UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the fiscal year ended December 31,
2009
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or
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o
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Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the transition period
from to
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Commission file
number: 1-1969
Arbitron Inc.
(Exact Name of Registrant as
Specified in Its Charter)
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Delaware
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52-0278528
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification
No.)
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9705 Patuxent Woods Drive
Columbia, Maryland 21046
(Address of principal executive
offices) (zip code)
(410) 312-8000
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b)
of the Act:
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Title of Each Class Registered
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Name of Each Exchange on Which Registered
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Common Stock, par value $0.50 per share
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of
1934. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period than the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
The aggregate market value of the registrants common stock
as of June 30, 2009, the last business day of the
registrants most recently completed second fiscal quarter
(based upon the closing sale price of Arbitrons common
stock as reported by the New York Stock Exchange on that date),
held by nonaffiliates, was $415,385,558.91.
Common stock, par value $0.50 per share, outstanding as of
February 19, 2010: 26,585,627 shares
DOCUMENTS
INCORPORATED BY REFERENCE
Part III incorporates certain information by reference from
the registrants definitive proxy statement for the 2010
annual meeting of stockholders, which proxy statement will be
filed no later than 120 days after the end of the
registrants fiscal year ended December 31, 2009.
Arbitron owns or has the rights to various trademarks, trade
names or service marks used in its radio audience measurement
business and subsidiaries, including the following: the Arbitron
name and logo,
Arbitrendssm,
RetailDirect®,
RADAR®,
TAPSCANtm,
TAPSCAN
WORLDWIDEtm,
LocalMotion®,
Maximi$er®,
Maximi$er®
Plus, Arbitron PD
Advantage®,
SmartPlus®,
Arbitron Portable People
MeterTM,
PPMtm,
Arbitron
PPMtm,
Arbitron
PPM®,
Marketing Resources
Plus®,
MRPsm,
PrintPlus®,
MapMAKER
Directsm,
Media
Professionalsm,
Media Professional
Plussm,
QUALITAPsm,
and
Schedule-Itsm.
The trademarks
Windows®
and Media Rating
Council®
referred to in this Annual Report on
Form 10-K
are the registered trademarks of others.
4
FORWARD-LOOKING
STATEMENTS
The following discussion should be read in conjunction with our
audited consolidated financial statements and the notes thereto
in this Annual Report on
Form 10-K.
In this report, Arbitron Inc. and its subsidiaries may be
referred to as Arbitron, or the Company,
or we, or us, or our.
This Annual Report on
Form 10-K
contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The statements
regarding Arbitron in this document that are not historical in
nature, particularly those that utilize terminology such as
may, will, should,
likely, expects, intends,
anticipates, estimates,
believes, or plans or comparable
terminology, are forward-looking statements based on current
expectations about future events, which we have derived from
information currently available to us. These forward-looking
statements involve known and unknown risks and uncertainties
that may cause our results to be materially different from
results implied by such forward-looking statements. These risks
and uncertainties include, in no particular order, whether we
will be able to:
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successfully maintain and promote industry usage of our
services, a critical mass of broadcaster encoding, and the
proper understanding of our audience measurement services and
methodology in light of governmental actions, including
investigation, regulation, legislation or litigation, customer
or industry group activism, or adverse community or public
relations efforts;
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complete the Media Rating Council, Inc. (MRC) audits
of our local market Arbitron Portable People
Metertm
(PPMtm)
ratings services in a timely manner and successfully obtain
and/or
maintain MRC accreditation for our audience measurement services;
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successfully commercialize our PPM service;
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design, recruit and maintain PPM panels that appropriately
balance research quality, panel size and operational cost;
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absorb costs related to legal proceedings and governmental
entity interactions and avoid any related fines, limitations or
conditions on our business activities, including, without
limitation, by meeting or exceeding our commitments and
agreements with various governmental entities;
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successfully develop, implement and fund initiatives designed to
increase sample quality;
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successfully manage the impact on costs of data collection due
to lower respondent cooperation in surveys, consumer trends
including a trend toward increasing incidence of cell-phone-only
households, privacy concerns, technology changes,
and/or
government regulations;
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provide appropriate levels of operational capacity and funding
to support the more labor intensive identification and
recruitment of cell-phone-only households into our panels and
samples;
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successfully manage the impact on our business of the current
economic downturn generally, and in the advertising market, in
particular, including, without limitation, the insolvency of any
of our customers or the impact of such downturn on our
customers ability to fulfill their payment obligations to
us;
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compete with companies that may have financial, marketing,
sales, technical or other advantages over us;
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effectively respond to rapidly changing technological needs of
our customer base, including creating proprietary technology and
systems to support our cell-phone-only sampling plans, and new
customer services that meet these needs in a timely manner;
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successfully execute our business strategies, including
evaluating and, where appropriate, entering into potential
acquisition, joint-venture or other material third-party
agreements;
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effectively manage the impact, if any, of any further ownership
shifts in the radio and advertising agency industries;
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successfully develop and implement technology solutions to
encode
and/or
measure new forms of media content and delivery, and advertising
in an increasingly competitive environment;
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successfully launch our cross-platform measurement
initiatives; and
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renew contracts with key customers.
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There are a number of additional important factors that could
cause actual events or our actual results to differ materially
from those indicated by such forward-looking statements,
including, without limitation, the factors set forth in
Item 1A. Risk Factors in this
report, and other factors noted in Managements Discussion
and Analysis of Financial Condition and Results of Operations,
particularly those noted under Critical Accounting
Policies and Estimates, and elsewhere, and any subsequent
periodic or current reports filed by us with the Securities and
Exchange Commission.
In addition, any forward-looking statements represent our
expectations only as of the day we first filed this annual
report with the Securities and Exchange Commission and should
not be relied upon as representing our expectations as of any
subsequent date. While we may elect to update forward-looking
statements at some point in the future, we specifically disclaim
any obligation to do so, even if our expectations change.
6
PART I
Arbitron Inc., a Delaware corporation, was formerly known as
Ceridian Corporation (Ceridian). Ceridian was formed
in 1957, though a predecessor began operating in 1912. We
commenced our audience research business in 1949. Our principal
executive offices are located at 9705 Patuxent Woods Drive,
Columbia, Maryland 21046 and our telephone number is
(410) 312-8000.
Overview
We are a leading media and marketing information services firm
primarily serving radio, advertising agencies, cable and
broadcast television, advertisers, retailers,
out-of-home
media, online media and, through our Scarborough Research joint
venture with The Nielsen Company (Nielsen),
broadcast television and print media. We currently provide four
main services:
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measuring and estimating radio audiences in local markets in the
United States;
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measuring and estimating radio audiences of network radio
programs and commercials;
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providing software used for accessing and analyzing our media
audience and marketing information data; and
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providing consumer, shopping, and media usage information
services.
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We provide radio audience estimates and related services in the
United States to radio stations, advertising agencies, and
advertisers. We estimate the size and demographics of the
audiences of radio stations in local markets in the United
States and report these estimates and certain related data as
ratings to our customers. Our customers use the information we
provide for valuing and executing advertising transactions.
Broadcasters use our data to price and sell advertising time,
and advertising agencies and advertisers use our data in
purchasing advertising time. Our Radio All Dimension Audience
Research (RADAR) service estimates national radio
audiences and the size and composition of audiences of network
radio programs and commercials.
We also provide software applications that allow our customers
to access our databases and enable our customers to more
effectively analyze and understand that information for sales,
management, and programming purposes. Some of our software
applications also allow our customers to access data owned by
third parties, provided the customers have a separate license to
use such third-party data.
In addition to our core radio ratings services, we provide
qualitative measures of consumer demographics, retail behavior,
and media consumption in local markets throughout the United
States. We provide custom research services to companies that
are seeking to demonstrate the value of their advertising
propositions. We also seek to market our quantitative and
qualitative audience and consumer information to customers
outside of our traditional base, such as the advertising sales
organizations of local cable television companies, national
cable and broadcast television networks and
out-of-home
media sales organizations.
We have developed an electronic Portable People
Metertm
(PPMtm)
service of audience measurement for commercialization in the
United States and have licensed our PPM technology to a number
of international media information services companies to use in
their media audience measurement services in specific countries
outside of the United States. See Item 1.
Business Portable People Meter Service below.
Our quantitative radio audience ratings services have
historically accounted for a substantial majority of our
revenue. The radio audience ratings service and related software
represented 90 percent, 89 percent, and
88 percent of our total revenue in 2009, 2008, and 2007,
respectively. Our revenue from continuing operations from
domestic sources and international sources was approximately
98 percent and two percent of our total revenue,
respectively, for the year ended December 31, 2009,
99 percent and one percent for the year ended
December 31, 2008, and 98 percent and two percent for
the year ended December 31, 2007. Additional information
regarding revenues by service and by geographical area is
provided in Note 20 in the Notes to Consolidated Financial
Statements contained in this Annual Report on
Form 10-K.
7
Corporate
Strategy
Our leading strategic objectives include strengthening and
defending our radio audience measurement business and expanding
our information services to a broader range of media, including
broadcast television, cable,
out-of-home
media, satellite radio and television, Internet broadcasts, and
mobile media. We believe there is an opportunity to leverage the
unique capabilities of the PPM technology to provide advertisers
with stronger return on investment tools that can follow
todays mobile consumers media consumption across
multiple platforms. We refer to this strategy as our
cross-platform initiative. Key elements of our
strategy to pursue these objectives include:
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Improving our customer value proposition. We
intend to continue to invest in research and quality
improvements while increasing utility in our radio audience
measurement services. We plan to facilitate this by engaging
with our customers, listening to and understanding their needs
and requirements and providing solutions that are competitive on
price, quality and value.
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Diversifying revenues. We believe that growth
opportunities exist in adjacent markets and intend to seek to
expand our customer base by developing and marketing new
information services designed to assist customers in
implementing marketing strategies.
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Building on our experience in the radio audience measurement
industry and our PPM technology to expand into information
services for other types of media
and/or
cross-platform media. In some cases, we may enter
into agreements with third parties to assist with the marketing,
technical and financial aspects of expanding into measurement
services for other types of media
and/or
cross-platform media.
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Developing and commercializing the next-generation data
collection and processing techniques. Our
businesses require sophisticated data collection and processing
systems, software and other technology. The collection of our
survey participant information in our diary-based radio ratings
service is dependent on individuals keeping track of their
listening, viewing and reading activities in diaries. In light
of the dynamic nature of the media industry, including in the
digital space, we will need to continue to attempt to develop
our data collection, processing and software systems to
accommodate these changes. The development of our PPM ratings
service is in response to a growing demand for higher quality,
and more efficient and timely methods for measuring and
reporting audiences.
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Addressing scale issues. We compete against
many companies that are larger and have greater capital and
other resources. We will seek to explore and evaluate strategic
opportunities to expand our business and better enable us to
compete with such companies.
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Expanding our international PPM business. We
continue to explore opportunities to license our PPM technology
into selected international regions, such as Europe and the
Asia/Pacific regions. We believe there is an international
demand for quality audience information from global advertisers
and media.
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Industry
Background and Markets
Since 1965, we have delivered to the radio industry timely and
actionable radio audience information collected from a
representative sample of radio listeners. The presence of
independent audience estimates in the radio industry has helped
radio broadcasters to price and sell advertising time, and
advertising agencies and advertisers to purchase advertising
time. The Arbitron ratings have also become a valuable tool for
use in radio programming, distribution, and scheduling decisions.
Shifts in radio station ownership in the United States, among
other factors, have led to a greater diversity of programming
formats. As audiences have become more fragmented, advertisers
have increasingly sought to tailor their advertising strategies
to target specific demographic groups through specific media.
The audience information needs of radio broadcasters,
advertising agencies, and advertisers have correspondingly
become more complex. Increased competition, including from
nontraditional media, such as the Internet, and more complex
informational requirements have heightened the desire of radio
broadcasters for more frequent and timely data delivery,
improved information management systems, larger sample sizes,
and more sophisticated means to analyze this information.
8
In addition, there is a demand for high-quality radio and
television audience information internationally from the
increasing number of commercial, noncommercial, and public
broadcasters in other countries.
As the importance of reaching niche audiences with targeted
marketing strategies increases, broadcasters, publishers,
advertising agencies, and advertisers increasingly require that
information regarding exposure to advertising is provided on a
more granular basis and is coupled with more detailed
information regarding lifestyles and purchasing behavior of
consumers. We believe the desire to integrate purchase data
information with advertising exposure information and our
ability to estimate a single consumers cross-platform
advertising exposure may create future opportunities for
innovative approaches to satisfy these information needs.
Portable
People Meter Technology
Since 1992, we have pursued a strategy of evolving our audience
ratings service in the largest markets from diaries, which are
completed by hand and returned by mail from survey participants,
to portable electronic measurement devices, which passively
collect information regarding exposure of survey participants
(whom we refer to as panelists) to encoded media
without additional manual effort by the panelists beyond
carrying the meter. We have pursued this strategy in an effort
to improve quality by taking advantage of new technological
capabilities and to address the vast proliferation of media
delivery vehicles, both inside and outside of the home.
We have developed our proprietary PPM technology, which is
capable of collecting data regarding panelists exposure to
encoded media for cross-platform programming and advertising
purposes including, among others, broadcast and satellite radio,
broadcast, cable and satellite television, Internet, and retail
in-store audio and video broadcasts. The PPM meter is a small
cell phone-sized device that a panelist carries throughout the
day. The PPM meter automatically detects proprietary codes that
are inaudible to the human ear, which broadcasters embed in the
audio portion of their programming using technology and encoders
we license to the broadcasters at no cost. We refer to the
embedding of our proprietary codes into the audio portion of
broadcasters programming as encoding the
broadcast. These proprietary codes identify the encoded media to
which a panelist is exposed throughout the day without the
panelist having to engage in any recall-based manual recording
activities. At the end of each day, the panelist places the PPM
device into a base station that recharges the device and sends
the collected codes to Arbitron for tabulation and use in
creating our audience estimates.
We believe there are many advantages to our PPM technology. It
is simple and easy for panelists to use. It requires no button
pushing, recall, or other effort by the panelist to identify and
memorialize media outlets to which they are exposed. The PPM
technology can passively detect exposure to encoded media by
identifying each source using our unique identification codes.
We believe the PPM service can help support the media
industrys increased focus on providing accountability for
the investments made by advertisers. It helps to shorten the
time period between when programming runs and when audience
estimates are reported, and can be utilized to provide
cross-platform measurement from the same panelist. The PPM
technology also produces high-quality compliance data, which we
believe is an additional advantage that makes the PPM data more
accountable to advertisers than various recall-based data
collection methods, such as diaries. The PPM technology can
produce more granular data than the recall-based data collection
methods, such as diaries, including minute by minute exposure
data, which we believe can be of particular value to media
programmers. Because our PPM service panels have larger weekly
and monthly samples than our Diary service, the audience
estimates exhibit more stable listening trends between survey
reports. Also, our PPM technology can be leveraged to measure
audiences of
out-of-home
media, print, new digital platforms, time-shifted broadcasts
(such as media recorded for later consumption using a DVR or
similar technology), and broadcasts in retail, sports, music,
and other venues.
The Audience Reaction service offered by Media Monitors, LLC
(Media Monitors) allows Media Monitors to combine
our PPM data with its airplay information to provide a service
designed to help radio programmers who also license our data
hear what audio was broadcast while observing changes in the
audience estimates. Media Monitors uses minute-level data from
our PPM ratings service for the
Mscoretm
index, which estimates how much a particular song aids in radio
listenership retention. We receive a royalty from Media Monitors
in connection with these services.
9
Radio
Audience Measurement Services
Portable
People Meter Ratings Service
Collection of Listener Data Through PPM
Methodology. In our PPM service, we gather data
regarding exposure to encoded audio material using our PPM
devices. We randomly recruit a sample panel of households to
participate in the service (all persons aged six and older in
the household). The household members are asked to participate
in the panel for a period of up to two years, carrying their
meters throughout their day. Panelists earn points based on
their compliance with the task of carrying the meter. Longer
carry time results in greater points, which are the basis for
monthly cash incentives we pay to our panel participants.
Demographic subgroups that our experience indicates may be less
likely to comply with the survey task of carrying the meter,
such as younger adults, are offered higher premiums based on
their compliance with the survey task. We consider the amount of
the cash incentive that we pay to the PPM panelists to be
proprietary information.
The PPM device collects the codes and adds a date/time stamp to
each listening occasion. At the end of each day, panelists place
their meters in a docking station and the information is
downloaded to Arbitron for processing, tabulation, and analysis
in producing our listening estimates. We issue a ratings report
in each measured market for 13 unique four-week measurement
periods per year. We also issue interim weekly reports to
station subscribers for programming information. Users access
our ratings estimates through an Internet-based software system
that we provide.
Commercialization. We currently utilize our
PPM ratings service to produce radio audience estimates in 33
United States local markets. We are in the process of executing
our previously announced plan to commercialize progressively our
PPM ratings service in the largest United States radio markets,
which we currently anticipate will result in commercialization
of the service in 48 local markets by December 2010
(collectively, the PPM Markets). We may continue to
update the timing of commercialization and the composition of
the PPM Markets from time to time.
During 2007 and 2008, we commercialized the PPM ratings service
in 15 local markets. During 2009, we commercialized the PPM
ratings service in 18 local markets.
We currently intend to commercialize the PPM service in another
15 local markets during 2010. On January 5, 2010, we
announced that we will not commercialize the PPM ratings service
in the New Orleans local market in 2010, but will maintain an
ongoing evaluation of that market.
Media
Rating Council Accreditation
The Media Rating Council, Inc. (the MRC) is a
voluntary, nonprofit organization, comprised of broadcasters,
advertisers, advertising agencies, and other users of media
research that reviews and accredits audience ratings services.
The MRC accreditation process is voluntary and there is no
requirement, legal or otherwise, that rating services seek
accreditation or submit to an MRC audit. MRC accreditation is
not a prerequisite to commercialization of any of our audience
ratings services.
Although accreditation is not required, we are pursuing MRC
accreditation for several of our audience ratings services. We
currently intend to continue to use commercially reasonable
efforts in good faith to pursue MRC accreditation of our PPM
ratings service in each PPM Market where we have commercialized
or intend to commercialize the service. We believe that we have
complied with and intend to continue to comply with the MRC
Voluntary Code of Conduct (VCOC) in each PPM Market
prior to commercializing our PPM ratings service in that market.
The VCOC requires, at a minimum, that we complete an MRC audit
of the local market PPM service, share the results of that audit
with the MRC PPM audit subcommittee, and disclose
pre-currency impact data prior to commercializing
the PPM ratings service in that local market. For more
information regarding MRC accreditation, see Item 1.
Business Governmental Regulation.
As of the date we filed this Annual Report on
Form 10-K
with the SEC, the
quarter-hour-based
radio ratings data produced by the PPM ratings service in three
local markets, Houston-Galveston, Riverside-San Bernardino,
and Minneapolis-St. Paul, are accredited by the MRC.
10
As of the date we filed this Annual Report on
Form 10-K
with the SEC, the data produced by the PPM ratings service is
not MRC accredited in any other PPM Market. On January 11,
2010, we announced that the MRC had denied accreditation to the
PPM ratings service in each of the following local markets:
Atlanta; Baltimore; Boston; Chicago; Dallas-Ft. Worth;
Denver-Boulder; Detroit; Los Angeles; New York;
Miami-Ft. Lauderdale-Hollywood; Philadelphia; Phoenix;
Pittsburgh, PA; St. Louis; San Diego; Seattle-Tacoma;
Tampa-St. Petersburg-Clearwater; and Washington D.C. In
addition, the MRC closed without action audits of the PPM
ratings service in two California markets, San Francisco
and San Jose, and the PPM service remains unaccredited in
these two markets. We have applied to the MRC for accreditation
in each of the other currently commercialized PPM Markets, but
the MRC has taken no official action on these applications and
the service remains unaccredited in each of these PPM Markets.
Although additional milestones remain and there is the
possibility that the pace of commercialization of the PPM
ratings service could be slowed, we believe that the PPM ratings
service is both a viable replacement for our Diary-based ratings
service and a significant enhancement to our audience estimates
in major radio markets. We also believe that the PPM ratings
service is an important component of our anticipated future
growth. If the pace of the commercialization of our PPM ratings
service is slowed, revenue increases that we expect to receive
related to the service will also be delayed.
Commercialization of our PPM ratings service requires and will
continue to require a substantial financial investment. We
believe our cash generated from operations, as well as access to
our existing credit facility, is sufficient to fund such
requirements. As we have previously disclosed, our ongoing
efforts to support the commercialization of our PPM ratings
service have had a material negative impact on our results of
operations. The amount of capital required for deployment of our
PPM ratings service and the impact on our results of operations
will be greatly affected by the speed of the commercialization.
PPM Ratings Service Quality Improvement
Initiatives. As we have commercialized the PPM
ratings service in several PPM Markets, we have experienced and
expect to continue to experience challenges in the operation of
the PPM ratings service similar to those we face in the
Diary-based service, including several of the challenges related
to sample proportionality and response rates described below. We
expect to continue to implement additional measures to address
these challenges.
We have announced a series of commitments concerning our PPM
ratings service that we intend to implement over the next
several years. We believe these steps reflect our commitment to
ongoing improvement and our responsiveness to feedback from
several governmental and customer entities. We believe these
commitments, which we refer to, collectively, as our continuous
improvement initiatives, are consistent with our ongoing efforts
to obtain and maintain MRC accreditation and to generally
improve our radio ratings services. These initiatives will
likely require expenditures that may be material in the
aggregate.
As part of our continuous improvement initiatives, in December
2007, we announced a sample size guarantee that
would provide a partial credit to our customers for PPM ratings
in any PPM Market for a monthly measurement period in which our
actual number of the installed panel that provides useable data
(the average daily In-Tab) among persons aged
18-54 falls
below 80 percent of our published average daily In-Tab
target for that market for that period. We subsequently enhanced
the sample size guarantee in PPM Markets that have been
commercialized for 12 months or more to provide such credit if
the average daily In-Tab among persons aged 18-54 falls below 90
percent of our published average daily In-Tab target for that
market for that period. To date, our delivered average daily
In-Tab has not fallen below the target and we have not provided
any credits under the sample size guarantee.
We use a measure known as Designated Delivery Index
(DDI) to measure our performance in achieving sample
quality based on how the number of persons actually in the
sample compares to our target number of persons in a particular
demographic. We define DDI as the actual sample size achieved
for a given demographic indexed against the target sample size
for that demographic (multiplied by 100).
We have established DDI benchmarks for the persons aged 6+ and
persons aged
18-34
demographic groups. For the first 12 months of PPM currency
in each market, the person aged 6+ DDI benchmark is equal to a
DDI of 95 and the persons aged
18-34 DDI
benchmark is equal to a DDI of 80. Beginning with the
13th month of PPM
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currency in each market the person aged 6+ DDI benchmark is
equal to a DDI of 100, based on a
13-month
rolling average. We have also established DDI benchmarks for
sub-demographic
groups that account for 10 percent or more of a measured
market.
Benchmarks do not represent goals or targets for performance,
rather these benchmarks represent the level of sample quality
for a given demographic group below which we intend to take
corrective action to improve the sample performance.
In April 2009, we expanded our in-person coaching initiatives in
the ten largest PPM Markets. The expansion program is called
Feet on the Street, and was designed in an attempt
to reduce respondent turnover and improve compliance, especially
among young
African-American
and Hispanic respondents in the PPM panels.
Throughout 2009, we continued to implement key methodological
enhancements in our PPM ratings service, including, but not
limited to:
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use of address-based sampling techniques for at least
15 percent of our total recruitment efforts by late 2009
with plans to increase this to at least 20 percent of our
total recruitment efforts by the end of 2010 in all PPM
Markets; and
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application of an average-daily In-Tab benchmark of
75 percent to all PPM Markets.
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We also continued to focus on improving the method of defining
response rates in a panel (also known as the Sample
Performance Indicator) and other sample quality metrics in
all PPM Markets.
On April 30, 2009, we announced a plan to increase our
sample target for cell-phone-only households in all PPM Markets
to an average of 15 percent across all PPM Markets by the
end of 2009. We revised this plan on August 13, 2009 when
we announced plans to increase the sample target for
cell-phone-only households to an average of 20 percent
across all PPM Markets by year-end 2010. During 2009, we
implemented a hybrid method of using an address-based sample
frame for recruitment of cell-phone-only households together
with a random digit dialing (RDD) sample frame to
recruit landline households similar to the method utilized in
our Diary service. Under this new methodology, we are able to
more efficiently contact cell-phone-only households for
recruitment into our panels.
On October 2, 2009, we announced implementation details of
our plan, first disclosed in July 2008, to increase the total
PPM sample size for Persons aged
18-54 by
approximately 10 percent in the aggregate across all PPM
Markets by mid-year 2011 together with implementation of
increased minimum sample sizes in all PPM Markets by mid-year
2011. We expect these two initiatives, taken together, to result
in an increase in total sample size of approximately 10% for
Persons aged 12+ across all PPM Markets by mid-year 2011.
In early November 2009, we realigned our PPM Panel Service group
in order to bundle existing compliance activities (installation,
habituation, service, coaching) and field personnel (market and
field coaches) into regional teams. The realignment combines a
regionally-focused organizational structure that is supported
and informed by centralized analytics with processes, controls
and a technological infrastructure. It supports a proactive
management of panel performance. We believe this reorganization
represents a logical reorientation of our existing support
infrastructure, which we have designed to provide clear
accountability and consistency in our interactions with current
and potential PPM panelists.
While we believe that our current PPM methodology is valid and
reliable, on February 12, 2010, we submitted a proposal to
the United States House of Representatives Committee on
Oversight and Government Reform comprised of several elements,
which are designed to enhance our PPM methodology and to help
better achieve MRC accreditation of the data produced by our PPM
ratings service in each PPM Market as quickly as possible. The
proposal includes introducing a multimodal recruitment approach
that is intended to increase the participation rate of key
segments of our sample that are heavily comprised of youth and
minorities. Under the multimodal recruitment approach, we plan
to begin in-person recruiting in July 2010. We expect that we
will deploy in-person recruiting in the high density Black and
Hispanic areas in the top 25 PPM Markets by year-end 2010 with
full address-based sampling to be completed in all PPM Markets
by 2011. In addition, we proposed to undertake several
initiatives focused on minority broadcasters, including:
(i) launching the previously disclosed engagement metric in
the first quarter of 2010; (ii) forming a minority
leadership council in Spring 2010 to bring the leadership of
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broadcasters and agency communities together; and,
(iii) expanding our current initiatives directed toward
advertiser outreach for minority radio. We also plan to renew
our ongoing commitment to continuous improvement and obtaining
and/or
maintaining MRC accreditation for our PPM ratings service. While
we have designed this proposal to accomplish the goals described
above, we can provide no assurance that we will be successful.
We continue to operate in a highly challenging business
environment. Our future performance will be impacted by our
ability to address a variety of challenges and opportunities in
the markets and industries we serve, including our ability to
continue to maintain and improve the quality of our PPM ratings
service, and manage increased costs for data collection, arising
among other ways, from increased numbers of cell-phone-only
households, which are more expensive for us to recruit than
households with landline phones. Our goal is to obtain and
maintain MRC accreditation in all of our PPM Markets, and
develop and implement effective and efficient technological
solutions to measure cross-platform media and advertising.
Diary
Service
Collection of Listener Data Through Diary
Methodology. We use listener diaries to gather
radio listening data from a random sample group of persons aged
12 and over in households in the 267 United States local markets
in which we currently provide Diary-based radio ratings.
Participants in Arbitron surveys are currently selected at
random, and we contact them by telephone to solicit their
agreement to participate in the survey. When participants in our
Diary survey (whom we refer to as diarykeepers)
agree to take part in a survey, we mail them a small,
pocket-sized diary and ask them to record their listening in the
diary over the course of a
seven-day
period. We ask diarykeepers to report in their diary the
station(s) to which they listened, when they listened and where
they listened, such as home, car, work, or other place. Although
survey periods are 12 weeks long, no participant keeps a
diary for more than seven days. Each diarykeeper receives a
diary, instructions for filling it out and a small cash
incentive. The incentive varies according to markets and
demographic group, and the range is generally $1.00 to $6.00 for
each diarykeeper in the household and up to $10.00 additional
per person for returned diaries in certain incentive programs to
encourage response from demographic groups less likely to return
diaries. In addition to the cash incentives included with the
diaries, further cash incentives are used at other points in the
survey process along with other communications such as
follow-up
letters and phone calls to maximize response rates. Diarykeepers
mail the diaries to our operations center, where we conduct a
series of quality control checks, enter the information into our
database, and produce periodic audience listening estimates. We
currently receive and process more than 1.1 million diaries
every year to produce our audience listening estimates. We
measure each of our local markets at least twice each year, and
major markets four times per year.
Diary Service Quality Improvement
Initiatives. Throughout 2009, we invested in
Diary service quality enhancements. As part of our continuous
improvement program, we intend to invest in Diary service
quality enhancements in 2010 and future years. Set forth below
is a description of some of the challenges we experience with
the Diary service and several of the significant Diary service
quality initiatives we implemented in 2009, including
cell-phone-only sampling. As the needs of our customers and the
service continue to evolve, we may choose to focus on different
areas for improvement during 2010 and beyond.
Response rates are one important measure of our effectiveness in
obtaining consent from persons to participate in our surveys.
Another measure often employed by users of our data to assess
quality in our ratings is sample proportionality, which refers
to how well the distribution of the sample for any individual
survey compares to the distribution of the population in the
local market. We strive to achieve representative samples. It
has become increasingly difficult and more costly for us to
obtain consent from persons to participate in our surveys. We
must achieve a level of both sample proportionality and response
rates sufficient to maintain confidence in our ratings, the
support of the industry and accreditation by the MRC.
Overall response rates for all survey research have declined
over the past several decades, and Arbitron has been adversely
impacted by this industry trend. We have worked to address this
decline through several initiatives, including various survey
incentive programs. If response rates continue to decline or the
costs of recruitment initiatives significantly increase, our
radio audience measurement business could be adversely affected.
We believe that additional expenditures will be required in the
future to research and test new measures associated with
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improving response rates and sample proportionality. We continue
to research and test new measures to address these sample
quality challenges.
One of the challenges in estimating radio audiences is to ensure
that the composition of survey respondents is sufficiently
representative of the market being measured. For example, if
eight percent of the population in a given market is comprised
of women aged 18 to 34, ideally eight percent of the
diarykeepers in our sample are women aged 18 to 34. Therefore,
each survey respondents listening should statistically
represent not only the survey respondents personal
listening but also the listening of the demographic segment in
the overall market. In striving to achieve representative
samples, we provide enhanced incentives and enhanced support to
certain demographic segments that our experience has shown may
be less likely to respond, such as males aged 18-34, in order to
encourage their participation. Households that self-identify as
having at least one member who is Hispanic receive bilingual
materials. We also use bilingual (Spanish-English) interviewers
for households that indicate Spanish is the preferred language.
In an effort to better target our Diary-keeper premium
expenditures to key buying demographics of the users of our
estimates, beginning with the Spring 2009 Diary survey, we
reduced the premium we pay to households where all members are
aged 55 or older and redirected those incremental premiums to
households containing persons aged
18-34.
On April 30, 2009, we announced a sample quality benchmark
for persons aged
18-34 in all
Diary markets beginning with the Spring 2009 survey. For the
first 12 months, the benchmark will be equal to a DDI of
70. Thereafter, the DDI benchmark will be equal to 80.
Benchmarks do not represent goals or targets for performance,
rather these benchmarks represent the level of sample quality
for a given demographic group below which we intend to take
corrective action to improve the sample performance.
In recent years, our ability to deliver sample proportionality
that matches the demographic composition of younger demographic
groups has deteriorated, caused in part by the trend among some
households to disconnect their landline telephones, effectively
removing these households from our telephone sample frame. In
December 2008, we announced plans to accelerate the introduction
of cell-phone-only sampling in Diary markets. Beginning with the
Spring 2009 survey, we added cell-phone-only households to our
Diary sample in 151 Diary markets utilizing a hybrid methodology
of address-based recruitment for cell-phone-only households,
while maintaining RDD recruitment for households with landline
telephone service. With the Fall 2009 survey, we expanded
cell-phone-only sampling to all remaining Diary markets in the
continental United States, Alaska, and Hawaii. Additionally, we
intend to increase our sample target for cell-phone-only
households in Diary markets from an average of 10 percent,
as achieved in the Spring 2009 survey through Fall 2009 surveys,
to an average of 15 percent across all Diary markets by
Spring 2010.
Cross-Platform
Media Measurement
In the fourth quarter of 2009, we formed a cross-platform media
measurement group that leverages the PPM technology and domestic
and international partnerships. The focus of this group is to
bridge the measurement gap among television, radio, Internet,
mobile and place-based media.
Television Suite of Audience Measurement
Services. On June 23, 2009, we announced the
creation of
ARB-TV,
a new suite of audience measurement services designed to
improve visibility into away-from-home television audiences for
media companies and advertisers. By leveraging the mobility and
utility of our PPM technologies, we believe the
ARB-TV
analytical tool can complement existing data services,
offers media greater insight into what constitutes their total
audience, and help advertisers plan how to reach that audience.
The
ARB-TV
service is not part of a regular syndicated rating service
accredited by the MRC, and we have not requested accreditation.
Arbitron does provide one or more syndicated services that are
accredited by the MRC.
In October 2009, Turner Broadcasting System, Inc. signed an
agreement to use our
ARB-TV
measurement services to help quantify its
out-of-home
audiences. On December 4, 2009, we announced that, together
with online marketing research and analytics companies comScore,
Inc. and Omniture, we are collaborating with NBC Sports, a
division of NBC Universal, Inc. to provide cross-platform
audience measurement services for the Vancouver 2010 Olympic
Winter Games.
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International
Operations
Portable People Meter Technology. We have
entered into arrangements with media information services
companies pursuant to which those companies use our PPM
technology in their audience measurement services in specific
countries outside of the United States. We currently have
arrangements with Kantar Media, formerly known as Taylor Nelson
Sofres, which is owned by WPP Group plc, a global communications
services group. Generally, under these arrangements we sell PPM
hardware and equipment to the company for use in its media
measurement services and collect a royalty once the service is
deemed commercial. Our PPM technology is currently being used
for media measurement in seven countries, including five that
have adopted PPM technology for measuring both television and
radio.
Our PPM technology was first used in a marketing panel in
Belgium and has been used to track television and radio there
since 2003. In 2006, Norway adopted a service using PPM
technology to produce radio currency ratings and Kazakhstan
adopted a service using PPM technology to produce television
currency ratings. Beginning in 2008, both television and radio
currency ratings were produced in Iceland using PPM equipment.
Also in 2008, the radio industry in Denmark began using PPM
equipment to produce radio currency ratings, and the PPM
encoding technology was introduced into Danish television for
commercial services to identify programming sources for set-top
measurement systems. In parallel, this service was also
introduced in Norway. This encoding technology has been
similarly deployed in Singapore since 2001.
Our PPM technology has been used for television currency ratings
in Montreal and Quebec, Canada, since 2004. In the fourth
quarter of 2008, BBM Canada, a
not-for-profit,
media ratings consortium that produces ratings for Canada,
commercialized its radio ratings service in Montreal using our
licensed PPM technology and equipment purchased from us. The
Montreal market launch was the first phase of BBM Canadas
PPM service rollout plan. On August 31, 2009, BBM Canada
launched the worlds largest combined panel for television
and radio audience measurement using our PPM technology covering
nationwide audience measurement as well as measurement in the
following major metropolitan areas: Montreal, Toronto,
Vancouver, Calgary and Edmonton. Following a competitive
process, BBM Canada chose our joint solution with Kantar Media
to support its multi-media measurement initiative in April 2008.
Collectively, these international arrangements are currently not
a material part of our business.
India. We have formed a wholly-owned
subsidiary organized under the laws of India, which
entitys current functions include oversight of software
and technology development in India. In the future we intend to
increase staffing to perform these and additional duties,
including in-house software development, although there can be
no assurance we will be successful in doing so.
