Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion and analysis should be read together with the accompanying consolidated financial statements and related notes thereto. Further, this report may contain material that includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect, when made, Nielsen’s current views with respect to current events and financial performance. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those described in “Item 1A. Risk Factors.” Statements, other than those based on historical facts, which address activities, events or developments that we expect or anticipate may occur in the future are forward-looking statements. Such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to Nielsen’s operations and business environment that may cause actual results to be materially different from any future results, express or implied, by such forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” in Part I of this Annual Report on Form 10-K. The terms “Company,” “Nielsen,” “we,” “our” or “us,” as used herein, refer to Nielsen Holdings plc and each of its consolidated subsidiaries unless other w ise stated or indicated by context.
Background and Executive Summary
We serve the world’s media and content ecosystem and are a global leader in audience measurement, data and analytics. Through our understanding of people and their behaviors across all channels and platforms, we empower our clients with independent and actionable intelligence so they can connect and engage with their audiences—now and into the future.
We provide a holistic and objective understanding of the media industry to our various clients. Our data is used by our publishing clients to understand their audiences, establish the value of their advertising inventory and maximize the value of their content. Our data is used by our marketer and advertiser agency clients to plan and optimize their spend and is used by our content creator clients to inform decisions and identify trends.
We believe that only Nielsen provides a fair playing field for the business of media, under our unique approach AUDIENCE IS EVERYTHING ® , and we believe that we are the only provider with data that’s representative of the entire media ecosystem. All of our products have been reviewed to ensure they are representative of diverse populations and we have launched intelligence into the marketplace on the value of audience representation . We are the currency of choice in the U.S. media market and essential to the global media and content ecosystem. We believe that we are uniquely positioned to deliver the most reliable deduplication metrics across linear and digital platforms. An S&P 500 company, we offer measurement and analytics service in more than 55 countries.
We believe that important measures of our results of operations include revenue, operating income /(loss) and Adjusted EBITDA (defined below). Our long-term financial objectives include consistent revenue growth and expanding operating margins. Accordingly, we are focused on geographic market and service offering expansion to drive revenue growth and improve operating efficiencies, including effective resource utilization, information technology leverage and overhead cost management.
Our business strategy is built upon a model that has traditionally yielded consistent revenue performance. Our measurement, data and analytics solutions, which have been developed through substantial investment over many decades, are deeply embedded into our clients’ workflows. Typically, before the start of each year, approximately 80% of our annual revenue has been committed under contracts, which provides us with a greater degree of stability for our revenue and allows us to more effectively manage our profitability and cash flows. We continue to look for growth opportunities through global expansion, specifically within emerging markets, as well as through the cross-platform expansion of our analytical services and measurement services.
Achieving our business objectives requires us to manage a number of key risk areas. Our growth objective of geographic market and service expansion requires us to maintain the consistency and integrity of our information and underlying processes on a global scale, and to effectively invest our capital in technology and infrastructure to keep pace with our clients’ demands and our competitors. Core to managing these key risk areas is our commitment to data privacy and security as it drives our ability to deliver quality insights for our clients in line with evolving regulatory requirements and governing standards across all the geographies and industries in which we operate. Our operating footprint in over 55 countries requires disciplined global and local resource management of internal and third-party providers to ensure success. In addition, our high level of indebtedness requires active management of our debt profile, with a focus on underlying maturities, interest rate risk, liquidity and operating cash flows.
COVID-19
We experienced an improvement in our business, particularly our short-cycle revenue and our sports business, in the last half of 2021 as compared to the same period in 2020, due to a recovery from the COVID-19 pandemic.
Global economic conditions will continue to be volatile as long as the COVID-19 pandemic remains a public health threat, including, as a result of new information concerning the severity of the pandemic, government actions to mitigate the effects of the pandemic in the near-term, and the resulting impact on our business and operations and sales and customer demand. We expect global economic performance and the performance of our businesses to vary by geography and discipline until the impact of the COVID-19 pandemic on the global economy subsides.
For further discussion regarding the potential impacts of COVID-19 and related economic conditions on the Company, see Part I, Item 1A “Risk Factors—Risks Related to the COVID-19 Pandemic, Environment and Other External Factors.”
Sale of our Global Connect Business
On March 5, 2021, we completed the previously announced sale of our Global Connect business (such business, “Global Connect,” and the sale of Global Connect, the “Connect Transaction”) to affiliates of Advent International Corporation (“Purchaser”), pursuant to the Stock Purchase Agreement, dated as of October 31, 2020 (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Purchaser acquired Global Connect by means of a sale of the equity interests of certain subsidiaries held by us, which operate Global Connect, for $2.7 billion in cash, subject to adjustments based on closing levels of cash, indebtedness, debt-like items and working capital, and a warrant to purchase equity interests in the company that, following the sale, owns Global Connect (the “Connect Warrant”). We received net proceeds of $2.4 billion on March 5, 2021 and recorded a gain of $489 million net of tax, inclusive of closing adjustments, during the year ended December 31, 2021. Proceeds from the sale were primarily utilized for debt repayment. See Note 20 to our consolidated financial statements– Discontinued Operations.
The results of operations of Global Connect have been classified as discontinued operations for all periods presented. As such, the results of Global Connect have been excluded from both continuing operations and segment results for all periods presented. Our continuing business operates as a single operating and reportable segment.
Critical Accounting Estimates
Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. 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. The most significant of these estimates relate to revenue recognition, goodwill and indefinite-lived intangible assets, long-lived assets, accounting for income taxes, share based compensation and pension costs
Revenue Recognition
Revenue is measured based on the consideration specified in a contract with a customer. We recognize revenue when it satisfies a performance obligation by transferring control of a product or service to a customer, which generally occurs over time. Our customer contracts may include promises to transfer multiple products or services. Determining whether products or services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Additionally, where there are multiple performance obligations, judgment is required to determine revenue for each distinct performance obligation.
Revenue is primarily generated from television, radio, digital and mobile audience measurement services and analytics, which are used by our media clients to establish the value of airtime and more effectively schedule and promote their programming and our advertising clients to plan and optimize their spend. As the customer simultaneously receives and consumes the benefits provided by our performance, revenues for these services are recognized over the period during which the performance obligations are satisfied, and control of the service is transferred to the customer.
We enter cooperation arrangements with certain customers, under which the customer provides us with its data in exchange for our services. We record these transactions at fair value, which is determined based on the fair value of goods or services received, if reasonably estimable. If not reasonably estimable, we consider the fair value of the goods or services surrendered.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill and other indefinite-lived intangible assets are stated at historical cost less accumulated impairment losses, if any. At December 31, 2021, goodwill and other indefinite-lived intangibles was $7,432 million.
We perform our annual goodwill impairment testing in the fourth quarter. Goodwill and other indefinite-lived intangible assets, consisting of our trade name, are each tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. We review the recoverability of our goodwill by comparing the estimated fair value of our reporting unit with the respective carrying amount.
The estimates of fair value of a reporting unit are determined using a combination of valuation techniques, primarily by an income approach using a discounted cash flow analysis and supplemented by a market-based approach.
A discounted cash flow analysis requires the use of various assumptions, including expectations of future cash flows, growth rates, discount rates and tax rates in developing the present value of future cash flow projections. The market-based approach utilizes available market comparisons such as indicative industry multiples that are applied to current year revenue and earnings, next year’s revenue and earnings as well as recent comparable transactions.
