer that individually represented approximately 19% of its revenue for the six-month period ended June 30, 2013. The Company had two customers that individually represented approximately 22%, and 20% of its total accounts receivable balance as of June 30, 2013, and one customer that individually represented approximately 26% of its total accounts receivable balance as of December 31, 2012. The Company has historically experienced a high level of contract renewals.

   

 

12.

Stock Repurchases

On February 9, 2012, the Company’s Board of Directors authorized a program to repurchase up to $100.0 million in shares of the Company’s outstanding common stock through either periodic open-market or private transactions, in accordance with applicable insider trading and other securities laws and regulations, at then-prevailing market prices over a period of up to two years ending February 9, 2014. As of June 30, 2013, the Company had repurchased 1,372,853 shares of its outstanding common stock under this program for approximately $50.0 million, which were repurchased during the six-month period ended June 30, 2012. No shares of the Company’s common stock were repurchased during the six-month period ended June 30, 2013.

 

 12