CSW Research Limited (Continental
Research). On January 31, 2008, we
sold Continental Research. Additional information regarding the
sale of Continental Research is provided in Note 3 in the
Notes to Consolidated Financial Statements contained in this
Annual Report on
Form 10-K.
Radio
Market Report and Other Data Services
We provide our listening estimates in a number of different
reports that we publish and license to our customers. The
cornerstone of our radio audience measurement services is the
Radio Market Report, which is available in all local markets for
which we currently provide radio ratings. Our Diary-based Radio
Market Report service is accredited by and subject to the review
of the MRC. The Radio Market Report provides audience estimates
for those stations in a market that meet our minimum reporting
standards. The estimates cover a wide variety of demographics
and dayparts, which are the time periods for which we report
audience estimates. Each Radio Market Report contains estimates
to help radio stations, advertising agencies and advertisers
understand who is listening to the radio, which stations they
are listening to, and where and when they are listening. Our
proprietary data regarding radio audience size and demographics
are generally provided to customers through multiyear license
agreements.
We also license our respondent-level database through Maximi$er,
TAPSCAN and TAPSCAN Web, which are services for radio stations,
and Media Professional and SmartPlus, which are services for
advertising agencies and advertisers. Our respondent-level
database allows radio stations, advertising agencies and
advertisers to customize
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survey areas, dayparts, demographics and time periods to support
targeted marketing strategies. The Maximi$er service includes a
Windows-based application to access a markets entire radio
Diary database on a clients personal computer. Radio
stations use the Maximi$er service to produce information about
their stations and programming not available in Arbitrons
published Radio Market Reports. The TAPSCAN Web service
allows radio stations, advertisers and advertising agencies to
access our National Regional Database (NRD) to
analyze ratings information for customer-defined groupings of
stations in multiple markets and counties. The Media
Professional and SmartPlus services are designed to help
advertising agencies and advertisers plan and buy radio
advertising time quickly, accurately and easily. These services
integrate radio planning and buying into one comprehensive
research and media-buying tool. They allow advertising agencies
and advertisers to uncover key areas critical to the buying
process, including determining the most effective media target,
understanding market trends and identifying potential new
business. In addition to the licensing above, we offer
third-party software providers and customers licenses to use
proprietary software that will enable enhanced access to our
respondent-level data.
In addition to the Radio Market Report, we provide a
range of ancillary services that include Arbitrends, Radio
County Coverage Reports, Hispanic Radio Data and Black Radio
Data.
RADAR. Our RADAR service provides a
measurement of national radio audiences and the audience size of
network radio programs and commercials. We provide the audience
measurements for a wide variety of demographics and dayparts for
total radio listening and for more than 56 separate radio
networks.
We create network audience estimates by merging the radio
listening of selected survey respondents with the reported times
that network programs and commercials are aired on each
affiliated station. We deliver the RADAR estimates through our
RADAR Software Suite software application, which includes a
number of tools for sophisticated analysis of network audiences.
We provide this service to radio networks, advertising agencies
and network radio advertisers.
Since 2003, the RADAR survey sample has increased from 50,000
Arbitron respondents to a survey sample of approximately 360,000
Arbitron respondents as of December 2009. Data from PPM
commercial markets are also incorporated into the RADAR survey
sample. During 2009, we transitioned operations and production
of our RADAR service from our offices in New Jersey to our
headquarters in Maryland.
Nationwide. Nationwide is our national radio
audience service that provides information on the size and
demographic composition of radio audiences for commercial and
public radio networks. We issue Nationwide twice each year,
based on our Fall and Spring surveys. Nationwide estimates are
based on a sample size of more than 450,000 Arbitron respondents
for each report, covering seven days of radio listening, and are
conducted over a 12-week period.
Nationwide gives clients the ability to monitor trends in
national radio network programming more reliably than other
sources of national radio information. It also gives customers a
resource that helps to determine how various affiliates perform
in different local markets.
Software Applications. In addition to our
reports, we license software applications that provide our
customers access to the audience estimates in our databases.
These applications enable our customers to more effectively
analyze and understand that information for sales, management
and programming purposes. These services also help our customers
to further refine sales strategies and compete more effectively
for advertising dollars. Some of our software applications also
allow our customers to access data owned by third parties,
provided the customers have a separate license to use such
third-party data.
Our TAPSCAN family of software solutions is used by many radio
stations, advertising agencies and advertisers. The TAPSCAN
software is one of the advertising industrys leading radio
analysis applications. It can help create illustrative charts
and graphs that make complex information more useful to
potential advertisers. Other features include pre-buy research,
including frequency-based tables,
cost-per-point
analysis,
hour-by-hour
and trending, use of respondent-level data, automatic scheduling
and goal tracking, instant access to station format and contact
information. Our TAPSCAN Sales Management service provides
software systems that help radio stations manage their
advertising sales process and automate the daily tasks in a
sales department. The TAPSCAN Sales Management applications
combine a customer relationship management system with
scheduling and research applications and with inventory/pricing
management tools. Our SmartPlus service provides media buying
software
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systems, including the SmartPlus software, to local and regional
advertising agencies for broadcast and print media. Another
TAPSCAN service, QUALITAP, is also made available to television
and cable outlets in the United States under a licensing
arrangement with Marketron International, Inc.
Our PD Advantage service offers radio station program directors
the ability to create a variety of reports that help analyze the
market, the audience and the competition.
Local
Market Consumer Information Services
In our radio ratings service, we provide primarily quantitative
data, such as how many people are listening. We also provide
qualitative data, such as consumer and media usage information
to radio stations, cable companies, television stations,
out-of-home
media, magazine and newspaper publishers, advertising agencies
and advertisers. The qualitative data on listeners, viewers and
readers provide more detailed socioeconomic information and
information on what survey participants buy, where they shop and
what forms of media they use. We provide these measurements of
consumer demographics, retail behavior, and media usage in local
markets throughout the United States.
We provide qualitative services tailored to fit a
customers specific market size and marketing requirements,
such as:
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the Scarborough Report, which is offered in larger markets;
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the RetailDirect Service, which is offered in medium
markets; and
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the Qualitative Diary Service/LocalMotion Service, which is
offered in smaller markets.
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Each service profiles a market, the consumers and the media
choices in terms of key characteristics. These services cover
major retail and media usage categories. We also provide
training and support services that help our customers understand
and use the local market consumer information that we provide.
Scarborough Report. The MRC-accredited
Scarborough service is provided through a joint venture between
Arbitron and a subsidiary of Nielsen and is governed by a
partnership agreement, which was automatically renewed until
December 2012. Although our equity interest in the Scarborough
Research joint venture is 49.5 percent, partnership voting
rights and earnings are divided equally between Arbitron and
Nielsen. The Scarborough service provides detailed information
about media usage, retail and shopping habits, demographics and
lifestyles in 81 large United States local markets, utilizing a
sample of consumers in the relevant markets.
Scarborough data feature more than 2,000 media, retail and
lifestyle characteristics, which can help radio stations,
television stations, cable companies, advertising agencies and
advertisers, newspaper and magazine publishers and
out-of-home
media companies develop an in-depth profile of their consumers.
Examples of Scarborough categories include retail shopping
(e.g., major stores shopped or purchases during the past
30 days), auto purchases (e.g., plan to buy new auto or
truck), leisure activities (e.g., attended sporting events) and
personal activities (e.g., golfing). Media information includes
broadcast and cable television viewing, radio listenership,
newspaper readership by section and yellow pages usage. This
information is provided twice each year to newspapers, radio and
television broadcasters, cable companies,
out-of-home
media, advertising agencies and advertisers in the form of the
Scarborough Report. Scarborough also provides a
Mid-Tier Local Market Consumer Study regarding media usage,
retail and shopping habits, demographics, and lifestyles of
adult consumers in 38 United States local markets.
We are the exclusive marketer of the Scarborough Report to radio
broadcasters, cable companies and
out-of-home
media. We also market the Scarborough Report to advertising
agencies and advertisers on a shared basis with Scarborough
Research. Scarborough Research markets the Scarborough Report to
newspapers, sports marketers and online service providers.
Nielsen markets the Scarborough Report to television
broadcasters.
RetailDirect Service. Our RetailDirect service
is a locally oriented, purchase data and media usage research
service provided in 19 midsized United States local markets.
This service, which utilizes diaries and telephone surveys,
provides a profile of the audience in terms of local media,
retail and consumer preferences so that local radio and
television broadcasters,
out-of-home
media and cable companies have information to help them develop
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targeted sales and programming strategies. Retail categories
include automotive, audio-video, furniture and appliances, soft
drinks and beer, fast food, department stores, grocery stores,
banks and hospitals. Media usage categories include local radio,
broadcast television, cable networks,
out-of-home
media, newspapers, yellow pages and advertising circulars.
Qualitative Diary Service/LocalMotion
Service. Our Qualitative Diary Service collects
consumer and media usage information from Arbitron radio
diarykeepers in 176 smaller United States local markets. The
same persons who report their radio listenership in the market
also answer 27 demographic, product and service questions. We
collect consumer behavior information for key local market
retail categories, such as automotive sales, grocery, fast food,
furniture and bedding stores, beer, soft drinks and banking. The
Qualitative Diary Service also collects information about other
media, such as television news viewership, cable television
viewership,
out-of-home
media exposure and newspaper readership. This qualitative
service provided for cable television companies is known as
LocalMotion.
Custom Research Services. Our custom research
services serve companies that are seeking to demonstrate the
value of their advertising propositions. For example, we have
provided custom research services for subscribers including
sports
play-by-play
broadcasters, digital
out-of-home
and place-based media companies, and radio station properties.
Through our custom research services, we are also exploring
additional applications of PPM data, including nonratings
programming, marketing and
out-of-home
services for broadcast television and cable television. We are
also exploring providing services for mobile media and companies
that sell advertising on in-store (retail) media and sports
arenas.
Customers,
Sales and Marketing
Our customers are primarily radio, cable and broadcast
television, advertising agencies, advertisers, buying services,
retailers,
out-of-home
media, online media and, through our Scarborough Research joint
venture with Nielsen, broadcast television and print media. One
customer, Clear Channel Communications, Inc. (Clear
Channel), represented approximately 19 percent of our
revenue in 2009. We believe that we are well positioned to
provide new services and other offerings to meet the emerging
needs of broadcasting groups.
We market our services in the United States through 132 sales
account managers, customer trainers and client services
representatives, as of December 31, 2009.
We have entered into a number of agreements with third parties
to assist in marketing and selling our services in the United
States. For example, Marketron International, Inc., distributes,
on an exclusive basis, our QUALITAP software to television and
cable outlets in the United States.
We support our sales and marketing efforts through the following:
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conducting direct-marketing programs directed toward radio
stations, cable companies, advertising agencies, television
stations,
out-of-home
companies, broadcast groups and corporate advertisers;
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promoting Arbitron and the industries we serve through a public
relations program aimed at the trade press of the broadcasting,
out-of-home
media, Internet, advertising and marketing industries, as well
as select local and national consumer and business press;
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gathering and publishing studies, which we make available for no
charge on our Web site, on national summaries of radio
listening, emerging trends in the radio industry, Internet
streaming,
out-of-home
and other media industries, as well as the media habits of radio
listeners and television, cable and Internet viewers;
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participating in key industry and government forums, trade
association meetings, and interest groups, such as the
Advertising Research Foundation, the American Association of
Advertising Agencies, the National Association of Broadcasters,
the Association of National Advertisers, the Radio Advertising
Bureau, the European Society for Opinion and Marketing Research,
the Coalition for Innovative Media Measurement, the Television
Bureau of Advertising, the Cabletelevision Advertising Bureau,
American Women in Radio and Television, Women in Cable
Telecommunications, the Cable & Telecommunications
Association for Marketing, the National Association of Black
Owned Broadcasters, Minority Media and Telecommunications
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Council, Media Rating Council, Committee on Local Radio Audience
Measurement, Committee on Local Television Audience Measurement,
national Radio Research Committee and the Outdoor Advertising
Association of America, as well as numerous state and local
advertising and broadcaster associations;
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participating in activities and strengthening relationships with
national and local chapters of grassroots organizations, such as
the National Council of La Raza, the National Urban League,
the National Association for the Advancement of Colored People,
and the Rainbow/PUSH Coalition; and
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maintaining a presence at major industry conventions, such as
those sponsored by the National Association of Broadcasters, the
Radio Advertising Bureau, the American Association of
Advertising Agencies, the Advertising Research Foundation, the
Cable Advertising Bureau and the Outdoor Advertising Association
of America.
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Competition
We believe that the principal competitive factors in our markets
are the credibility, utility, and reliability of our audience
research, the ability to provide quality analytical services for
use with the audience information, and the end-user experience
with services and price.
We are the leader in the radio audience measurement business in
the United States. During 2009, we competed in the radio
audience measurement business in some small United States
markets with Eastlan Resources, a privately held research
company. In November 2008, Nielsen began providing audience
measurement and radio ratings services in 51 small and mid-sized
United States local markets in which Cumulus Media Inc.
(Cumulus) broadcasts (the Cumulus
Markets). Clear Channel has also indicated that it has
subscribed to the Nielsen service in 17 of the Cumulus Markets.
We cannot provide any assurances that Nielsen will not in the
future seek to expand its radio ratings services beyond the 51
Cumulus Markets. Cumulus elected not to renew its agreement with
us to receive radio audience estimates in the Cumulus Markets
when it expired on December 31, 2008. Our lost Diary
revenue in the Cumulus Markets from Cumulus and Clear Channel
combined was approximately $5.0 million in 2009.
Thereafter, we estimate a $10.0 million per year reduction
of expected annual revenue as compared to assumed renewals.
We currently intend to continue to offer our Diary-based
audience ratings services in the Cumulus Markets. We also intend
to offer an array of options to customers in individual local
markets smaller than the 100 largest markets that can provide
them with the data they need to appropriately position their
stations to maximize revenue opportunities. We are also aware of
at least six companies, GfK AG, Integrated Media Measurement
Inc., Ipsos SA, IBOPE Group, Nielsen, and Thompson Electronics
Ltd., which are developing technologies that could compete with
our PPM ratings service.
We compete with a large number of other providers of
applications software, qualitative data, and proprietary
qualitative studies used by broadcasters, cable companies,
advertising agencies, advertisers, and
out-of-home
media companies. These competitors include Donovan Data Systems,
Interactive Media Systems, Marketron Inc., STRATA Marketing
Inc., and Telmar Information Services Corp., in the area of
applications software, and The Media Audit (a division of
International Demographics, Inc.), Mediamark Research Inc. (a
subsidiary of GfK AG) and Simmons Market Research Bureau (a
subsidiary of Experian Marketing Solutions) in the area of
qualitative data.
In our cross-platform services, we currently compete with
several media measurement companies offering return on
investment and advertising targeting solutions, including among
others, Nielsen, Rentrak Corporation, Canoe Ventures, TiVo,
Kantar Media and TRA Global, Inc. (TRA).
Intellectual
Property
Our intellectual property is, in the aggregate, of material
importance to our business. We rely upon a combination of
patents, copyrights, trademarks, service marks, trade secret
laws, license agreements, confidentiality procedures and other
contractual restrictions to establish and protect proprietary
rights in our methods and services. As of December 31,
2009, 39 United States patents were issued and 44 United States
patent applications were pending on our behalf. Internationally,
179 foreign patents were issued and 158 foreign patent
applications
19
were pending on our behalf. Our patents relate to our data
collection, processing systems, software and hardware
applications, the PPM technology and its methods, and other
intellectual property assets. Several patents relating to the
PPM technology and its methods expire at various times beginning
in 2012. These include patents relating to previous generations
and elements of our current PPM technology and its methods.
Our audience listening estimates are original works of
authorship protectable under United States copyright laws. We
publish the Radio Market Report monthly, quarterly or
semiannually, depending on the Arbitron market surveyed, while
we publish the Radio County Coverage Report annually. We seek
copyright registration for each Radio Market Report and
for each Radio County Coverage Report published in the United
States. We also seek copyright protection for our proprietary
software and for databases comprising the Radio Market Report
and other services containing our audience estimates and
respondent-level data. Prior to the publication of our reports
and release of the software containing the respondent-level
data, we register our databases under the United States federal
copyright laws. We generally provide our proprietary data
regarding audience size and demographics to customers through
multiyear license agreements.
We market a number of our services under United States federally
registered trademarks that are helpful in creating brand
recognition in the marketplace. Some of our registered
trademarks and service marks include: the Arbitron name and
logo, Maximi$er, RetailDirect and RADAR. The Arbitron name and
logo is of material importance to our business. We have a
registration pending for Arbitron PPM in class 35
(conducting audience measurement services). We also have a
number of common-law trademarks, including Media Professional,
and QUALITAP. We have registered our name as a trademark in the
United Kingdom, Mexico, the European Union, Australia,
Singapore, Brazil, Canada, Argentina, Columbia, Russia, New
Zealand, Taiwan, Hong Kong, Israel, Kazakhstan, Kenya, Chile and
Japan, and are exploring the registration of our marks in other
foreign countries.
The laws of some countries might not protect our intellectual
property rights to the same extent as the laws of the United
States. Effective patent, copyright, trademark and trade secret
protection may not be available in every country in which we
market or license our data and services.
We believe our success depends primarily on the innovative
skills, technical competence, customer service and marketing
abilities of our personnel. We enter into confidentiality and
assignment-of-inventions
agreements with substantially all of our employees and enter
into nondisclosure agreements with substantially all of our
suppliers and customers to limit access to and disclosure of our
proprietary information.
We must protect against the unauthorized use or misappropriation
of our audience estimates, databases and technology by third
parties. There can be no assurance that the copyright laws and
other statutory and contractual arrangements we currently depend
upon will provide us sufficient protection to prevent the use or
misappropriation of our audience estimates, databases and
technology in the future. The failure to protect our proprietary
information, intellectual property rights and, in particular,
our audience estimates and databases, could severely harm our
business.
Additionally, claims by third parties that our current or future
products or services infringe upon their intellectual property
rights may harm our business. Intellectual property litigation
is complex and expensive, and the outcome of such litigation is
difficult to predict. We have been involved in litigation
relating to the enforcement of our copyrights covering our radio
listening estimates and patents covering our proprietary
technology. Although we have generally been successful in these
cases, there can be no assurance that the copyright laws and
other statutory and contractual arrangements we currently depend
upon will provide us sufficient protection to prevent the use or
misappropriation of our audience estimates, databases and
technology in the future. Litigation, regardless of outcome, may
result in substantial expense and a significant diversion of our
management and technical personnel. Any adverse determination in
any litigation may subject us to significant liabilities to
third parties, require us to license disputed rights from other
parties, if licenses to these rights could be obtained, or
require us to cease using certain technology.
Research
and Development
Our research and development activities have related primarily
to the development of new services, customer software, PPM
equipment and maintenance and enhancement of our legacy
operations and reporting systems. We
20
expect that we will continue research and development activities
on an ongoing basis, particularly in light of the rapid
technological changes affecting our business. We expect that the
majority of the effort will be dedicated to improving the
overall quality and efficiency of our data collection and
processing systems, developing new software applications that
will assist our customers in realizing the full potential of our
audience measurement services, developing our PPM technology and
developing a single-source service that will be able to measure
audience and other information from a number of different forms
of media and media delivery methods. Research and development
expenses during fiscal years 2009, 2008, and 2007 totaled
$42.0 million, $41.4 million, and $42.5 million,
respectively.
Governmental
Regulation
Our PPM equipment has been certified to meet Federal
Communications Commission (FCC) requirements
relating to emissions standards and standards for modem
connectivity. Additionally, all PPM equipment has been certified
to meet the safety standards of Underwriters Laboratories Inc.
(commonly referred to as UL), as well as Canadian and European
safety and environmental standards.
Our media research activities are subject to an agreement with
the United States Federal Trade Commission in accordance with a
Decision and Order issued in 1962 to CEIR, Inc., a predecessor
company. This order originally arose in connection with a
television ratings business, and we believe that today it
applies to our media measurement services. The order requires
full disclosure of the methodologies we use and prohibits us
from making representations in selling or offering to sell an
audience measurement service without proper qualifications and
limitations regarding probability sample, sampling error and
accuracy or reliability of data. It prohibits us from making
statements that any steps or precautions are taken to ensure the
proper maintenance of diaries unless such steps or precautions
are in fact taken. It also prohibits us from making overly broad
statements regarding the media behavior a survey reflects. The
order further prohibits us from representing the data as
anything other than estimates and from making a statement that
the data are accurate to any precise mathematical value. The
order requires that we make affirmative representations in our
reports regarding nonresponse by survey participants and the
effect of this nonresponse on the data, the hearsay nature of a
survey participants response, the fact that projections
have been made, and the limitations and deficiencies of the
techniques or procedures used. We believe that we have conducted
and continue to conduct our radio audience measurement services
in compliance with the order.
Federal and state regulations restrict telemarketing to
individuals who request to be included on a do-not-call list.
Currently, these regulations do not apply to survey research,
but there can be no assurance that these regulations will not be
made applicable to survey research in the future. In addition,
federal regulations prohibit calls made by autodialers to
wireless lines without consent from the subscriber. Because
consumers are able to transfer a wireless number to a landline
carrier or a landline number to a wireless carrier, it can be
difficult for us to identify efficiently wireless numbers in
advance of placing an autodialed call.
On September 2, 2008, a group of broadcasters and trade
associations representing some broadcasters and advertising
agencies filed an Emergency Petition for Section 403
Inquiry with the FCC urging the FCC to open an inquiry,
under Section 403 of the Communications Act of 1934, as
amended (the Communications Act), into our PPM
ratings service. The group alleges that the PPM methodology
undercounts minority radio listeners and that the
commercialization of the PPM ratings service will harm minority
broadcasters. We deny such allegations. In May 2009, the FCC
issued a Notice of Inquiry (NOI) regarding the
impact of Arbitron audience ratings measurement on radio
broadcasters. The NOI sought comment related to concerns
regarding the PPM technology and methodology, the rollout of PPM
ratings service in various U.S. markets, the effect of the
PPPM ratings service on minority broadcasters, and the
FCCs use of Arbitrons data in its decision-making
process. The Company filed a response to the NOI noting that the
FCC lacks jurisdiction to regulate Arbitron and providing
information related to specific questions posed by the FCC in
the NOI. To date, the FCC has taken no formal action on the
petition. We can provide no assurances that the FCC will not in
the future assert that it has competent jurisdiction pursuant to
the Communications Act to conduct an investigation of the
Company and our PPM ratings services.
During 2009, we participated in several hearings held by the
United States House of Representatives Committee on Oversight
and Government Reform and Committee on the Judiciary regarding
allegations that the PPM methodology undercounts minority radio
listeners and that the commercialization of the PPM ratings
21
service will harm minority broadcasters. While we believe that
our current PPM methodology is valid and reliable, on
February 12, 2010, we submitted a proposal to the House
Committee on Oversight and Government Reform that is comprised
of several elements, which are designed to enhance our PPM
methodology and to help better achieve MRC accreditation of the
data produced by our PPM ratings service in each PPM Market as
quickly as possible. For more information regarding this
proposal see Radio Audience Measurement
Services Portable People Meter Ratings
Service PPM Ratings Service Quality Improvement
Initiatives.
Media
Rating Council Accreditation
Our Diary-based Radio Market Report service is accredited
by and subject to the review of the MRC. The MRC has accredited
our Diary-based Radio Market Report service since 1968.
For more information regarding MRC accreditation status, see
Radio Audience Measurement
Services Portable People Meter Ratings
Service Commercialization Media Rating
Council Accreditation.
Additional Arbitron services that are currently accredited by
the MRC are RADAR, Scarborough, Maximi$er and Media
Professional software, the Custom Survey Area Report
(CSAR) and the Radio County Coverage services. To
merit continued accreditation of our services, we must:
(1) adhere to the MRCs minimum standards for Media
Rating Research; (2) supply full information to the MRC
regarding details of our operations; (3) conduct our media
measurement services substantially in accordance with
representations to our subscribers and the MRC; (4) submit
to, and pay the cost of, thorough annual audits of our
accredited services by certified public accounting firms engaged
by the MRC; and (5) commit to continuous improvement of our
media measurement services.
Employees
As of December 31, 2009, we employed approximately
971 people on a full-time basis and approximately
350 people on a part-time basis in the United States and
58 people on a full-time basis internationally. None of our
employees is covered by a collective bargaining agreement. We
believe our employee relations are good.
Seasonality
We recognize revenue for services over the terms of license
agreements as services are delivered, and expenses are
recognized as incurred. We currently gather radio-listening data
in 300 U.S. local markets, including 267 Diary markets and
33 PPM Markets. All Diary markets are measured at least twice
per year (April-May-June for the Spring Survey and
October-November-December for the Fall Survey). In
addition, we measure all major Diary markets two additional
times per year (January-February-March for the Winter
Survey and July-August-September for the Summer
Survey). Our revenue is generally higher in the first and
third quarters as a result of the delivery of the Fall Survey
and Spring Survey, respectively, to all Diary markets compared
to revenue in the second and fourth quarters, when delivery of
the Winter Survey and Summer Survey, respectively, is made only
to major Diary markets.
The seasonality for PPM services is expected to result in higher
revenue in the fourth quarter than in each of the first three
quarters because the PPM service delivers surveys 13 times a
year with four surveys delivered in the fourth quarter. There
will be fluctuations in the depth of the seasonality pattern
during the periods of transition between the services in each
PPM Market. The amount of deferred revenue recorded on our
balance sheet is expected to decrease as we commercialize
additional PPM Markets due to the more frequent delivery of our
PPM service, which is delivered 13 times a year versus the
quarterly and semi-annual delivery for our Diary service.
Pre-currency data represents PPM data that are released to
clients for planning purposes in advance of the period of
commercialization of the service in a local market. Once the
service is commercialized, the pre-currency data then becomes
currency and the client may use it to buy and sell advertising.
Pre-currency revenue will be recognized in the two months
preceding the PPM survey release month for commercialization.
The PPM service in new markets is generally commercialized and
declared currency at the beginning of a quarter for the
preceding period.
During the first quarter of commercialization of the PPM radio
ratings service in a market, we recognize revenue based on the
delivery of both the final quarterly Diary ratings and the
initial monthly PPM ratings for that
22
market. Our expenses are generally higher in the second and
fourth quarters as we conduct the Spring Survey and Fall Survey
for our Diary markets. The transition from the Diary service to
the PPM service in the PPM Markets has and will continue to have
an impact on the seasonality of costs and expenses. We
anticipate that PPM costs and expenses will generally accelerate
six to nine months in advance of the commercialization of each
market as we build the panels. These preliminary costs are
incremental to the costs associated with our Diary-based ratings
service and we will recognize these increased costs as incurred
rather than upon the delivery of a particular survey.
The size and seasonality of the PPM transition impact on a
period to period comparison will be influenced by the timing,
number, and size of individual markets contemplated in our PPM
commercialization schedule, which currently includes a goal of
commercializing 48 PPM Markets by the end of 2010. As we
commercialize more markets, we expect that the seasonal impact
will lessen. During 2009, we commercialized 19 PPM Markets and,
during 2010, we expect to commercialize 15 additional PPM
Markets.
Scarborough typically experiences losses during the first and
third quarters of each year because revenue is recognized
predominantly in the second and fourth quarters when the
substantial majority of services are delivered. Scarborough
royalty costs, which are recognized in costs of revenue, are
also higher during the second and fourth quarters.
Available
Information
We routinely post important information on our Web site at
www.arbitron.com, and interested persons may obtain, free of
charge, copies of filings (including our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and any amendments to those reports) that we have made with the
Securities and Exchange Commission through a hyperlink at this
site to a third-party Securities and Exchange Commission filings
Web site (as soon as reasonably practicable after such filings
are filed with, or furnished to, the Securities and Exchange
Commission). The Securities and Exchange Commission maintains an
Internet site that contains our reports, proxy and information
statements, and other information. The Securities and Exchange
Commissions Web site address is www.sec.gov. Also
available on our Web site are our Corporate Governance Policies
and Guidelines, Code of Ethics for the Chief Executive Officer
and Financial Managers, Code of Ethics and Conduct, Stock
Ownership Guidelines for Executive Officers and Non-Employee
Managers, the Audit Committee Charter, the Nominating and
Corporate Governance Committee Charter and the Compensation and
Human Resources Committee Charter. Copies of these documents are
also available in print, free of charge, to any stockholder who
requests a copy by contacting our Treasury Manager.
Risk
Factors Relating to Our Business and the Industry in Which We
Operate
Our business, financial position, and operating results
are dependent on the performance of our quantitative radio
audience ratings service.
Our quantitative radio audience measurement service and related
software sales represented 90 percent of our total revenue
for 2009. We expect that such sales related to our radio
audience ratings service will continue to represent a
substantial portion of our revenue for the foreseeable future.
Any factors adversely affecting the pricing of, demand for, or
market acceptance of our quantitative radio audience ratings
service and related software, such as competition, technological
change, legislation or regulation, alternative means of valuing
advertising transactions, economic challenges, or further
ownership shifts in the radio industry, could adversely impact
our business, financial position and operating results.
If the domestic and worldwide recession continues or
intensifies it could adversely impact demand for our services,
our customers revenues or their ability to pay for our
services.
Our customers derive most of their revenue from transactions
involving the sale or purchase of advertising. During recent
challenging economic times, advertisers have reduced advertising
expenditures, impacting advertising agencies and media. As a
result, advertising agencies and media companies have been and
may continue to be less likely to purchase our services, which
has and could continue to adversely impact our business,
financial position, and operating results.
23
Continued market disruptions could cause broader economic
downturns, which also may lead to lower demand for our services
or to our customers that have expiring contracts with us not to
renew or to renew for fewer services, increased incidence of
customers inability to pay their accounts, an increase in
our provision for doubtful accounts, an increase in collection
cycles for accounts receivable, insolvency, or bankruptcy of our
customers, any of which could adversely affect our results of
operations, liquidity, cash flows, and financial condition.
Since September 2008, we have experienced an increase in the
average number of days our sales have been outstanding before we
have received payment, which has resulted in a material increase
in trade accounts receivable as compared to historical trends.
If the economic downturn expands or is sustained for an extended
period into the future, it may also lead to an increase of
incidences of customers inability to pay their accounts,
an increase in our provision for doubtful accounts, and a
further increase in collection cycles for accounts receivable or
insolvency of our customers. Additionally, we periodically
receive requests from our customers for pricing concessions. The
current economic environment could exacerbate the level of
requests.
If the domestic and worldwide recession continues or
intensifies, potential disruptions in the credit markets could
adversely affect our business, including the availability and
cost of short-term funds for liquidity requirements and our
ability to meet long-term commitments, which could adversely
affect our results of operations, cash flows, and financial
condition.
If internal funds are not available from our operations, we may
be required to rely on the banking and credit markets to meet
our financial commitments and short-term liquidity needs.
Disruptions in the capital and credit markets, as were
experienced during 2008 and 2009, could adversely affect our
ability to draw on our revolving credit facility. Our access to
funds under that credit facility is dependent on the ability of
the banks that are parties to the facility to meet their funding
commitments. Those banks may not be able to meet their funding
commitments to us if they experience shortages of capital and
liquidity or if they experience excessive volumes of borrowing
requests from Arbitron and other borrowers within a short period
of time.
Longer-term disruptions in the capital and credit markets as a
result of uncertainty, changing or increased regulation, reduced
alternatives, or failures of significant financial institutions
could adversely affect our access to liquidity needed for our
business. Any disruption could require us to take measures to
conserve cash until the markets stabilize or until alternative
credit arrangements or other funding for our business needs can
be arranged. Such measures could include deferring capital
expenditures, and reducing or eliminating future share
repurchases, dividend payments or other discretionary uses of
cash. Any disruption and the measures we take in response could
adversely affect our business.
We have limited experience designing, recruiting and
maintaining PPM panels. If we are unable to design, recruit, and
maintain PPM panels that appropriately balance research quality,
panel size and operational cost, our financial results will
suffer.
The commercial viability of our PPM ratings service and,
potentially, other new business initiatives, are dependent on
our ability to design, recruit, and maintain panels of persons
to carry our Portable People Meters, and to ensure appropriate
panel composition to accommodate a broad variety of media
research services. Our research methodologies require us to
maintain panels of reasonably sufficient size and reasonably
representative demographic composition. Our research
methodologies also require our panelists to comply with certain
standards, such as carrying the meter for a minimum number of
hours each day and docking the meter daily, in order for us to
use the data collected by the meter in estimating ratings.
Through the end of 2009, we have commercialized the PPM ratings
service in 33 PPM Markets. During 2010, we intend to
commercialize the service in 15 additional PPM Markets. The
increasing number of panels and panelists may prove to be more
complex and resource intensive for us to manage than we
currently anticipate.
Participation in a PPM panel requires panelist households to
make a longer-term commitment than participation in our
Diary-based ratings service. Designing, recruiting, and
maintaining PPM panels are substantially different than
recruiting participants for our Diary-based ratings service. We
have limited experience in operating such PPM panels and we may
encounter unanticipated difficulties as we attempt to do so.
Without historical benchmarks on key sample performance metrics,
it will be challenging for us to maintain the appropriate
balance of
24
research quality, panel size, and operational costs. Designing,
recruiting, and maintaining such panels may also cause us to
incur expenses substantially in excess of our current
expectations.
If we are unable to successfully design, recruit and maintain
such PPM panels, or if we are required to incur expenses
substantially in excess of our current expectations in order to
do so, it could adversely impact our ability to obtain
and/or
maintain MRC accreditation of our PPM ratings service, adversely
impact our ongoing dialogues with regulatory and governmental
entities, or otherwise adversely impact our business, financial
position and operating results.
If our PPM ratings service does not generate the revenues
that we anticipate, or if our ability to earn such revenues is
delayed for any reason, our financial results will
suffer.
Our financial results during 2010 and beyond will depend in
substantial part on our success in commercializing and operating
the PPM ratings service and our ability to generate meaningful
revenues from it. If our continued commercialization and
operation of the PPM ratings service is delayed, expected
revenue increases will also be delayed and our financial results
will be materially and negatively impacted. Factors that may
affect the pace of the commercialization of our PPM ratings
service, and as a result, our future revenues and operating
results include the following, some of which are beyond our
control:
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obtaining
and/or
maintaining MRC accreditation;
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the speed with which we can complete the MRC audit process;
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increased government oversight, legislation or regulation;
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the acceptance of the PPM ratings service by broadcasters,
advertisers and other users of our estimates;
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technical difficulties or service interruptions that impair our
ability to deliver the PPM ratings service on schedule;
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the impact of general economic conditions on our customers
ability to pay increased license fees; and
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our ability to obtain, in a timely manner, sufficient quantities
of quality: (i) equipment, (ii) cell-phone-only sample
and (iii) software products from third-party suppliers
necessary to support our services.
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We may be unsuccessful in obtaining
and/or
maintaining MRC accreditation for our local market radio ratings
services, and we may be required to expend significant resources
in order to obtain
and/or
maintain MRC accreditation for our local market PPM ratings
services, any of which could adversely impact our
business.
As of the date we filed this Annual Report on
Form 10-K
with the SEC, the
quarter-hour-based
radio ratings data produced by the PPM ratings service in three
local markets, Houston-Galveston, Riverside-San Bernardino,
and Minneapolis-St. Paul, are accredited by the MRC. On
January 11, 2010, we announced that the MRC had denied
accreditation to the PPM ratings service in each of the
following local markets: Atlanta; Baltimore; Boston; Chicago;
Dallas-Ft. Worth; Denver-Boulder; Detroit; Los Angeles; New
York; Miami-Ft. Lauderdale-Hollywood; Philadelphia;
Phoenix; Pittsburgh, PA; St. Louis; San Diego;
Seattle-Tacoma; Tampa-St. Petersburg-Clearwater; and Washington
D.C. In addition, the MRC closed without action audits of the
PPM ratings service in two California markets,
San Francisco and San Jose, and the PPM service
remains unaccredited in these two markets.