Estimating the fair value of our reporting unit requires the use of significant judgments that are based on a number of factors including actual operating results, internal forecasts, market observable multiples, and determining the appropriate discount rate and long-term growth rate assumptions. It is reasonably possible that the judgments and estimates described above could change in future periods, and therefore could affect the amount of potential impairment.
The 2021 evaluation resulted in no goodwill impairment charges. We used a 2.5% long-term growth rate and 11.2% discount rate in our evaluation. The fair value exceeded carrying value by more than 20% for our reporting unit. We also performed sensitivity analyses on our assumptions, primarily around long-term growth rates and discount rate assumptions. Our sensitivity analyses included several combinations of reasonably possible scenarios regarding these assumptions, including a one percent movement in both our long-term growth rate and discount rate assumptions. When applying these sensitivity analyses, we noted that the fair value was greater than the carrying value for our reporting unit.
Other indefinite-lived intangible assets are tested for impairment on an annual basis and whenever events or circumstances indicate that the carrying amount of such asset may not be recoverable. The impairment test for other indefinite-lived intangible assets consists of a comparison of the fair value of an 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 the royalty rate, estimated future revenue (inclusive of long-term revenue growth rates) and discount rate. Discount rate assumptions are based on an assessment of the risk inherent in the respective intangible assets. The discount rates we used in our evaluation was 11.7%. Assumptions about the royalty rate are based on the rates at which comparable trade names and trademarks are being licensed in the marketplace. The 2021 evaluation resulted in no impairment charge as the fair value exceeded carrying value. As of the annual impairment assessment, the fair value exceeded carrying value by less than 10%. The valuation is sensitive to the assumptions discussed above. A trend in revenue projections or an increase in discount rate could lead to a future .
Amortizable Intangible Assets
We are required to assess whether the value of our amortizable intangible assets have been impaired 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 expected to be 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 impairment is considered to exist based on undiscounted cash flows, the charge is measured using an estimation of the assets’ fair value, typically using a discounted cash flow method. The identification of 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 indicators, expected cash flows and applicable discount rates. These estimates are subject to revision as market conditions and our assessments change.
We capitalize software development costs with respect to major internal use software initiatives or enhancements. 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 seven 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 value is not recoverable from future cash flows, the software cost is written down to estimated fair value and an impairment is recognized. These estimates are subject to revision as market conditions and as our assessments change.
No impairment indicators were noted for other long-lived assets in 2021.
Income Taxes
We have a presence in more than 55 countries, and our effective tax rate is subject to significant variation due to several factors including variability in our pre-tax and taxable income or loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in where or how we do business, acquisitions or dispositions, audit-related developments, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions.
We have completed a number of material acquisitions and divestitures that have generated complex tax issues requiring management to use its judgment to make various tax determinations. We have sought to organize the affairs of our subsidiaries in a tax efficient manner, taking into consideration the jurisdictions in which we operate. Although we are confident that tax returns have been appropriately prepared and filed, there is risk that additional tax may be assessed on certain transactions or that the deductibility of certain expenditures may be disallowed for tax purposes. Our policy is to estimate tax risk to the best of our ability and provide accordingly for those risks and take positions in which a high degree of confidence exists that the tax treatment will be accepted by the tax authorities. The policy with respect to deferred taxation is to provide in full for temporary differences using the liability method.
Deferred tax assets and deferred tax liabilities are computed by assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. The carrying value of deferred tax assets is adjusted by a valuation allowance to the extent that these deferred tax assets are not considered to be realized on a more likely than not basis. Realization of deferred tax assets is based, in part, on our judgment and various factors including reversal of deferred tax liabilities, our ability to generate future taxable income in jurisdictions where such assets have arisen and potential tax planning strategies. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount expected to be realized in the future.
We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Such tax positions are, based solely on their technical merits, more likely than not to be sustained upon examination by taxing authorities and reflect the largest amount of benefit, determined on a cumulative probability basis, which is more likely than not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
The U.S. Tax Cuts and Jobs Act (“TCJA”) imposed a U.S. tax on global intangible low taxed income (“GILTI”) that is earned by certain foreign affiliates owned by a U.S. shareholder and was intended to tax earnings of a foreign corporation that are deemed to be in excess of certain threshold return. As of December 31, 2018, Nielsen made a policy decision and elected to treat taxes on GILTI as a current period expense and have reflected as such in the financial statements for the years ended December 31, 2019 through December 31, 2021.
Share-based Compensation
Our share-based compensation programs are comprised of stock options, performance-based stock options, restricted stock units and performance restricted stock units. We measure the cost of all share-based payments, including stock options, at fair value on the grant date and recognize such costs within the consolidated statements of operations.
Determining the fair value of share-based awards at the grant date requires considerable judgment. Share-based compensation expense for the performance-based stock options is based on the Monte Carlo simulation model which considers factors such as estimating the expected term of stock options, expected volatility of our stock, and the number of share-based awards expected to be forfeited due to future terminations. Some of the critical assumptions used in estimating the grant date fair value are presented in the table below:
Expected life (years)
Risk-free interest rate
Expected dividend yield
Expected volatility
Weighted average volatility
We consider the historical option exercise behavior of our employees, which we believe is representative of future behavior, in estimating the expected life of our options granted. For 2021 and 2020, expected volatility was based on our historical volatility. For the year ended December 31, 2019, there were no time and performance-based stock options issued.
The assumptions used in calculating the fair value of share-based awards represent our best estimates and, although we believe them to be reasonable, these estimates involve inherent uncertainties and the application of management’s judgment. If factors change and we employ different assumptions in the application of our option-pricing model in future periods or if we experience different forfeiture rates, the compensation expense that is derived may differ significantly from what we have recorded in the current year.
In addition, for our share-based awards where vesting is dependent upon achieving certain operating performance goals over an annual or multi-year time period, we estimate the likelihood of achieving the performance goals.
Pension Costs
We provide a number of retirement benefits to our employees, including defined benefit pension plans. 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. Management reviews these critical 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 our 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. For the non-U.S. plans, the discount rate is set by reference to market yields on high-quality corporate bonds. We believe the timing and amount of cash flows related to the bonds in these portfolios are expected to match the estimated payment benefit streams of our plans.
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 $1 million per year. We assumed that the weighted averages of long-term returns on our pension plans were 5.8% for the year ended December 31, 2021, 6.5% for the year ended December 31, 2020 and 6.7% for the year ended December 31, 2019. The expected long-term rate of return is applied to the fair value of pension plan assets. The actual return on plan assets will vary year to year from this assumption. Although the actual return on plan assets will vary from year to year, 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.
Factors Affecting Nielsen’s Financial Results
Foreign Currency
Our financial results are reported in U.S. dollars 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 U.S. dollars. Our principal foreign exchange revenue exposure is spread across several currencies, primarily the Euro. The table below sets forth the profile of our revenue by principal currency.