If the efforts required to obtain
and/or
maintain MRC accreditation in the PPM Markets are substantially
greater than our current expectations, or if we are required to
make significant changes with respect to methodology and panel
composition and management in order to establish that the
service meets the MRC accreditation standards in any current or
future PPM Market, or for any other reason, we may be required
to make expenditures, the amount of which could be material.
As a result of the MRCs recent decision to deny
accreditation of our PPM ratings service in several PPM Markets
and in the event of any future denials of accreditation, users
of our audience estimates could experience reduced confidence in
our ratings, which could negatively impact demand for our
services and our financial performance. Additionally, these and
any other denials of accreditation of our PPM ratings service by
the MRC could become a factor considered important by
governmental entities in evaluating whether or not to exert
oversight over the Company or its operations or in determining
how to interact with the Company in ongoing dialogues.
25
The MRC has accredited our Diary-based radio ratings service and
several of our other services including our RADAR service, which
currently incorporates radio exposure information from
participants in both our Diary service and our PPM service,
which the MRC has not accredited in all markets. If the MRC
elected to revoke accreditation of any currently accredited
service, it could adversely impact our business.
If we do not successfully manage the transitions
associated with our new CEO, it could have an adverse impact on
our revenues, operations, or results of operations.
On January 11, 2010, we announced the appointment of our
new President and CEO. Our success will be dependent upon his
ability to gain proficiency in leading our Company, his ability
to implement or adapt our corporate strategies and initiatives,
and his ability to develop key professional relationships,
including relationships with our employees, customers, and other
key constituencies and business partners.
Our new CEO could make organizational changes, including changes
to our management team and may make future changes to our
Companys structure. It is important for us to manage
successfully these transitions as our failure to do so could
adversely affect our ability to compete effectively.
In addition, in 2010, we will incur additional expense
associated with the compensation of both our new CEO and our
former CEO, even though there is no guarantee that we will
successfully manage the transition of our new CEO.
We are subject to governmental oversight or influence,
which may harm our business.
Federal, state, and local governmental entities, including state
attorneys general, have increasingly asserted that our
operations are subject to oversight or influence by them. Our
ratings services have undergone a change from manual,
recall-based Diary methodology to electronic, PPM-based
methodology. This change has been subject to public attention,
in particular, our PPM ratings service has been subject to
increasing scrutiny by governmental entities. We expect
increased governmental oversight relating to this business.
The governmental oversight environment could have a significant
effect on us and our business. Among other things, we could be
fined or required to make other payments, prohibited from
engaging in some of our business activities, or subject to
limitations or conditions on our business activities.
Significant governmental oversight action against us could have
material adverse financial effects, cause significant
reputational harm, or harm business prospects. New laws or
regulations or changes in the enforcement of existing laws or
regulations applicable to us may also adversely affect our
business.
Criticism of our audience measurement service by various
governmental entities, industry groups, and market segments
could adversely impact our business.
Due to the high-profile nature of our services in the media and
marketing information services industry, we could become the
target of additional government regulation, legislation,
litigation, activism, or negative public relations efforts by
various industry groups and market segments. During 2008 and
2009, critics of our PPM ratings service urged the FCC and
Congress to investigate the service and several state and
municipal governmental entities inquired about the service. We
expect such opposition will continue during 2010. We believe
that any of the foregoing criticism of our methodology or
negative perception of the quality of our research could delay
the continued commercialization of the PPM ratings service or
negatively impact industry confidence in the ratings we produce,
any of which could have a material negative impact on the demand
for our services and require us to make expenditures
substantially in excess of our current expectations in an
attempt to maintain such confidence. In addition, we may incur
significant expenses associated with protecting our rights to
publish our estimates.
Data collection costs are increasing faster than has been
our historical experience and if we are unable to become more
efficient in our data collection and our management of
associated costs, our operating margins and results of
operations could suffer.
Our success will depend on our ability to reach and recruit
participants and to achieve response rates sufficient to
maintain our audience measurement services. As consumers adopt
modes of telecommunication other than telephone landlines, such
as cell phones and cable or Internet calling, it is becoming
increasingly difficult for us to reach and recruit participants.
Recent government estimates have indicated that the percentage
of cell-phone-only
26
households has been increasing nationally. We seek to include in
our samples a statistically representative number of persons
that reside in cell-phone-only households. We recruit
cell-phone-only households based on the government estimates,
and thus, our ability to recruit is based on available data,
which may not be
up-to-date
and is only provided in regional estimates, not
market-by-market.
It has been our experience that recruiting cell-phone-only
households is significantly more expensive than recruiting
landline households. We have announced initiatives to increase
the percentage of our cell-phone-only households in our Diary
and PPM samples, which could adversely impact our operating
margins and results of operations.
Our ability to acquire cell-phone-only sample is dependent
on a single vendor and if our sample volume increases or we are
unable to utilize this vendor, it would be more expensive for us
to acquire the necessary sample and may delay the full
implementation of our continuous improvement initiatives for
cell-phone-only sampling, which may harm our business.
We use an address-based sampling methodology to recruit
cell-phone-only households. We currently acquire the sample from
a single vendor. As our address-based sample volume increases,
it may be more difficult for our vendor and more expensive for
us to acquire the necessary sample. If this vendor is unable to
satisfy all of our requirements, we would have to bring some or
all of the operations in-house or hire and train one or more
additional vendors, which would increase expenses and delay the
full implementation of continuous improvement initiatives
focused on cell-phone-only sampling, which could harm our
business.
Our success will depend on our ability to protect our
intellectual property rights and we incur substantial expense to
obtain, enforce and defend our intellectual property rights
which could adversely affect our business.
We believe that the success of our business will depend, in
part, on:
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obtaining patent protection for our technology, proprietary
methods, and services, and in particular, our PPM ratings
service;
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defending and enforcing our patents once obtained;
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preserving our trade secrets;
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defending and enforcing our copyrights for our data services and
audience estimates; and
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operating without infringing upon patents and proprietary rights
held by others.
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We rely on a combination of contractual provisions,
confidentiality procedures and patent, copyright, trademark,
service mark and trade secret laws to protect the proprietary
aspects of our technology, data and estimates. Several patents
related to our PPM ratings service begin expiring in 2012. Our
patents when viewed together are of material importance to us.
These legal measures afford only limited protection, and
competitors may gain access to our intellectual property and
proprietary information. Litigation may be necessary to enforce
our intellectual property rights, to protect our trade secrets
and to determine the validity and scope of our proprietary
rights. We have been involved in litigation relating to the
enforcement of the copyrights covering our radio listening
estimates. Although we have generally been successful in these
cases, there can be no assurance that the copyright laws and
other statutory and contractual arrangements we currently depend
upon will provide us sufficient protection to prevent the use or
misappropriation of our audience estimates, databases and
technology in the future. Litigation, regardless of outcome,
could result in substantial expense and a significant diversion
of resources with no assurance of success and could adversely
impact our business, financial position and operating results.
In addition, despite the foregoing efforts to protect and
enforce our intellectual property rights, Arbitron may be
required to defend against third-party claims that our
technology potentially infringes their proprietary rights, or
that our issued patents are invalid, or other issues related to
our intellectual property rights. As a result, we may incur
substantial expense in defending against such allegations
and/or in
settling such claims. Such claims could divert managements
attention and require significant expenditures with no
assurances of success.
Costs associated with significant legal proceedings may
adversely affect our results of operations.
We are party to a number of legal proceedings and governmental
entity investigations and other interactions. It is possible
that the effect of these unresolved matters or costs and
expenses incurred by us in connection with such
27
proceedings or interactions could be material to our
consolidated results of operations. For a discussion of these
unresolved matters, see Item 3. Legal
Proceedings. These matters have resulted in, and may
continue to result in, a diversion of our managements time
and attention as well as significant costs and expenses.
Our future growth and success will depend on our ability
to compete successfully with companies that may have financial,
marketing, technical, and other advantages over us.
We compete with many companies, some of which are larger and
have access to greater capital resources. We believe that our
future growth and success will depend on our ability to compete
successfully with other companies that provide similar services
in the same markets, some of which may have financial,
marketing, technical, and other advantages. We cannot provide
any assurance that we will be able to compete successfully, and
the failure to do so could have a material adverse impact on our
business, financial position, and operating results.
We expect to invest in the continued development and
commercialization of our PPM ratings service, which we may not
ultimately commercialize successfully. The costs associated with
commercialization of this service will adversely impact our
operating results and operating margins over the
commercialization period.
The continuing commercialization of the PPM ratings service
requires and will continue to require significant capital
resources and a substantial financial investment over the next
several years. We also anticipate that through the
commercialization period, our results of operations and
operating margins will be materially and negatively impacted as
a result of the commercialization of our PPM ratings service.
The amount of capital required for deployment of our PPM ratings
service and the impact on our results of operations will be
greatly affected by the speed of the commercialization.
Commercialization of our PPM ratings service has had a material
negative impact on our results of operations and operating
margins. We expect to continue to invest in quality and service
enhancements, including increasing sample sizes and
cell-phone-only sampling, either of which could have a negative
impact on margins.
The loss or insolvency of any of our key customers would
significantly reduce our revenue and operating results.
We are dependent on a large number of key customers, the loss or
insolvency of which would significantly reduce our revenue and
operating results. In 2009, Clear Channel represented
approximately 19 percent of our revenue. Several other
large customers represented significant portions of our 2009
revenue.
We cannot provide any assurances that we could replace the
revenue that would be lost if any of our key customers failed to
renew all or part of their agreements with us. The loss or
insolvency of any of our key customers would materially and
adversely impact our business, financial position and operating
results.
Our agreements with our customers are not exclusive and
contain no renewal obligations. The failure of our customers to
renew all or part of their contracts could have an adverse
impact on our business, financial position and operating
results.
Our customer agreements do not prohibit our customers from
entering into agreements with any other competing service
provider, and once the term of the agreement (usually one to
seven years) expires, there is generally no automatic renewal
feature in our customer contracts. It is not unusual for our
customer contracts to expire before renewal negotiations are
concluded. Therefore, there may be significant uncertainty as to
whether a particular customer will renew all or part of its
contract and, if so, the particular terms of such renewal. If a
customer owning stations in a significant number of markets does
not renew its contracts, this would have an adverse impact on
our business, financial position and operating results.
Long-term agreements with our customers limit our ability
to increase the prices we charge for our services if our costs
increase.
We generally enter into long-term contracts with our customers,
including contracts for delivery of our radio audience
measurement services. The term of these customer agreements
usually ranges from one to seven years. Over the term of these
agreements our costs of providing services may increase, or
increase at rates faster than our historical experience.
Although our customer contracts generally provide for annual
price increases, there can be no
28
assurance that these contractual revenue increases will exceed
any increased cost of providing our services, which could have
an adverse impact on our business, financial position and
operating results.
Our ability to recruit participants for our surveys could
be adversely impacted by governmental regulations.
We believe there is an increasing concern among the American
public regarding privacy issues. Federal and state regulations
restrict telemarketing to individuals who request to be included
on a do-not-call list. Currently, these regulations do not apply
to survey research. If these laws and regulations are extended
to include survey research, our ability to recruit participants
for our surveys could be adversely impacted. We are evaluating
alternatives to our current methodology, including using panels
for our surveys and recontacting previous consenters. In
addition, federal regulations prohibit calls made by autodialers
to wireless lines without consent from the subscriber. Because
consumers are able to transfer a wireless number to a landline
carrier or a landline number to a wireless carrier, it can be
difficult for us to identify wireless numbers in advance of
placing an autodialed call. We are using the services of a
third-party supplier that tracks wireless numbers to help
identify wireless numbers in our telephone sample, but there can
be no assurance that all transfers of numbers are captured. If
we were for any reason unable to use auto dialers in the future,
we believe it would be more expensive to recruit panelists.
The success of our radio audience ratings business depends
on diarykeepers who record their listening habits in diaries and
return these diaries to us and panelists who carry our PPM
devices. Our failure to collect these diaries or to recruit
compliant participants could adversely impact our
business.
We use listener diaries and electronic data gathered from
participants who agree to carry our PPM devices to gather radio
listening data from sample households in the United States local
markets for which we currently provide radio ratings. A
representative sample of the population in each local market is
randomly selected for each survey. To encourage their
participation in our surveys, we give participants a cash
incentive. It is becoming increasingly difficult and more costly
to obtain consent from the phone sample to participate in the
surveys, especially among younger demographic groups. Achieving
adequate response rates is important to maintain confidence in
our ratings, the support of the industry and accreditation by
the MRC. Our failure to successfully recruit compliant survey
participants could adversely impact our business, financial
position and operating results. Our survey and panel
participants do so, on a voluntary basis only, and there can be
no assurance that they will continue to do so.
We expect to continue to invest in the improvement of our
Diary ratings service. The costs associated with such investment
will adversely impact our operating results.
During 2009, we announced significant enhancements to our Diary
ratings service and substantial acceleration of our existing
initiatives. Significant enhancements and acceleration of our
cell-phone-only sampling initiatives will require a substantial
investment by the Company. Our contracts do not allow us to pass
the costs of these investments along to our customers.
Accordingly, our margins will be adversely impacted by increased
costs to provide our services, without an offsetting increase in
revenues. If we are not able to recoup the costs of our
investments in our Diary ratings service, our financial results
will be negatively impacted.
Errors, defects or disruptions in the hardware or software
used to produce or deliver our services could diminish demand
for our services and subject us to substantial liability.
Because our services are complex and we have deployed a variety
of new computer hardware and software, both developed in-house
and acquired from third-party vendors, our hardware or software
used to produce or deliver our services may have errors or
defects that could result in unanticipated downtime for our
subscribers and harm our reputation and our business. We have
from time to time found defects in the hardware or software used
to produce or deliver our services and new errors in our
existing software services may be detected in the future. In
addition, our customers may use our software services in
unanticipated ways that may cause a disruption in software
service for other customers attempting to access our data.
Because the services we provide are important to our
customers businesses, any errors, defects, or disruptions
in the hardware or software used to produce or deliver our
services could hurt our reputation and may damage our
customers businesses. If that occurs, customers could
elect not to renew, or delay or withhold payment to us, we could
lose future sales, or customers may make claims against us,
which could adversely impact our business, financial position,
and results of operations.
29
Interruptions, delays, or unreliability in the delivery of
our services could adversely affect our reputation and reduce
our revenues.
Our customers currently access our services via the Internet. We
currently rely on third parties to provide data services and
disaster recovery data services. Despite any precautions we may
take, any unsuccessful or delayed data transfers may impair the
delivery of our services. Further, any damage to, or failure of,
our systems generally could result in interruptions in our
service. Interruptions in our service may reduce our revenue,
cause us to issue credits or pay penalties, cause customers to
terminate their subscriptions and adversely affect our renewal
rates and our ability to attract new customers. Our business may
be further harmed if customers and potential customers believe
our services are unreliable.
We rely on third parties to provide data and services in
connection with our current business and we may require
additional third-party data and services to expand our business
in the future, which, if available, could adversely impact our
business.
In the event that third-party data and services are unavailable
for our use or are not available to us on favorable terms, our
business could be adversely impacted. Further, in order for us
to build on our experience in the radio audience measurement
industry and expand into measurement for other types of media,
we may need to enter into agreements with third parties. Our
inability to enter into these agreements with third parties at
all or upon favorable terms, when necessary, could adversely
impact our growth and business.
Technological change may render our services obsolete and
it may be difficult for us to develop new services or enhance
existing ones.
We expect that the market for our services will be characterized
by changing technology, evolving industry standards, frequent
new service announcements and enhancements and changing customer
demands. The introduction of new services incorporating new
technologies and the emergence of new industry standards could
render existing services obsolete
and/or
challenge current accepted levels of precision of data
measurement. Additionally, advertising-supported media may be
challenged by new technologies that could have an effect on the
advertising industry, our customers, and our services. Our
continued success will depend on our ability to adapt to
changing technologies and to improve the performance, features,
and reliability of our services in response to changing customer
and industry demands. We may experience difficulties that could
delay or prevent the successful design, development, testing,
introduction, or marketing of our services. Our new services,
such as our PPM ratings service, or enhancements to our existing
services, may not adequately meet the requirements of our
current and prospective customers or achieve any degree of
significant market acceptance. Failure to successfully adapt to
changing technologies and customer demands, either through the
development and marketing of new services, or through
enhancements to our existing services, our business, financial
position, and results of operations could be adversely affected.
We may fail to attract or retain the qualified research,
sales, marketing, and managerial personnel, and key executive
officers required to operate our business successfully.
Our success is largely dependent on the skills, experience, and
efforts of our senior management and certain other key
personnel. If, for any reason, one or more senior executives or
key personnel were not to remain active in our company, our
results of operations could be adversely affected.
We recently formed a cross-platform media measurement
group, which could have a material adverse impact on our
business.
We recently formed a cross-platform media measurement group. The
cross-platform media measurement group leverages the PPM
technology and domestic and international partnerships. We do
not have significant experience in designing, operating,
maintaining or integrating cross-platform services among
television, radio, Internet, mobile and place-based media. This
business may fail, or incur significant losses. Our entry into
cross-platform measurement may bring risks of which we are
currently unaware and could have a material adverse impact on
our business.
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We are dependent on our proprietary software and hardware
systems for current and future business requirements.
Significant delays in the completion of these systems, cost
overages
and/or
inadequate performance or failure of the systems once completed
could adversely impact our business, financial position and
operating results.
We are becoming increasingly reliant on our proprietary software
and hardware systems. We are engaged in an effort to upgrade,
enhance, and, where necessary, replace our internal processing
software for Diary and PPM ratings services, and our client
software. Significant delays in the completion of these systems,
or cost overages, could have an adverse impact on our business
and inadequate performance or failure of these systems, once
completed, could adversely impact our business, financial
position and operating results.
If our proprietary systems such as PPM devices, in-home beacons,
media encoders, or related firmware inadequately perform or
fail, our ability to provide our PPM ratings services could be
significantly impacted and such impact could materially and
adversely impact our business, financial position and operating
results.
Operation of the PPM ratings service is dependent on a
single vendor that assembles the PPM equipment according to our
proprietary design as well as on those who manufacture
parts.
We will need to purchase equipment used in the PPM ratings
service and we are currently dependent on one vendor to assemble
our PPM equipment. The equipment must be assembled by the vendor
in a timely manner, in the quantities needed and with the
quality necessary to function appropriately in the market.
Certain specialized parts used in the PPM equipment may impact
the manufacturing and the timing of the delivery of the
equipment to us. We may become liable for design or
manufacturing defects in the PPM equipment. In addition, if
countries and states enact additional regulations limiting
certain materials, we may be required to redesign some of our
PPM components to meet these regulations. A redesign process,
whether as a result of changed environmental regulations or our
ability to obtain quality parts, may impact the manufacturing
and timing of the delivery of the equipment to us. Our failure
to obtain, in a timely manner, sufficient quantities of quality
equipment to meet our needs could adversely impact the
commercial deployment of the PPM ratings service and therefore
could adversely impact our operating results.
Ownership shifts in the radio broadcasting industry may
put pressure on the pricing of our quantitative radio audience
measurement service and related software sales, thereby leading
to decreased earnings growth.
Ownership shifts in the radio broadcasting industry could put
pressure on the pricing of our quantitative radio audience
ratings service and related software sales, from which we derive
a substantial portion of our total revenue. We price our
quantitative radio audience ratings service and related software
applications on a per radio station, per service or per product
basis, negotiating licenses and pricing with the owner of each
radio station or group of radio stations. If we agree to make
substantial price concessions, it could adversely impact our
business, financial position and operating results.
The license of enhanced access to our respondent-level
data to third-party data processors and customers could
adversely impact the revenue derived from our existing software
licenses.
We license our respondent-level database and the related
software we use to calculate our audience estimates to certain
customers that allow enhanced access to our respondent-level
database. Previously, limited access to our respondent-level
data was available only to those customers who licensed certain
software services directly from us. As we license our enhanced
access to the respondent-level data and software, sales of our
existing software services may be adversely impacted.
Advertisers are pursuing increased accountability from the
media industry for a return on their investments made in media
which could reduce demand for our services.
If advertisers see radio as less accountable, advertisers may
shift advertising expenditures away from media that they
perceive as less accountable. As a result, advertising agencies
and radio stations may be less likely to purchase our media
information services, which could have an adverse impact on our
business, financial position and operating results.
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Long-term disruptions in the mail, telecommunication
infrastructure
and/or air
service could adversely impact our business.
Our business is dependent on the use of the mail,
telecommunication infrastructure and air service. Long-term
disruptions in one or more of these services, which could be
caused by events such as natural disasters, the outbreak of war,
the escalation of hostilities
and/or acts
of terrorism could adversely impact our business, financial
position and operating results.
If the lump- sum payments made to retiring participants in
our defined benefit plans exceed the total of the service cost
and the interest cost in 2010, we would need to record a loss,
which may materially reduce our operating results.
Our defined benefit plans allow participants to receive a
lump-sum distribution for benefits earned in lieu of annuity
payments when they retire from Arbitron. If the lump-sum
distributions made for a calendar year exceed the total of the
service cost and interest cost, we must recognize for that
years results of operations the pro rata portion of
unrecognized actuarial loss equal to the percentage reduction of
the projected benefit obligation. During the years ended
December 31, 2009 and 2008, lump-sum payments in certain of
our defined benefit plans exceeded the total of the service cost
and the interest cost. This resulted in the recognition of a
loss in the amount of $1.8 million and $1.7 million
for the years ended December 31, 2009 and 2008,
respectively. We expect that the lump-sum payments in certain of
our defined benefit plans will again exceed the total of the
service cost and the interest cost in 2010, and the adjustment
could materially reduce operating results. See Note 14 in
the Notes to Consolidated Financial Statements contained in this
Annual Report on
Form 10-K
for more information regarding our retirement plans.
If our subsidiary in India is not successful, we may incur
losses.
The success of our subsidiary in India may be dependent on our
ability to attract and retain talented software developers. The
market for highly skilled workers in software development in
India is becoming increasingly more competitive. If we are
unable to attract and retain employees, we may need to shut down
the facility, and this could adversely impact our financial
position and operating results.
Risk
Factors Relating to Our Indebtedness
Our credit facility contains restrictive covenants that
limit our financial flexibility, which could adversely affect
our ability to conduct our business.
On December 20, 2006, we entered into a five-year,
$150.0 million revolving credit facility that contains
financial terms, covenants and operating restrictions that could
restrict our financial flexibility and could adversely impact
our ability to conduct our business. These include:
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the requirement that we maintain certain leverage and coverage
ratios; and
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restrictions on our ability to sell certain assets, incur
additional indebtedness and grant or incur liens on our assets.
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These restrictions may limit or prohibit our ability to raise
additional debt capital when needed or could prevent us from
investing in other growth initiatives. Our ability to comply
with these financial requirements and other restrictions may be
affected by events beyond our control, and our inability to
comply with them could result in a default under the terms of
the agreement.
If a default occurs, either because we are unable to generate
sufficient cash flow to service the debt or because we fail to
comply with one or more of the restrictive covenants, the
lenders could elect to declare all of the then-outstanding
borrowings, as well as accrued interest and fees, to be
immediately due and payable. In addition, a default may result
in the application of higher rates of interest on the amounts
due, resulting in higher interest expense being incurred by us.
Further, as discussed above in Risk Factors Relating to
Our Business and the Industry in Which We Operate,
continued or intensified disruption in the credit markets may
adversely affect our ability to draw on our credit facility,
which could adversely affect our business.
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Our revolving credit facility expires on December 20,
2011, and we may not be able to replace it on favorable market
terms, or at all.
We compete in the capital markets with other potential
borrowers. Our revolving credit facility expires on
December 20, 2011. We may not be able to replace it on
favorable market terms, or at all. If we are unable to replace
it, if market conditions are unfavorable or we are unable to
obtain alternative sources of liquidity, we could be adversely
impacted.
Risk
Factors Relating to Owning Our Common Stock
Changes in market conditions, or sales of our common
stock, could adversely impact the market price of our common
stock.
The market price of our common stock depends on various
financial and market conditions, which may change from time to
time and which are outside of our control.
Sales of a substantial number of shares of our common stock, or
the perception that such sales could occur, also could adversely
impact prevailing market prices for our common stock. In
addition to the possibility that we may sell shares of our
common stock in a public offering at any time, we also may issue
shares of common stock in connection with grants of restricted
stock or upon exercise of stock options that we grant to our
directors, officers and employees. All of these shares will be
available for sale in the public markets from time to time.
It may be difficult for a third party to acquire us, which
could depress the stock price of our common stock.
Delaware corporate law and our Amended and Restated Certificate
of Incorporation and Bylaws contain provisions that could have
the effect of delaying, deferring or preventing a change in
control of Arbitron or the removal of existing management or
directors and, as a result, could prevent our stockholders from
being paid a premium for their common stock over the
then-prevailing market price. These provisions could also limit
the price that investors might be willing to pay in the future
for shares of our common stock. These include:
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a stockholders rights plan, which likely will limit,
through November 21, 2012, the ability of a third party to
acquire a substantial amount of our common stock without prior
approval by the Board of Directors;
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restriction from engaging in a business combination
with an interested stockholder for a period of three
years after the date of the transaction in which the person
became an interested stockholder under Section 203 of the
Delaware General Corporation Law;
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authorization to issue one or more classes of preferred stock
that can be created and issued by the Board of Directors without
prior stockholder approval, with rights senior to common
stockholders;
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advance notice requirements for the submission by stockholders
of nominations for election to the Board of Directors and for
proposing matters that can be acted upon by stockholders at a
meeting; and
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requirement of a supermajority vote of 80 percent of the
stockholders to exercise the stockholders right to amend
the Bylaws.
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Our Amended and Restated Certificate of Incorporation also
contains the following provisions, which could prevent
transactions that are in the best interest of stockholders:
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requirement of a supermajority vote of two-thirds of the
stockholders to approve some mergers and other business
combinations; and
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restriction from engaging in a business combination
with a controlling person unless either a modified
supermajority vote is received or the business combination will
result in the termination of ownership of all shares of our
common stock and the receipt of consideration equal to at least
fair market value.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
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Our headquarters is located at 9705 Patuxent Woods Drive,
Columbia, Maryland. In addition, we have five regional sales
offices located in the metropolitan areas of New York City, New
York; Atlanta, Georgia; Illinois; Dallas, Texas; and Los
Angeles, California; and operations offices in Dallas, Texas;
Birmingham, Alabama; and Kochi, India. We conduct all of our
operations in leased facilities. Most of these leases contain
renewal options and require payments for taxes, insurance and
maintenance in addition to base rental payments. We believe that
our facilities are sufficient for their intended purposes and
are adequately maintained.
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ITEM 3.
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LEGAL
PROCEEDINGS
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We are involved, from time to time, in litigation and
proceedings, including with governmental authorities, arising
out of the ordinary course of business. Legal costs for services
rendered in the course of these proceedings are charged to
expense as they are incurred.
On April 30, 2008, Plumbers and Pipefitters Local Union
No. 630 Pension-Annuity Trust Fund filed a securities
class action lawsuit in the United States District Court for the
Southern District of New York on behalf of a purported Class of
all purchasers of Arbitron common stock between July 19,
2007, and November 26, 2007. The plaintiff asserts that
Arbitron, Stephen B. Morris (our former Chairman, President and
Chief Executive Officer), and Sean R. Creamer (our Executive
Vice President, Finance and Planning & Chief Financial
Officer) violated federal securities laws. The plaintiff alleges
misrepresentations and omissions relating, among other things,
to the delay in commercialization of our PPM ratings service in
November 2007, as well as stock sales during the period by
company insiders who were not named as defendants and
Messrs. Morris and Creamer. The plaintiff seeks class
certification, compensatory damages plus interest and
attorneys fees, among other remedies. On
September 22, 2008 the plaintiff filed an Amended
Class Action Complaint. On November 25, 2008,
Arbitron, Mr. Morris, and Mr. Creamer each filed
Motions to Dismiss the Amended Class Action Complaint. On
January 23, 2009, the plaintiff filed a Memorandum of Law
in Opposition to Defendants Motions to Dismiss the Amended
Class Action Complaint. On February 23, 2009,
Arbitron, Mr. Morris, and Mr. Creamer filed replies in
support of their Motions to Dismiss. In September 2009, the
plaintiff sought leave to file a Second Amended
Class Action Complaint in lieu of oral argument on the
pending Motions to Dismiss. The court granted leave to file a
Second Amended Class Action Complaint and denied the
pending Motions to Dismiss without prejudice. On or about
October 19, 2009, the plaintiff filed a Second Amended
Class Action Complaint. Briefing on motions to dismiss the
Second Amended Class Action Complaint is not scheduled to
be completed until March 2010.
On or about June 13, 2008, a purported stockholder
derivative lawsuit, Pace v. Morris, et al., was filed
against Arbitron, as a nominal defendant, each of our directors,
and certain of our current and former executive officers in the
Supreme Court of the State of New York for New York County. The
derivative lawsuit is based on essentially the same substantive
allegations as the securities class action lawsuit. The
derivative lawsuit asserts claims against the defendants for
misappropriation of information, breach of fiduciary duty, abuse
of control, and unjust enrichment. The derivative plaintiff
seeks equitable
and/or
injunctive relief, restitution and disgorgement of profits, plus
attorneys fees and costs, among other remedies.
The Company intends to defend itself and its interests
vigorously against these allegations.
On April 22, 2009, the Company filed suit in the United
States District Court for the Southern District of New York
against John Barrett Kiefl seeking a judgment that Arbitron is
the sole owner and assignee of certain patents relating to
Arbitrons Portable People Meter technology. On
July 22, 2009, Mr. Kiefl filed an answer and
counterclaim and seeks a judgment that: (i) Arbitron is not
the sole owner of the patents at issue, (ii) he is an
inventor and owner of one of the patents at issue,
(iii) Arbitron breached certain non-disclosure agreements
entered into with Mr. Kiefl, (iv) for unjust
enrichment, and (v) he receive further relief as the court
may deem just and proper. Recently, Mr. Kiefl has abandoned
his claim that Arbitron breached the non-disclosure agreements
with Arbitron. Arbitron has moved to dismiss both of
Mr. Kiefls remaining claims. No decision has been
issued by the Court.
The Company intends to prosecute its interests vigorously.
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On November 12, 2009, Arbitron was named as a defendant in
an action filed in Mississippi State Court entitled
Dowdy & Dowdy Partnership, d/b/a WZKX (FM) v.
Arbitron Inc., Clear Channel Communications, Inc. The Complaint
alleges anti-competitive conduct including but not limited to
price discrimination in violation of Mississippi state law.
Arbitron answered, denying the allegations of the complaint, and
removed the action to federal court in Mississippi. The case is
pending. The plaintiff in the action is an entity related to JMD
Inc., a company against which Arbitron obtained a money judgment
in Federal Court in 2008 in the amount of $487,853.61. for
breach of contract. After judgment was entered against JMD, Inc.
and its appeal was unsuccessful, this action was commenced
against Arbitron.
The Company intends to defend itself and its interests
vigorously against these allegations.
On February 11, 2009, Arbitron commenced an action in New
York State Court against Spanish Broadcasting System, Inc.,
(SBS) for breach of an encoding agreement that
requires SBS to encode its radio station signals until at least
December, 2012. Arbitron discovered on February 4, 2010,
that SBS had shut down the PPM encoders. Upon filing of the
Complaint, the Company also sought emergency relief from the
Court requiring SBS to resume encoding immediately. At a hearing
held on February, 11, 2010, the Court granted the Companys
request for a temporary restraining order compelling SBS to
resume encoding and set a full hearing on Arbitrons motion
for a preliminary injunction for February 16, 2010. At the
conclusion of the hearing on February 16, 2010, the Court
continued the order compelling SBS to encode pending a written
decision on the motion for a preliminary injunction which is
expected within the next 2 months.
The Company intends to prosecute its interests vigorously.
New
York
On October 6, 2008, we commenced a civil action in the
United States District Court for the Southern District of New
York, seeking a declaratory judgment and injunctive relief
against the New York Attorney General to prevent any attempt by
the New York Attorney General to restrain our publication of our
PPM listening estimates (the New York Federal
Action).
On October 10, 2008, the State of New York commenced a
civil action against the Company in the Supreme Court of New
York for New York County alleging false advertising and
deceptive business practices in violation of New York consumer
protection and civil rights laws relating to the marketing and
commercialization in New York of our PPM ratings service (the
New York State Action). The lawsuit sought civil
penalties and an order preventing us from continuing to publish
our PPM listening estimates in New York.
On January 7, 2009, we joined in a Stipulated Order on
Consent (the New York Settlement) in connection with
the New York State Action. The New York Settlement, when fully
performed by the Company to the reasonable expectation of the
New York Attorney General, will resolve all claims against the
Company that were alleged by the New York Attorney General in
the New York State Action. In connection with the New York
Settlement, we also agreed to dismiss the New York Federal
Action.
In connection with the New York Settlement, we have agreed to
achieve specified metrics concerning telephone number-based,
address-based, and cell-phone-only sampling, and to take all
reasonable measures designed to achieve certain specified
metrics concerning sample performance indicator and in-tab rates
(the Specified Metrics) in our New York local market
PPM ratings service by agreed dates. We also will make certain
disclosures to users and potential users of our audience
estimates, report to the New York Attorney General on our
performance against the Specified Metrics, and make all
reasonable efforts in good faith to obtain and retain
accreditation by the MRC of our New York local market PPM
ratings service. If, by October 15, 2009, we had not:
(i) obtained accreditation from the MRC of our New York
local market PPM ratings service, (ii) achieved all of the
minimum requirements set forth in the New York Settlement, and
(iii) taken all reasonable measures designed to achieve the
minimum requirements set forth in the New York Settlement, the
New York Attorney General reserved the right to rescind the New
York Settlement and reinstitute litigation against us for the
allegations made in the civil action. While we cannot provide
any assurance that the New York Attorney General will not seek
to reinstitute litigation against us for the allegations made in
the civil action, we believe we have taken all reasonable
measures to achieve the minimum requirements set forth in the
New York Settlement.
35
We have paid $200,000 to the New York Attorney General in
settlement of the claims and $60,000 for investigative costs and
expenses.
On October 9, 2008, the Company and certain of our
executive officers received subpoenas from the New York Attorney
General regarding, among other things, the commercialization of
the PPM ratings service in New York and purchases and sales of
Arbitron securities by those executive officers. The New York
Settlement does not affect these subpoenas.
New
Jersey
On October 10, 2008, we commenced a civil action in the
United States District Court for the District of New Jersey,
seeking a declaratory judgment and injunctive relief against the
New Jersey Attorney General to prevent any attempt by the New
Jersey Attorney General to restrain our publication of our PPM
listening estimates (the New Jersey Federal Action).
On October 10, 2008, the State of New Jersey commenced a
civil action against us in the Superior Court of New Jersey for
Middlesex County, alleging violations of New Jersey consumer
fraud and civil rights laws relating to the marketing and
commercialization in New Jersey of our PPM ratings service (the
New Jersey State Action). The lawsuit sought civil
penalties and an order preventing us from continuing to publish
our PPM listening estimates in New Jersey.
On January 7, 2009, we joined in a Final Consent Judgment
(the New Jersey Settlement) in connection with the
New Jersey State Action. The New Jersey Settlement, when fully
performed by the Company to the reasonable expectation of the
New Jersey Attorney General, will resolve all claims against the
Company that were alleged by the New Jersey Attorney General in
the New Jersey State Action. In connection with the New Jersey
Settlement, we also agreed to dismiss the New Jersey Federal
Action. As part of the New Jersey Settlement, the Company denied
any liability or wrongdoing.
In connection with the New Jersey Settlement, we have agreed to
achieve, and in certain circumstances to take reasonable
measures designed to achieve, Specified Metrics in our New York
and Philadelphia local market PPM ratings services by agreed
dates. We also will make certain disclosures to users and
potential users of our audience estimates, report to the New
Jersey Attorney General on our performance against the Specified
Metrics, and make all reasonable efforts in good faith to obtain
and retain accreditation by the MRC of our New York and
Philadelphia local market PPM ratings services. If, by
December 31, 2009, we had not obtained accreditation from
the MRC of either our New York or Philadelphia local market PPM
ratings service and also had failed to achieve all of the
Specified Metrics, the New Jersey Attorney General reserved the
right to rescind the New Jersey Settlement and reinstitute
litigation against us for the allegations made in the New Jersey
Action. While we cannot provide any assurance that the New
Jersey Attorney General will not seek to reinstitute litigation
against us for the allegations made in the civil action, we
believe we have taken all reasonable measures to achieve the
minimum requirements set forth in the New Jersey Settlement.
The Company has paid $130,000 to the New Jersey Attorney General
for investigative costs and expenses.
Jointly in connection with the New York Settlement and the New
Jersey Settlement, the Company also created and funded a
non-response bias study in the New York market, funded an
advertising campaign promoting minority radio in major trade
journals, and paid a single lump sum of $100,000 to the National
Association of Black Owned Broadcasters (NABOB) for
a joint radio project between NABOB and the Spanish Radio
Association to support minority radio.
Maryland
On February 6, 2009, we announced that we had reached an
agreement with the Office of the Attorney General of Maryland
regarding our PPM ratings services in the Washington, DC and
Baltimore local markets. In connection with the Washington, DC
local market we agreed to achieve, and in certain circumstances
take reasonable measures designed to achieve Specified Metrics
by agreed dates. We will also make certain disclosures to users
and potential users of our audience estimates and take all
reasonable efforts to obtain accreditation by the MRC of our
Washington, DC local market PPM service. We have agreed to use
comparable methods and comply with
36
comparable terms in connection with the commercialization of the
PPM service in the Baltimore local market that reflect the
different demographic characteristics of that local market and
the timetable for commercializing the PPM service in the
Baltimore local market.
Florida
On July 14, 2009, the State of Florida commenced a civil
action against us in the Circuit Court of the Eleventh Judicial
Circuit in and for Miami-Dade County, Florida, alleging
violations of Florida consumer fraud law relating to the
marketing and commercialization in Florida of our PPM ratings
service. The lawsuit seeks civil penalties of $10,000 for each
alleged violation and an order preventing us from continuing to
publish our PPM listening estimates in Florida. The Company has
answered the Complaint and is in the process of negotiating a
confidentiality agreement with the plaintiff regarding the
exchange of documents. No further proceedings have taken place.
The Company intends to defend itself and its interests
vigorously against these allegations.
We are involved from time to time in a number of judicial and
administrative proceedings considered ordinary with respect to
the nature of our current and past operations, including
employment-related disputes, contract disputes, government
proceedings, customer disputes, and tort claims. In some
proceedings, the claimant seeks damages as well as other relief,
which, if granted, would require substantial expenditures on our
part. Some of these matters raise difficult and complex factual
and legal issues, and are subject to many uncertainties,
including, but not limited to, the facts and circumstances of
each particular action, and the jurisdiction, forum and law
under which each action is pending. Because of this complexity,
final disposition of some of these proceedings may not occur for
several years. As such, we are not always able to estimate the
amount of our possible future liabilities. There can be no
certainty that we will not ultimately incur charges in excess of
present or future established accruals or insurance coverage.
Although occasional adverse decisions (or settlements) may
occur, we believe that the likelihood that final disposition of
these proceedings will, considering the merits of the claims,
have a material adverse impact on our financial position or
results of operations is remote.
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Our common stock is listed on the New York Stock Exchange
(NYSE) under the symbol ARB. As of
February 19, 2010, there were 26,585,627 shares
outstanding and 4,614 stockholders of record of our common
stock.
The following table sets forth the high and low sale prices of
our common stock as reported on the NYSE Composite Tape and the
dividends declared per share of our common stock for each
quarterly period for the past two years ended December 31,
2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
1Q
|
|
|
2Q
|
|
|
3Q
|
|
|
4Q
|
|
|
Full Year
|
|
|
High
|
|
$
|
17.44
|
|
|
$
|
22.45
|
|
|
$
|
21.07
|
|
|
$
|
25.36
|
|
|
$
|
25.36
|
|
Low
|
|
$
|
10.57
|
|
|
$
|
14.89
|
|
|
$
|
14.87
|
|
|
$
|
20.33
|
|
|
$
|
10.57
|
|
Dividend
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
1Q
|
|
|
2Q
|
|
|
3Q
|
|
|
4Q
|
|
|
Full Year
|
|
|
High
|
|
$
|
46.24
|
|
|
$
|
51.50
|
|
|
$
|
50.87
|
|
|
$
|
44.69
|
|
|
$
|
51.50
|
|
Low
|
|
$
|
38.49
|
|
|
$
|
43.15
|
|
|
$
|
43.98
|
|
|
$
|
9.90
|
|
|
$
|
9.90
|
|
Dividend
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.40
|
|
37
The transfer agent and registrar for our common stock is The
Bank of New York.
On November 14, 2007, our Board of Directors authorized a
program to repurchase up to $200.0 million in shares of our
outstanding common stock through either periodic open-market or
private transactions at then-prevailing market prices over a
period of up to two years. No shares of common stock were
purchased under the program during the year ended
December 31, 2009. As of November 14, 2009, the
program expiration date, 2,247,000 shares of common stock
had been repurchased under this program for $100.0 million.
Arbitron
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number
|
|
Maximum Dollar Value
|
|
|
Total Number of
|
|
Average Price
|
|
of Shares Purchased
|
|
of Shares That May
|
|
|
Shares
|
|
Paid
|
|
as Part of Publicly
|
|
Yet Be Purchased
|
Period
|
|
Purchased
|
|
Per Share
|
|
Announced Program
|
|
Under the Program
|
|
October 1 - December 31
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
38
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The selected financial data set forth below should be read
together with the information under the heading
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations and
Arbitrons consolidated financial statements and related
notes included in this Annual Report on
Form 10-K.
Our statements of income for the years ended December 31,
2009, 2008, and 2007 and balance sheet data as of
December 31, 2009, and 2008 set forth below are derived
from audited consolidated financial statements included
elsewhere in this Annual Report on
Form 10-K.
The statement of income data for the years ended
December 31, 2006, and 2005 and balance sheet data as of
December 31, 2007, 2006, and 2005 are derived from audited
consolidated financial statements of Arbitron not included in
this Annual Report on
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Income Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
384,952
|
|
|
$
|
368,824
|
|
|
$
|
338,469
|
|
|
$
|
319,335
|
|
|
$
|
300,368
|
|
Costs and expenses
|
|
|
330,111
|
|
|
|
312,359
|
|
|
|
279,187
|
|
|
|
243,386
|
|
|
|
206,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
54,841
|
|
|
|
56,465
|
|
|
|
59,282
|
|
|
|
75,949
|
|
|
|
93,650
|
|
Equity in net income of affiliate(s)
|
|
|
7,637
|
|
|
|
6,677
|
|
|
|
4,057
|
|
|
|
7,748
|
|
|
|
7,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest and income tax
expense
|
|
|
62,478
|
|
|
|
63,142
|
|
|
|
63,339
|
|
|
|
83,697
|
|
|
|
101,479
|
|
Interest expense (income), net
|
|
|
1,346
|
|
|
|
1,593
|
|
|
|
(1,453
|
)
|
|
|
3,092
|
|
|
|
971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense
|
|
|
61,132
|
|
|
|
61,549
|
|
|
|
64,792
|
|
|
|
80,605
|
|
|
|
100,508
|
|
Income tax expense
|
|
|
18,972
|
|
|
|
24,330
|
|
|
|
24,288
|
|
|
|
30,259
|
|
|
|
33,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
42,160
|
|
|
|
37,219
|
|
|
|
40,504
|
|
|
|
50,346
|
|
|
|
67,290
|
|
Income (loss) from discontinued operations, net of taxes
|
|
|
|
|
|
|
(39
|
)
|
|
|
(324
|
)
|
|
|
312
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
42,160
|
|
|
$
|
37,180
|
|
|
$
|
40,180
|
|
|
$
|
50,658
|
|
|
$
|
67,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Weighted Average Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.59
|
|
|
$
|
1.37
|
|
|
$
|
1.38
|
|
|
$
|
1.68
|
|
|
$
|
2.16
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, basic
|
|
$
|
1.59
|
|
|
$
|
1.37
|
|
|
$
|
1.37
|
|
|
$
|
1.69
|
|
|
$
|
2.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.58
|
|
|
$
|
1.37
|
|
|
$
|
1.37
|
|
|
$
|
1.67
|
|
|
$
|
2.14
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, diluted
|
|
$
|
1.58
|
|
|
$
|
1.36
|
|
|
$
|
1.35
|
|
|
$
|
1.68
|
|
|
$
|
2.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
Weighted average common shares used in calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,493
|
|
|
|
27,094
|
|
|
|
29,399
|
|
|
|
29,937
|
|
|
|
31,179
|
|
Diluted
|
|
|
26,676
|
|
|
|
27,259
|
|
|
|
29,665
|
|
|
|
30,086
|
|
|
|
31,500
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
75,179
|
|
|
$
|
73,845
|
|
|
$
|
68,618
|
|
|
$
|
105,545
|
|
|
$
|
160,926
|
|
Total assets
|
|
|
203,829
|
|
|
|
199,597
|
|
|
|
180,543
|
|
|
|
210,320
|
|
|
|
254,708
|
|
Long-term debt, including the short-term portion thereof
|
|
|
68,000
|
|
|
|
85,000
|
|
|
|
12,000
|
|
|
|
|
|
|
|
50,000
|
|
Stockholders equity (deficit)
|
|
$
|
30,575
|
|
|
$
|
(14,495
|
)
|
|
$
|
48,200
|
|
|
$
|
89,256
|
|
|
$
|
96,182
|
|
Share-based Compensation Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
$
|
10,031
|
|
|
$
|
8,415
|
|
|
$
|
6,532
|
|
|
$
|
6,545
|
|
|
$
|
426
|
|
39
Certain per share data amounts may not total due to rounding.
As of January 1, 2006, we adopted the recognition
provisions for share-based awards based upon the fair-value of
the award on the date of grant and the allocation of the total
expense over the vest life of the award. See Note 15 to the
Notes to the Consolidated Financial Statements for further
discussion and analysis.
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion should be read in conjunction with our
consolidated financial statements and the notes thereto that
follow in this Annual Report on
Form 10-K.
Overview
Historically, our quantitative radio ratings services and
related software have accounted for a substantial majority of
our revenue. Our radio audience ratings services and the related
software revenues represented 90 percent, 89 percent,
and 88 percent of our total revenue in 2009, 2008, and
2007, respectively. While we expect that our quantitative radio
ratings services and related software will continue to account
for the majority of our revenue for the foreseeable future, we
are actively seeking opportunities to diversify our revenue base
by, among other things, leveraging the investment we have made
in our PPM technology by exploring applications of the
technology beyond our domestic radio ratings business.
We are in the process of executing our previously announced plan
to commercialize progressively our PPM radio ratings service in
the largest United States radio markets, which we currently
anticipate will result in commercialization of the service in 48
local markets by December 2010. According to our analysis of
BIAs 2009 Investing in Radio Market Report, those
broadcasters with whom we have entered into multi-year PPM
agreements account for most of the total radio advertising
dollars in the PPM markets. These agreements generally provide
for a higher fee for PPM-based ratings than we charge for
Diary-based ratings. As a result, we expect that the percentage
of our revenues derived from our radio ratings and related
software is likely to increase as we commercialize the PPM
service. Growth in revenue is expected for 2010 due to a full
year impact of revenue recognized for the 33 PPM Markets
commercialized prior to 2010, as well as the partial year impact
related to the 15 PPM Markets scheduled for commercialization
during the latter half of 2010. However, the full revenue impact
of the launch of each PPM Market is not expected to occur within
the first year after commercialization because our customer
contracts allow for phased-in pricing toward the higher PPM
service rate over a period of time.
Nielsens signing of Cumulus and Clear Channel as customers
for its radio ratings service in certain small to mid-sized
markets resulted in a $5.0 million negative impact on
revenue we would have received for the year ended
December 31, 2009, and is anticipated to adversely impact
our expected revenue by approximately $10.0 million per
year thereafter. Due to the impact of the current economic
downturn on anticipated sales of discretionary services and
renewals of agreements to provide ratings services, as well as
the high penetration of our current services in the radio
broadcasting business, we expect that our future annual organic
rate of revenue growth from our quantitative Diary-based radio
ratings services will be slower than historical trends.
We depend on a limited number of key customers for our radio
ratings services and related software. For example, in 2009,
Clear Channel represented 19 percent of our total revenue.
We cannot provide any assurances that we could replace the
revenue that would be lost if any of our key customers failed to
renew all or part of their agreements with us or became
insolvent. The loss of any key customer would materially impact
our business, financial position, and operating results. Because
many of our largest customers own and operate radio stations in
markets that we expect to transition to PPM measurement, we
expect that our dependence on our largest customers will
continue for the foreseeable future.
We anticipate that PPM costs and expenses will accelerate six to
nine months in advance of the commercialization of the service
in each PPM Market as we build the panels. These costs are
incremental to the costs associated with our Diary-based ratings
service. In addition, we expect to increase the percentage of
cell-phone-only households in both the Diary and PPM services,
which we expect will increase our annual cost of revenue.
40
We continue to operate in a highly challenging business
environment. Our future performance will be impacted by our
ability to address a variety of challenges and opportunities in
the markets and industries we serve. Such challenges and
opportunities include our ability to continue to maintain and
improve the quality of our PPM service, and manage increased
costs for data collection, arising from, among other things,
increased numbers of cell-phone-only households, which are more
expensive for us to recruit than are households with landline
telephones. Our goal is to obtain
and/or
maintain MRC accreditation in all of our PPM Markets, and
develop and implement effective and efficient technological
solutions to measure cross-platform media and advertising.
Protecting and supporting our existing customer base, and
ensuring our services are competitive from a price, quality and
service perspective are critical components to these overall
goals, although there can be no guarantee that we will be
successful in our efforts.
Restructuring,
Reorganization and Expense Reduction Plan
During the first quarter of 2009, we implemented a
restructuring, reorganization, and expense reduction plan (the
Plan). Part of the Plan included reducing our
full-time workforce by approximately 10 percent. During
2009, we incurred restructuring charges, related principally to
severance, termination benefits, retirement plan settlement
charges, outplacement support and certain other expenses that
were incurred as part of the Plan.
In accordance with our retirement plan provisions, participants
may elect, at their option, to receive their retirement benefits
either in a lump sum payment or an annuity. If the lump sum
distributions paid during the year exceed the total of the
service cost and interest cost for the retirement plan year, we
must recognize for that years results of operations the
pro rata portion of any unrecognized gain or loss equal to the
percentage reduction of the projected benefit obligation. During
2009, the aggregate of lump sum distribution elections by a
number of pension plan participants who were terminated as part
of the Plan, resulted in the recognition of a non-cash charge
for the settlement related to two of the Companys
retirement plans. For the year ended December 31, 2009, we
incurred non-cash settlement charges of $1.8 million and a
total restructuring charge, including the non-cash settlement
charges, of $10.0 million.
Investment
in TRA
We made a $3.4 million minority investment in preferred
stock of TRA in May 2009. We account for our investment in TRA
using the cost method of accounting, which requires a
measurement of the Fair Market Value (FMV) of the
investment in order to determine if an impairment of the asset
has occurred. We believe the carrying value of TRA approximates
its FMV.
TRAs shares are not publicly traded, which makes it
difficult to ascertain its FMV. However, TRA is currently
engaged in raising additional capital, which it has indicated to
us it expects to complete in the first half of 2010. We will
re-evaluate the value of our investment based on the results of
the capital raise.
Legal
Expenses
During 2009 and 2008, we incurred approximately
$8.8 million in aggregate legal costs and expenses in
connection with two securities-law civil actions and a
governmental interaction, relating primarily to the
commercialization of our PPM radio ratings service. For
additional information regarding the Companys legal
interactions, see Item 3. Legal
Proceedings. As of December 31, 2009, we received
$2.0 million in insurance reimbursements related to these
legal actions and estimated that an additional $3.5 million
of the aggregate costs and expenses were probable for recovery
under our Director and Officer insurance policy. During the
first quarter of 2010, we received $0.4 million from our
Director and Officer insurance carrier and we reached a
settlement for $3.1 million, which we also expect to
receive during the first quarter of 2010. We are also involved
in other legal matters for which we do not expect that the legal
costs and expenses will be recoverable through insurance. We can
provide no assurance that we will not continue to incur legal
costs and expenses at comparable or
41
higher levels in the future. For further information regarding
these legal costs, see Critical Accounting
Policies and Estimates.
General
Economic Conditions
Our customers derive most of their revenue from transactions
involving the sale or purchase of advertising. During recent
challenging economic times, advertisers have reduced advertising
expenditures, impacting advertising agencies and media. As a
result, advertising agencies and media companies have been and
may continue to be less likely to purchase our services, which
has and could continue to adversely impact our business,
financial position, and operating results.
Since September 2008, we have experienced an increase in the
average number of days our sales have been outstanding before we
have received payment, which has resulted in a material increase
in trade accounts receivable as compared to historical trends.
Our accounts receivable remained at this elevated level
throughout 2009, however, the increase since December 31,
2008 was not significant. If the economic downturn expands or is
sustained for an extended period into the future, it may also
lead to increased incidence of customers inability to pay
their accounts, an increase in our provision for doubtful
accounts, and a further increase in collection cycles for
accounts receivable or insolvency of our customers.
Critical
Accounting Policies and Estimates
Critical accounting policies and estimates are those that both
are important to the presentation of our financial position and
results of operations, and require our most difficult, complex
or subjective judgments.
Software development costs. We capitalize
software development costs with respect to significant internal
use software initiatives or enhancements from the time that the
preliminary project stage is completed and management considers
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 amortized over periods of
three to five years. We perform an assessment quarterly to
determine if it is probable that all capitalized software will
be used to perform its intended function. If an impairment
exists, the software cost is written down to estimated fair
value. As of December 31, 2009, and 2008, our capitalized
software developed for internal use had carrying amounts of
$23.9 million and $22.6 million, respectively,
including $13.7 million and $13.3 million,
respectively, of software related to the PPM service.
Deferred income taxes. We use the asset and
liability method of accounting for income taxes. Under this
method, income tax expense is recognized for the amount of taxes
payable or refundable for the current year and for deferred tax
assets and liabilities for the future tax consequences of events
that have been recognized in an entitys financial
statements or tax returns. We must make assumptions, judgments
and estimates to determine the current provision for income
taxes and also deferred tax assets and liabilities and any
valuation allowance to be recorded against a deferred tax asset.
Our assumptions, judgments, and estimates relative to the
current provision for income taxes take into account current tax
laws, interpretation of current tax laws and possible outcomes
of current and future audits conducted by domestic and foreign
tax authorities. Changes in tax law or interpretation of tax
laws and the resolution of current and future tax audits could
significantly impact the amounts provided for income taxes in
the consolidated financial statements. Our assumptions,
judgments and estimates relative to the value of a deferred tax
asset take into account forecasts of the amount and nature of
future taxable income. Actual operating results and the
underlying amount and nature of income in future years could
render current assumptions, judgments and estimates of
recoverable net deferred tax assets inaccurate. We believe it is
more likely than not that we will realize the benefits of these
deferred tax assets. Any of the assumptions, judgments and
estimates mentioned above could cause actual income tax
obligations to differ from estimates, thus impacting our
financial position and results of operations.
We include, in our tax calculation methodology, an assessment of
the uncertainty in income taxes by establishing recognition
thresholds for our tax positions. Inherent in our calculation
are critical judgments by management related to the
determination of the basis for our tax positions. For further
information regarding our unrecognized tax benefits, see
Note 13 in the Notes to Consolidated Financial Statements
contained in this Annual Report on
Form 10-K.
42
Insurance Receivables. During 2008, we became
involved in two securities-law civil actions and a governmental
interaction primarily related to the commercialization of our
PPM service. During 2009 and 2008, we incurred a combined total
of $8.8 million in legal fees and expenses in connection
with these matters. As of December 31, 2009,
$2.0 million in insurance reimbursements related to these
legal actions was received. As of December 31, 2009, and
2008, we estimated that $3.5 million and $4.8 million,
respectively, of such legal fees and expenses were probable for
future receipt under our Directors and Officers insurance
policy. These amounts are included in our prepaid expenses and
other current assets on our balance sheet.
During 2008 and 2009, we incurred a combined total of
$2.7 million of business interruption losses and damages as
a result of Hurricane Ike. We estimated that insurance
reimbursements for a portion of these expenses were probable for
future receipt under our insurance policy. We recorded
$0.9 million and $1.0 million, as of December 31,
2009, and 2008, respectively, as an insurance claims receivable
and included such estimates within our prepaid expenses and
other current assets on our balance sheet. As of
December 31, 2009, approximately $0.5 million in
insurance reimbursements were received.
43
Results
of Operations
Comparison
of Year Ended December 31, 2009 to Year Ended
December 31, 2008
The following table sets forth information with respect to our
consolidated statements of income for the years ended
December 31, 2009 and 2008.
Consolidated
Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Increase
|
|
|
Percentage
|
|
|
|
December 31,
|
|
|
(Decrease)
|
|
|
of Revenue
|
|
|
|
2009
|
|
|
2008
|
|
|
Dollars
|
|
|
Percent
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
$
|
384,952
|
|
|
$
|
368,824
|
|
|
$
|
16,128
|
|
|
|
4.4
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
196,269
|
|
|
|
185,632
|
|
|
|
10,637
|
|
|
|
5.7
|
%
|
|
|
51.0
|
%
|
|
|
50.3
|
%
|
Selling, general and administrative
|
|
|
81,866
|
|
|
|
85,315
|
|
|
|
(3,449
|
)
|
|
|
(4.0
|
)%
|
|
|
21.3
|
%
|
|
|
23.1
|
%
|
Research and development
|
|
|
42,008
|
|
|
|
41,412
|
|
|
|
596
|
|
|
|
1.4
|
%
|
|
|
10.9
|
%
|
|
|
11.2
|
%
|
Restructuring and reorganization
|
|
|
9,968
|
|
|
|
|
|
|
|
9,968
|
|
|
|
NM
|
|
|
|
2.6
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
330,111
|
|
|
|
312,359
|
|
|
|
17,752
|
|
|
|
5.7
|
%
|
|
|
85.8
|
%
|
|
|
84.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
54,841
|
|
|
|
56,465
|
|
|
|
(1,624
|
)
|
|
|
(2.9
|
)%
|
|
|
14.2
|
%
|
|
|
15.3
|
%
|
Equity in net income of affiliate(s)
|
|
|
7,637
|
|
|
|
6,677
|
|
|
|
960
|
|
|
|
14.4
|
%
|
|
|
2.0
|
%
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest and tax expense
|
|
|
62,478
|
|
|
|
63,142
|
|
|
|
(664
|
)
|
|
|
(1.1
|
)%
|
|
|
16.2
|
%
|
|
|
17.1
|
%
|
Interest income
|
|
|
49
|
|
|
|
623
|
|
|
|
(574
|
)
|
|
|
(92.1
|
)%
|
|
|
0.0
|
%
|
|
|
0.2
|
%
|
Interest expense
|
|
|
1,395
|
|
|
|
2,216
|
|
|
|
(821
|
)
|
|
|
(37.0
|
)%
|
|
|
0.4
|
%
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense
|
|
|
61,132
|
|
|
|
61,549
|
|
|
|
(417
|
)
|
|
|
(0.7
|
)%
|
|
|
15.9
|
%
|
|
|
16.7
|
%
|
Income tax expense
|
|
|
18,972
|
|
|
|
24,330
|
|
|
|
(5,358
|
)
|
|
|
(22.0
|
)%
|
|
|
4.9
|
%
|
|
|
6.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
42,160
|
|
|
|
37,219
|
|
|
|
4,941
|
|
|
|
13.3
|
%
|
|
|
11.0
|
%
|
|
|
10.1
|
%
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
(462
|
)
|
|
|
462
|
|
|
|
NM
|
|
|
|
|
|
|
|
(0.1
|
)%
|
Gain on sale, net of taxes
|
|
|
|
|
|
|
423
|
|
|
|
(423
|
)
|
|
|
NM
|
|
|
|
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
(39
|
)
|
|
|
39
|
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
(0.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
42,160
|
|
|
$
|
37,180
|
|
|
$
|
4,980
|
|
|
|
13.4
|
%
|
|
|
11.0
|
%
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per weighted average common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.59
|
|
|
$
|
1.37
|
|
|
$
|
0.22
|
|
|
|
16.1
|
%
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, basic
|
|
$
|
1.59
|
|
|
$
|
1.37
|
|
|
$
|
0.22
|
|
|
|
16.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.58
|
|
|
$
|
1.37
|
|
|
$
|
0.21
|
|
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, diluted
|
|
$
|
1.58
|
|
|
$
|
1.36
|
|
|
$
|
0.22
|
|
|
|
16.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain per share data and percentage amounts may not total due
to rounding.
NM not meaningful
44
Consolidated
Statements of Income
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Increase
|
|
|
|
December 31,
|
|
|
(Decrease)
|
|
|
|
2009
|
|
|
2008
|
|
|
Dollars
|
|
|
Percent
|
|
|
Other data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT(1)
|
|
$
|
62,478
|
|
|
$
|
63,142
|
|
|
$
|
(664
|
)
|
|
|
(1.1
|
)%
|
EBITDA(1)
|
|
$
|
85,847
|
|
|
$
|
80,605
|
|
|
$
|
5,242
|
|
|
|
6.5
|
%
|
EBIT and EBITDA Reconciliation(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
42,160
|
|
|
$
|
37,219
|
|
|
$
|
4,941
|
|
|
|
13.3
|
%
|
Income tax expense
|
|
|
18,972
|
|
|
|
24,330
|
|
|
|
(5,358
|
)
|
|
|
(22.0
|
)%
|
Interest (income)
|
|
|
(49
|
)
|
|
|
(623
|
)
|
|
|
574
|
|
|
|
(92.1
|
)%
|
Interest expense
|
|
|
1,395
|
|
|
|
2,216
|
|
|
|
(821
|
)
|
|
|
(37.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT(1)
|
|
|
62,478
|
|
|
|
63,142
|
|
|
|
(664
|
)
|
|
|
(1.1
|
)%
|
Depreciation and amortization
|
|
|
23,369
|
|
|
|
17,463
|
|
|
|
5,906
|
|
|
|
33.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
85,847
|
|
|
$
|
80,605
|
|
|
$
|
5,242
|
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBIT (earnings before interest and income taxes) and EBITDA
(earnings before interest, income taxes, depreciation and
amortization) are non-GAAP financial measures that we believe
are useful to investors in evaluating our results. For further
discussion of these non-GAAP financial measures, see paragraph
below entitled EBIT and EBITDA. |
Revenue. Revenue increased 4.4% or
$16.1 million for the year ended December 31, 2009, as
compared to 2008. Revenue increased, in particular, by
$86.9 million due to the partial year impact of the
commercialization of 19 PPM Markets during 2009, as well as the
full year impact of the 12 PPM Markets commercialized during
2008. Higher fees are charged for PPM-based ratings than for
Diary-based ratings within the PPM Markets commercialized. The
increase in revenue due to PPM Market commercialization was
largely offset by a $64.7 million decrease related to the
transition from our Diary-based ratings service. PPM
International sales increased by $1.5 million for the year
ended December 31, 2009, as compared to 2008.
These net increases were partially offset by a $5.0 million
reduction in revenue associated with two customers, primarily
Cumulus, Inc., for our Diary-based radio ratings service in a
limited number of small and medium sized markets. The growth
rate of our ratings revenue was also diminished due to decreased
demand for discretionary services, such as software and
qualitative data services, in the currently challenging economic
environment. Revenue associated with these two qualitative
services decreased by $2.7 million for the year ended
December 31, 2009, as compared to 2008.
Cost of Revenue. Cost of revenue
increased by 5.7% or $10.6 million for the year ended
December 31, 2009, as compared to 2008. Cost of revenue
increased due to $18.6 million of increased PPM service
related costs, including $2.0 million in increased
cell-phone-only household recruitment for our PPM service,
incurred to build and manage PPM panels for the 33 PPM Markets
commercialized in total as of December 31, 2009, as
compared to the 14 PPM Markets commercialized as of
December 31, 2008. In addition, we spent $6.4 million
on cell-phone-only household recruitment initiatives for our
Diary service during 2009 and $2.9 million in increased
costs incurred during the year ended December 31, 2009, to
support the increased infrastructure within our computer center.
These increases were partially offset by a $9.1 million
decrease in Diary data collection and processing costs,
excluding Diary cell-phone-only household recruitment, as a
result of the transition from our Diary service to the PPM
service in certain markets, and a $4.9 million decrease
associated with labor cost reductions resulting from our
restructuring initiative. Scarborough royalty costs decreased by
$1.4 million for the year ended December 31, 2009, as
compared to 2008, due to the decreased demand for discretionary
services, such as software and qualitative data services.
45
Selling, General, and
Administrative. Selling, general, and
administrative expense decreased by 4.0% or $3.4 million
for the year ended December 31, 2009, as compared to 2008,
due primarily to a $4.8 million decrease related to cost
savings incurred as a result of our restructuring and
reorganization plan, a $2.5 million decrease in net legal
costs and a $0.7 million decrease in employee incentive
compensation expense. These decreases in selling, general, and
administrative expense were partially offset by an increase in
share-based compensation expense of $2.3 million, a
$1.3 million insurance recovery reversal associated with an
insurance claim settlement for certain legal matters and
governmental interactions, and a $1.1 million increase in
our bad debt expense primarily due to the impact of the
declining economy for the year ended December 31, 2009, as
compared to 2008.
Restructuring and
Reorganization. During 2009, we reduced our
workforce by approximately 10 percent of our full-time
employees. We incurred $10.0 million of pre-tax
restructuring charges, related principally to severance,
termination benefits, outplacement support, and certain other
expenses in connection with our restructuring plan, including a
$1.8 million settlement loss related to two of our
retirement plans.
Equity in Net Income of
Affiliates. Equity in net income of
affiliates increased by 14.4% or $1.0 million for the year
ended December 31, 2009, as compared to 2008, due primarily
to the termination of the Project Apollo affiliate in June 2008.
Our share of the Project Apollo affiliate loss was
$1.9 million for the year ended December 31, 2008, as
compared to no loss incurred for 2009. This increase was
partially offset by a decrease in our share of the Scarborough
affiliate income of $0.9 million for the year ended
December 31, 2009, as compared to 2008.
Income Tax Expense. The effective tax
rate on continuing operations was 31.0% for the year ended
December 31, 2009. The effective tax rate decreased from
39.5% in 2008 to 31.0% in 2009 primarily due to a
$4.8 million tax benefit recognized as a result of a
favorable state tax ruling received during the fourth quarter of
2009.
Net Income. Net income increased by
13.4% or $5.0 million for the year ended December 31,
2009, as compared to 2008, primarily due to the increased
revenue associated with our transition to our PPM service, net
of costs incurred in our continuing efforts to further build and
operate our PPM service panels for the 33 PPM Markets
commercialized as of December 31, 2009. Such efforts
include supporting recruitment initiatives aimed at increasing
our representation of cell-phone-only households within our
audience ratings services. Net income was favorably impacted by
a nonrecurring state net operating loss tax benefit in the
amount of $4.8 million recorded during the fourth quarter
of 2009, and net income was adversely impacted by a
$1.3 million insurance recovery reversal associated with an
insurance claim settlement for certain legal matters and
governmental interactions.
EBIT and EBITDA. We believe that
presenting EBIT and EBITDA, both non-GAAP financial measures, as
supplemental information helps investors, analysts and others,
if they so choose, in understanding and evaluating our operating
performance in some of the same ways that we do because EBIT and
EBITDA exclude certain items that are not directly related to
our core operating performance. We reference these non-GAAP
financial measures in assessing current performance and making
decisions about internal budgets, resource allocation and
financial goals. EBIT is calculated by deducting interest income
from income from continuing operations and adding back interest
expense and income tax expense to income from continuing
operations. EBITDA is calculated by deducting interest income
from income from continuing operations and adding back interest
expense, income tax expense, and depreciation and amortization
to income from continuing operations. EBIT and EBITDA should not
be considered substitutes either for income from continuing
operations, as indicators of our operating performance, or for
cash flow, as measures of our liquidity. In addition, because
EBIT and EBITDA may not be calculated identically by all
companies, the presentation here may not be comparable to other
similarly titled measures of other companies.
EBIT decreased by $0.7 million for the year ended
December 31, 2009, as compared to 2008. However, EBITDA
increased by 6.5% or $5.2 million because this non-GAAP
financial measure excludes depreciation and amortization, which
for the year ended December 31, 2009, increased by 33.8%,
as compared to 2008.
46
Comparison
of Year Ended December 31, 2008 to Year Ended
December 31, 2007
The following table sets forth information with respect to our
consolidated statements of income for the years ended
December 31, 2008 and 2007.
Consolidated
Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Increase
|
|
|
Percentage of
|
|
|
|
December 31,
|
|
|
(Decrease)
|
|
|
Revenue
|
|
|
|
2008
|
|
|
2007
|
|
|
Dollars
|
|
|
Percent
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
$
|
368,824
|
|
|
$
|
338,469
|
|
|
$
|
30,355
|
|
|
|
9.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
185,632
|
|
|
|
157,175
|
|
|
|
28,457
|
|
|
|
18.1
|
%
|
|
|
50.3
|
%
|
|
|
46.4
|
%
|
Selling, general and administrative
|
|
|
85,315
|
|
|
|
79,516
|
|
|
|
5,799
|
|
|
|
7.3
|
%
|
|
|
23.1
|
%
|
|
|
23.5
|
%
|
Research and development
|
|
|
41,412
|
|
|
|
42,496
|
|
|
|
(1,084
|
)
|
|
|
(2.6
|
)%
|
|
|
11.2
|
%
|
|
|
12.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
312,359
|
|
|
|
279,187
|
|
|
|
33,172
|
|
|
|
11.9
|
%
|
|
|
84.7
|
%
|
|
|
82.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
56,465
|
|
|
|
59,282
|
|
|
|
(2,817
|
)
|
|
|
(4.8
|
)%
|
|
|
15.3
|
%
|
|
|
17.5
|
%
|
Equity in net income of affiliates
|
|
|
6,677
|
|
|
|
4,057
|
|
|
|
2,620
|
|
|
|
64.6
|
%
|
|
|
1.8
|
%
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest and tax expense
|
|
|
63,142
|
|
|
|
63,339
|
|
|
|
(197
|
)
|
|
|
(0.3
|
)%
|
|
|
17.1
|
%
|
|
|
18.7
|
%
|
Interest income
|
|
|
623
|
|
|
|
2,118
|
|
|
|
(1,495
|
)
|
|
|
(70.6
|
)%
|
|
|
0.2
|
%
|
|
|
0.6
|
%
|
Interest expense
|
|
|
2,216
|
|
|
|
665
|
|
|
|
1,551
|
|
|
|
233.2
|
%
|
|
|
0.6
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense
|
|
|
61,549
|
|
|
|
64,792
|
|
|
|
(3,243
|
)
|
|
|
(5.0
|
)%
|
|
|
16.7
|
%
|
|
|
19.1
|
%
|
Income tax expense
|
|
|
24,330
|
|
|
|
24,288
|
|
|
|
42
|
|
|
|
0.2
|
%
|
|
|
6.6
|
%
|
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
37,219
|
|
|
|
40,504
|
|
|
|
(3,285
|
)
|
|
|
(8.1
|
)%
|
|
|
10.1
|
%
|
|
|
12.0
|
%
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
|
(462
|
)
|
|
|
(324
|
)
|
|
|
(138
|
)
|
|
|
42.6
|
%
|
|
|
(0.1
|
)%
|
|
|
(0.1
|
)%
|
Gain on sale, net of taxes
|
|
|
423
|
|
|
|
|
|
|
|
423
|
|
|
|
NM
|
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loss from discontinued operations, net of taxes
|
|
|
(39
|
)
|
|
|
(324
|
)
|
|
|
285
|
|
|
|
(88.0
|
)%
|
|
|
(0.0
|
)%
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
37,180
|
|
|
$
|
40,180
|
|
|
$
|
(3,000
|
)
|
|
|
(7.5
|
)%
|
|
|
10.1
|
%
|
|
|
11.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per weighted average common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.37
|
|
|
$
|
1.38
|
|
|
$
|
(0.01
|
)
|
|
|
(0.7
|
)%
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, basic
|
|
$
|
1.37
|
|
|
$
|
1.37
|
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.37
|
|
|
$
|
1.37
|
|
|
$
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share, diluted
|
|
$
|
1.36
|
|
|
$
|
1.35
|
|
|
$
|
0.01
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common share
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain per share data and percentage amounts may not total due
to rounding.