Year Ended December 31,
U.S. Dollar
Euro
Other Currencies
Total
As a result, fluctuations in the value of foreign currencies relative to the U.S. dollar impact our operating results. Impacts associated with fluctuations in foreign currency are discussed in more detail under “Item 7A.—Quantitative and Qualitative Disclosures about Market Risk.” In countries with currencies other than the U.S. dollar, assets and liabilities are translated into U.S. dollars using end-of-period exchange rates; revenues, expenses and cash flows are translated using average rates of exchange. The average U.S. dollar to Euro exchange rate was $1.18, $1.14 and $1.12 to €1.00 for the years ended December 31, 2021, 2020 and 2019, respectively. Constant currency growth rates used in the following discussion of results of operations eliminate the impact of year-over-year foreign currency fluctuations.
We evaluate our results of operations on both an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP financial measure, excludes the impact of year-over-year fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance and is consistent with how management evaluates the Company’s performance. We calculate constant currency percentages by converting our prior-period local currency financial results using the current period exchange rates and comparing these adjusted amounts to our current period reported results. This calculation may differ from similarly-titled measures used by others and, accordingly, the constant currency presentation is not meant to be a substitution for recorded amounts presented in conformity with GAAP nor should such amounts be considered in isolation.
Consolidated Results of Operations – Yea rs E nded December 31, 2021, 2020 and 2019
The following table sets forth, for the periods indicated, the amounts included in our consolidated statements of operations:
Year Ended December 31,
(IN MILLIONS)
Revenues
Cost of revenues, exclusive of depreciation and amortization shown separately below
Selling, general and administrative expenses, exclusive of depreciation and amortization shown separately below
Depreciation and amortization
Impairment of goodwill and other long-lived assets
Restructuring charges
Operating income
Interest expense, net
Foreign currency exchange transaction (losses)/gains, net
Other expense, net
Income before income taxes and equity in net loss of affiliates
Benefit/(provision) for income taxes
Equity in net loss of affiliates
Net income from continuing operations
Net income/(loss) from discontinued operations, net of taxes
Net income/(loss)
Net income attributable to noncontrolling interests
Net income/(loss) attributable to Nielsen shareholders
Net Income from continuing operations to Adjusted EBITDA Reconciliation
Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Adjusted EBITDA margin is Adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.
We use Adjusted EBITDA to measure our performance from period to period to evaluate and fund incentive compensation programs and to compare our results to those of our competitors. In addition to Adjusted EBITDA being a significant measure of performance for management purposes, we also believe that this presentation provides useful information to investors regarding financial and business trends related to our results of operations and that when non-GAAP financial information is viewed with GAAP financial information, investors are provided with a more meaningful understanding of our ongoing operating performance.
Adjusted EBITDA should not be considered as an alternative to net income or loss, operating income/(loss), cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance or cash flows as measures of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In addition, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies and may, therefore, have limitations as a comparative analytical tool.
We define Adjusted EBITDA as net income or loss from continuing operations of our consolidated statements of operations before interest income and expense, income taxes, depreciation and amortization, restructuring charges, impairment of goodwill and other long-lived assets, share-based compensation expense and other non-operating items from our consolidated statements of operations, as well as certain other items that arise outside the ordinary course of our continuing operations specifically described below.
Impairment of goodwill and other long-lived assets : We exclude the impact of charges related to the impairment of goodwill and other long-lived assets. We believe that the exclusion of these impairments, which are non-cash, allows for meaningful comparisons of operating results to peer companies. We believe that this increases period-to-period comparability and is useful to evaluate the performance of the total company.
Share-based compensation expense : We exclude the impact of costs relating to share-based compensation. Due to the subjective assumptions and a variety of award types, we believe that the exclusion of share-based compensation expense, which is typically non-cash, allows for more meaningful comparisons of our operating results to peer companies. Share-based compensation expense can vary significantly based on the timing, size and nature of awards granted.
Restructuring charges : We exclude restructuring expenses, which primarily include employee severance, office consolidation and contract termination charges, from our Adjusted EBITDA to allow more accurate comparisons of the financial results to historical operations and forward-looking guidance. By excluding these expenses from our non-GAAP measures, we are better able to evaluate our ability to utilize our existing assets and estimate the long-term value these assets will generate for us. Furthermore, we believe that the adjustments of these items more closely correlate with the sustainability of our operating performance.
Other non-operating income/(expense), net : We exclude foreign currency exchange transaction gains and losses, primarily related to intercompany financing arrangements, as well as other non-operating income and expense items, such as gains and losses recorded on business combinations or dispositions, sales of investments, net income/(loss) attributable to noncontrolling interests and early redemption payments made in connection with debt refinancing. We believe that the adjustments of these items more closely correlate with the sustainability of our operating performance.
Other items : To measure operating performance, we exclude certain expenses and gains that arise outside the ordinary course of our continuing operations. Such costs primarily include legal settlements and related fees, acquisition related expenses, business optimization costs and other transaction costs. We believe the exclusion of such amounts allows management and the users of the financial statements to better understand our financial results.
The below table presents a reconciliation from net income from continuing operations to Adjusted EBITDA for the years ended December 31, 2021, 2020 and 2019:
Year Ended December 31,
(IN MILLIONS)
Net income from continuing operations
Less: Net income attributable to noncontrolling interests
Net income from continuing operations attributable to Nielsen shareholders
Interest expense, net
(Benefit)/provision for income taxes
Depreciation and amortization
EBITDA
Equity in net loss of affiliates
Other non-operating expense, net (1)
Restructuring charges
Impairment of goodwill and other long-lived assets
Share-based compensation expense
Dis-synergy costs (2 )
Other items (3)
Adjusted EBITDA
In 2019, other non-operating expense, net, included non-cash expenses of $72 million for pension settlements which included plan transfers to third parties in the Netherlands and UK, where we terminated our responsibility for future defined benefit obligations and transferred that responsibility to the third parties. See Note 11 to our consolidated financial statements – “Pensions and Other Post-Retirement Benefits” for more information.
Costs to stand-up Nielsen as a standalone company including incremental real estate, IT/infrastructure, transition services agreements (TSAs) and commercial arrangements.
Other items primarily consists of legal settlements and related fees, business optimization costs and transaction related costs in 2021. Other items primarily consists of business optimization costs, including strategic review costs and transaction related costs, for the years ended December 31, 2020 and 2019.
Results from continuing operations for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
Revenues
The table below sets forth our revenue in 2021 compared to the year ended December 31, 2020, both on an as-reported and constant currency basis.
(IN MILLIONS)
Year Ended
December 31,
Year Ended
December 31,
% Variance
Reported
Year Ended
December 31,
Constant
Currency
% Variance
Constant
Currency
Measurement
Impact / Content
Total
Revenues increased 4.1% to $3,500 million in 2021 from $3,361 million in 2020 or an increase of 3.4% on a constant currency basis. Revenue growth was primarily driven by growth in Measurement, which increased 3.7%, or an increase of 3.2% on a constant currency basis, with overall solid growth, with strength in national and digital measurement products and local products returning to positive growth. Impact / Content revenues increased 5.4%, or an increase of 3.9% on a constant currency basis. This was driven in part by improving trends in short-cycle revenues, solid growth in Content, and recovery in the Sports business.
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues decreased 1.9% to $1,212 million in 2021 from $1,235 million in 2020, or a decrease of 2.6% on a constant currency basis. The decrease in costs were primarily from the impact of our broad-based optimization plan during 2020 and other productivity initiatives and temporary actions taken in response to the COVID-19 pandemic, partially offset by our continued investments in our products and services.
Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
Selling, general and administrative expenses increased 24.8% to $891 million in 2021 from $714 million in 2020, or an increase of 23.1% on a constant currency basis. The increase in costs were primarily due to our increased costs to operate as a standalone company without the Global Connect business and continued investments in our products and services, partially offset by the impact of our broad-based optimization plan during 2020 and other productivity initiatives, as well as the impact of temporary actions taken in response to the COVID-19 pandemic.
Depreciation and Amortization
Depreciation and amortization expense was $512 million in 2021 as compared to $550 million in 2020, inclusive of depreciation and amortization expense associated with tangible and intangibles assets acquired in business combinations of $152 million and $165 million, respectively. This decrease was primarily due to certain assets becoming fully amortized and the decrease in depreciation and amortization expense associated with tangible and intangible assets acquired in business combinations, partially offset by higher capital expenditures during the period.
Impairment of Goodwill and other Long-Lived Assets
There were no impairment charges in 2021.
We recorded a non-cash charge of $58 million for the impairment of other long-lived assets in 2020, related to management’s decision to exit certain smaller, underperforming markets and non-core businesses as well as a change in the extent to which certain self-developed software would be utilized. Also in 2020, we recorded a non-cash charge of $88 million for the impairment of an indefinite-lived trade name related to our annual impairment testing .
Restructuring Charges
On June 30, 2020, we announced a broad-based optimization plan (the “Restructuring Plan”) to drive permanent cost savings and operational efficiencies, as well as to position us for greater profitability and growth. The Restructuring Plan was substantially completed in 2020. Pre-tax restructuring charges in 2021 were $13 million, which primarily r elated to real estate consolidation, and $37 million in 2020, which primarily related to severance costs associated with employee separation packages.
Operating Income
Operating income was $872 million in 2021 as compared to operating income of $679 million in 2020. The increase was primarily due to the revenue performance discussed above, temporary actions taken in response to the COVID-19 pandemic, the benefit of permanent cost actions from the Restructuring Plan, lower depreciation and amortization expense and lower restructuring charges in 2021, as well as the impairment charge recorded during the year ended December 31, 2020, partially offset by our increased costs to operate as a standalone company without the Global Connect business .
Interest Expense, Net
Interest expense was $285 million in 2021 compared to $329 million in 2020. This decrease was primarily due to lower loan balances and lower LIBOR rates.
Foreign Currency Exchange Transaction Gains/(Losses), Net
Foreign currency exchange transaction losses, net, represent the net loss on revaluation of certain cash, external debt, intercompany loans and other receivables and payables. Fluctuations in the value of foreign currencies relative to the U.S. Dollar, particularly the Euro, have a significant effect on our operating results. The average U.S. Dollar to Euro exchange rate was $1.18 and $1.14 to €1.00 for the years ended December 31, 2021 and 2020, respectively.
We realized net losses of $5 million and net gains of $17 million in 2021 and 2020, respectively, resulting primarily from fluctuations in certain foreign currencies associated with intercompany transactions.
Other Expense, Net
Other expense, net of $24 million in 2021, was primarily related to the write-off of certain previously capitalized deferred financing fees in conjunction with the May 2021 debt refinancing and a loss from a business disposition, partially offset by a gain from the sale of an equity investment.
Other expense, net of $20 million in 2020, was primarily related to certain costs incurred in connection with our debt refinancing transactions, as well as the write-off of certain previously deferred financing fees in conjunction with the refinancing, certain non-service related pension costs , and loss from business disposition.
Income from continuing operations before Income Taxes and Equity in Net Loss of Affiliates
Income was $558 million in 2021 compared to income of $347 million in 2020 due primarily to the consolidated results mentioned above.
Income Taxes
The effective tax rates in December 31, 2021 and 2020 were 0% and 41%, respectively.
Our effective tax rate of 0% in December 31, 2021 was lower than the UK statutory rate primarily as a result of decreases in valuation allowances attributable to the utilization of foreign tax credits and the utilization of net operating losses.
Our effective tax rate in December 31, 2020 was higher than the UK statutory rate primarily as a result of withholding and foreign taxes as well as state and local income taxes.
At December 31, 2021 and 2020, we had gross uncertain tax positions of $161 million and $128 million, respectively. We also have accrued interest and penalties associated with these uncertain tax positions as of December 31, 2021 and 2020 of $7 million and $11 million, respectively.
Estimated interest and penalties related to the underpayment of income taxes is classified as a component of our provision or benefit for income taxes. It is reasonably possible that a reduction in a range of $131 million to $139 million of uncertain tax positions may occur within the next twelve months, and of this amount, approximately $1 million to $9 million would result in a tax benefit for income taxes as a result of projected resolutions of worldwide tax disputes, filed tax returns, and expirations of statute of limitations in various jurisdictions, along with related interest and penalties. Furthermore, the amounts ultimately paid may differ from the amounts accrued.
A djusted EBITDA
(IN MILLIONS)
Year Ended
December 31,
Year Ended
December 31,
% Variance
Reported
Year Ended
December 31, 2020
Constant Currency
% Variance
Constant Currency
Adjusted EBITDA
Adjusted EBITDA increased 5.7% to $1,491 million in 2021 from $1,411 million in 2020, or an increase of 5.4% on a constant currency basis. Our Adjusted EBITDA margin increased to 42.6% in 2021 from 42.0% driven by the strong revenue performance and benefits from the Restructuring Plan, partially offset by the return of the temporary costs savings realized in 2020 in response to the COVID-19 pandemic and investments in growth initiatives.
Revenues
The table below sets forth our segment revenue performance data in 2020 compared to 2019, both on an as-reported and constant currency basis.
(IN MILLIONS)
Year Ended
December 31,
Year Ended
December 31,
% Variance
Reported
Year Ended
December 31,
Constant
Currency
% Variance
Constant
Currency
Measurement
Impact / Content
Total
Revenues decreased 2.3% to $3,361 million in 2020 from $3,441 million in 2019, or a decrease of 2.3% on a constant currency basis. Revenues from Measurement decreased 0.6%, or a decrease of 0.5% on a constant currency basis, reflecting the impact of the COVID-19 pandemic on sports and non-contracted revenue and pressure in local television. Impact / Contact revenues decreased 6.7% on a reported and constant currency basis, primarily reflecting the impact of the COVID-19 pandemic on sports, Gracenote auto and short-cycle revenue .
Cost of Revenues, Exclusive of Depreciation and Amortization
Cost of revenues increased 3.7% to $1,235 million in 2020 from $1,191 million in 2019, or an increase of 3.8% on a constant currency basis, primarily due to the impact of our investments and higher spending on product portfolio management initiatives, partially offset by temporary actions taken in response to the COVID-19 pandemic and productivity initiatives.
Selling, General and Administrative Expenses, Exclusive of Depreciation and Amortization
Selling, general and administrative expenses decreased 19.3% to $714 in 2020 from $885 million in 2019, or a decrease of 19.3% on a constant currency basis, primarily due to temporary actions taken in response to the COVID-19 pandemic and the impact of our optimization plan and other productivity initiatives.
Depreciation and Amortization
Depreciation and amortization expense was $550 million in 2020 as compared to $465 million in 2019. This increase was primarily due to higher depreciation and amortization expense associated with more assets in use. Depreciation and amortization expense associated with tangible and intangibles assets acquired in business combinations decreased to $165 million in 2020 from $166 million in 2019 and is included in depreciation and amortization expense in the consolidated statement of operations.