NM not meaningful
47
Consolidated
Statements of Income
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Increase
|
|
|
|
December 31,
|
|
|
(Decrease)
|
|
|
|
2008
|
|
|
2007
|
|
|
Dollars
|
|
|
Percent
|
|
|
Other data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT(1)
|
|
$
|
63,142
|
|
|
$
|
63,339
|
|
|
$
|
(197
|
)
|
|
|
(0.3
|
)%
|
EBITDA(1)
|
|
$
|
80,605
|
|
|
$
|
75,889
|
|
|
$
|
4,716
|
|
|
|
6.2
|
%
|
EBIT and EBITDA Reconciliation(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
37,219
|
|
|
$
|
40,504
|
|
|
$
|
(3,285
|
)
|
|
|
(8.1
|
)%
|
Income tax expense
|
|
|
24,330
|
|
|
|
24,288
|
|
|
|
42
|
|
|
|
0.2
|
%
|
Interest (income)
|
|
|
(623
|
)
|
|
|
(2,118
|
)
|
|
|
1,495
|
|
|
|
(70.6
|
)%
|
Interest expense
|
|
|
2,216
|
|
|
|
665
|
|
|
|
1,551
|
|
|
|
233.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT(1)
|
|
|
63,142
|
|
|
|
63,339
|
|
|
|
(197
|
)
|
|
|
(0.3
|
)%
|
Depreciation and amortization
|
|
|
17,463
|
|
|
|
12,550
|
|
|
|
4,913
|
|
|
|
39.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
80,605
|
|
|
$
|
75,889
|
|
|
$
|
4,716
|
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
EBIT (earnings before interest and income taxes) and EBITDA
(earnings before interest, income taxes, depreciation and
amortization) are non-GAAP financial measures that we believe
are useful to investors in evaluating our results. For further
discussion of these non-GAAP financial measures, see paragraph
below entitled EBIT and EBITDA. |
The following table sets forth information with regard to
pension settlement costs and expenses recognized for the year
ended December 31, 2008.
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
2008
|
|
|
Cost of revenue
|
|
$
|
885
|
|
Selling, general, and administrative
|
|
|
484
|
|
Research and development
|
|
|
301
|
|
|
|
|
|
|
Total costs and expenses
|
|
$
|
1,670
|
|
|
|
|
|
|
Revenue. Revenue increased 9.0% or
$30.4 million for the year ended December 31, 2008, as
compared to 2007, due primarily to the commercialization of 12
additional PPM markets during 2008, a full year of currency
revenue associated with the Houston-Galveston and Philadelphia
markets commercialized in the first half of 2007, and increases
related to the radio ratings subscriber base, contract renewals,
and price escalations in multiyear customer contracts for our
PPM service and Diary-based quantitative rating business. During
the last three years, our efforts to support the
commercialization of our PPM ratings service have had a material
negative impact on our results of operations.
Cost of Revenue. Cost of revenue
increased by 18.1% or $28.5 million for the year ended
December 31, 2008, as compared to 2007. The increase in
cost of revenue was largely attributable to a $24.8 million
increase associated with our PPM ratings service, which was due
primarily to increased costs related to additional markets
commercialized in 2008 and certain markets expected to be
commercialized in 2009. The increase in cost of revenue for
2008, as compared to 2007, also includes a $3.5 million
increase in expenses on initiatives in support of our Diary
rating business.
Selling, General, and
Administrative. Selling, general, and
administrative expense increased by 7.3% or $5.8 million
for the year ended December 31, 2008, as compared to 2007,
due primarily to a $5.8 million increase in legal costs,
net of anticipated insurance recoveries, related to certain
legal matters and governmental interactions, a $1.7 million
increase in marketing efforts mainly related to supporting our
PPM service, and a $1.7 million increase
48
in non-cash share-based compensation for the year ended
December 31, 2008, as compared to 2007, partially offset by
a $2.9 million decrease from cost-saving initiatives in our
sales and marketing divisions.
Research and Development. Research and
development expense decreased 2.6% or $1.1 million during
the year ended December 31, 2008, as compared to 2007. The
decrease in research and development expenses resulted primarily
from a $4.3 million reduction associated with the
development of the next generation of our client software, and a
$1.2 million decrease in expenses associated with the
development of our accounts receivable and contract management
system, largely offset by a $2.2 million increase related
to applications and infrastructure to support our PPM service, a
$1.4 million increase associated with supporting our Diary
service, and $0.8 million in increased expenses incurred in
expanding our technology operations in India.
Equity in Net Income of
Affiliates. Equity in net income of
affiliates increased by 64.6% or $2.6 million due to the
termination of the Project Apollo affiliate in June 2008.
Project Apollo losses were reported for four quarters during the
year ended December 31, 2007 and only two quarters during
2008.
Interest Income. Interest income
decreased by 70.6% or $1.5 million due to a
$30.9 million decrease in the average aggregate cash and
short-term investment balance for the year ended
December 31, 2008, as compared to 2007.
Interest Expense. Interest expense
increased by 233.2% or $1.6 million due to the interest
incurred on average debt of $57.2 million for the year
ended December 31, 2008, as compared to $4.5 million
of average debt outstanding during 2007. The interest expense
incurred during 2007 was primarily related to ongoing credit
facility fees and the scheduled amortization of deferred
financing costs.
Net Income. Net income decreased 7.5%
or $3.0 million for the year ended December 31, 2008,
as compared to the same period in 2007, due primarily to our
continuing efforts to further build and operate our PPM service
panels for markets launched in the third quarter of 2008,
including New York, Nassau-Suffolk (Long Island),
Middlesex-Somerset-Union, Los Angeles,
Riverside-San Bernardino, Chicago, San Francisco, and
San Jose; and those markets commercialized in the fourth
quarter of 2008 and the first quarter of 2009, including
Atlanta, Dallas-Ft. Worth, Washington DC, Detroit, and
Boston. Net income was also negatively impacted by certain
lawsuits and governmental interactions occurring in 2008, a
portion of which is not expected to be covered by insurance, as
well as cost and expenses related to pension settlements
recognized under SFAS No. 88. These decreases to net
income were partially offset by cost reductions associated with
research and development and the termination of the Project
Apollo affiliate, which was operating at a loss.
EBIT and EBITDA. We believe that
presenting EBIT and EBITDA, both non-GAAP financial measures, as
supplemental information helps investors, analysts, and others,
if they so choose, in understanding and evaluating our operating
performance in some of the same manners that we do because EBIT
and EBITDA exclude certain items that are not directly related
to our core operating performance. We reference these non-GAAP
financial measures in assessing current performance and making
decisions about internal budgets, resource allocation and
financial goals. EBIT is calculated by deducting interest income
from income from continuing operations and adding back interest
expense and income tax expense to income from continuing
operations. EBITDA is calculated by deducting interest income
from income from continuing operations and adding back interest
expense, income tax expense, and depreciation and amortization
to income from continuing operations. EBIT and EBITDA should not
be considered substitutes either for income from continuing
operations, as indicators of our operating performance, or for
cash flow, as measures of our liquidity. In addition, because
EBIT and EBITDA may not be calculated identically by all
companies, the presentation here may not be comparable to other
similarly titled measures of other companies. EBIT decreased by
0.3% or $0.2 million for the year ended December 31,
2008, as compared to 2007, due to the same reasons previously
mentioned for our decreased net income. EBITDA increased 6.2% or
$4.7 million because this non-GAAP financial measure
excludes depreciation and amortization, which for 2008,
experienced an increasing net trend resulting from higher PPM
capital expenditures in 2008, as compared to 2007.
49
Liquidity
and Capital Resources
Comparison
of Year Ended December 31, 2009 to Year Ended
December 31, 2008
Liquidity indicators
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
As of December 31,
|
|
|
|
|
2009
|
|
2008
|
|
Change
|
|
Cash and cash equivalents
|
|
$
|
8,217
|
|
|
$
|
8,658
|
|
|
$
|
(441
|
)
|
Working deficit
|
|
$
|
(10,737
|
)
|
|
$
|
(28,592
|
)
|
|
$
|
17,855
|
|
Working capital, excluding deferred revenue
|
|
$
|
32,411
|
|
|
$
|
28,712
|
|
|
$
|
3,699
|
|
Total long-term debt
|
|
$
|
68,000
|
|
|
$
|
85,000
|
|
|
$
|
(17,000
|
)
|
Over the last two years, we have relied upon our cash flow from
operations, supplemented by borrowings under our available
revolving credit facility (Credit Facility) as
needed, to fund our dividends, capital expenditures, contractual
obligations, and share repurchases. We expect that our cash
position as of December 31, 2009, cash flow generated from
operations, and our Credit Facility will be sufficient to
support our operations for the next 12 to 24 months. See
Credit Facility for further discussion of the
relevant terms of our Credit Facility.
Operating activities. For the year ended
December 31, 2009, the net cash provided by operating
activities was $57.3 million, which was primarily due to
$85.8 million in EBITDA, as discussed and reconciled to
income from continuing operations in Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operations Results of
Operations, partially offset by $23.7 million in
income taxes paid during 2009.
Net cash provided by operating activities also reflects a
$5.3 million decrease related to increased accounts
receivable balances resulting from higher billings and from
slower collections from our customers in the midst of a
declining economy. As a result, our collection cycle has
lengthened and our accounts receivable balance as of
December 31, 2009, is higher than our historical trends.
Investing activities. Net cash used in
investing activities was $35.1 million and
$31.5 million for the years ended December 31, 2009,
and 2008, respectively. This $3.6 million increase in cash
used in investing activities was primarily due to a
$2.3 million increase in equity and other investments
related to our $3.4 million investment in TRA in 2009, as
compared to our $1.1 million investment in Project Apollo
during 2008. The increase in net cash used in investing
activities was also due to a $2.1 million net cash inflow
during the prior year associated with our discontinued operation
of Continental Research, which was sold during 2008. See
Note 3 Discontinued Operations to the Notes to
Consolidated Financial Statements in this
Form 10-K
for further information.
Financing activities. Net cash used in
financing activities was $22.8 million and
$26.9 million for the years ended December 31, 2009,
and 2008, respectively. This $4.1 million decrease in net
cash used in financing activities was due to several factors.
Net cash used in financing activities decreased significantly
due to a $100.0 million decrease related to no stock
repurchase activity during 2009, as compared to
$100.0 million in cash used to repurchase our common stock
during 2008. Also, a decrease in net cash used in financing
activity for the year ended December 31, 2009, as compared
to 2008, related to $3.8 million in increased bank
overdraft payables, which was recorded as a financing activity
in 2009 as compared to no bank overdraft activity recorded for
2008.
These decreases in net cash used in financing activities were
largely offset by $90.0 million in net debt activity, which
was comprised of a net pay down of $17.0 million of
outstanding obligations under our Credit Facility in 2009, as
compared to $73.0 million of net borrowings to assist our
cash flow from operations with funding our stock repurchase
program during 2008. Net cash used in financing activities also
increased due to a decline in our average stock price during the
latter half of 2008, which persisted into 2009 at a level that
caused a substantial number of our stock options to be
out-of-the money during most of 2009. This caused a
$9.3 million decrease in stock option exercises during
2009, as compared to 2008.
50
Comparison
of Year Ended December 31, 2008 to Year Ended
December 31, 2007
Liquidity indicators
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of December 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Change
|
|
|
Cash and cash equivalents
|
|
$
|
8,658
|
|
|
$
|
21,141
|
|
|
$
|
(12,483
|
)
|
Working (deficit) capital
|
|
$
|
(28,592
|
)
|
|
$
|
(45,841
|
)
|
|
$
|
17,249
|
|
Working capital, excluding deferred revenue
|
|
$
|
28,712
|
|
|
$
|
20,927
|
|
|
$
|
7,785
|
|
Total long-term debt, excluding current portion
|
|
$
|
85,000
|
|
|
$
|
7,000
|
|
|
$
|
78,000
|
|
Operating activities. For the year ended
December 31, 2008, the net cash provided by operating
activities was $44.9 million, which was primarily due to
$80.6 million in EBITDA, as discussed and reconciled to
income from continuing operations in Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operations Results of
Operations, and a $5.4 million increase in accounts
payable due largely to increased payables associated with legal
services rendered during the fourth quarter of 2008, which were
partially offset by $19.8 million in income taxes paid
during 2008, and a $17.5 million decrease related to
increased accounts receivable balances resulting from both
higher PPM service billings recorded in conjunction with the
commercialization of 12 PPM Markets in the latter half of 2008,
and slower collections from our customers in the midst of a
declining economy. Net cash provided by operating activities
also reflects a $6.2 million decrease related to increased
prepaids and other current assets, which consists largely of a
$5.8 million insurance claim receivable recorded in 2008
for cost recoveries related to certain legal matters,
governmental interactions, and Hurricane Ike business
interruption loss and damages.
Investing activities. Net cash used in
investing activities was $31.5 million and
$0.7 million for the years ended December 31, 2008,
and 2007, respectively. This $30.8 million increase in cash
used in investing activities was primarily due to
$27.6 million of net short-term investment sales made
during 2007. No investment purchases or sales activity occurred
during 2008. Prior to the end of 2007, all of our short-term
investments were sold to help fund the completion of our then
authorized $100.0 million stock repurchase program. For
further information regarding the impact to our consolidated
financial statements of our stock repurchase programs, see the
discussion of the net financing activities below.
The change in cash flow associated with investing activities was
also impacted by a $6.7 million increase in capital
spending in 2008, primarily related to PPM equipment and
PPM-related software capitalization, as well as machinery and
equipment purchased in conjunction with expanding our research
and development subsidiary in India. These cash outflows were
partially offset by a $2.2 million net cash inflow related
to our discontinued operation (i.e., Continental Research). See
Note 3 Discontinued Operations to the Notes to
Consolidated Financial Statements in this
Form 10-K
for further information.
Financing activities. Net cash used in
financing activities was $26.9 million and
$76.0 million for the years ended December 31, 2008,
and 2007, respectively. This $49.1 million decrease in net
cash used in financing activities was due largely to
$61.0 million in increased net borrowings under our Credit
Facility to assist our cash flow from operations with funding
our stock repurchase program in 2008 as compared to 2007. This
decrease in net cash used was partially offset by a reduction in
proceeds from stock option exercises resulting primarily from a
decrease in our average stock price during the latter half of
2008.
Credit
Facility
On December 20, 2006, we entered into an agreement with a
consortium of lenders to provide up to $150.0 million of
financing to us through a five-year, unsecured revolving credit
facility. The agreement contains an expansion feature for us to
increase the total financing available under the Credit Facility
by up to $50.0 million to an aggregate of
$200.0 million. Such increased financing would be provided
by one or more existing Credit Facility lending institutions,
subject to the approval of the lending banks,
and/or in
combination with one or more new lending institutions, subject
to the approval of the Credit Facilitys administrative
agent. Interest on borrowings under the Credit Facility is
calculated based on a floating rate for a duration of up to six
months as selected by us.
Our Credit Facility contains financial terms, covenants and
operating restrictions that potentially restrict our financial
flexibility. The material debt covenants under our Credit
Facility include both a maximum leverage ratio and a minimum
interest coverage ratio. The leverage ratio is a non-GAAP
financial measure equal to the amount of our consolidated total
51
indebtedness, as defined in our Credit Facility, divided by a
contractually defined adjusted Earnings Before Interest, Taxes,
Depreciation and Amortization and non-cash compensation
(Consolidated EBITDA) for the trailing twelve-month
period. The interest coverage ratio is a non-GAAP financial
measure equal to Consolidated EBITDA divided by total interest
expense. Both ratios are designed as measures of our ability to
meet current and future obligations. The following table
presents the actual ratios and their threshold limits as defined
by the Credit Facility as of December 31, 2009:
|
|
|
|
|
|
|
|
|
Covenant
|
|
Threshold
|
|
Actual
|
|
Maximum leverage ratio
|
|
|
3.0
|
|
|
|
0.71
|
|
Minimum interest coverage ratio
|
|
|
3.0
|
|
|
|
69
|
|
As of December 31, 2009, based upon these financial
covenants, there was no default or limit on our ability to
borrow the unused portion of our Credit Facility.
Our Credit Facility contains customary events of default,
including nonpayment and breach covenants. In the event of
default, repayment of borrowings under the Credit Facility could
be accelerated. Our Credit Facility also contains cross default
provisions whereby a default on any material indebtedness, as
defined in the Credit Facility, could result in the acceleration
of our outstanding debt and the termination of any unused
commitment under the Credit Facility. The agreement potentially
limits, among other things, our ability to sell assets, incur
additional indebtedness, and grant or incur liens on our assets.
Under the terms of the Credit Facility, all of our material
domestic subsidiaries, if any, guarantee the commitment.
Currently, we do not have any material domestic subsidiaries as
defined under the terms of the Credit Facility. Although we do
not believe that the terms of our Credit Facility limit the
operation of our business in any material respect, the terms of
the Credit Facility may restrict or prohibit our ability to
raise additional debt capital when needed or could prevent us
from investing in other growth initiatives. Our outstanding
borrowings decreased from $85.0 million at
December 31, 2008, to $68.0 million at
December 31, 2009. We have been in compliance with the
terms of the Credit Facility since the agreements
inception. As of February 19, 2010, we had
$73.0 million in outstanding debt under the Credit Facility.
Other
Liquidity Matters
On November 14, 2007, our Board of Directors authorized a
program to repurchase up to $200.0 million in shares of our
outstanding common stock through either periodic open-market or
private transactions at then-prevailing market prices over a
period of up to two years. As of the November 2009 expiration
date, 2,247,400 shares of outstanding common stock had been
repurchased under this program for $100.0 million.
Commercialization of our PPM ratings service requires and will
continue to require a substantial financial investment. We
believe our cash generated from operations, as well as access to
the Credit Facility, is sufficient to fund such requirements for
the next 12 to 24 months. We anticipate that PPM costs and
expenses will accelerate six to nine months in advance of the
commercialization of the service in each PPM Market as we build
the panels. Cell-phone-only household recruitment initiatives in
both the Diary and PPM services will also increase our cost of
revenue.
Contractual
Obligations
The following table summarizes our contractual cash obligations
as of December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due By Period
|
|
|
|
Less Than
|
|
|
1 - 3
|
|
|
3 - 5
|
|
|
More Than
|
|
|
|
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Long-term debt(A)
|
|
$
|
701
|
|
|
$
|
68,682
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
69,383
|
|
Operating leases(B)
|
|
|
8,858
|
|
|
|
15,603
|
|
|
|
10,255
|
|
|
|
20,691
|
|
|
|
55,407
|
|
Purchase obligations(C)
|
|
|
9,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,977
|
|
Contributions for retirement plans(D)
|
|
|
5,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,010
|
|
Unrecognized tax benefits(E)
|
|
|
335
|
|
|
|
439
|
|
|
|
436
|
|
|
|
|
|
|
|
1,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,881
|
|
|
$
|
84,724
|
|
|
$
|
10,691
|
|
|
$
|
20,691
|
|
|
$
|
140,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
(A) |
|
See Note 10 in the Notes to Consolidated Financial
Statements for additional information regarding our revolving
credit facility (amounts in table consist of future payments of
$68.0 million for long-term borrowings, and
$1.4 million for interest). |
|
(B) |
|
See Note 12 in the Notes to Consolidated Financial
Statements. |
|
(C) |
|
Other than for PPM equipment purchases, we generally do not make
unconditional, noncancelable purchase commitments. We enter into
purchase orders in the normal course of business, and they
generally do not exceed one-year terms. |
|
(D) |
|
Amount represents an estimate of our cash contribution for 2010
for retirement plans. Future cash contributions will be
determined based upon the funded status of the plan. See
Note 14 in the Notes to Consolidated Financial Statements. |
|
(E) |
|
The amount related to unrecognized tax benefits in the table
includes $0.3 million of interest and penalties. See
Note 13 in the Notes to the Consolidated Financial
Statements. |
Off-Balance
Sheet Arrangements
We did not enter into any off-balance sheet arrangements during
the years ended December 31, 2009, 2008 or 2007, nor did we
have any off-balance sheet arrangements outstanding as of
December 31, 2009, or 2008.
New
Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (i.e.
FASB) issued Accounting Standards Update
No. 2009-13
Revenue Recognition (Topic 605) - Multiple-Deliverable Revenue
Arrangements a consensus of the FASB Emerging Issues Task Force
(i.e. ASU
2009-13).
We reviewed this guidance and determined that it had no impact
to our consolidated financial statements as of December 31,
2009.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest
Rate Risk
We hold our cash and cash equivalents in highly liquid
securities.
In December 2006, we entered into an agreement with a consortium
of lenders to provide us up to $150.0 million of financing
through a five-year, unsecured revolving credit facility.
Interest on borrowings under the Credit Facility is calculated
based on a floating rate for a duration of up to six months. We
do not use derivatives for speculative or trading purposes. As
of December 31, 2009, we reported outstanding borrowings
under the Credit Facility of $68.0 million, which is also
equal to the obligations fair value. A hypothetical market
interest rate change of 1% would have an impact of
$0.7 million on our results of operations over a
12-month
period. A hypothetical market interest rate change of 1% would
have no impact on either the carrying amount or the fair value
of the Credit Facility.
Foreign
Currency Risk
Our foreign operations are not significant at this time, and,
therefore, our exposure to foreign currency risk is not
material. If we expand our foreign operations, our exposure to
foreign currency exchange rate changes could increase.
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The report of the independent registered public accounting firm
and financial statements are set forth below (see
Item 15(a) for a list of financial statements and financial
statement schedules):
53
ARBITRON
INC.
INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
55
|
|
|
|
|
57
|
|
|
|
|
58
|
|
|
|
|
59
|
|
|
|
|
60
|
|
|
|
|
61
|
|
|
|
|
62
|
|
|
|
|
91
|
|
54
Report
of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Arbitron Inc.:
We have audited the accompanying consolidated balance sheets of
Arbitron Inc. and subsidiaries as of December 31, 2009 and
2008, and the related consolidated statements of income,
stockholders equity (deficit), comprehensive income and
cash flows for each of the years in the three-year period ended
December 31, 2009. In connection with our audits of the
consolidated financial statements, we also have audited the
financial statement schedule listed under item 15(a)(2).
These consolidated financial statements and financial statement
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Arbitron Inc. and subsidiaries as of
December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Note 14, of the notes to the consolidated
financial statements, the Company adopted the measurement date
provisions of Statement of Financial Accounting Standards
No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (included in FASB ASC
Topic 715, Compensation-Retirement Benefits) as of
December 31, 2008.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Arbitron Inc.s internal control over financial reporting
as of December 31, 2009, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated March 1, 2010, expressed
an unqualified opinion on the effectiveness of the
Companys internal control over financial reporting.
Baltimore, Maryland
March 1, 2010
55
Report
of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Arbitron Inc.:
We have audited Arbitron Inc.s internal control over
financial reporting as of December 31, 2009, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Arbitron
Inc.s management is responsible for maintaining effective
internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial
reporting, included in the accompanying Managements Report
on Internal Control over Financial Reporting. Our responsibility
is to express an opinion on the Companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Arbitron Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on criteria established in
Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Arbitron Inc. as of
December 31, 2009 and 2008, and the related consolidated
statements of income, stockholders equity (deficit),
comprehensive income and cash flows for each of the years in the
three-year period ended December 31, 2009, and our report
dated March 1, 2010, expressed an unqualified opinion on
those consolidated financial statements.
Baltimore, Maryland
March 1, 2010
56
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
8,217
|
|
|
$
|
8,658
|
|
Trade accounts receivable, net of allowance for doubtful
accounts of $4,708 in 2009 and $2,598 in 2008
|
|
|
52,607
|
|
|
|
50,037
|
|
Inventory
|
|
|
532
|
|
|
|
2,507
|
|
Prepaid expenses and other current assets
|
|
|
8,841
|
|
|
|
10,167
|
|
Deferred tax assets
|
|
|
4,982
|
|
|
|
2,476
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
75,179
|
|
|
|
73,845
|
|
Investment in affiliates
|
|
|
16,938
|
|
|
|
14,901
|
|
Property and equipment, net
|
|
|
67,903
|
|
|
|
62,930
|
|
Goodwill, net
|
|
|
38,500
|
|
|
|
38,500
|
|
Other intangibles, net
|
|
|
809
|
|
|
|
950
|
|
Noncurrent deferred tax assets
|
|
|
4,130
|
|
|
|
7,576
|
|
Other noncurrent assets
|
|
|
370
|
|
|
|
895
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
203,829
|
|
|
$
|
199,597
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity (Deficit)
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
14,463
|
|
|
$
|
15,401
|
|
Accrued expenses and other current liabilities
|
|
|
28,305
|
|
|
|
29,732
|
|
Deferred revenue
|
|
|
43,148
|
|
|
|
57,304
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
85,916
|
|
|
|
102,437
|
|
Long-term debt
|
|
|
68,000
|
|
|
|
85,000
|
|
Other noncurrent liabilities
|
|
|
19,338
|
|
|
|
26,655
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
173,254
|
|
|
|
214,092
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit)
|
|
|
|
|
|
|
|
|
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 December 31,
2009, and 2008
|
|
|
16,169
|
|
|
|
16,169
|
|
Net distributions to parent prior to March 30, 2001 spin-off
|
|
|
(239,042
|
)
|
|
|
(239,042
|
)
|
Retained earnings subsequent to spin-off
|
|
|
267,305
|
|
|
|
226,345
|
|
Common stock held in treasury, 5,750 shares in 2009 and
5,928 shares in 2008
|
|
|
(2,875
|
)
|
|
|
(2,964
|
)
|
Accumulated other comprehensive loss
|
|
|
(10,982
|
)
|
|
|
(15,003
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
30,575
|
|
|
|
(14,495
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
203,829
|
|
|
$
|
199,597
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
$
|
384,952
|
|
|
$
|
368,824
|
|
|
$
|
338,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
196,269
|
|
|
|
185,632
|
|
|
|
157,175
|
|
Selling, general and administrative
|
|
|
81,866
|
|
|
|
85,315
|
|
|
|
79,516
|
|
Research and development
|
|
|
42,008
|
|
|
|
41,412
|
|
|
|
42,496
|
|
Restructuring and reorganization
|
|
|
9,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
330,111
|
|
|
|
312,359
|
|
|
|
279,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
54,841
|
|
|
|
56,465
|
|
|
|
59,282
|
|
Equity in net income of affiliate(s)
|
|
|
7,637
|
|
|
|
6,677
|
|
|
|
4,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before interest and income tax
expense
|
|
|
62,478
|
|
|
|
63,142
|
|
|
|
63,339
|
|
Interest income
|
|
|
49
|
|
|
|
623
|
|
|
|
2,118
|
|
Interest expense
|
|
|
1,395
|
|
|
|
2,216
|
|
|
|
665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax expense
|
|
|
61,132
|
|
|
|
61,549
|
|
|
|
64,792
|
|
Income tax expense
|
|
|
18,972
|
|
|
|
24,330
|
|
|
|
24,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
42,160
|
|
|
|
37,219
|
|
|
|
40,504
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
(462
|
)
|
|
|
(324
|
)
|
Gain on sale of discontinued operations, net of taxes
|
|
|
|
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
(39
|
)
|
|
|
(324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
42,160
|
|
|
$
|
37,180
|
|
|
$
|
40,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per weighted-average common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.59
|
|
|
$
|
1.37
|
|
|
$
|
1.38
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.59
|
|
|
$
|
1.37
|
|
|
$
|
1.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
1.58
|
|
|
$
|
1.37
|
|
|
$
|
1.37
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.58
|
|
|
$
|
1.36
|
|
|
$
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares used in calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,493
|
|
|
|
27,094
|
|
|
|
29,399
|
|
Potentially dilutive securities
|
|
|
183
|
|
|
|
165
|
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
26,676
|
|
|
|
27,259
|
|
|
|
29,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share outstanding
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Certain per share data amounts may not total due to
rounding.
See accompanying notes to consolidated financial statements.
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to Parent
|
|
|
Retained
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Prior to
|
|
|
Earnings
|
|
|
Common Stock
|
|
|
Other
|
|
|
Total
|
|
|
|
Shares
|
|
|
Common
|
|
|
Additional
|
|
|
March 31, 2001
|
|
|
Subsequent
|
|
|
Held in
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Outstanding
|
|
|
Stock
|
|
|
Paid-in Capital
|
|
|
Spin-off
|
|
|
to Spin-off
|
|
|
Treasury
|
|
|
Loss
|
|
|
Equity (Deficit)
|
|
|
Balance at December 31, 2006
|
|
|
29,692
|
|
|
|
16,169
|
|
|
|
53,598
|
|
|
|
(239,042
|
)
|
|
|
266,905
|
|
|
|
(1,323
|
)
|
|
|
(7,051
|
)
|
|
|
89,256
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,180
|
|
|
|
|
|
|
|
|
|
|
|
40,180
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
53
|
|
Retirement and post-retirement liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198
|
|
|
|
198
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(109
|
)
|
|
|
(109
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,783
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,783
|
)
|
Common stock issued
|
|
|
712
|
|
|
|
|
|
|
|
20,908
|
|
|
|
|
|
|
|
|
|
|
|
356
|
|
|
|
|
|
|
|
21,264
|
|
Noncash share-based compensation
|
|
|
|
|
|
|
|
|
|
|
6,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,532
|
|
Common stock repurchased
|
|
|
(2,094
|
)
|
|
|
|
|
|
|
(98,953
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,047
|
)
|
|
|
|
|
|
|
(100,000
|
)
|
Tax benefits from share-based awards
|
|
|
|
|
|
|
|
|
|
|
2,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,609
|
|
Reclass of negative APIC to retained earnings
|
|
|
|
|
|
|
|
|
|
|
15,306
|
|
|
|
|
|
|
|
(15,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
|
28,310
|
|
|
|
16,169
|
|
|
|
|
|
|
|
(239,042
|
)
|
|
|
279,996
|
|
|
|
(2,014
|
)
|
|
|
(6,909
|
)
|
|
|
48,200
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,180
|
|
|
|
|
|
|
|
|
|
|
|
37,180
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,087
|
)
|
|
|
(1,087
|
)
|
Retirement and post-retirement liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,468
|
)
|
|
|
(12,468
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,238
|
|
|
|
5,238
|
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,826
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,826
|
)
|
Common stock issued
|
|
|
347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,065
|
|
|
|
164
|
|
|
|
|
|
|
|
10,229
|
|
Noncash share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,406
|
|
|
|
9
|
|
|
|
|
|
|
|
8,415
|
|
Common stock repurchased
|
|
|
(2,247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98,876
|
)
|
|
|
(1,123
|
)
|
|
|
|
|
|
|
(99,999
|
)
|
Tax benefits from share-based awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
830
|
|
|
|
|
|
|
|
|
|
|
|
830
|
|
Impact of SFAS No. 158 measurement date adoption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service, interest, and expected return component
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(207
|
)
|
|
|
|
|
|
|
|
|
|
|
(207
|
)
|
Amortization of prior service and actuarial loss component
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(223
|
)
|
|
|
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
26,410
|
|
|
|
16,169
|
|
|
|
|
|
|
|
(239,042
|
)
|
|
|
226,345
|
|
|
|
(2,964
|
)
|
|
|
(15,003
|
)
|
|
|
(14,495
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,160
|
|
|
|
|
|
|
|
|
|
|
|
42,160
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
(42
|
)
|
Retirement and post-retirement liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,694
|
|
|
|
6,694
|
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,631
|
)
|
|
|
(2,631
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,597
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,597
|
)
|
Common stock issued
|
|
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,188
|
|
|
|
89
|
|
|
|
|
|
|
|
1,277
|
|
Noncash share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,031
|
|
|
|
|
|
|
|
|
|
|
|
10,031
|
|
Reduced tax benefits from share-based awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,822
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,822
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
26,588
|
|
|
$
|
16,169
|
|
|
$
|
|
|
|
$
|
(239,042
|
)
|
|
$
|
267,305
|
|
|
$
|
(2,875
|
)
|
|
$
|
(10,982
|
)
|
|
$
|
30,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net income
|
|
$
|
42,160
|
|
|
$
|
37,180
|
|
|
$
|
40,180
|
|
Other comprehensive (loss) income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in foreign currency translation adjustment, net of tax
benefit (expense) of $16, $429, and $(19) for 2009, 2008, and
2007, respectively
|
|
|
(26
|
)
|
|
|
(658
|
)
|
|
|
34
|
|
Change in retirement liabilities, net of tax (expense) benefit
of $(2,647), $4,809, and $(90) for 2009, 2008, and 2007,
respectively
|
|
|
4,047
|
|
|
|
(7,659
|
)
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
|
4,021
|
|
|
|
(8,317
|
)
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
46,181
|
|
|
$
|
28,863
|
|
|
$
|
40,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
42,160
|
|
|
$
|
37,180
|
|
|
$
|
40,180
|
|
Less: loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
(39
|
)
|
|
|
(324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
42,160
|
|
|
|
37,219
|
|
|
|
40,504
|
|
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property and equipment
|
|
|
23,228
|
|
|
|
17,161
|
|
|
|
11,773
|
|
Amortization of intangible assets
|
|
|
141
|
|
|
|
302
|
|
|
|
777
|
|
Loss on asset disposals
|
|
|
2,088
|
|
|
|
1,550
|
|
|
|
1,263
|
|
Loss due to retirement plan settlements
|
|
|
1,803
|
|
|
|
1,670
|
|
|
|
|
|
Asset impairment charges
|
|
|
|
|
|
|
48
|
|
|
|
831
|
|
Deferred income taxes
|
|
|
(1,690
|
)
|
|
|
2,400
|
|
|
|
1,768
|
|
Reduced tax benefits on share-based awards
|
|
|
(1,822
|
)
|
|
|
|
|
|
|
|
|
Equity in net income of affiliate(s)
|
|
|
(7,637
|
)
|
|
|
(6,677
|
)
|
|
|
(4,057
|
)
|
Distributions from affiliate
|
|
|
9,000
|
|
|
|
8,100
|
|
|
|
7,800
|
|
Bad debt expense
|
|
|
2,723
|
|
|
|
1,636
|
|
|
|
1,175
|
|
Non-cash share-based compensation
|
|
|
10,031
|
|
|
|
8,415
|
|
|
|
6,532
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
(5,293
|
)
|
|
|
(17,502
|
)
|
|
|
(4,813
|
)
|
Prepaid expenses and other assets
|
|
|
2,148
|
|
|
|
(6,184
|
)
|
|
|
124
|
|
Inventory
|
|
|
1,856
|
|
|
|
(1,678
|
)
|
|
|
2,964
|
|
Accounts payable
|
|
|
(3,157
|
)
|
|
|
5,352
|
|
|
|
485
|
|
Accrued expense and other current liabilities
|
|
|
(1,672
|
)
|
|
|
2,307
|
|
|
|
(3,558
|
)
|
Deferred revenue
|
|
|
(14,156
|
)
|
|
|
(9,464
|
)
|
|
|
1,175
|
|
Other noncurrent liabilities
|
|
|
(2,427
|
)
|
|
|
1,426
|
|
|
|
121
|
|
Net operating activities from discontinued operations
|
|
|
|
|
|
|
(1,194
|
)
|
|
|
198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
57,324
|
|
|
|
44,887
|
|
|
|
65,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(31,681
|
)
|
|
|
(32,005
|
)
|
|
|
(25,333
|
)
|
Purchases of short-term investments
|
|
|
|
|
|
|
|
|
|
|
(170,545
|
)
|
Proceeds from sales of short-term investments
|
|
|
|
|
|
|
|
|
|
|
198,170
|
|
Investments in affiliate
|
|
|
(3,400
|
)
|
|
|
(1,062
|
)
|
|
|
(2,885
|
)
|
Payments for business acquisition
|
|
|
|
|
|
|
(522
|
)
|
|
|
|
|
Net investing activities from discontinued operations
|
|
|
|
|
|
|
2,123
|
|
|
|
(60
|
)
|
Net cash used in investing activities
|
|
|
(35,081
|
)
|
|
|
(31,466
|
)
|
|
|
(653
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from stock option exercises and stock purchase plan
|
|
|
988
|
|
|
|
10,331
|
|
|
|
21,347
|
|
Stock repurchases
|
|
|
|
|
|
|
(99,999
|
)
|
|
|
(100,000
|
)
|
Tax benefits realized from share-based awards
|
|
|
|
|
|
|
830
|
|
|
|
2,609
|
|
Dividends paid to stockholders
|
|
|
(10,584
|
)
|
|
|
(11,022
|
)
|
|
|
(11,914
|
)
|
Increase in bank overdraft payables
|
|
|
3,833
|
|
|
|
|
|
|
|
|
|
Borrowings issued on long-term debt
|
|
|
33,000
|
|
|
|
140,000
|
|
|
|
35,000
|
|
Payments of long-term debt
|
|
|
(50,000
|
)
|
|
|
(67,000
|
)
|
|
|
(23,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(22,763
|
)
|
|
|
(26,860
|
)
|
|
|
(75,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
79
|
|
|
|
(31
|
)
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(441
|
)
|
|
|
(13,470
|
)
|
|
|
(11,512
|
)
|
Cash and cash equivalents at beginning of year
|
|
|
8,658
|
|
|
|
22,128
|
|
|
|
33,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
8,217
|
|
|
$
|
8,658
|
|
|
$
|
22,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents from continuing operations at end of
year
|
|
|
8,217
|
|
|
|
8,658
|
|
|
|
21,141
|
|
Cash and cash equivalents from discontinued operations at end of
year
|
|
|
|
|
|
|
|
|
|
|
987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
8,217
|
|
|
$
|
8,658
|
|
|
$
|
22,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
61
ARBITRON
INC.