Impairment of Goodwill and other Long-Lived Assets
During 2020, we recorded a non-cash impairment charge of other long-lived assets of $58 million related to management’s decision to exit certain smaller, underperforming markets and non-core businesses as well as a change in the extent to which certain self-developed software would be utilized. We recorded a non-cash charge of $88 million for the impairment of an indefinite-lived trade name related to our annual impairment testing.
There were no impairment charges in 2019 .
Restructuring Charges
In June 2020, we announced a broad-based optimization plan to drive permanent cost savings and operational efficiencies, as well as to position us for greater profitability and growth. The plan was substantially completed in 2020 .
We recorded $37 million in restructuring charges in 2020. These charges primarily related to severance costs associated with employee separation packages.
We recorded $30 million in restructuring charges, primarily related to employee severance costs associated with our plans to reduce selling, general and administrative expenses and consolidate operations centers, as well as automation initiatives in 2019.
Operating Income
Operating income was $679 million in 2020 as compared to $870 million in 2019. The decrease was driven primarily by the revenue decrease due to the COVID-19 pandemic discussed above, higher depreciation and amortization expense, higher restructuring charges and the impairment of other long-lived assets in 2020.
Interest Expense, Net
Interest expense was $329 million in 2020 compared to $342 million in 2019. This decrease was primarily due to slightly lower USD LIBOR interest rates on our senior secured term loans without hedged positions .
Foreign Currency Exchange Transaction Gains/(Losses), Net
Foreign currency exchange transaction gains/(losses), net, represent the net loss on revaluation of certain cash, external debt, intercompany loans and other receivables and payables. Fluctuations in the value of foreign currencies relative to the U.S. Dollar, particularly the Euro, have a significant effect on our operating results. The average U.S. Dollar to Euro exchange rate was $1.14 and $1.12 to €1.00 for the years ended December 31, 2020 and 2019, respectively.
We realized net gains of $17 million and net losses of $13 million in 2020 and 2019, respectively, resulting primarily from fluctuations in certain foreign currencies associated with intercompany transactions.
Other Expense, Net
Other expense, net of $20 million in 2020, was primarily related to certain costs incurred in connection with our debt refinancing transactions, as well as the write-off of certain previously deferred financing fees in conjunction with the refinancing, certain non-service related pension costs, and loss from business disposition.
Other expense, net of $77 million in 2019 was primarily related to a non-cash expense of $72 million for pension settlements which included plan transfers to third parties in the Netherlands and UK, where we terminated our responsibility for future defined benefit obligations and transferred that responsibility to the third parties. See Note 11 to our consolidated financial statements – “Pensions and Other Post-Retirement Benefits” for more information.
Income from continuing operations Before Income Taxes and Equity in Net Loss of Affiliates
Income was $347 million in 2020 compared to income of $438 million in 2019 due primarily to the consolidated results mentioned above.
Income Taxes
The effective tax rates in December 31, 2020 and 2019 were 41% and a benefit of 32%, respectively.
Our effective tax rate in December 31, 2020 was higher than the UK statutory rate primarily as a result of withholding and foreign taxes as well as state and local income taxes.
Our effective tax rate benefit in December 31, 2019 was lower than the UK statutory rate primarily as a result of the changes in estimates for uncertain tax positions and audit settlements and decreases in valuation allowances attributable to the utilization of
foreign tax credits and the utilization of net operating losses, offset by the unfavorable impact of state and local taxes and base erosion and anti-abuse tax (“BEAT”).
Adjusted EBITDA
(IN MILLIONS)
Year Ended
December 31,
Year Ended
December 31,
% Variance
Reported
Year Ended
December 31, 2019
Constant Currency
% Variance
Constant Currency
Adjusted EBITDA
Adjusted EBITDA increased 1.9% to $1,411 million in 2020 from $1,385 million in 2019, or an increase of 2.0% on a constant currency basis. Our Adjusted EBITDA margin increased to 41.98% in 2020 from 40.25% in 2019 driven by temporary cost savings realized in 2020 in response to the covid-19 pandemic and the Restructuring Plan, partially offset by the revenue performance discussed above and investments in our growth initiatives.
Results from Discontinued Operations for the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 as well as the Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
The Connect Transaction closed on March 5, 2021. The Company received net proceeds of $2.4 billion on March 5, 2021, subject to final closing adjustments. During the third quarter of 2021, the Company finalized the closing adjustments resulting in a $10.5 million reduction in net proceeds, and recorded a gain of $489 million net of tax, inclusive of closing adjustments, during the year ended December 31, 2021. Proceeds from the sale were primarily utilized for debt repayment. The results of operations of Global Connect have been classified as discontinued operations for all periods presented.
Net income/(loss) from discontinued operations, net of taxes from Global Connect in 2021 was $412 million as compared to $(196) million in 2020. The increase is primarily due to the gain on sale of $489 million recorded in 2021. Included in the $412 million is a net loss from Global Connect of $77 million, which reflects operating results through March 5, 2021. This compares to a net loss of $196 million in the twelve months of 2020 which included $107 million in restructuring expense and $38 million impairment of other long-lived assets.
Net loss from discontinued operations from Global Connect in 2020 was $196 million as compared to a loss of $982 million in 2019. The decrease in net loss from discontinued operations is primarily due to the goodwill impairment of $1,004 million recorded during the year ended December 31, 2019.
See Note 20 to our consolidated financial statements – Discontinued Operations - for further detail.
Consolidated Liquidity and Capital Resources
Cash flows from operations (including Global Connect through the Connect Transaction close date), provided a source of funds of $666 million, $999 million and $1,066 million during the years ended December 31, 2021, 2020 and 2019, respectively. This decrease in net cash provided in operating activities was primarily due to working capital timing and higher separation related cash costs, partially offset by the Adjusted EBITDA performance discussed above, lower interest payments, lower employee annual incentive payments, and lower income tax payments .
We provide additional liquidity through several sources including maintaining an adequate cash balance, access to global funding sources and a committed revolving credit facility. The following table provides a summary of the major sources of liquidity for the years ended December 31, 2021, 2020 and 2019:
(IN MILLIONS)
Net cash from operating activities
Cash and short-term marketable securities
Revolving credit facility
Of the $380 million in cash and cash equivalents at December 31, 2021, approximately $247 million was held in jurisdictions outside the U.S. We regularly review the amount of cash and cash equivalents held outside of the U.S. to determine the amounts necessary to fund the current operations of our foreign operations and their growth initiatives and amounts needed to service our U.S. indebtedness and related obligations.
The below table illustrates our weighted average interest rate and cash paid for interest over the last three years.
Weighted average interest rate
Cash paid for interest, net of amounts capitalized (in millions)
Our contractual obligations, commitments and debt service requirements over the next several years are significant. We believe we will have available resources to meet both our short-term and long-term liquidity requirements, including our senior secured debt service. We expect the cash flow from our operations, combined with existing cash and amounts available under the revolving credit facility, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, restructuring obligations, dividend payments and capital spending over the next year. In addition, we may, from time to time, purchase, repay, redeem or retire any of our outstanding debt securities (including any publicly issued debt securities) in privately negotiated or open market transactions, by tender offer or otherwise.
Except as disclosed below, 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.
Long-term borrowings
The following table provides a summary of our outstanding long-term borrowings as of December 31, 2021:
Weighted
(IN MILLIONS)
Carrying
Interest
Senior secured term loans
Amount
Rate
Maturing in 2023, L+1.75%
Maturing in 2023, L+2.00%
Maturing in 2023, $850 revolving credit facility L+1.75%
Total (with weighted-average interest rate)
Senior debenture loans
$500, maturing in 2025, 5.000%
$1,000, maturing in 2028, 5.625%
$750, maturing in 2030, 5.875%
$625, maturing in 2029, 4.500%
$625, maturing in 2031, 4.750%
Total (with weighted-average interest rate)
Total long-term debt
Finance lease and other financing obligations
Total debt and other financing arrangements
Less: Current portion of long-term debt, finance lease and other
financing obligations and other short-term borrowings
Non-current portion of long-term debt and finance lease and other
financing obligations
On March 16, 2021, primarily utilizing the proceeds from the Connect Transaction, we completed the partial prepayment of $1.0 billion of the senior secured term loans due 2023 and $0.3 billion of the senior secured term loans due 2025. We redeemed $150 million outstanding aggregate principal amount of its 5.500% senior notes due 2021 effective March 21, 2021 and called for redemption of $825 million of outstanding aggregate principal amount of the 5.000% senior notes due 2022 effective April 10, 2021, in each case at a redemption price equal to 100% of the principal amount of such notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.
The indentures governing the senior notes limit the majority of our subsidiaries’ ability to use assets as security in other transactions and sell certain assets or merge with or into other companies subject to certain exceptions. Upon a change in control, Nielsen is required under each indenture to make an offer to redeem all of the senior notes issued pursuant to such indenture at a redemption price equal to the 101% of the aggregate principal amount plus accrued and unpaid interest. The senior notes are jointly and severally guaranteed by the Company, substantially all of our wholly owned material U.S. subsidiaries and certain of the non-U.S. wholly-owned subsidiaries of the Company .
Nielsen applied the net proceeds of the offering plus cash on hand to prepay the approximately $430 million aggregate outstanding principal amount of senior secured dollar term loans and the approximately €530 million aggregate outstanding principal amount of senior secured euro term loans which were both due 2025 and the approximately €204 million aggregate outstanding principal amount of senior secured euro term loans due 2023 , in each case, at a prepayment price equal to par plus accrued and unpaid interest. Nielsen wrote-off certain previously deferred financing fees of $20 million in connection with the May 2021 prepayments.
In connection with the prepayment of the senior secured dollar and euro term loans due 2025, Nielsen terminated the Credit Agreement dated June 4, 2020, as amended on July 21, 2020, and all commitments thereunder .
During the fourth quarter of 2021, Nielsen utilized cash on hand to partially prepay approximately $250 million of senior secured dollar term loans due 2023 at a prepayment price equal to par plus accrued and unpaid interest. Nielsen wrote-off certain previously deferred financing fees of $0.4 million in connection with the prepayments made during the fourth quarter of 2021.
For the years ended December 31, 2021, 2020 and 2019 interest expense, net, includes zero, $2 million and $6 million of interest income in our consolidated statement of operations.
Covenants
As of December 31, 2021, Nielsen were in full compliance with the financial covenant described below.
Nielsen’s Sixth Amended and Restated Credit Agreement, dated July 21, 2020 (the “Amended Credit Agreement”) contain a number of covenants that, among other things, restrict, subject to certain exceptions, the ability of Nielsen Holding and Finance B.V. and its restricted subsidiaries (which together constitute most of our subsidiaries) to incur 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, amend or otherwise alter terms of certain indebtedness, sell certain assets, transact with affiliates, enter into agreements limiting subsidiary distributions and alter the business they conduct. These entities are restricted, subject to certain exceptions, in their ability to transfer their net assets to Nielsen. Such restricted net assets amounted to approximately $1.3 billion at December 31, 2021. The Amended Credit Agreement contains a total leverage covenant that requires the Covenant Parties (as defined in the Amended Credit Agreement) maintain a ratio of Consolidated Total Net Debt (as defined in the Amended Credit Agreement) to Consolidated EBITDA (as defined in the Amended Credit Agreement) at or below 5.50 to 1.00, measured at the end of each calendar quarter for the four quarters most recently ended. Neither Nielsen nor TNC B.V. is currently bound by any financial or negative covenants contained in the Amended Credit Agreement. The Amended Credit Agreement also contain certain customary affirmative covenants and events of . Certain significant financial covenants are described further below.
Failure to comply with the financial covenant described above would result in an event of default under Nielsen’s Amended Credit Agreement unless waived by certain of Nielsen’s term lenders and our revolving lenders. An event of default under the Company’s Amended Credit Agreement can result in the acceleration of our indebtedness under the facilities thereunder, which in turn would result in an event of default and possible acceleration of indebtedness under the agreements governing Nielsen’s debt securities. As Nielsen’s failure to comply with the financial covenant described above can cause Nielsen to go into default under the agreements governing our indebtedness, management believes that our Amended Credit Agreement and this covenant are material to Nielsen.
Pursuant to the terms of our Amended Credit Agreement, Nielsen are subject to making mandatory prepayments on the term loans outstanding thereunder to the extent in any full calendar year we generate Excess Cash Flow (“ECF”), as defined in the Amended Credit Agreement. The percentage of ECF that must be applied as a repayment under the Amended Credit Agreement is a function of several factors, including Nielsen’s ratio of total net debt to Covenant EBITDA, as well other adjustments, including any voluntary term loan repayments and permanent reductions of revolving credit commitments made in the course of the calendar year. To the extent any mandatory repayment is required pursuant to this ECF clause; such payment must generally occur on or around the time of the delivery of the annual consolidated financial statements to the applicable lenders. At December 31, 2021, Nielsen’s ratio of total net debt to Covenant EBITDA was less than 5.00 to 1.00 and therefore no mandatory repayment was required. Nielsen’s next ECF measurement date will occur upon completion of the 2022 results, and although Nielsen does not expect to be required to issue any mandatory repayments in 2022 or beyond, it is uncertain at this time if any such payments will be required in future periods .
Supplemental Consolidating Information
Pursuant to Regulation S-X Rule 13-01, which simplifies certain disclosure requirements for guarantors and issuers of guaranteed securities, Nielsen is no longer required to provide consolidating financial statements for Nielsen and its subsidiaries, including the guarantors and non-guarantors under the Amended Credit Agreement and the indentures governing our senior notes. Nielsen Holding and Finance B.V., the parent covenant party under the Amended Credit Agreement and the indentures governing the Company’s senior notes, and its restricted subsidiaries together comprise substantially all of Nielsen’s assets, liabilities and operations, and there are no material differences between the consolidating information related to Nielsen, on the one hand, and Nielsen Holding and Finance B.V. and its restricted subsidiaries on a standalone basis, on the other hand.
Revolving Credit Facility
The Amended Credit Agreement contains a senior secured revolving credit facility with aggregate revolving credit commitments of $850 million and a final maturity of July 2023 under which Nielsen Finance LLC, TNC (US) Holdings, Inc., and Nielsen Holding and Finance B.V. can borrow revolving loans. The revolving credit facility can also be used for letters of credit, guarantees and swingline loans.