Basis
of Consolidation
The consolidated financial statements of Arbitron Inc.
(Arbitron or the Company) for the year
ended December 31, 2009, reflect the consolidated financial
position, results of operations and cash flows of the Company
and its subsidiaries: Arbitron Holdings Inc., Audience Research
Bureau S.A. de C.V., 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
consummated the sale of CSW Research Limited (Continental
Research) and Euro Fieldwork Limited, a subsidiary of
Continental Research, on January 31, 2008. The financial
information of Continental Research has been separately
reclassified within the consolidated financial statements as a
discontinued operation. See Note 3 for further information.
Description
of Business
Arbitron is a leading media and marketing information services
firm, primarily serving radio, cable television, advertising
agencies, advertisers, retailers,
out-of-home
media, online media and, through the Companys Scarborough
Research (Scarborough) joint venture with The
Nielsen Company, broadcast television and print media. The
Company currently provides four main services: measuring and
estimating radio audiences in local markets in the United
States; measuring and estimating radio audiences of network
radio programs and commercials; providing software used for
accessing and analyzing our media audience and marketing
information data; and providing consumer, shopping, and media
usage information services.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Revenue
Recognition
Syndicated or recurring products and services are licensed on a
contractual basis. Revenues for such products and services are
recognized over the term of the license agreement as products or
services are delivered. Customer billings in advance of delivery
are recorded as a deferred revenue liability. Deferred revenue
relates primarily to quantitative radio measurement surveys
which are delivered to customers in the subsequent quarterly or
monthly period. Software revenue is recognized ratably over the
life of the agreement. Through the standard software license
agreement, customers are provided enhancements and upgrades, if
any, that occur during their license term at no additional cost.
Customer agreements with multiple licenses are reviewed for
separate revenue recognition for deliverables specified by the
agreements. Sales tax charged to customers is presented on a net
basis within the consolidated income statement and excluded from
revenues.
Expense
Recognition
Direct costs associated with the Companys data collection,
diary processing and deployment of the Companys Portable
People Meter ratings service are recognized when incurred and
are included in cost of revenue. Selling, general, and
administrative expenses are recognized when incurred. Research
and development expenses consist primarily of expenses
associated with the development of new products and customer
software and other technical expenses including maintenance of
operations and reporting systems.
Cash
Equivalents
Cash equivalents consist primarily of highly liquid investments
with insignificant interest rate risk and original maturities of
three months or less.
62
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
Short-term
Investments
There were no short-term investment assets recorded on the
Companys consolidated balance sheet as of
December 31, 2009, and 2008. All of the Companys
short-term investment assets, if any, are classified as
available-for-sale
securities. No short-term investment transactions occurred
during 2009 or 2008. During 2007, purchases and sales of
short-term investments consisted of the buying and selling of
variable rate demand notes and auction rate securities. These
investments were investment grade, highly liquid securities. The
Company conducted these transactions through various financial
institutions which were evaluated for their credit quality.
Because the Companys short-term investment transactions
were traded at par, the amount of realized gains and losses
included in earnings was zero.
Trade
Accounts Receivable
Trade accounts receivable are recorded at invoiced amounts. The
allowance for doubtful accounts is estimated based on historical
trends of past due accounts and write-offs, as well as a review
of specific accounts.
Inventories
Inventories consist of PPM equipment held for resale to
international licensees of the PPM service. The inventory is
accounted for on a
first-in,
first-out (FIFO) basis.
Property
and Equipment
Property and equipment are recorded at cost and depreciated or
amortized on a straight-line basis over the estimated useful
lives of the assets, which are as follows:
|
|
|
Computer equipment
|
|
3 years
|
Purchased and internally developed software
|
|
3 5 years
|
Leasehold improvements
|
|
Shorter of useful life or life of lease
|
Machinery, furniture and fixtures
|
|
3 6 years
|
Repairs and maintenance are charged to expense as incurred.
Gains and losses on dispositions are included in the
consolidated results of operations at the date of disposal.
Expenditures for significant software purchases and software
developed for internal use are capitalized. For software
developed for internal use, external direct costs for materials
and services and certain payroll and related fringe benefit
costs are capitalized as well. The costs are capitalized from
the time that the preliminary project stage is completed and
management considers 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 amortized over
periods of three to five years. Management performs an
assessment quarterly to determine if it is probable that all
capitalized software will be used to perform its intended
function. If an impairment exists, the software cost is written
down to estimated fair value.
Investment
in Affiliates
Investment in affiliates is accounted for using either the
equity method or the cost method, depending upon the nature of
the Companys investment interests. The equity method is
used when the Company has an ownership interest of 50% or less
and the ability to exercise significant influence or has a
majority ownership interest but does not have the ability to
exercise effective control. The cost method is used when the
Company has an ownership of 20% or less and does not have the
ability to exercise significant influence.
63
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
Goodwill
and Other Intangibles
Goodwill represents the excess of costs over fair value of
assets of businesses acquired. Goodwill and intangible assets
acquired in a purchase business combination and determined to
have an indefinite useful life are not amortized. Intangible
assets with estimable useful lives are amortized over their
respective estimated useful lives to their estimated residual
values, and are regularly reviewed for impairment.
Goodwill and intangible assets not subject to amortization are
tested annually for impairment or more frequently if events and
circumstances indicate that the asset might be impaired. The
Company performs its annual impairment test at the reporting
unit level as of January 1st for each fiscal year. An
impairment loss is recognized to the extent that the carrying
amount of the asset exceeds its fair value.
Impairment
of Long-Lived Assets
Long-lived assets, such as property, plant, and equipment, and
purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated
future cash flows, an impairment charge is recognized in the
amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of are reported
at the lower of the carrying amount or fair value less costs to
sell, and effective with the date classified as held for sale,
are no longer depreciated. The assets and liabilities of a
disposal group classified as held for sale, as well as the
results of operations and cash flows of the disposal group, if
any, are presented separately in the appropriate sections of the
consolidated financial statements for all periods presented.
Income
Taxes
Income taxes are accounted for using the asset and liability
method. Deferred tax assets and liabilities are recognized based
on the future tax consequences attributable to differences
between financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be
applied to taxable income in years in which those temporary
differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rate
is recognized in income in the period that includes the
enactment date. The Company recognizes the effect of income tax
positions only if those positions are more likely than not of
being sustained. Recognized income tax positions are measured at
the largest amount that is greater than 50% likely of being
realized. Changes in recognition or measurement are reflected in
the period in which the change in judgment occurs.
Net
Income per Weighted Average Common Share
The computations of basic and diluted net income per
weighted-average common share for 2009, 2008, and 2007 are based
on the Companys 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 that the proceeds from the
exercise of all stock options are used to repurchase the
Companys common stock at the average market price for the
period. As of December 31, 2009, 2008, and 2007, there were
stock options to purchase 2,852,161, 1,713,557, and
1,685,251 shares of the Companys common stock
outstanding, respectively, of which stock options to purchase
2,052,132, 1,646,825, and 183,110 shares of the
Companys common stock, respectively, were excluded from
the computation of the diluted net income per weighted-average
common share, either because the stock options exercise
prices were greater than the average market price of the
Companys common shares or assumed repurchases from
proceeds from the stock options exercise were antidilutive.
64
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The Company elected to use the short-cut method of determining
its initial hypothetical tax benefit windfall pool, and the
assumed proceeds associated with the entire amount of tax
benefits for share-based awards granted prior to January 1,
2006, were used in the diluted shares computation. For
share-based awards granted subsequent to the January 1,
2006, the assumed proceeds for the related excess tax benefits,
if any, were also used in the diluted shares computation.
Translation
of Foreign Currencies
Financial statements of foreign subsidiaries are translated into
United States dollars at current rates at the end of the period
except that revenue and expenses are translated at average
current exchange rates during each reporting period. Net
translation exchange gains or losses and the effect of exchange
rate changes on intercompany transactions of a long-term nature
are recorded in accumulated other comprehensive loss in
stockholders equity (deficit). Gains and losses from
translation of assets and liabilities denominated in other than
the functional currency of the operation are recorded in income
as incurred.
Advertising
Expense
The Company recognizes advertising expense the first time
advertising takes place. Advertising expense for the years ended
December 31, 2009, 2008 and 2007, was $2.3 million,
$1.8 million and $1.7 million, respectively.
Accounting
Estimates
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant items, if any, subject to such estimates and
assumptions may include: valuation allowances for receivables
and deferred income tax assets, loss contingencies, and assets
and obligations related to employee benefits. Actual results
could differ from those estimates.
Legal
Matters
The Company is involved, from time to time, in litigation and
proceedings arising out of the ordinary course of business.
Legal costs for services rendered in the course of these
proceedings are charged to expense as they are incurred.
Leases
The Company conducts all of its operations in leased facilities
and leases certain equipment which have minimum lease
obligations under noncancelable operating leases. Certain of
these leases contain rent escalations based on specified
percentages. Most of the leases contain renewal options and
require payments for taxes, insurance and maintenance. Rent
expense is charged to operations as incurred except for
escalating rents, which are charged to operations on a
straight-line basis over the life of the lease.
New
Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (i.e.
FASB) issued Accounting Standards Update
No. 2009-13
Revenue Recognition (Topic 605)
Multiple-Deliverable Revenue Arrangements a consensus of the
FASB Emerging Issues Task Force (i.e. ASU
2009-13).
The management of the Company is currently reviewing this
guidance.
65
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
3.
|
Discontinued
Operation
|
During the fourth quarter of 2007, the Company approved a plan
to sell Continental Research. On January 31, 2008, the sale
of Continental Research was completed at a gain of
$0.4 million. The assets and liabilities, results of
operations and cash flow activity of Continental Research have
been reclassified separately as a discontinued operation held
for sale within the Companys consolidated financial
statements. The following table present key information
associated with the operating results of the discontinued
operations for the 2008 and 2007 reporting periods presented in
the Companys income statement filed in this annual report
on
Form 10-K
for the year ended December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
Results of Operations of Discontinued Operations
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
$
|
1,011
|
|
|
$
|
13,578
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
|
(791
|
)
|
|
|
119
|
|
Net interest income
|
|
|
7
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income tax benefit (expense)
|
|
|
(784
|
)
|
|
|
245
|
|
Income tax benefit (expense)
|
|
|
322
|
|
|
|
(569
|
)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of taxes
|
|
|
(462
|
)
|
|
|
(324
|
)
|
Gain on sale, net of taxes
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loss from discontinued operations, net of tax
|
|
$
|
(39
|
)
|
|
$
|
(324
|
)
|
|
|
|
|
|
|
|
|
|
During December 2007, a $1.4 million distribution of
accumulated earnings was received by the Company from
Continental Research in anticipation of the sale. This
distribution was recognized as taxable dividend income in the
United States. The related tax accrual was recognized as
additional income tax expense and included in the results of
discontinued operations for the year ended December 31,
2007.
|
|
4.
|
Investment
in Affiliates
|
The Companys equity and other investments consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Scarborough
|
|
$
|
13,538
|
|
|
$
|
14,901
|
|
|
|
|
|
|
|
|
|
|
Equity investments
|
|
|
13,538
|
|
|
|
14,901
|
|
|
|
|
|
|
|
|
|
|
TRA preferred stock
|
|
|
3,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
|
3,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity and other investments
|
|
$
|
16,938
|
|
|
$
|
14,901
|
|
|
|
|
|
|
|
|
|
|
The Companys 49.5% investment in Scarborough Research
(Scarborough), a Delaware general partnership, is
accounted for using the equity method of accounting. The
Companys preferred stock investment in TRA Global, Inc., a
Delaware corporation (TRA), is accounted for using
the cost method of accounting. The Company invested
$3.4 million in TRA in May 2009. See Note 17 for
further information regarding the Companys TRA investment
as of December 31, 2009.
During the years ended December 31, 2008 and 2007,
investment in affiliates included the Companys investment
in Scarborough, as well as a 50.0% interest in Project Apollo
LLC, a pilot national marketing research service. The Project
Apollo investment was accounted for using the equity method of
accounting and was
66
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
subsequently terminated on June 30, 2008. The following
table shows the investment activity for each of the
Companys affiliates during 2009, 2008, and 2007.
Summary
of Investment Activity in Affiliates (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
|
Year Ended December 31, 2008
|
|
|
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Project
|
|
|
|
|
|
|
|
|
Project
|
|
|
|
|
|
|
Scarborough
|
|
|
TRA
|
|
|
Total
|
|
|
Scarborough
|
|
|
Apollo LLC
|
|
|
Total
|
|
|
Scarborough
|
|
|
Apollo LLC
|
|
|
Total
|
|
|
Beginning balance
|
|
$
|
14,901
|
|
|
$
|
|
|
|
$
|
14,901
|
|
|
$
|
14,420
|
|
|
$
|
842
|
|
|
$
|
15,262
|
|
|
$
|
13,907
|
|
|
$
|
|
|
|
$
|
13,907
|
|
Equity in net income (loss)
|
|
|
7,637
|
|
|
|
|
|
|
|
7,637
|
|
|
|
8,581
|
|
|
|
(1,904
|
)
|
|
|
6,677
|
|
|
|
8,313
|
|
|
|
(4,256
|
)
|
|
|
4,057
|
|
Distributions
|
|
|
(9,000
|
)
|
|
|
|
|
|
|
(9,000
|
)
|
|
|
(8,100
|
)
|
|
|
|
|
|
|
(8,100
|
)
|
|
|
(7,800
|
)
|
|
|
|
|
|
|
(7,800
|
)
|
Non-cash investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,213
|
|
|
|
2,213
|
|
Cash investments
|
|
|
|
|
|
|
3,400
|
|
|
|
3,400
|
|
|
|
|
|
|
|
1,062
|
|
|
|
1,062
|
|
|
|
|
|
|
|
2,885
|
|
|
|
2,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
13,538
|
|
|
$
|
3,400
|
|
|
$
|
16,938
|
|
|
$
|
14,901
|
|
|
$
|
|
|
|
$
|
14,901
|
|
|
$
|
14,420
|
|
|
$
|
842
|
|
|
$
|
15,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under the Scarborough partnership agreement, the Company has the
exclusive right to license Scarboroughs services to radio
stations, cable companies, and
out-of-home
media, and a nonexclusive right to license Scarboroughs
services to advertising agencies and advertisers. The Company
pays a royalty fee to Scarborough based on a percentage of
revenues. Royalties of $25.8 million, $26.8 million
and $26.4 million for 2009, 2008, and 2007, respectively,
are included in cost of revenue in the Companys
consolidated statements of income. Accrued royalties due to
Scarborough as of December 31, 2009, and 2008, of
$5.4 million and $6.3 million, respectively, are
recorded in accrued expenses and other current liabilities in
the consolidated balance sheets.
Scarboroughs revenue was $64.1 million,
$69.3 million and $67.4 million in 2009, 2008 and
2007, respectively. Scarboroughs net income was
$15.3 million, $17.0 million and $16.6 million,
respectively in the same periods. Scarboroughs total
assets and liabilities were $32.6 million and
$1.1 million, and $36.4 million and $2.1 million,
as of December 31, 2009, and 2008, respectively.
Prior to the termination of Project Apollo LLC on June 30,
2008, Project Apollo LLCs revenue was $0.6 million
and $3.3 million for the years ended December 31,
2008, and 2007, respectively. Project Apollo LLCs net loss
was $3.8 million and $8.5 million for the years ended
December 31, 2008, and 2007, respectively.
|
|
5.
|
Property
and Equipment
|
Property and equipment as of December 31, 2009, and 2008
consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Purchased and internally developed software
|
|
$
|
53,811
|
|
|
$
|
44,463
|
|
Portable People Meter equipment
|
|
|
38,155
|
|
|
|
28,915
|
|
Computer equipment
|
|
|
19,946
|
|
|
|
17,327
|
|
Leasehold improvements
|
|
|
16,298
|
|
|
|
14,435
|
|
Machinery, furniture and fixtures
|
|
|
9,443
|
|
|
|
8,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,653
|
|
|
|
113,968
|
|
Accumulated depreciation and amortization
|
|
|
(69,750
|
)
|
|
|
(51,038
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
67,903
|
|
|
$
|
62,930
|
|
|
|
|
|
|
|
|
|
|
67
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Additional Information
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue
|
|
$
|
20,702
|
|
|
$
|
15,086
|
|
|
$
|
9,513
|
|
Selling, general, and administrative
|
|
|
2,207
|
|
|
|
1,731
|
|
|
|
1,891
|
|
Research and development
|
|
|
319
|
|
|
|
344
|
|
|
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
$
|
23,228
|
|
|
$
|
17,161
|
|
|
$
|
11,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges
|
|
$
|
|
|
|
$
|
48
|
|
|
$
|
831
|
|
Interest capitalized during the year
|
|
$
|
52
|
|
|
$
|
107
|
|
|
$
|
42
|
|
|
|
6.
|
Goodwill
and Other Intangible Assets
|
Goodwill is measured for impairment annually as of
January 1. A valuation is also performed when conditions
arise that management determines could potentially trigger an
impairment. During 2009, 2008, and 2007, the Company tested its
goodwill at the reporting unit level. As of December 31,
2009, the Company had one reporting unit (Arbitron
reporting unit) and as such all of the Companys
goodwill has been allocated to it. For these purposes, the
Companys estimate of the fair value of the Arbitron
reporting unit is equal to the Companys market
capitalization value calculated as the closing price of the
Companys common stock on the New York Stock Exchange on
the impairment valuation date times the number of shares of our
common stock outstanding on that date. For the fiscal years
ended December 31, 2009, and 2008, the Company has
determined that the estimated fair value of the Arbitron
reporting unit substantially exceeds its carrying value, and
therefore, no impairment exists as of those dates.
Other intangible assets, which consist of customer lists with
finite lives, are being amortized to expense over their
estimated useful lives. As of December 31, 2009, and 2008,
the Company had no intangible assets with indefinite useful
lives. The following table presents additional information
regarding the amortization of other intangibles (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Amortization expense for other intangible assets
|
|
$
|
141
|
|
|
$
|
302
|
|
|
$
|
777
|
|
Future amortization expense for intangible assets is estimated
to be as follows:
|
|
|
|
|
|
|
Amount
|
|
2010
|
|
$
|
141
|
|
2011
|
|
$
|
141
|
|
2012
|
|
$
|
141
|
|
2013
|
|
$
|
141
|
|
2014
|
|
$
|
141
|
|
Thereafter
|
|
$
|
104
|
|
|
|
7.
|
Restructuring
and Reorganization Initiative
|
During the first quarter of 2009, the Company implemented a
restructuring, reorganization and expense reduction plan (the
Plan). Part of the Plan included reducing the
Companys full-time workforce by approximately
10 percent. The Company incurred restructuring charges
related principally to severance, termination benefits,
outplacement support, retirement plan settlement charges, and
certain other expenses that were incurred as part of the Plan.
68
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
In accordance with our retirement plan provisions, participants
may elect, at their option, to receive their retirement benefits
either in a lump sum payment or an annuity. If the lump sum
distributions paid during the plan year exceed the total of the
service cost and interest cost for the plan year, any
unrecognized gain or loss in the plan is recognized for the pro
rata portion of such gain or loss equal to the percentage
reduction of the projected benefit obligation. The Company
recognized a $1.8 million non-cash charge for the
settlement incurred as a result of aggregate lump sum
distribution elections made by a number of pension plan
participants who were terminated as part of the Plan. The
Company recorded $10.0 million in restructuring and
reorganization charges during the year ended December 31,
2009, including the $1.8 million non-cash settlement charge.
The following table presents additional information regarding
the restructuring and reorganization activity for 2009 (in
thousands):
|
|
|
|
|
Restructuring and Reorganization
|
|
2009
|
|
|
Beginning liability as of January 1, 2009
|
|
$
|
|
|
Costs incurred and charged to expense
|
|
|
9,968
|
|
Costs paid during the year
|
|
|
(7,683
|
)
|
Less: non-cash charges
|
|
|
(1,803
|
)
|
|
|
|
|
|
Ending liability as of December 31, 2009
|
|
$
|
482
|
|
|
|
|
|
|
The ending restructuring and reorganization liability balance
noted above, is included in the accrued expenses and other
current liabilities on the Companys consolidated balance
sheet as of December 31, 2009.
|
|
8.
|
Prepaids
and Other Current Assets
|
Prepaids and other current assets as of December 31, 2009,
and 2008, consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Insurance recovery receivables
|
|
$
|
4,391
|
|
|
$
|
5,775
|
|
Survey participant incentives and prepaid postage
|
|
|
2,172
|
|
|
|
2,615
|
|
Other
|
|
|
2,278
|
|
|
|
1,777
|
|
|
|
|
|
|
|
|
|
|
Prepaids and other current assets
|
|
$
|
8,841
|
|
|
$
|
10,167
|
|
|
|
|
|
|
|
|
|
|
During 2008, the Company became involved in two securities-law
civil actions and a governmental interaction primarily related
to the commercialization of our PPM service, which we believe
are covered by the Companys Directors and Officers
insurance policy. As of December 31, 2009, and 2008, the
Company
incurred-to-date
$8.8 million and $6.2 million, respectively, in legal
fees and costs in defense of its positions related thereto. A
$0.7 million and a $4.8 million increase in the
estimated gross insurance recovery were reported as reductions
to selling, general and administrative expense during the years
ended December 31, 2009, and 2008, respectively. These
reductions partially offset the $2.6 million and
$6.2 million in related legal fees recorded during 2009,
and 2008, respectively. As of December 31, 2009, we have
received $2.0 million in insurance reimbursements related
to these legal actions and estimated that an additional
$3.5 million of the aggregate costs and expenses were
probable for recovery under our Director and Officer insurance
policy. During the first quarter of 2010, we received
$0.4 million from our Director and Officer insurance
carrier and we reached a settlement for $3.1 million, which
we also expect to receive during the first quarter of 2010.
During 2009 and 2008, the Company incurred $2.7 million in
business interruption losses and damages as a result of
Hurricane Ike. As of December 31, 2009, approximately
$0.5 million in insurance reimbursements were received and
the Company estimates that an additional $0.9 million in
reimbursements are probable for future receipt under the
Companys insurance policy. As of December 31, 2008,
the Companys insurance claims receivable estimate related
to Hurricane Ike was $1.0 million.
69
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
9.
|
Accrued
Expenses and Other Current Liabilities
|
Accrued expenses and other current liabilities as of
December 31, 2009, and 2008 consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Employee compensation and benefits
|
|
$
|
20,089
|
|
|
$
|
18,609
|
|
Royalties due to Scarborough
|
|
|
5,448
|
|
|
|
6,318
|
|
Dividend payable
|
|
|
2,646
|
|
|
|
2,633
|
|
Other
|
|
|
122
|
|
|
|
2,172
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,305
|
|
|
$
|
29,732
|
|
|
|
|
|
|
|
|
|
|
On December 20, 2006, the Company entered into an agreement
with a consortium of lenders to provide up to
$150.0 million of financing to the Company through a
five-year, unsecured revolving credit facility (the Credit
Facility) expiring on December 20, 2011. The
agreement contains an expansion feature to increase the total
financing available under the Credit Facility by up to
$50.0 million to an aggregate of $200.0 million. Such
increased financing would be provided by one or more existing
Credit Facility lending institutions, subject to the approval of
the lending banks,
and/or in
combination with one or more new lending institutions, subject
to the approval of the Credit Facilitys administrative
agent. The Credit Facility includes a $15.0 million maximum
letter of credit commitment. As of December 31, 2009, and
2008, the outstanding borrowings under the Credit Facility were
$68.0 million and $85.0 million, respectively.
The Credit Facility has two borrowing options, a Eurodollar rate
option or an alternate base rate option, as defined in the
Credit Facility. Under the Eurodollar option, the Company may
elect interest periods of one, two, three or six months at the
inception date and each renewal date. Borrowings under the
Eurodollar option bear interest at the London Interbank Offered
Rate (LIBOR) plus a margin of 0.575% to 1.25%. Borrowings under
the base rate option bear interest at the higher of the lead
lenders prime rate or the Federal Funds rate plus
50 basis points, plus a margin of 0.00% to 0.25%. The
specific margins, under both options, are determined based on
the Companys leverage ratio and is adjusted every
90 days. The Credit Facility contains a facility fee
provision whereby the Company is charged a fee, ranging from
0.175% to 0.25%, applied to the total amount of the commitment.
Interest paid in 2009, 2008, and 2007 was $1.4 million,
$2.3 million, and $0.5 million, respectively. Interest
capitalized in 2009, 2008, and 2007 was $0.1 million,
$0.1 million, and less than $0.1 million,
respectively. Non-cash amortization of deferred financing costs
classified as interest expense in 2009, 2008, and 2007 was
$0.1 million, $0.1 million, and $0.1 million,
respectively. The interest rate on outstanding borrowings as of
December 31, 2009, and 2008, was 1.03% and 1.31%,
respectively.
The Credit Facility contains certain financial covenants, and
limits, among other things, the Companys ability to sell
certain assets, incur additional indebtedness, and grant or
incur liens on its assets. The material debt covenants under the
Companys Credit Facility include both a maximum leverage
ratio (leverage ratio) and a minimum interest
coverage ratio (interest coverage ratio). The
leverage ratio is a non-GAAP financial measure equal to the
amount of the Companys consolidated total indebtedness, as
defined in the Credit Facility, divided by a contractually
defined adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization and non-cash compensation (Consolidated
EBITDA) for the trailing twelve-month period. The interest
coverage ratio is a non-GAAP financial measure equal to the same
contractually defined Consolidated EBITDA divided by total
interest expense. Both ratios are designed as measures of the
Companys ability to meet current and future obligations.
70
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
As of December 31, 2009, based upon these financial
covenants, there was no default or limit on the Companys
ability to borrow the unused portion of the Credit Facility.
The Credit Facility also contains customary events of default,
including nonpayment and breach covenants. In the event of
default, repayment of borrowings under the Credit Facility, as
well as the payment of accrued interest and fees, could be
accelerated. The Credit Facility also contains cross default
provisions whereby a default on any material indebtedness, as
defined in the Credit Facility, could result in the acceleration
of our outstanding debt and the termination of any unused
commitment under the Credit Facility. The Company currently has
no outstanding debt other than those associated with borrowings
under the Credit Facility. In addition, a default may result in
the application of higher rates of interest on the amounts due.
Under the terms of the Credit Facility, all of the
Companys material domestic subsidiaries, if any, guarantee
the commitment. As of December 31, 2009, and 2008, the
Company had no material domestic subsidiaries as defined by the
terms of the Credit Facility. As of December 31, 2009, and
2008, the Company was in compliance with the terms of its Credit
Facility.
|
|
11.
|
Accumulated
Other Comprehensive Loss
|
The components of accumulated other comprehensive loss as of
December 31, 2009, and 2008 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Retirement plan liabilities, net of tax
|
|
$
|
(10,672
|
)
|
|
$
|
(14,719
|
)
|
Foreign currency translation, net of tax
|
|
|
(310
|
)
|
|
|
(284
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(10,982
|
)
|
|
$
|
(15,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
12.
|
Commitments
and Contingencies
|
Leases
The Company conducts all of its operations in leased facilities
and leases certain equipment which have minimum lease
obligations under noncancelable operating leases. Certain of
these leases contain rent escalations based on specified
percentages. Most of the leases contain renewal options and
require payments for taxes, insurance and maintenance. Rent
expense is charged to operations as incurred except for
escalating rents, which are charged to operations on a
straight-line basis over the life of the lease.
71
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
A summary of rental expense for the three years ended
December 31, 2009, 2008, and 2007, is presented below, as
well as the future minimum lease commitments under noncancelable
operating leases having an initial term of more than one year
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Summary of rental expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rentals
|
|
$
|
9,724
|
|
|
$
|
9,854
|
|
|
$
|
9,630
|
|
Less: Sublease rentals
|
|
|
(859
|
)
|
|
|
(836
|
)
|
|
|
(737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental expense
|
|
$
|
8,865
|
|
|
$
|
9,018
|
|
|
$
|
8,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of future lease commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
8,858
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
8,393
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
7,210
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
5,667
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
4,588
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
20,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum payments required(a)
|
|
$
|
55,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Minimum payments have not been reduced by sublease rentals of
$3,588 due in the future under noncancelable subleases. |
Legal
Matters
The Company is involved, from time to time, in litigation and
proceedings arising out of the ordinary course of business.
Legal costs for services rendered in the course of these
proceedings are charged to expense as they are incurred.
During 2009 and 2008, the Company was involved in a number of
significant legal actions and governmental interactions
primarily related to the commercialization of our PPM service. A
contingent loss in the amount of $0.5 million was recorded
for these claims as of December 31, 2009. No contingent
losses were recorded as of December 31, 2008, because the
Company believed the likelihood of a significant loss was remote.
The provision for income taxes on continuing operations is based
on income recognized for consolidated financial statement
purposes and includes the effects of permanent and temporary
differences between such income and income recognized for income
tax return purposes. As a result of the reverse spin-off from
Ceridian, deferred tax assets consisting of net operating loss
(NOL) and credit carryforwards were transferred from
Ceridian to the Company, along with temporary differences
related to the Companys business. The NOL carryforwards
will expire in various amounts from 2010 to 2028.
72
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The components of income from continuing operations before
income tax expense and a reconciliation of the statutory federal
income tax rate to the income tax rate on income from continuing
operations before income tax expense for the years ended
December 31, 2009, 2008 and 2007 are as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income from continuing operations before income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
59,853
|
|
|
$
|
61,898
|
|
|
$
|
64,562
|
|
International
|
|
|
1,279
|
|
|
|
(349
|
)
|
|
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
61,132
|
|
|
$
|
61,549
|
|
|
$
|
64,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
18,464
|
|
|
$
|
19,628
|
|
|
$
|
20,817
|
|
State, local and foreign
|
|
|
2,198
|
|
|
|
2,302
|
|
|
|
1,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,662
|
|
|
|
21,930
|
|
|
|
22,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
1,310
|
|
|
|
469
|
|
|
|
478
|
|
State, local and foreign
|
|
|
(3,000
|
)
|
|
|
1,931
|
|
|
|
1,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1,690
|
)
|
|
|
2,400
|
|
|
|
1,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,972
|
|
|
$
|
24,330
|
|
|
$
|
24,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense at U.S. statutory rate
|
|
$
|
21,396
|
|
|
$
|
21,542
|
|
|
$
|
22,677
|
|
State income taxes, net of federal benefit
|
|
|
2,904
|
|
|
|
2,770
|
|
|
|
1,902
|
|
Tax-exempt interest income
|
|
|
|
|
|
|
|
|
|
|
(613
|
)
|
Meals and entertainment
|
|
|
199
|
|
|
|
294
|
|
|
|
358
|
|
Foreign tax credit and capital loss carryforward
|
|
|
|
|
|
|
282
|
|
|
|
(452
|
)
|
(Decrease) increase in valuation allowance for foreign tax credit
|
|
|
|
|
|
|
(282
|
)
|
|
|
452
|
|
State NOLs recognized
|
|
|
(4,801
|
)
|
|
|
|
|
|
|
(12
|
)
|
Adjustments to tax liabilities
|
|
|
207
|
|
|
|
257
|
|
|
|
294
|
|
Other
|
|
|
(933
|
)
|
|
|
(533
|
)
|
|
|
(318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
18,972
|
|
|
$
|
24,330
|
|
|
$
|
24,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
31.0
|
%
|
|
|
39.5
|
%
|
|
|
37.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate on continuing operations was 31.0% for
the year ended December 31, 2009. The effective tax rate
decreased from 39.5% in 2008 to 31.0% in 2009 primarily due to a
$4.8 million state tax benefit recognized as a result from
a favorable state tax ruling received during the fourth quarter
of 2009.
During 2009, certain liabilities for tax contingencies related
to prior periods were recognized. Certain other liabilities were
reversed due to the settlement and completion of income tax
audits and returns and the expiration of audit statutes during
the year. The net tax expense of these changes and other items
was $0.8 million in 2009.
The earnings from the Companys foreign operations in India
are subject to a tax holiday which expires in fiscal year 2013.
In July 2008, the Indian government approved the Companys
application to conduct business in a Special Economic Zone (SEZ)
providing for zero percent taxation on certain classes of income
when certain conditions are met. We were in compliance with
these conditions as of December 31, 2009. A deferred tax
liability
73
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
was recognized for the cumulative undistributed earnings, which
the Company does not expect to permanently reinvest outside of
the United States. The Companys reduction to tax expense
due to the tax holiday was immaterial during 2009 and 2008.
The following table summarizes the activity related to the
Companys unrecognized tax benefits as of December 31,
2009:
|
|
|
|
|
|
|
Total
|
|
|
Balance at January 1, 2009
|
|
$
|
1,420
|
|
Increases related to current year tax positions
|
|
|
436
|
|
Increases related prior years tax positions
|
|
|
541
|
|
Expiration of the statute of limitations for the assessment of
taxes
|
|
|
(187
|
)
|
|
|
|
|
|
Balance at December 31, 2009
|
|
$
|
2,210
|
|
|
|
|
|
|
During 2009, the Companys net unrecognized tax liabilities
for certain tax contingencies increased by $0.8 million to
$2.2 million as of December 31, 2009. If recognized,
the $2.2 million of unrecognized tax benefits would reduce
the Companys effective tax rate in future periods.
The Company accrues potential interest and penalties and
recognizes income tax expense where, under relevant tax law,
interest and penalties would be assessed if the uncertain tax
position ultimately were not sustained. The Company has recorded
a liability for potential interest and penalties of
$0.3 million as of December 31, 2009.
Management determined it is reasonably possible that certain
unrecognized tax benefits as of December 31, 2009, will
decrease during the subsequent 12 months due to the
expiration of statutes of limitations and due to the settlement
of certain state audit examinations. The estimated decrease in
these unrecognized federal tax benefits and the estimated
decrease in unrecognized tax benefits from various states are
both immaterial.