The senior secured revolving credit facility is provided under the Amended Credit Agreement and so contains covenants and restrictions as noted above with respect to the Amended Credit Agreement. Obligations under the revolving credit facility are guaranteed by the same entities that guarantee obligations under the Amended Credit Agreement.
As of December 31, 2021, Nielsen had zero borrowings outstanding and outstanding letters of credit of $13 million. As of December 31, 2020, Nielsen had zero borrowings outstanding and outstanding letters of credit of $18 million. As of December 31, 2021, Nielsen had $837 million available for borrowing under the revolving credit facility.
Dividends and Share Repurchase
We continue to drive shareholder value through our quarterly cash dividend policy, which was adopted by our Board of Directors (“Board”) in 2013. Under this plan, we have paid consecutive quarterly cash dividends since 2013. We paid $86 million in cash dividends during each of the years ended December 31, 2021 and 2020. On November 3, 2019, the Board approved a plan to reduce the quarterly cash dividend, with the goal of strengthening our balance sheet and providing added flexibility to invest for growth. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will be subject to the Board’s continuing determination that the dividend policy and the declaration of dividends thereunder are in the best interests of our shareholders, and are in compliance with all laws and agreements to which we are subject.
On February 10, 2022, our Board declared a cash dividend of $0.06 per share on our common stock. The dividend is payable on March 17, 2022 to shareholders of record at the close of business on March 3, 2022.
On February 26, 2022, our Board authorized the repurchase of up to $1 billion of our ordinary shares. The Board authorization may be suspended, modified or terminated at any time without prior notice subject to compliance with applicable laws and regulation. This share repurchase authorization replaces all previous authorizations. There were no share repurchases in 2021 or 2020. The timing of any repurchases will depend on a number of factors, including constraints specified in any Rule 10b5-1 trading, price, general business and market conditions, and alternative investment opportunities. This authorization has been executed within the limitations of the authority granted to us at our annual shareholders meeting held on May 25, 2021 (the "Authority") such authority to remain in place until the end of the 2022 annual shareholders meeting, or close of business on August 25, 2022, whichever is earlier. Pursuant to the Authority, we may only repurchase ordinary shares in accordance with procedures for "off-market" purchases under the UK Companies Act (the "Act") and, in order to be compliant with the Act, share repurchases can only be made pursuant to the terms of one or more share repurchase agreements entered into in either of the forms approved, and with counterparties that have also been approved, by shareholders at the 2021 annual shareholders meeting.
Two forms of share repurchase contracts were approved by shareholders. The first provides that the counterparty will purchase shares on the New York Stock Exchange at such prices and in such quantities as we may instruct from time to time, subject to the limitations set forth in Rule 10b-18 of the Exchange Act, as amended. The second form of agreement provides that the amount of shares to be purchased each day, the limit price and the total amount that may be purchased under the agreement will be determined at the time the agreement is executed. Both agreements provide that the counterparty will purchase the ordinary shares as principal and sell any ordinary shares purchased to us in record form. Any such shares repurchased by us pursuant to either form of contract will be cancelled.
Consolidated Cash Flows for the year ended December 31, 2021 versus for the year ended December 31, 2020
Operating activities . Net cash provided by operating activities was $666 million in 2021, compared to $999 million in 2020. This decrease in net cash provided by operating activities was primarily due to working capital timing and higher separation related cash costs, partially offset by the Adjusted EBITDA performance discussed above, lower interest payments, lower employee annual incentive payments, and lower income tax payments . Our key collections performance measure, days billing outstanding, increased by two days as compared to the same period last year, excluding Global Connect results .
Investing activities. Net cash provided by investing activities was $1,933 million in 2021, compared to net cash used in investing activities $537 million in 2020. The primary drivers for the increase were the proceeds from the sale of our Global Connect business received during the first quarter of 2021 and lower capital expenditures during the year ended December 31, 2021 as compared to the same period for 2020.
Financing activities . Net cash used in financing activities was $2,816 million in 2021, compared to $307 million in 2020. The increase in net cash used by financing activities was primarily due to higher debt repayments and lower net proceeds from debt issuances as compared to the same period for 2020 .
Consolidated Cash Flows for the year ended December 31, 2020 versus for the year ended December 31, 2019
Operating activities . Net cash provided by operating activities was $999 million in 2020, compared to $1,066 million in 2019. This decrease in net cash provided in operating activities was primarily due to higher employee annual incentive payments and higher restructuring payments, partially offset by working capital timing and lower income tax payments and interest payments . Our key collections performance measure, days billing outstanding (DBO), increased by 3 days as compared to the same period last year.
Investing activities. Net cash used in investing activities was $537 million in 2020, compared to $582 million in 2019. The primary drivers for the decrease were lower acquisition payments and a decrease in purchases of equity investments during the year ended December 31, 2020 as compared to the same period for 2019.
Financing activities . Net cash used in financing activities was $307 million in 2020, compared to $544 million in 2019. The decrease in net cash used in financing activities was primarily due to the decrease in cash dividends, as described in “Dividends and Share Repurchase”, partially offset by the net proceeds from debt issuances and repayments compared to the same period for 2019.
Capital Expenditures (includes Global Connect prior to the sale)
Investments in property, plant, equipment, software and other assets totaled $341 million, $519 million and $519 million in 2021, 2020 and 2019, respectively.
Commitments and Contingencies
Outsourced Services Agreements
In July 2019, Nielsen amended its Second Amended and Restated Master Services Agreement (the “MSA”), dated as of October 1, 2017 and effective as of January 1, 2017 (the “Effective Date”), with Tata America International Corporation and Tata Consultancy Services Limited (jointly, “TCS”) by executing Amendment Number One (the “Amendment”) with TCS, dated as of July 1, 2019 and effective as of January 1, 2019 (the “Amendment Effective Date”). The Amendment reduced the amount of services Nielsen committed to purchase from TCS from the Amendment Effective Date through the remaining term of the MSA (the “Minimum Commitment”) to $1.4 billion, including a commitment to purchase at least $184 million in services per year from 2021 through 2024, and $138 million in services in 2025 (in each of the foregoing cases, the “Annual Commitment”). As of December 31, 2020, the aggregate TCS commitment was approximately $875 million. In September 2021, it was agreed with TCS that Nielsen’s remaining Minimum Commitment, after giving effect to the sale of Global Connect, was $90 million (“Remaining Minimum Commitment”). It was also agreed that the remaining annual commitment for services would be $45 million in 2021 and $17 million per year from 2022 through 2025 (“Remaining Annual Commitment”). As of December 31, 2021, the Remaining Minimum Commitment was fully and the Remaining Annual Commitment no longer applies as a result.
Other Contractual Obligations
Our other contractual obligations include finance lease obligations (including interest portion), facility leases, leases of certain computer and other equipment, agreements to purchase data and telecommunication services, the payment of principal and interest on debt and pension fund obligations.
At December 31, 2021, the minimum annual payments 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. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax positions at December 31, 2021, we are unable to make reasonably reliable estimates of the timing of any potential cash settlements with the respective taxing authorities. Therefore, $168 million in uncertain tax positions (which includes interest and penalties of $7 million) have been excluded from the contractual obligations table below. See Note 15 to our consolidated financial statements – “Income Taxes” – for a discussion on income taxes.