The Company files numerous income tax returns, primarily in the
United States, including federal, state, and local
jurisdictions, and certain foreign jurisdictions. Tax years
ended December 31, 2006 through December 31, 2008,
remain open for assessment by the Internal Revenue Service.
Generally, the Company is not subject to state, local, or
foreign examination for years prior to 2004. However, tax years
1991 through 2003 remain open for assessment for certain state
taxing jurisdictions where NOL carryforwards were utilized on
income tax returns for such states since 2004.
74
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
Temporary differences and the resulting deferred income tax
assets of continuing operations as of December 31, 2009,
and 2008, were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Current deferred tax assets
|
|
|
|
|
|
|
|
|
Accruals
|
|
$
|
3,688
|
|
|
$
|
2,273
|
|
Net operating loss carryforwards
|
|
|
1,294
|
|
|
|
203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,982
|
|
|
|
2,476
|
|
Noncurrent deferred tax assets
|
|
|
|
|
|
|
|
|
Benefit plans
|
|
$
|
9,191
|
|
|
$
|
11,213
|
|
Depreciation
|
|
|
701
|
|
|
|
1,526
|
|
Accruals
|
|
|
782
|
|
|
|
731
|
|
Net operating loss carryforwards
|
|
|
2,440
|
|
|
|
|
|
Share-based compensation
|
|
|
6,595
|
|
|
|
5,378
|
|
Partnership interest
|
|
|
2,024
|
|
|
|
2,285
|
|
Other
|
|
|
1,006
|
|
|
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,739
|
|
|
|
22,226
|
|
Less valuation allowance
|
|
|
(332
|
)
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
27,389
|
|
|
|
24,370
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax liabilities
|
|
|
|
|
|
|
|
|
Goodwill and other intangible amortization
|
|
$
|
(16,151
|
)
|
|
$
|
(12,097
|
)
|
Benefit plans
|
|
|
(1,672
|
)
|
|
|
(2,084
|
)
|
Other
|
|
|
(454
|
)
|
|
|
(137
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(18,277
|
)
|
|
|
(14,318
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
9,112
|
|
|
$
|
10,052
|
|
|
|
|
|
|
|
|
|
|
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will be realized.
The ultimate realization of the deferred tax assets is dependent
upon the generation of future taxable income during periods in
which the temporary differences become deductible and before tax
credits or net operating loss carryforwards expire. Management
considered the historical results of the Company during the
previous three years and projected future U.S. and foreign
taxable income and determined that a valuation allowance of
$0.3 million and $0.3 million was required as of
December 31, 2009 and 2008, respectively, for certain
foreign tax credit carryforwards.
Income taxes paid on continuing operations in 2009, 2008, and
2007 were $23.7 million, $19.8 million and
$19.3 million, respectively.
Adoption
of Measurement Date Provisions
The Company adopted revised defined benefit plan measurement
provisions as of December 31, 2008, which required that the
measurement date coincide with the date of the Companys
fiscal year-end statement of financial position. For the year
ended December 31, 2009, the Companys measurement
period was the 12 months ended
75
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
December 31, 2009. For the year ended December 31,
2008, the Company recognized an adjustment to retained earnings
associated with the first three months of transition within the
15 month measurement period ended December 31, 2008.
Recognition
of Retirement Plan Settlements
In accordance with our retirement plan provisions, participants
may elect, at their option, to receive their retirement benefits
either in a lump sum payment or an annuity. If the lump sum
distributions paid during the plan year exceed the total of the
service cost and interest cost for the plan year, any
unrecognized gain or loss in the plan should be recognized for
the pro rata portion equal to the percentage reduction of the
projected benefit obligation. The Company recognized a
$1.8 million non-cash charge for the settlement incurred
during 2009 as a result of aggregate lump sum distribution
elections made by a number of pension plan participants who were
terminated as part of the Companys restructuring and
reorganization plan. See Note 7 for further information.
Lump sum payments also exceeded the service and interest
threshold during the year ended December 31, 2008.
Accordingly, the Company recognized a non-cash charge of
$1.7 million in the results of operations for 2008.
The following table shows the income statement line items
impacted by the recognition of the settlement charges in both
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
2009
|
|
|
2008
|
|
|
Cost of revenue
|
|
$
|
|
|
|
$
|
885
|
|
Selling, general, and administrative
|
|
|
|
|
|
|
484
|
|
Research and development
|
|
|
|
|
|
|
301
|
|
Restructuring and reorganization
|
|
|
1,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
$
|
1,803
|
|
|
$
|
1,670
|
|
|
|
|
|
|
|
|
|
|
Lump sum payments did not exceed the threshold during 2007 and
therefore, no settlement charge was recognized in 2007.
Pension
Benefits
Certain of the Companys U.S. employees participate in
a defined benefit pension plan that closed to new participants
effective January 1, 1995. Benefits under the plan for most
eligible employees are calculated using the highest five-year
average salary of the employee. Employees participate in this
plan by means of salary reduction contributions. Retirement plan
funding amounts are based on independent consulting
actuaries determination of the Employee Retirement Income
Security Act of 1974 funding requirements.
For purposes of measuring the Companys benefit obligation
as of December 31, 2009, and 2008, a discount rate of 5.52%
and 5.37%, respectively, was used. These discount rates were
chosen using an analysis of the Hewitt Bond Universe yield curve
that reflects the plans projected cash flows. Due
primarily to the effect of improving market conditions, the
pension plans investments yielded investment gains in 2009
rather than the losses experienced during 2008. The fair value
of plan assets increased by $2.3 million as of
December 31, 2009, as compared to December 31, 2008.
In addition, the plans projected benefit obligation
decreased by a net amount of $1.5 million, due in large
part to the significant amount of benefits paid during 2009. The
amount of benefits paid during 2009 was significantly impacted
by the Companys workforce reduction initiative, which was
implemented in 2009 as part of its restructuring and
reorganization plan. The Companys projected benefit
obligations exceeded plan assets by $10.2 million and
$14.0 million as of December 31, 2009, and 2008,
respectively. Pension cost was $1.5 million,
$1.1 million and $1.1 million for 2009, 2008, and
2007, respectively.
76
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The Companys expected long-term rate of return on assets
is 8.0%. The Company employs a total return investment approach
whereby a mix of equities and fixed income investments is used
to maximize the long-term return of plan assets for a prudent
level of risk. The intent of this strategy is to minimize plan
expenses by outperforming plan liabilities over the long run.
Risk tolerance is established through careful consideration of
plan liabilities, plan funded status, and corporate financial
condition. The Companys investment strategy is to
diversify assets so that adverse results from one asset or asset
class will not have an unduly detrimental effect on the entire
portfolio. Diversification includes by type, by characteristic,
and by number of investments, as well as by investment style of
management organization.
The investment portfolio contains a diversified blend of common
collective trust fund investments, which include both equity and
fixed income type investments. Equity investments are
diversified across U.S. and
non-U.S. stocks,
as well as growth and value stocks. Fixed income investments are
diversified across mortgage-backed securities,
U.S. treasury securities, and corporate bonds. Investment
risk is measured and monitored on an ongoing basis through
annual liability measurements, periodic asset/liability studies
and periodic investment performance reviews.
The Financial Accounting Standards Board provides a fair value
hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (level 1 measurements) and
the lowest priority to unobservable inputs (level 3
measurements). The three levels of the fair value hierarchy are
described below:
Level 1 Inputs to the valuation methodology are
unadjusted quoted prices for identical assets or liabilities in
active markets.
Level 2 Inputs to the valuation methodology
include:
|
|
|
|
|
Quoted prices for similar assets or liabilities in active
markets;
|
|
|
|
Quoted prices for identical or similar assets or liabilities in
inactive markets;
|
|
|
|
Inputs other than quoted prices that are observable for the
asset or liability;
|
|
|
|
Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
|
Level 3 Inputs to the valuation methodology are
unobservable and significant to the fair value measurement.
The following is a description of the valuation methodologies
used for assets measured at fair value.
Money market fund: The investment in the money
market fund is valued at the net asset value of shares held at
year end.
Collective investment funds: Investments in
collective investment funds are valued at the last reported
transaction price per unit.
77
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The fair values of the Companys pension plan assets at
December 31, 2009, by asset category are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
Asset Category
|
|
Total Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Collective investment funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income(a)
|
|
$
|
9,810
|
|
|
$
|
|
|
|
$
|
9,810
|
|
|
$
|
|
|
U.S. equity growth
|
|
|
6,071
|
|
|
|
|
|
|
|
6,071
|
|
|
|
|
|
U.S. equity value
|
|
|
6,073
|
|
|
|
|
|
|
|
6,073
|
|
|
|
|
|
Foreign equity
|
|
|
2,437
|
|
|
|
|
|
|
|
2,437
|
|
|
|
|
|
Money market fund
|
|
|
196
|
|
|
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension assets at December 31, 2009
|
|
$
|
24,587
|
|
|
$
|
196
|
|
|
$
|
24,391
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
As of December 31, 2009, the fixed income fund consisted of
a 40% investment in mortgage-backed securities, a 37% investment
in U.S. treasury securities, and a 23% investment in corporate
bonds. |
Cash held and intended to pay benefits is considered to be a
residual asset in the asset mix, and therefore, compliance with
the ranges and targets specified shall be calculated excluding
such assets. Assets of the plan do not include securities issued
by the Company. The target allocation for each asset class is
60% equity securities and 40% debt securities.
The components of net periodic cost and other comprehensive loss
for the twelve months ended December 31, 2009, 2008, and
2007, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Cost
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost of benefits
|
|
$
|
790
|
|
|
$
|
783
|
|
|
$
|
869
|
|
Interest cost
|
|
|
1,847
|
|
|
|
2,026
|
|
|
|
1,781
|
|
Expected return on plan assets
|
|
|
(2,172
|
)
|
|
|
(2,423
|
)
|
|
|
(2,208
|
)
|
Amortization of net actuarial loss
|
|
|
992
|
|
|
|
728
|
|
|
|
661
|
|
Amortization of prior service cost
|
|
|
22
|
|
|
|
22
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,479
|
|
|
$
|
1,136
|
|
|
$
|
1,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in plan assets and projected benefit obligation
recognized in other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss arising this period
|
|
|
(2,295
|
)
|
|
|
12,229
|
|
|
|
696
|
|
Actuarial loss charged to expense due to settlement
|
|
|
(1,521
|
)
|
|
|
(1,670
|
)
|
|
|
|
|
Net actuarial loss amortized this period
|
|
|
(992
|
)
|
|
|
(728
|
)
|
|
|
(661
|
)
|
Prior service cost amortized this period
|
|
|
(22
|
)
|
|
|
(22
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in other comprehensive (income) loss
|
|
|
(4,830
|
)
|
|
|
9,809
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in net periodic pension cost and other
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive (income) loss
|
|
$
|
(3,351
|
)
|
|
$
|
10,945
|
|
|
$
|
1,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement date change adjustment recognized directly
|
|
|
|
|
|
|
|
|
|
|
|
|
into accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
|
N/A
|
|
|
$
|
(182
|
)
|
|
|
N/A
|
|
Prior service cost
|
|
|
N/A
|
|
|
$
|
(6
|
)
|
|
|
N/A
|
|
78
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The Companys estimate for contributions to be paid in 2009
is $1.8 million. The expected benefit payments are as
follows (in thousands):
|
|
|
|
|
2010
|
|
$
|
1,296
|
|
2011
|
|
$
|
1,469
|
|
2012
|
|
$
|
1,513
|
|
2013
|
|
$
|
1,596
|
|
2014
|
|
$
|
1,712
|
|
2015 2019
|
|
$
|
14,224
|
|
The accumulated benefit obligation for the defined benefit
pension plan was $30.1 million and $30.8 million as of
December 31, 2009, and 2008, respectively.
79
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The funded status of the plan as of the measurement dates of
December 31, 2009 and 2008, and the change in funded status
for the measurement periods ended December 31, 2009 and
2008, are shown in the accompanying table for the Companys
pension plan, along with the assumptions used in the
calculations (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
|
|
Twelve Months Ended
|
|
|
Fifteen Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
$
|
36,302
|
|
|
$
|
34,889
|
|
Service cost
|
|
|
790
|
|
|
|
979
|
|
Interest cost
|
|
|
1,847
|
|
|
|
2,532
|
|
Plan participants contributions
|
|
|
284
|
|
|
|
392
|
|
Actuarial (gain) loss
|
|
|
(420
|
)
|
|
|
2,171
|
|
Benefits paid
|
|
|
(4,043
|
)
|
|
|
(4,661
|
)
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
$
|
34,760
|
|
|
$
|
36,302
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
$
|
22,337
|
|
|
$
|
32,273
|
|
Actual return on plan assets
|
|
|
4,047
|
|
|
|
(7,029
|
)
|
Employer contribution
|
|
|
1,962
|
|
|
|
1,362
|
|
Plan participants contributions
|
|
|
284
|
|
|
|
392
|
|
Benefits paid
|
|
|
(4,043
|
)
|
|
|
(4,661
|
)
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
$
|
24,587
|
|
|
$
|
22,337
|
|
|
|
|
|
|
|
|
|
|
Funded status net pension liability at year
end
|
|
$
|
(10,173
|
)
|
|
$
|
(13,965
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
14,436
|
|
|
$
|
19,244
|
|
Prior service cost
|
|
$
|
|
|
|
$
|
22
|
|
Estimated amounts of accumulated other comprehensive loss to
be recognized as net periodic cost during the subsequent
period
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
1,052
|
|
|
$
|
994
|
|
Prior service cost
|
|
$
|
|
|
|
$
|
22
|
|
Measurement date adjustment to retained earnings
|
|
|
N/A
|
|
|
$
|
284
|
|
Weighted-average assumptions
|
|
|
|
|
|
|
|
|
Discount rate components of cost
|
|
|
5.37
|
%
|
|
|
6.00
|
%
|
Discount rate benefit obligations
|
|
|
5.52
|
%
|
|
|
5.37
|
%
|
Expected return on plan assets
|
|
|
8.00
|
%
|
|
|
8.00
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
Supplemental
Retirement Benefits
The Company also sponsors two nonqualified, unfunded
supplemental retirement plans; the Benefit Equalization Plan and
the Supplemental Executive Retirement Plan (BEP and
SERP respectively or Supplemental Plans
combined). The purpose of the BEP is to ensure that pension plan
participants will not be deprived of benefits otherwise payable
under the pension plan but for the operation of the provisions
of Internal Revenue Code
80
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
sections 415 and 401. The accumulated benefit obligation
for the BEP as of December 31, 2009, and 2008, was
$4.5 million and $5.0 million, respectively. The SERP
is a supplemental retirement plan for the Companys former
chief executive officer. The accumulated benefit obligation for
the SERP as of December 31, 2009, and 2008, was
$0.7 million and $0.7 million, respectively.
As of December 31, 2009, and 2008, prepaid pension costs
related to the Supplemental Plans of $0.1 million and
$0.4 million, respectively, were held in benefit protection
trusts and included in other noncurrent assets in the
consolidated balance sheets. The Companys estimate for
contributions to be paid for the Supplemental Plans in 2010 is
$3.1 million. The expected benefit payments for the
Supplemental Plans are as follows (in thousands):
|
|
|
|
|
2010
|
|
$
|
3,100
|
|
2011
|
|
$
|
282
|
|
2012
|
|
$
|
237
|
|
2013
|
|
$
|
208
|
|
2014
|
|
$
|
338
|
|
2015 - 2019
|
|
$
|
834
|
|
The components of net periodic cost and other comprehensive
(income) loss for the Supplemental Plans for the twelve months
ended December 31, 2009, 2008, and 2007 are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost of benefits
|
|
$
|
93
|
|
|
$
|
118
|
|
|
$
|
130
|
|
Interest cost
|
|
|
318
|
|
|
|
234
|
|
|
|
209
|
|
Amortization of net actuarial loss
|
|
|
431
|
|
|
|
184
|
|
|
|
193
|
|
Amortization of prior service credit
|
|
|
(16
|
)
|
|
|
(22
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
826
|
|
|
$
|
514
|
|
|
$
|
510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in plan assets and projected benefit obligation
recognized in other comprehensive loss (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (gain) loss arising this
|
|
$
|
(1,104
|
)
|
|
$
|
2,726
|
|
|
$
|
71
|
|
period
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss amortized this period
|
|
|
(431
|
)
|
|
|
(184
|
)
|
|
|
(193
|
)
|
Actuarial loss due to settlement
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
Prior service credit due to curtailment
|
|
|
6
|
|
|
|
|
|
|
|
|
|
Prior service credit amortized this
|
|
|
16
|
|
|
|
22
|
|
|
|
22
|
|
period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in other comprehensive (income) loss
|
|
$
|
(1,780
|
)
|
|
$
|
2,564
|
|
|
$
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in net periodic cost and other comprehensive (income)
loss
|
|
$
|
(954
|
)
|
|
$
|
3,078
|
|
|
$
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The funded status as of the measurement dates of
December 31, 2009, and 2008, and the change in funded
status for the measurement periods ended December 31, 2009,
and 2008 are shown in the accompanying table for
81
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
the Companys supplemental retirement plans, along with the
assumptions used in the calculations (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Supplemental Retirement Plans
|
|
|
|
Twelve Months Ended
|
|
|
Fifteen Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
$
|
7,028
|
|
|
$
|
4,001
|
|
Service cost
|
|
|
93
|
|
|
|
145
|
|
Interest cost
|
|
|
318
|
|
|
|
285
|
|
Plan participants contributions
|
|
|
26
|
|
|
|
48
|
|
Actuarial (gain) loss
|
|
|
(1,104
|
)
|
|
|
2,726
|
|
Benefits paid
|
|
|
(662
|
)
|
|
|
(177
|
)
|
Curtailment
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
$
|
5,720
|
|
|
$
|
7,028
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
$
|
|
|
|
$
|
|
|
Actual return on plan assets
|
|
|
|
|
|
|
|
|
Employer contribution
|
|
|
636
|
|
|
|
129
|
|
Plan participants contributions
|
|
|
26
|
|
|
|
48
|
|
Benefits paid
|
|
|
(662
|
)
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(5,720
|
)
|
|
$
|
(7,028
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
2,429
|
|
|
$
|
4,231
|
|
Prior service credit
|
|
$
|
|
|
|
$
|
(22
|
)
|
Estimated amounts of accumulated other comprehensive loss to
be recognized as net periodic cost during the subsequent
period
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
214
|
|
|
$
|
557
|
|
Prior service credit
|
|
$
|
|
|
|
$
|
(22
|
)
|
Measurement date adjustment to retained earnings
|
|
|
N/A
|
|
|
$
|
105
|
|
Weighted-average assumptions
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
|
|
|
|
|
|
Components of cost
|
|
|
5.37
|
%
|
|
|
6.00
|
%
|
Benefit obligations
|
|
|
5.52
|
%
|
|
|
5.37
|
%
|
Expected return on plan assets
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
Measurement date change adjustment recognized directly into
accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
|
N/A
|
|
|
$
|
(33
|
)
|
Prior service credit
|
|
|
N/A
|
|
|
$
|
6
|
|
82
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
Postretirement
Benefits
The Company provides health care benefits for eligible retired
employees who participate in the pension plan and were hired
before January 1, 1992. These postretirement benefits are
provided by several health care plans in the United States for
both pre-age 65 retirees and certain grandfathered
post-age 65 retirees. Employer contributions to these plans
differ for various groups of retirees and future retirees.
Employees hired before January 1, 1992 and retiring after
that date may enroll in plans for which a Company subsidy is
provided through age 64. As of December 31, 2009, and
2008, the Companys discount rate on its actuarially
determined benefit obligations was 5.17% and 5.37%,
respectively. The discount rates for 2009 and 2008 were chosen
using an analysis of the Hewitt Bond Universe yield curve that
reflects the plans projected cash flows.
The Companys postretirement benefit liability was
$1.8 million and $1.8 million as of December 31,
2009, and 2008, respectively. The Companys postretirement
benefit expense was $0.2 million for each of the years
ended December 31, 2009, 2008, and 2007. The postretirement
plan is unfunded.
The Company expects to make $0.1 million in contributions
in 2010. The expected benefit payments are as follows (in
thousands):
|
|
|
|
|
2010
|
|
$
|
110
|
|
2011
|
|
$
|
119
|
|
2012
|
|
$
|
120
|
|
2013
|
|
$
|
129
|
|
2014
|
|
$
|
150
|
|
2015-2019
|
|
$
|
769
|
|
The components of net periodic pension cost and other
comprehensive loss (income) for the twelve months ended
December 31, 2009, 2008, and 2007, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Cost
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service cost of benefits
|
|
$
|
49
|
|
|
$
|
41
|
|
|
$
|
39
|
|
Interest cost
|
|
|
92
|
|
|
|
94
|
|
|
|
87
|
|
Amortization of net actuarial loss
|
|
|
43
|
|
|
|
34
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
184
|
|
|
$
|
169
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other changes in plan assets and projected benefit obligation
recognized in other comprehensive loss (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain) arising this period
|
|
$
|
(41
|
)
|
|
$
|
129
|
|
|
$
|
(67
|
)
|
Net actuarial loss amortized this period
|
|
|
(43
|
)
|
|
|
(34
|
)
|
|
|
(44
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in other comprehensive (income) loss
|
|
$
|
(84
|
)
|
|
$
|
95
|
|
|
$
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognized in net periodic cost and other comprehensive loss
|
|
$
|
100
|
|
|
$
|
264
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement date change adjustment recognized directly into
accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
|
N/A
|
|
|
$
|
(8
|
)
|
|
|
N/A
|
|
83
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
The accompanying table presents the balances of and changes in
the aggregate benefit obligation as of the measurement dates of
December 31, 2009, and 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Postretirement Plan
|
|
|
|
Twelve Months Ended
|
|
|
Fifteen Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Change in benefit obligation during the period
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
$
|
1,750
|
|
|
$
|
1,548
|
|
Service cost
|
|
|
49
|
|
|
|
51
|
|
Interest cost
|
|
|
92
|
|
|
|
118
|
|
Plan participants contributions
|
|
|
47
|
|
|
|
48
|
|
Actuarial loss (gain)
|
|
|
(41
|
)
|
|
|
129
|
|
Benefits paid
|
|
|
(114
|
)
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
$
|
1,783
|
|
|
$
|
1,750
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets
|
|
|
|
|
|
|
|
|
At beginning of period
|
|
$
|
|
|
|
$
|
|
|
Employer contribution
|
|
|
67
|
|
|
|
96
|
|
Plan participants contributions
|
|
|
47
|
|
|
|
48
|
|
Benefits paid
|
|
|
(114
|
)
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
At end of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(1,783
|
)
|
|
$
|
(1,750
|
)
|
Contributions between measurement date and year end
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Net post retirement liability at fiscal year end
|
|
$
|
(1,783
|
)
|
|
$
|
(1,750
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
526
|
|
|
$
|
610
|
|
Measurement date adjustment to retained earnings
|
|
|
N/A
|
|
|
$
|
42
|
|
Estimated amounts of accumulated other comprehensive loss to
be recognized as net periodic cost during the subsequent
period
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
36
|
|
|
$
|
43
|
|
Weighted-average assumptions
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
|
|
|
|
|
|
Components of cost
|
|
|
5.37
|
%
|
|
|
6.00
|
%
|
Benefit obligations
|
|
|
5.17
|
%
|
|
|
5.37
|
%
|
Expected return on plan assets
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
The assumed health care cost trend rate used in measuring the
post retirement benefit obligation was 9.30% for p
re-age 65 and post-age 65 in 2008, with pre-age and
post-age 65 rates declining to an ultimate rate of 5.00% in
2017. A 1.0% change in this rate would change the benefit
obligation by approximately $0.2 million and the aggregate
service and interest cost by less than $0.1 million.
84
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
401(k)
Plan
Arbitron employees may also participate in a defined
contribution plan that is sponsored by the Company. The plan
generally provides for employee salary deferral contributions of
up to 17% of eligible employee compensation. Under the terms of
the plan, the Company contributes a matching contribution of 50%
up to a maximum of 3% of eligible employee compensation related
to employees who are pension participants and up to a maximum of
6% of eligible employee compensation related to employees who
are not pension participants. The employer may also make an
additional discretionary matching contribution of up to 30% up
to the maximum, which is either 3% or 6% of eligible employee
compensation depending upon the employees participation in
the pension plan. The Companys costs with respect to its
contributions to the defined contribution plan were
$2.0 million, $2.7 million and $2.2 million in
2009, 2008, and 2007, respectively.
|
|
15.
|
Share-Based
Compensation
|
The following table sets forth information with regard to the
income statement recognition of share-based compensation (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cost of revenue
|
|
$
|
451
|
|
|
$
|
756
|
|
|
$
|
681
|
|
Selling, general and administrative
|
|
|
9,438
|
|
|
|
7,131
|
|
|
|
5,431
|
|
Research and development
|
|
|
142
|
|
|
|
528
|
|
|
|
420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
$
|
10,031
|
|
|
$
|
8,415
|
|
|
$
|
6,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total income tax benefit recognized in the income statement
for share-based compensation arrangements was $3.9 million,
$3.3 million, and $2.4 million for the years ended
December 31, 2009, 2008, and 2007, respectively. There was
no capitalized share-based compensation cost recorded during the
years ended December 31, 2009, 2008, and 2007. The
(decrease) increase in net excess tax benefits realized for the
tax deductions from stock options exercised and stock awards
vesting during the year was $(1.8) million,
$0.8 million, and $2.6 million for the years ended
December 31, 2009, 2008, and 2007, respectively.
The Company currently has two active stock incentive plans
(SIP individually or SIPs collectively)
from which awards of stock options, nonvested share awards and
performance unit awards are available for grant to eligible
participants: the 2001 SIP, a non-stockholder-approved plan; and
the 2008 Equity Compensation Plan, a stockholder-approved plan.
The Companys SIPs permit the grants of share-based awards,
including stock options and nonvested share awards, for up to
3,500,000 shares of common stock. The Company believes that
such awards align the interests of its employees with those of
its stockholders. Eligible recipients in the SIPs include all
employees of the Company and any nonemployee director,
consultant and independent contractor of the Company. The
Companys policy for issuing shares upon exercise of stock
options or the vesting of its share awards
and/or
conversion of deferred stock units under all of the
Companys SIPs is to issue new shares of common stock,
unless treasury stock is available at the time of exercise or
conversion. As of December 31, 2009, shares available for
grant were 38,535 shares and 775,603 shares, under the
2001 and 2008 plans, respectively.
For share-based arrangements granted subsequent to
January 1, 2006, the Company accelerates expense
recognition if retirement eligibility affects the vesting of the
award.
Stock
Options
Stock options awarded to employees under the SIPs generally vest
annually over a three-year period, have a
10-year term
and have an exercise price of not less than the fair market
value of the Companys common stock at the date of grant.
Stock options granted to directors under the SIPs generally vest
upon the date of grant, are generally exercisable six months
after the date of grant, have a
10-year term
and an exercise price of not less than the fair
85
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
market value of the Companys common stock at the date of
grant. The Companys stock options generally provide for
accelerated vesting if there is a change in control of the
Company.
The Company uses historical data to estimate future option
exercises and employee terminations in order to determine the
expected term of the stock option; identified groups of
optionholders that have similar historical exercise behavior are
considered separately for valuation purposes. The expected term
of stock options granted represents the period of time that such
stock options are expected to be outstanding. The expected term
can vary for certain groups of optionholders exhibiting
different behavior. The risk-free rate for periods within the
contractual life of the stock option is based on the
U.S. Treasury strip bond yield curve in effect at the time
of grant. Expected volatilities are based on the historical
volatility of the Companys common stock.
The fair value of each option granted during the years ended
December 31, 2009, 2008 and 2007, was estimated on the date
of grant using a Black-Scholes option valuation model that used
the assumptions noted in the following table:
|
|
|
|
|
|
|
Assumptions for options granted to
|
|
|
|
|
|
|
employees and nonemployee directors
|
|
2009
|
|
2008
|
|
2007
|
|
Expected volatility
|
|
31.88 - 35.31%
|
|
23.99 - 31.31%
|
|
24.61 - 26.52%
|
Expected dividends
|
|
1.91 - 2.95%
|
|
1.00 - 3.00%
|
|
1.00%
|
Expected term (in years)
|
|
5.75 - 6.25
|
|
5.50 - 6.00
|
|
5.75 - 6.25
|
Risk-free rate
|
|
2.13 - 2.94%
|
|
1.44 - 3.44%
|
|
3.43 - 4.91%
|
Weighted-average volatility
|
|
33.96%
|
|
25.26%
|
|
25.45%
|
Weighted-average dividends
|
|
2.22%
|
|
1.01%
|
|
1.00%
|
Weighted-average term (in years)
|
|
5.96
|
|
5.93
|
|
5.94
|
Weighted-average risk-free rate
|
|
2.47%
|
|
2.90%
|
|
4.59%
|
Weighted-average grant date fair value
|
|
$5.31
|
|
$11.40
|
|
$14.86
|
A summary of option activity under the SIPs as of
December 31, 2009, and changes during the year then ended,
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic Value
|
|
Options
|
|
Shares
|
|
|
Exercise Price
|
|
|
Term (Years)
|
|
|
(In thousands)
|
|
|
Outstanding at January 1, 2009
|
|
|
1,713,557
|
|
|
$
|
39.93
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,621,553
|
|
|
|
18.37
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2,836
|
)
|
|
|
23.91
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(480,113
|
)
|
|
|
33.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
2,852,161
|
|
|
$
|
28.69
|
|
|
|
7.54
|
|
|
$
|
7,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested or expected to vest at December 31, 2009
|
|
|
2,849,807
|
|
|
$
|
28.70
|
|
|
|
7.53
|
|
|
$
|
7,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009
|
|
|
1,334,543
|
|
|
$
|
37.94
|
|
|
|
5.66
|
|
|
$
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
As of December 31, 2009, there was $6.4 million of
total unrecognized compensation cost related to options granted
under the SIPs. This aggregate cost is expected to be recognized
over a weighted-average period of 2.3 years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In thousands)
|
|
Intrinsic value of stock options exercised
|
|
$
|
3
|
|
|
$
|
3,688
|
|
|
$
|
7,787
|
|
Cash received from stock options exercised
|
|
$
|
68
|
|
|
$
|
9,071
|
|
|
$
|
19,934
|
|
Nonvested
Share Awards
A summary of the status of the Companys nonvested share
awards as of December 31, 2009, and changes during the year
ended December 31, 2009, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
Nonvested Share Awards
|
|
Shares
|
|
|
Grant-Date Fair Value
|
|
|
Outstanding at January 1, 2009
|
|
|
210,480
|
|
|
$
|
43.97
|
|
Granted
|
|
|
340,534
|
|
|
|
18.37
|
|
Vested
|
|
|
(108,657
|
)
|
|
|
38.75
|
|
Cancellations
|
|
|
(62,388
|
)
|
|
|
38.30
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
379,969
|
|
|
$
|
23.45
|
|
|
|
|
|
|
|
|
|
|
Expected to vest at December 31, 2009
|
|
|
379,710
|
|
|
$
|
23.46
|
|
|
|
|
|
|
|
|
|
|
The Companys nonvested share awards vest over four or five
years on either a monthly or annual basis. Compensation expense
is recognized on a straight-line basis using the fair market
value of the Companys stock on the date of grant as the
nonvested share awards vest. As of December 31, 2009, there
was $6.7 million of total unrecognized compensation cost
related to nonvested share-based compensation arrangements
granted under the SIPs. This aggregate cost of nonvested share
awards is expected to be recognized over a weighted-average
period of 2.8 years. The total fair value of share awards
vested, using the fair value on vest date, during the years
ended December 31, 2009, 2008, and 2007, was
$2.0 million, $2.0 million, and $1.4 million,
respectively.
Deferred
Stock Units
A summary of the status of the Companys deferred stock
units as of December 31, 2009, and changes during the year
ended December 31, 2009, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
Nonvested Deferred Stock Units
|
|
Shares
|
|
|
Grant-Date Fair Value
|
|
|
Outstanding at January 1, 2009
|
|
|
24,119
|
|
|
$
|
42.46
|
|
Granted
|
|
|
38,175
|
|
|
|
19.30
|
|
Vested
|
|
|
(62,294
|
)
|
|
|
28.26
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested at December 31, 2009
|
|
|
127,204
|
|
|
$
|
34.21
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, there was no unrecognized
compensation cost related to deferred stock units granted under
the SIPs. Deferred stock units granted to employees were issued
at the fair market value of the Companys stock upon the
date of grant, and the awards vested annually on a calendar
year-end basis over the remaining post-grant period ended
December 31, 2009. The deferred stock units granted by the
Company to employees are convertible to shares of common stock,
subsequent to their termination of employment. Deferred stock
units granted to nonemployee directors vest immediately upon
grant, are convertible to shares of common stock
87
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
subsequent to their termination of service as a director, and
are issued at the fair market value of the Companys stock
upon the date of grant. Other deferred stock unit information
for the years ended December 31, 2009, 2008, and 2007, is
noted in the following table (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Shares granted to employee directors
|
|
|
22,529
|
|
|
|
21,667
|
|
|
|
21,667
|
|
Shares granted to nonemployee directors
|
|
|
15,646
|
|
|
|
9,219
|
|
|
|
4,786
|
|
Fair value of shares vested
|
|
$
|
1,369
|
|
|
$
|
570
|
|
|
$
|
778
|
|
Employee
Stock Purchase Plan
On May 13, 2008, the Companys stockholders approved
an amendment to its compensatory Employee Stock Purchase Plan
(ESPP) increasing the maximum number of shares of
Company common stock reserved for sale under the ESPP from
600,000 to 850,000. The purchase price of the stock to ESPP
participants is 85% of the lesser of the fair market value on
either the first day or the last day of the applicable
three-month offering period. Other ESPP information for the
years ended December 31, 2009, 2008, and 2007 is noted in
the following table (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Number of ESPP shares issued
|
|
|
102,081
|
|
|
|
46,091
|
|
|
|
35,078
|
|
Amount of proceeds received from employees
|
|
$
|
1,233
|
|
|
$
|
1,158
|
|
|
$
|
1,327
|
|
Share-based compensation expense
|
|
$
|
385
|
|
|
$
|
292
|
|
|
$
|
309
|
|
|
|
16.
|
Significant
Customers and Concentration of Credit Risk
|
The Companys quantitative radio audience ratings and
related software licensing revenue accounted for the following
percentages of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Quantitative radio audience ratings and related software
licensing
|
|
|
90
|
%
|
|
|
89
|
%
|
|
|
88
|
%
|
The Company had one customer that individually represented 19%,
18%, and 19% of its annual revenue for the years ended
December 31, 2009, 2008, and 2007, respectively. The
Company had one customer that individually represented 24% of
the Companys total accounts receivable as of
December 31, 2009, and one customer that individually
represented 13% of the Companys total accounts receivable
as of December 31, 2008. The Company has historically
experienced a high level of contract renewals.
|
|
17.
|
Financial
Instruments
|
Fair values of accounts receivable and accounts payable
approximate carrying values due to their short-term nature. Due
to the floating rate nature of the Companys revolving
obligation under its Credit Facility, the fair values of the
$68.0 million and $85.0 million in related outstanding
borrowings as of December 31, 2009, and December 31,
2008, respectively, also approximate their carrying amounts. The
Company believes that the fair market value of the TRA
investment, which was made in May 2009, approximates the
carrying value of $3.4 million as of December 31, 2009.
On November 16, 2006, the Company announced that its Board
of Directors authorized a program to repurchase up to
$100.0 million of its outstanding common stock through
either periodic open-market or private transactions at
then-prevailing market prices over a period of two years through
November 2008. As of October 19,
88
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
2007, the program was completed with 2,093,500 shares being
repurchased for an aggregate purchase price of approximately
$100.0 million.
On November 14, 2007, the Companys Board of Directors
authorized a program to repurchase up to $200.0 million of
the Companys outstanding common stock through either
periodic open-market or private transactions at then-prevailing
market prices over a period of two years through
November 14, 2009. As of the November 14, 2009
expiration date, the Company repurchased 2,247,400 shares
of outstanding common stock under this program for
$100.0 million.