Payments due by period
(IN MILLIONS)
Total
Thereafter
Finance lease obligations (a)
Operating leases (b)
Other contractual obligations (c)
Long-term debt, including current portion (a)
Interest (d)
Pension fund obligations (e)
Total
Our short-term and long-term debt obligations are described in Note 12 – “Long-term Debt and Other Financing Arrangements” and our short-term and long-term finance lease obligations are described in Note 5 to our consolidated financial statements – “Leases”.
Our operating lease obligations are described in Note 17 to our consolidated financial statements – “Commitments and Contingencies”.
Other contractual obligations represent obligations under agreements, which are not unilaterally cancelable by us, are legally enforceable and specify fixed or minimum amounts or quantities 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 including cloud services.
Interest payments consists of interest on both fixed-rate and variable-rate debt based on LIBOR as of December 31, 2021.
Our contributions to pension and other post-retirement defined benefit plans were $14 million, $13 million and $4 million during 2021, 2020 and 2019, respectively. Future minimum pension and other post-retirement benefits contributions are not determinable for time periods after 2022. See Note 11 to our consolidated financial statements – “Pensions and Other Post -Retirement Benefits” – for a discussion on plan obligations.
Guarantees and Other Contingent Commitments
At December 31, 2021, we were committed under the following significant guarantee arrangements:
Sub-lease guarantees. We provide sub-lease guarantees in accordance with certain agreements pursuant to which we guarantee all rental payments upon default of rental payment by the sub-lessee. To date, we have not been required to perform under such arrangements, and do not anticipate making any significant payments related to such guarantees and, accordingly, no amounts have been recorded.
Letters of credit. Letters of credit issued and outstanding amount to $13 million at December 31, 2021.
Legal Proceedings and Contingencies
In August 2018, a putative shareholder class action lawsuit was filed in the Southern District of New York, naming as defendants Nielsen, former Chief Executive Officer Dwight Mitchell Barns, and former Chief Financial Officer Jamere Jackson. Another lawsuit, which alleged similar facts but also named other of our officers, was filed in the Northern District of Illinois in
September 2018 and transferred to the Southern District of New York in December 2018. The actions were consolidated on April 22, 2019, and the Public Employees’ Retirement System of Mississippi was appointed lead plaintiff for the putative class. The operative complaint was filed on September 27, 2019, and asserts violations of certain provisions of the Securities Exchange Act of 1934, as amended, based on allegedly false and materially misleading statements relating to the outlook of our Buy segment (now “Global Connect,” which was sold in the first quarter of 2021), o ur preparedness for changes in global data privacy laws and our reliance on third-party data. We moved to dismiss the operative complaint on November 26, 2019. On January 4, 2021, certain of th e allegations against us and our officers were dismissed, while others were sustained. On February 3, 2022, the parties reached a settlement in principle to resolve this and are currently documenting the terms of that settlemen t for submission to the Court. Once the formal documents are executed and submitted to the Court, the settlement will be su bject to Court approval. The amount of any settlement payment, if approved, is expected to be paid by our insurance carriers.
In addition, in January 2019, a shareholder derivative lawsuit was filed in New York Supreme Court against a number of our current and former officers and directors. The derivative lawsuit alleges that the named officers and directors breached their fiduciary duties to us in connection with factual assertions substantially similar to those in the putative class action complaint. The derivative lawsuit further alleges that certain officers and directors engaged in trading our stock based on material, nonpublic information. An amended complaint was filed on May 7, 2021, which we moved to dismiss on July 16, 2021. By agreement dated September 8, 2021, the action was stayed for a period of 90 days. On January 31, 2022, the stay was extended to June 1, 2022. We intend to defend this lawsuit vigorously. Based on currently available information, we believe that we have meritorious defenses to this action and that its resolution is not likely to have a material adverse effect on our business, financial position, or results of operations .
We are subject to litigation and other claims in the ordinary course of business, some of which include claims for substantial sums. Accruals have been recorded when the outcome is probable and can be reasonably estimated. While the ultimate results of claims and litigation cannot be determined, we expect that the ultimate disposition of these matters will not have a material adverse effect on our operations or financial condition. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect our future results of operations or cash flows in a particular period.
Summary of Recent Accounting Pronouncements
Income Taxes (Topic 740): Simplifying the Accounting for Income taxes
Effective January 1, 2021, we adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard amends and aims to simplify accounting disclosure requirements regarding a number of topics including: intraperiod tax allocation, accounting for deferred taxes when there are changes in consolidation of certain investments, tax basis step up in an acquisition and the application of effective rate changes during interim periods, amongst other improvements. The adoption of this new standard did not have a significant impact on our financial statements.
Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting
On March 12, 2020, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASC 848 contains optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The provisions of ASC 848 must be applied at a Topic, Subtopic or Industry Subtopic for all transactions other than derivatives, which may be applied at a hedging relationship level. The Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur .
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 equity instruments. We are exposed to market risk, primarily related to foreign exchange and interest rates. We actively monitor these exposures. Historically, in order to manage the volatility relating to these exposures, we entered into a variety of derivative financial instruments, mainly interest rate swaps, cross-currency swaps and forward rate agreements. Currently we only employ basic contracts, that is, without options, embedded or otherwise. Our objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings, cash flows and the value of our net investments in subsidiaries resulting from changes in interest rates and foreign currency rates. It is our policy not to trade in financial instruments.
Foreign Currency Exchange Rate Risk
We operate globally and we predominantly generate revenues 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 our reporting currency, we are subject to currency translation exposure on the profits of our operations, in addition to transaction exposure.
For the years ended December 31, 2021 and 2020, we recorded a net loss of $1 million and $2 million, respectively, associated with foreign currency derivative financial instruments within foreign currency exchange transactions gains/(losses), net in our consolidated statements of operations. As of December 31, 2021 and 2020, the notional amounts of outstanding foreign currency derivative financial instruments were $29 million and $68 million, respectively.
The table below details the percentage of revenues and expenses by currency for the years ended December 31, 2021 and 2020:
U.S. Dollars
Euro
Other Currencies
Year ended December 31, 2021
Revenues
Operating costs
Year ended December 31, 2020
Revenues
Operating costs
Based on the year ended December 31, 2021, a one cent change in the U.S. dollar/Euro exchange rate would have impacted revenues by approximately $2 million annually, with an immaterial impact on operating income/(loss).
Interest Rate Risk
We continually review our fixed and variable rate debt along with related hedging opportunities in order to ensure our portfolio is appropriately balanced as part of our overall interest rate risk management strategy and through this process we consider both short-term and long-term considerations in the U.S. and global financial markets in making adjustments to our tolerable exposures to interest rate risk. At December 31, 2021, we had $2,093 million of floating-rate debt under our senior secured credit facilities, of which $1,050 million was subject to effective floating-fixed interest rate swaps. These derivatives have been designated as interest rate cash flow hedges and fix the LIBOR-related portion of interest rates of a corresponding amount of our variable-rate-debt. A one percent increase in interest rates applied to our floating rate indebtedness would therefore increase annual interest expense by approximately $10 million ($21 million without giving effect to any of our interest rate swaps).
Derivative instruments involve, to varying degrees, elements of non-performance, or credit risk. We do not believe that we currently face a significant risk of loss in the event of non-performance by the counterparties associated with these instruments, as these transactions were executed with a diversified group of major financial institutions with a minimum investment-grade or better credit rating. Our credit risk exposure is managed through the continuous monitoring of our exposures to such counterparties.