Subsequent events were evaluated through March 1, 2010, the
date of issuance for the Companys financial statements for
the year ended December 31, 2009, as filed on this
Form 10-K.
Except as may be disclosed elsewhere, no subsequent events that
warrant further disclosure herein were noted during this
evaluation.
|
|
20.
|
Enterprise-Wide
Information
|
The following table sets forth the revenues for each group of
services provided to our external customers for the years ended
December 31, 2009, 2008, and 2007 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Service Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Radio audience ratings services
|
|
$
|
316,207
|
|
|
$
|
297,132
|
|
|
$
|
267,804
|
|
Local market consumer information services
|
|
|
34,991
|
|
|
|
36,872
|
|
|
|
36,393
|
|
Software applications
|
|
|
33,754
|
|
|
|
34,820
|
|
|
|
34,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
384,952
|
|
|
$
|
368,824
|
|
|
$
|
338,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth geographic information for the
years ended December 31, 2009, 2008, and 2007 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
International(1)
|
|
Total
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
379,055
|
|
|
$
|
5,897
|
|
|
$
|
384,952
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
364,425
|
|
|
$
|
4,399
|
|
|
$
|
368,824
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
333,164
|
|
|
$
|
5,305
|
|
|
$
|
338,469
|
|
|
|
|
(1) |
|
The revenues of the individual countries comprising these
amounts are not significant enough to require separate
disclosure. |
89
ARBITRON
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
21.
|
Quarterly
Information (Unaudited) (dollars in thousands, except per share
data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
98,489
|
|
|
$
|
86,799
|
|
|
$
|
98,123
|
|
|
$
|
101,541
|
|
Gross profit
|
|
|
58,960
|
|
|
|
31,037
|
|
|
|
53,669
|
|
|
|
45,017
|
|
Income from continuing operations
|
|
|
12,341
|
|
|
|
3,496
|
|
|
|
13,719
|
|
|
|
12,604
|
|
Income from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,341
|
|
|
$
|
3,496
|
|
|
$
|
13,719
|
|
|
$
|
12,604
|
|
Income per weighted average common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.47
|
|
|
$
|
0.13
|
|
|
$
|
0.52
|
|
|
$
|
0.47
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.47
|
|
|
$
|
0.13
|
|
|
$
|
0.52
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.46
|
|
|
$
|
0.13
|
|
|
$
|
0.51
|
|
|
$
|
0.47
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.46
|
|
|
$
|
0.13
|
|
|
$
|
0.51
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
94,065
|
|
|
$
|
78,655
|
|
|
$
|
102,526
|
|
|
$
|
93,578
|
|
Gross profit
|
|
|
58,955
|
|
|
|
26,070
|
|
|
|
60,731
|
|
|
|
37,436
|
|
Income from continuing operations
|
|
|
16,312
|
|
|
|
625
|
|
|
|
16,900
|
|
|
|
3,382
|
|
(Loss) income from discontinued operations, net of taxes
|
|
|
(45
|
)
|
|
|
(25
|
)
|
|
|
55
|
|
|
|
(24
|
)
|
Net income
|
|
$
|
16,267
|
|
|
$
|
600
|
|
|
$
|
16,955
|
|
|
$
|
3,358
|
|
Income per weighted average common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.58
|
|
|
$
|
0.02
|
|
|
$
|
0.63
|
|
|
$
|
0.13
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.58
|
|
|
$
|
0.02
|
|
|
$
|
0.64
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
0.58
|
|
|
$
|
0.02
|
|
|
$
|
0.63
|
|
|
$
|
0.13
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
0.57
|
|
|
$
|
0.02
|
|
|
$
|
0.63
|
|
|
$
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
Per share data are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly net
income per share will not necessarily equal the total for the
year. Per share data may not total due to rounding.
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Allowance for doubtful trade accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
2,598
|
|
|
$
|
1,688
|
|
|
$
|
1,397
|
|
Additions charged to expenses
|
|
|
2,723
|
|
|
|
1,636
|
|
|
|
1,162
|
|
Write-offs net of recoveries
|
|
|
(613
|
)
|
|
|
(726
|
)
|
|
|
(871
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
4,708
|
|
|
$
|
2,598
|
|
|
$
|
1,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
There have been no changes in, or disagreements with,
accountants on accounting and financial disclosure.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
The Companys management, with the participation of the
Companys chief executive officer and chief financial
officer, evaluated the effectiveness of the Companys
disclosure controls and procedures as of December 31, 2009.
The term disclosure controls and procedures, as
defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to
be disclosed by a company in the reports that it files or
submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in
the SECs rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the
companys management, including its principal executive and
principal financial officers, as appropriate to allow timely
decisions regarding required disclosure. Management recognizes
that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving
their objectives and management necessarily applies its judgment
in evaluating the cost-benefit relationship of possible controls
and procedures. Based on the evaluation of the Companys
disclosure controls and procedures as of December 31, 2009,
the Companys chief executive officer and chief financial
officer concluded that, as of such date, the Companys
disclosure controls and procedures were effective at the
reasonable assurance level.
Arbitrons management is responsible for establishing and
maintaining adequate internal control over financial reporting
(as defined in
Rule 13a-15(f)
under the Securities Exchange Act of 1934, as amended). Our
management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2009. In making
this assessment, our management used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.
Based upon that assessment, our management has concluded that,
as of December 31, 2009, our internal control over
financial reporting is effective based on these criteria.
The attestation report of KPMG LLP, our independent registered
public accounting firm, on the effectiveness of our internal
control over financial reporting is set forth on page 60 of
this Annual Report on
Form 10-K,
and is incorporated herein by reference.
There were no changes in the Companys internal control
over financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) that occurred during the quarterly
period ended December 31, 2009, that have materially
affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION NONE
|
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Information related to directors, nominees for directorships,
and executive officers required by this Item is included in the
sections entitled Election of Directors and
Executive Compensation and Other Information of the
definitive proxy statement for the Annual Stockholders Meeting
to be held in 2010 (the proxy statement),
92
which is incorporated herein by reference and will be filed with
the Securities and Exchange Commission not later than
120 days after the close of Arbitrons fiscal year
ended December 31, 2009.
Information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 required by this item is
included in the section entitled Other Matters
Section 16(a) Beneficial Ownership Reporting
Compliance of the proxy statement, which is incorporated
herein by reference.
Arbitron has adopted a Code of Ethics for the Chief Executive
Officer and Financial Managers (Code of Ethics),
which applies to the Chief Executive Officer, the Chief
Financial Officer and all managers in the financial organization
of Arbitron. The Code of Ethics is available on Arbitrons
Web site at www.arbitron.com. The Company intends to disclose
any amendment to, or a waiver from, a provision of its Code of
Ethics on its Web site within four business days following the
date of the amendment or waiver.
Information regarding the Companys Nominating Committee
and Audit Committee required by this Item is included in the
section entitled Election of Directors of the proxy
statement, which is incorporated herein by reference.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Information required by this Item is included in the sections
entitled Election of Directors Director
Compensation, Compensation Discussion and
Analysis, and Executive Compensation and Other
Information of the proxy statement, which is incorporated
herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Information required by this Item regarding security ownership
of certain beneficial owners, directors, nominees for
directorship and executive officers is included in the section
entitled Stock Ownership Information of the proxy
statement, which is incorporated herein by reference.
The following table summarizes the equity compensation plans
under which Arbitrons common stock may be issued as of
December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities to be
|
|
|
Weighted-Average
|
|
|
Future Issuance Under
|
|
|
|
Issued Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
3,226,219
|
|
|
$
|
27.67
|
|
|
|
775,603
|
|
Equity compensation plans not approved by security holders
|
|
|
133,115
|
|
|
$
|
43.66
|
|
|
|
38,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,359,334
|
|
|
$
|
28.30
|
|
|
|
814,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
Information regarding certain relationships and related
transactions required by this Item is included in the section
entitled Certain Relationships and Related
Transactions of the proxy statement, which is incorporated
herein by reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Information required by this Item is included in the section
entitled Independent Auditors and Audit Fees of the
proxy statement, which is incorporated herein by reference.
93
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a) Documents filed as part of this report
(1) Financial Statements: The following financial
statements, together with the report thereon of independent
auditors, are included in this Report:
|
|
|
|
|
Independent Registered Public Accounting Firm Reports
|
|
|
|
Consolidated Balance Sheets as of December 31, 2009 and 2008
|
|
|
|
Consolidated Statements of Income for the Years Ended
December 31, 2009, 2008 and 2007
|
|
|
|
Consolidated Statements of Stockholders Equity Deficit for
the Years Ended December 31, 2009, 2008 and 2007
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2009, 2008 and 2007
|
|
|
|
Notes to Consolidated Financial Statements for the Years Ended
December 31, 2009, 2008 and 2007
|
(2) Consolidated Financial Statement Schedule of Valuation
and Qualifying Accounts
(3) Exhibits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|
|
|
|
|
|
SEC File
|
|
|
|
|
|
|
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of Arbitron Inc. (formerly
known as Ceridian Corporation)
|
|
S-8
|
|
33-54379
|
|
|
4
|
.01
|
|
6/30/94
|
|
|
|
|
|
3
|
.2
|
|
Certificate of Amendment of Restated Certificate of
Incorporation of Arbitron Inc. (formerly known as Ceridian
Corporation)
|
|
10-Q
|
|
1-1969
|
|
|
3
|
|
|
8/13/96
|
|
|
|
|
|
3
|
.3
|
|
Certificate of Amendment of Restated Certificate of
Incorporation of Arbitron Inc. (formerly known as Ceridian
Corporation)
|
|
10-Q
|
|
1-1969
|
|
|
3
|
.01
|
|
8/11/99
|
|
|
|
|
|
3
|
.4
|
|
Certificate of Amendment of the Restated Certificate of
Incorporation of Arbitron Inc. (formerly known as Ceridian
Corporation)
|
|
10-K
|
|
1-1969
|
|
|
3
|
.4
|
|
4/02/01
|
|
|
|
|
|
3
|
.5
|
|
Second Amended and Restated Bylaws of Arbitron Inc., effective
as of February 25, 2009
|
|
10-K
|
|
1-1969
|
|
|
3
|
.5
|
|
3/02/09
|
|
|
|
|
|
4
|
.1
|
|
Specimen of Common Stock Certificate
|
|
10-K
|
|
1-1969
|
|
|
4
|
.1
|
|
4/02/01
|
|
|
|
|
|
4
|
.2
|
|
Rights Agreement, dated as of November 21, 2002, between
Arbitron Inc. and The Bank of New York, as Rights Agent, which
includes the form of Certificate of Designation of the
Series B Junior Participating Preferred Stock as
Exhibit A, the Summary of Rights to Purchase
Series B Junior Participating Preferred Shares as
Exhibit B and the Form of Rights Certificate as
Exhibit C
|
|
8-K
|
|
1-1969
|
|
|
99
|
.1
|
|
11/22/02
|
|
|
|
|
|
4
|
.3
|
|
Amendment No. 1 to Rights Agreement, dated as of
January 31, 2007, between Arbitron Inc. and The Bank of New
York, as Rights Agent
|
|
10-K
|
|
1-1969
|
|
|
4
|
.3
|
|
2/27/07
|
|
|
|
|
|
(10)
|
|
|
Executive Compensation Plans and Arrangements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
.1
|
|
Arbitron Executive Investment Plan, effective as of
January 1, 2001
|
|
10-K
|
|
1-1969
|
|
|
10
|
.10
|
|
3/08/05
|
|
|
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|
|
|
|
|
|
SEC File
|
|
|
|
|
|
|
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
|
|
10
|
.2
|
|
Form of Non-Qualified Stock Option Agreement
|
|
8-K
|
|
1-1969
|
|
|
10
|
.1
|
|
2/23/05
|
|
|
|
|
|
10
|
.3
|
|
Form of Non-Qualified Stock Option Agreement for Annual
Non-Employee Director Stock Option Grants
|
|
8-K
|
|
1-1969
|
|
|
10
|
.2
|
|
2/23/05
|
|
|
|
|
|
10
|
.4
|
|
Form of Non-Qualified Stock Option Agreement for Initial
Non-Employee Director Stock Option Grants
|
|
8-K
|
|
1-1969
|
|
|
10
|
.3
|
|
2/23/05
|
|
|
|
|
|
10
|
.5
|
|
Form of Nonqualified Stock Option Agreement for Non-Employee
Director Stock Options in lieu of Fees Grants
|
|
8-K
|
|
1-1969
|
|
|
10
|
.4
|
|
2/23/05
|
|
|
|
|
|
10
|
.6
|
|
Form of Deferred Stock Unit Agreement for Non-Employee Director
Stock-for-Fees
Deferred Stock Unit
|
|
8-K
|
|
1-1969
|
|
|
10
|
.5
|
|
2/23/05
|
|
|
|
|
|
10
|
.7
|
|
Amended and Restated Arbitron Inc. Director Deferred
Compensation Procedures
|
|
10-K
|
|
1-1969
|
|
|
10
|
.18
|
|
2/27/06
|
|
|
|
|
|
10
|
.8
|
|
1999 Stock Incentive Plan, Amended as of May 15, 2007
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
8/03/07
|
|
|
|
|
|
10
|
.9
|
|
1999 Stock Incentive Plan Form of Restricted Stock Agreement
|
|
8-K
|
|
1-1969
|
|
|
10
|
.1
|
|
2/28/06
|
|
|
|
|
|
10
|
.10
|
|
Form of Restricted Stock Unit Agreement Granted under the 1999
Stock Incentive Plan
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
5/04/07
|
|
|
|
|
|
10
|
.11
|
|
Form of CEO Restricted Stock Unit Grant Agreement Granted Under
the 1999 Stock Incentive Plan
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.3
|
|
5/04/07
|
|
|
|
|
|
10
|
.12
|
|
Form of 2008 CEO Restricted Stock Unit Agreement Granted Under
the 1999 Stock Incentive Plan
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
5/06/08
|
|
|
|
|
|
10
|
.13
|
|
Arbitron Benefit Equalization Plan, effective as of
January 1, 2001
|
|
10-K
|
|
1-1969
|
|
|
10
|
.20
|
|
3/08/05
|
|
|
|
|
|
10
|
.14
|
|
Arbitron Inc. 2001 Broad Based Stock Incentive Plan
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.14
|
|
5/15/01
|
|
|
|
|
|
10
|
.15
|
|
Arbitron Inc. 2008 Equity Compensation Plan, effective as of
May 13, 2008
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.1
|
|
11/04/08
|
|
|
|
|
|
10
|
.16
|
|
Form of Non-Statutory Stock Option Agreement Under the 2008
Equity Compensation Plan
|
|
10-K
|
|
1-1969
|
|
|
10
|
.25
|
|
3/02/09
|
|
|
|
|
|
10
|
.17
|
|
Form of 2008 Equity Compensation Plan Non-Statutory Stock Option
Agreement (Director Grant in Lieu of Fees)
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.1
|
|
5/07/09
|
|
|
|
|
|
10
|
.18
|
|
Form of 2008 Equity Compensation Plan Director Deferred Stock
Unit Agreement
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
5/07/09
|
|
|
|
|
|
10
|
.19
|
|
Form of 2008 Equity Compensation Plan Non-Statutory Stock Option
Agreement (Annual Director Grant)
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.3
|
|
5/07/09
|
|
|
|
|
|
10
|
.20
|
|
Form of 2008 Equity Compensation Plan Non-Statutory Stock Option
Agreement (Non-Executive Officers)
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.1
|
|
8/05/09
|
|
|
|
|
|
10
|
.21
|
|
Form of 2008 Equity Compensation Plan Restricted Stock Unit
Agreement (Executive Officers)
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
8/05/09
|
|
|
|
|
95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|
|
|
|
|
|
SEC File
|
|
|
|
|
|
|
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
|
|
10
|
.22
|
|
Form of 2008 Equity Compensation Plan Restricted Stock Unit
Agreement (Non-Executive Officers)
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.3
|
|
8/05/09
|
|
|
|
|
|
10
|
.23
|
|
Form of 2008 Equity Compensation Plan Director Deferred Stock
Unit Agreement Initial Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
10
|
.24
|
|
Form of 2008 Equity Compensation Plan Director Deferred Stock
Unit Agreement Annual Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
10
|
.25
|
|
CEO Deferral Election Form for Restricted Stock
|
|
8-K
|
|
1-1969
|
|
|
10
|
.1
|
|
4/03/06
|
|
|
|
|
|
10
|
.26
|
|
CEO Deferred Stock Unit Agreement, entered into and effective as
of March 31, 2006, by and between Arbitron Inc. and Stephen
B. Morris
|
|
8-K
|
|
1-1969
|
|
|
10
|
.2
|
|
4/03/06
|
|
|
|
|
|
10
|
.27
|
|
Form of Executive Retention Agreement
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.3
|
|
11/04/08
|
|
|
|
|
|
10
|
.28
|
|
Arbitron Inc. Employee Stock Purchase Plan, effective as of
May 13, 2008
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
11/04/08
|
|
|
|
|
|
10
|
.29
|
|
Credit Agreement dated as of December 20, 2006 among
Arbitron Inc. the Lenders Party thereto, Citizens Bank of
Pennsylvania as Documentation Agent, Citibank, N.A. and Wachovia
Bank, National Association as Co-Syndication Agents and JPMorgan
Chase Bank, NA as Administrative Agent J.P. Morgan
Securities Inc. as Sole Bookrunner and Sole Lead Arranger
|
|
8-K
|
|
1-1969
|
|
|
10
|
.1
|
|
12/21/06
|
|
|
|
|
|
10
|
.30
|
|
Radio Station License Agreement to Receive and Use Arbitron PPM
Data and Estimates, effective May 18, 2006, by and between
Arbitron Inc. and CBS Radio Inc.**
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
8/03/06
|
|
|
|
|
|
10
|
.31
|
|
Master Station License Agreement to Receive and Use Arbitron
Radio Audience Estimates, effective May 18, 2006, by and
between Arbitron Inc. and CBS Radio Inc.**
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.3
|
|
8/03/06
|
|
|
|
|
|
10
|
.32
|
|
Radio Station License Agreement to Receive and Use Arbitron PPM
Data and Estimates by and between Arbitron and Clear Channel
Broadcasting, Inc. dated June 26, 2007**
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.1
|
|
8/03/07
|
|
|
|
|
|
10
|
.33
|
|
Master Station License Agreement to Receive and Use Arbitron
Radio Audience Estimates, effective as of May 4, 2009,
between Arbitron Inc. and Clear Channel Broadcasting, Inc.**
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.5
|
|
8/05/09
|
|
|
|
|
|
10
|
.34
|
|
Form of Deferred Stock Unit Agreement for Non-Employee Directors
(Non-Employee Directors Post-2005
Stock-for-Fees
Deferred Stock Unit)
|
|
10-K
|
|
1-1969
|
|
|
10
|
.19
|
|
2/27/06
|
|
|
|
|
|
10
|
.35
|
|
Executive Transition Agreement between Arbitron Inc. and Stephen
B. Morris, dated December 30, 2008
|
|
10-K
|
|
1-1969
|
|
|
10
|
.12
|
|
3/02/09
|
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference
|
|
|
|
|
|
|
|
|
SEC File
|
|
|
|
|
|
|
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
|
|
10
|
.36
|
|
Executive Employment Agreement between Arbitron Inc. and Michael
P. Skarzynski, dated January 7, 2009
|
|
10-K
|
|
1-1969
|
|
|
10
|
.13
|
|
3/02/09
|
|
|
|
|
|
10
|
.37
|
|
Amendment to Executive Employment Agreement between Arbitron
Inc. and Michael P. Skarzynski, effective September 18, 2009
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.1
|
|
11/04/09
|
|
|
|
|
|
10
|
.38
|
|
Settlement Agreement and General Release, effective as of
January 11, 2010, by and between Arbitron Inc. and Michael
P. Skarzynski
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
10
|
.39
|
|
Executive Employment Agreement, dated as of March 6, 2009,
by and between Arbitron Inc. and Alton L. Adams
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.4
|
|
5/07/09
|
|
|
|
|
|
10
|
.40
|
|
Executive Employment Agreement, dated as of March 2, 2009,
by and between Arbitron Inc. and Dr. Robert Henrick
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.6
|
|
5/07/09
|
|
|
|
|
|
10
|
.41
|
|
Form of Waiver and Amendment of Executive Retention Agreement
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.4
|
|
8/05/09
|
|
|
|
|
|
10
|
.42
|
|
Second Waiver and Amendment of Executive Retention Agreement
between Arbitron Inc. and Pierre C. Bouvard, dated
October 1, 2009
|
|
10-Q
|
|
1-1969
|
|
|
10
|
.2
|
|
11/04/09
|
|
|
|
|
|
10
|
.43
|
|
Executive Employment Agreement, effective as of
February 11, 2010, by and between Arbitron Inc. and William
T. Kerr
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
10
|
.44
|
|
CEO Non-Statutory Stock-Option Agreement, entered into and
effective as of February 11, 2010, by and between Arbitron
Inc. and William T. Kerr
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
10
|
.45
|
|
CEO Deferred Stock Unit Agreement, entered into and effective as
of February 11, 2010, by and between Arbitron Inc. and
William T. Kerr
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
10
|
.46
|
|
Amended and Restated Schedule of Non-Employee Director
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
21
|
|
|
Subsidiaries of Arbitron Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
24
|
|
|
Power of Attorney
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Securities
Exchange Act of 1934 Rule 13a 14(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Securities
Exchange Act of 1934 Rule 13a 14(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
32
|
.1
|
|
Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
* |
|
Filed or furnished herewith |
|
** |
|
A request for confidential treatment has been submitted with
respect to this exhibit. The copy filed as an exhibit omits the
information subject to the request for confidential treatment. |
97
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, we have duly caused this report
to be signed on behalf by the undersigned, thereunto duly
authorized.
ARBITRON INC.
William T. Kerr
Chief Executive Officer and President
Date: March 1, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons
on behalf of the Company in the capacities and on the dates
indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ William
T. Kerr
William
T. Kerr
|
|
Chief Executive Officer, President and Director (Principal
Executive Officer)
|
|
March 1, 2010
|
|
|
|
|
|
/s/ Sean
R. Creamer
Sean
R. Creamer
|
|
Executive Vice President of Finance and Planning and Chief
Financial Officer (Principal Financial and Principal Accounting
Officer)
|
|
March 1, 2010
|
|
|
|
|
|
*
Shellye
L. Archambeau
|
|
Director
|
|
|
|
|
|
|
|
*
David
W. Devonshire
|
|
Director
|
|
|
|
|
|
|
|
*
John
A. Dimling
|
|
Director
|
|
|
|
|
|
|
|
*
Philip
Guarascio
|
|
Chairman and Director
|
|
|
|
|
|
|
|
*
Larry
E. Kittelberger
|
|
Director
|
|
|
|
|
|
|
|
*
Luis
B. Nogales
|
|
Director
|
|
|
|
|
|
|
|
*
Richard
A. Post
|
|
Director
|
|
|
|
|
|
|
|
|
|
* By:
|
|
/s/ Timothy
T. Smith
Timothy
T. Smith
Attorney-in-Fact
|
|
|
|
March 1, 2010
|
98
EXHIBIT 10.23
Grant No.
o Participants Copy
o Companys Copy
Arbitron Inc.
2008 Equity Compensation Plan
Director Deferred Stock Unit Agreement Initial Grant
To :
Arbitron Inc.
(the Company) has granted you (the Grant) deferred stock units
(DSUs) as
set forth on Exhibit A to this Agreement (the DSUs)
under its 2008 Equity Compensation Plan (the
Plan).
The Grant is subject in all respects to the applicable provisions of the Plan. This Agreement
does not cover all of the rules that apply to the Grant under the Plan, and the Plan defines any
capitalized terms in this Agreement that this Agreement does not define.
In addition to the Plans terms and restrictions, the following terms and restrictions apply:
|
|
|
Vesting Schedule
|
|
The Grant is fully nonforfeitable (Vested) on the Grant Date. |
|
|
|
Distribution Date
|
|
You will receive a distribution of shares (the Shares) of Company common stock (Common Stock) equivalent
to your DSUs as indicated on Exhibit A, the Distribution Date, subject to any overriding provisions in the
Plan. |
|
|
|
Limited Status
|
|
You understand and agree that the Company will not consider you a shareholder for any purpose with respect to
the Shares, unless and until the Shares have been issued to you on the Distribution Date(s). You will,
however, receive dividend equivalents (Dividend Equivalent Rights) with respect to the DSUs, measured using
the Shares they represent, with the amounts convertible into full or fractional additional DSUs based on
dividing the dividends by the Fair Market Value (as defined in the Plan) as of the date of dividend
distribution and holding the resulting additional DSUs for distribution as provided for the other DSUs. |
|
|
|
Voting
|
|
DSUs cannot be voted. You may not vote the Shares unless and until the Shares are distributed to you. |
|
|
|
Transfer
Restrictions
|
|
You may not sell, assign, pledge, encumber, or otherwise transfer any interest
(Transfer) in the Shares until the Shares are distributed to you.
Any attempted Transfer that precedes the Distribution Date for such Shares is invalid. |
|
|
|
Additional
Conditions
|
|
The Company may postpone issuing and delivering any Shares for so long as the
Company determines to be advisable to satisfy the following: |
to Receipt |
|
|
|
|
|
its completing or amending any securities registration or qualification of the Shares or its or your
satisfying any exemption from registration under any Federal or state law, rule, or regulation; |
|
|
|
|
its receiving proof it considers satisfactory that a person or entity seeking to receive the Shares
after your death is entitled to do so; |
-1-
|
|
|
your complying with any requests for representations under the Grant and the Plan; and |
|
|
|
|
its or your complying with any federal, state, or local tax withholding obligations. |
|
|
|
Taxes and
Withholding
|
|
The DSUs provide tax deferral, meaning that they are not taxable to you until you
actually receive Shares on or around each Distribution Date. You will then owe taxes at ordinary income tax
rates as of each Distribution Date at the Shares value. |
|
|
|
|
|
If you become employed by the Company before a Distribution Date, the
Company will be required to withhold (in cash from salary or other amounts
owed you) the applicable percentage of the value of the Shares on the
Distribution Date. If the Company does not choose to do so, you agree to
arrange for payment of the withholding taxes and/or confirm that the Company
is arranging for appropriate withholding. |
|
|
|
Additional
Representations
from You
|
|
If you receive Shares at a time when the Company does not have a current registration
statement (generally on Form S-8) under the Act that covers issuance of Shares to you,
you must comply with the following before the Company will release the Shares to you. You must: |
|
|
|
represent to the Company, in a manner satisfactory to the Companys counsel, that you are acquiring the
Shares for your own account and not with a view to reselling or distributing the Shares; and |
|
|
|
|
agree that you will not sell, transfer, or otherwise dispose of the Shares unless: |
|
|
|
a registration statement under the Act is effective at the time of disposition with respect to
the Shares you propose to sell, transfer, or otherwise dispose of; or |
|
|
|
|
the Company has received an opinion of counsel or other information and representations it
considers satisfactory to the effect that, because of Rule 144 under the Act or otherwise, no registration
under the Act is required. |
|
|
|
Additional Restriction
|
|
You will not receive the Shares if issuing the Shares would violate any applicable
federal or state securities laws or other laws or regulations. |
|
|
|
No Effect on
Service
Providing
Relationship
|
|
Nothing in this Agreement restricts the Companys rights or those of any of its affiliates
to terminate your service on the Companys Board of Directors or other relationship at
any time, with or without cause. The termination of your relationship, whether by the
Company or any of its affiliates or otherwise, and regardless of the reason for such termination, has the
consequences provided for under the Plan. |
|
|
|
No Effect on
Running Business
|
|
You understand and agree that the existence of the DSU will not affect in any way the
right or power of the Company or its stockholders to make or authorize any adjustments, recapitalizations,
reorganizations, or other changes in the Companys capital structure or its business, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, preferred or other stock, with preference
ahead of or convertible into, or otherwise affecting the Companys common stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether or not of a similar character to those described
above. |
-2-
|
|
|
Section 409A
|
|
This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and
must be construed consistently with that section.
Notwithstanding anything in the Plan or this Agreement to the contrary, if
(x) you are a specified employee within the meaning of Section 409A at the
time of your separation from service (as determined by the Company, by which
determination you agree you are bound) and (y) the payment under the DSUs
will result in the imposition of additional tax under Section 409A if paid
to you within the six month period following your separation from service,
then the payment under such accelerated DSUs will not be made until the
earlier of (i) the date six months and one day following the date of your
separation from service or (ii) the 10th day after your date of
death, and will be paid within 10 days thereafter. Neither the Company nor
you shall have the right to accelerate or defer the delivery of any such
payments or benefits except to the extent specifically permitted or required
by Section 409A. In any event, the Company makes no representations or
warranty and shall have no liability to you or any other person, if any
provisions of or payments under this Agreement are determined to constitute
deferred compensation subject to Code Section 409A but not to satisfy the
conditions of that section. |
|
|
|
Unsecured
Creditor
|
|
This Agreement creates a contractual obligation on the part of the Company to make
payment under the DSUs credited to your account at the time provided for in this
Agreement. Neither you nor any other party claiming an interest in deferred
compensation hereunder shall have any interest whatsoever in any specific assets of the
Company. Your right to receive payments hereunder is that of an unsecured general
creditor of Company. |
|
|
|
Governing Law
|
|
The laws of the State of Delaware will govern all matters relating to this Agreement,
without regard to the principles of conflict of laws. |
|
|
|
Notices
|
|
Any notice you give to the Company must follow the procedures then in effect. If no
other procedures apply, you must send your notice in writing by hand or by mail to the
office of the Companys Secretary. If mailed, you should address it to the Companys
Secretary at the Companys then corporate headquarters, unless the Company directs
participants to send notices to another corporate department or to a third party
administrator or specifies another method of transmitting notice. The Company and the
Administrator will address any notices to you at your office or home address as
reflected on the Companys business records. You and the Company may change the
address for notice by like notice to the other, and the Company can also change the
address for notice by general announcements to participants. |
|
|
|
Plan Governs
|
|
Wherever a conflict may arise between the terms of this Agreement and the terms of the
Plan, the terms of the Plan will control. |
-3-
ACKNOWLEDGMENT
I acknowledge I received a copy of the Plan. I represent that I have read and am familiar
with the Plans terms. I accept the Grant subject to all of the terms and provisions of this
Agreement and of the Plan under which the Grant is made, as the Plan may be amended in accordance
with its terms. I agree to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator concerning any questions arising under the Plan with respect
to the Grant.
No one may sell, transfer, or distribute the securities covered by the Grant without an
effective registration statement relating thereto or an opinion of counsel satisfactory to the
Company or other information and representations satisfactory to the Company that such registration
is not required.
-4-
Grant No.
Arbitron Inc.
2008 Equity Compensation Plan
Deferred Stock Unit Initial Grant
Exhibit A
Recipient Information:
Grant Information:
DSUs:
Date of Grant:
|
|
|
Distribution Date
|
|
Your Distribution Date will be a date within 30 days
after the six month anniversary of my ceasing to serve
as a director of the Company, at which point I will
receive all Shares covered by the DSUs. |
|
|
|
|
|
If a Change in Control Event (as defined in the Plan) occurs before
the Distribution Date and the Change in Control Event also would be
an event described in Treas. Reg. Section 1.409A-3(i)(5), full
payment will be made in connection with the closing of the Change in
Control Event. A Change in Control Event that does not comport with
that regulation will not affect the payment timing. The payment will
be in cash (unless the Board determines otherwise) equal to the value
per share of the consideration received in the Change in Control
Event multiplied by the number of DSUs, at which point the DSUs will
expire without further obligation to you. The Board will have the
authority to value any consideration received in the Change in
Control Event to the extent neither cash nor readily marketable
securities. |
-5-
EXHIBIT 10.24
Grant No.
o Participants Copy
o Companys Copy
Arbitron Inc.
2008 Equity Compensation Plan
Director Deferred Stock Unit Agreement Annual Grant
To :
Arbitron Inc. (the Company) has granted you (the Grant) deferred stock units (DSUs) as
set forth on Exhibit A to this Agreement (the DSUs) under its 2008 Equity Compensation Plan (the
Plan).
The Grant is subject in all respects to the applicable provisions of the Plan. This Agreement
does not cover all of the rules that apply to the Grant under the Plan, and the Plan defines any
capitalized terms in this Agreement that this Agreement does not define.
In addition to the Plans terms and restrictions, the following terms and restrictions apply:
|
|
|
Vesting Schedule
|
|
The Grant is fully nonforfeitable (Vested) on the Grant Date. |
|
|
|
Distribution Dates
|
|
You will receive a distribution of shares (the Shares) of Company common stock
(Common Stock) equivalent to your DSUs as soon as practicable following the date or
dates indicated on Exhibit A, the Distribution Date(s), subject to any overriding
provisions in the Plan. |
|
|
|
Limited Status
|
|
You understand and agree that the Company will not consider you a shareholder for any
purpose with respect to the Shares, unless and until the Shares have been issued to
you on the Distribution Date(s). You will, however, receive dividend equivalents
(Dividend Equivalent Rights) with respect to the DSUs, measured using the Shares
they represent, with the amounts convertible into full or fractional additional DSUs
based on dividing the dividends by the Fair Market Value (as defined in the Plan) as
of the date of dividend distribution and holding the resulting additional DSUs for
distribution as provided for the other DSUs. |
|
|
|
Voting
|
|
DSUs cannot be voted. You may not vote the Shares unless and until the Shares are
distributed to you. |
|
|
|
Transfer
Restrictions
|
|
You may not sell, assign, pledge, encumber, or otherwise transfer any interest
(Transfer) in the Shares until the Shares are distributed to you.
Any attempted Transfer that precedes the Distribution Date for such Shares is invalid. |
|
|
|
Additional
Conditions
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The Company may postpone issuing and delivering any Shares for so long as the
Company determines to be advisable to satisfy the following: |
to Receipt |
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its completing or amending any securities registration or qualification of the Shares
or its or your satisfying any exemption from registration under any Federal or state
law, rule, or regulation; |
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its receiving proof it considers satisfactory that a person or entity seeking to
receive the Shares after your death is entitled to do so; |
-1-
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your complying with any requests for representations under the Grant
and the Plan; and |
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its or your complying with any federal, state, or local tax
withholding obligations. |
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Taxes and
Withholding
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The DSUs provide tax deferral, meaning that they are not taxable to you until you
actually receive Shares on or around each Distribution Date. You will then owe taxes at ordinary income tax rates
as of each Distribution Date at the Shares value. |
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If you become employed by the Company before a Distribution Date, the
Company will be required to withhold (in cash from salary or other amounts
owed you) the applicable percentage of the value of the Shares on the
Distribution Date. If the Company does not choose to do so, you agree to
arrange for payment of the withholding taxes and/or confirm that the Company
is arranging for appropriate withholding. |
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Additional
Representations
from You
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If you receive Shares at a time when the Company does not have a current registration
statement (generally on Form S-8) under the Act that covers issuance of Shares to you,
you must comply with the following before the Company will release the Shares to you. You must: |
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represent to the Company, in a manner satisfactory to the Companys counsel, that you are acquiring the
Shares for your own account and not with a view to reselling or distributing the Shares; and |
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agree that you will not sell, transfer, or otherwise dispose of the Shares unless: |
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a registration statement under the Act is effective at the time of disposition with respect to
the Shares you propose to sell, transfer, or otherwise dispose of; or |
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the Company has received an opinion of counsel or other information and representations it
considers satisfactory to the effect that, because of Rule 144 under the Act or otherwise, no registration
under the Act is required. |
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Additional
Restriction
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You will not receive the Shares if issuing the Shares would violate any applicable federal
or state securities laws or other laws or regulations. |
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No Effect on
Service
Providing
Relationship
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Nothing in this Agreement restricts the Companys rights or those of any of its affiliates
to terminate your service on the Companys Board of Directors or other relationship at
any time, with or without cause. The termination of your relationship, whether by the
Company or any of its affiliates or otherwise, and regardless of the reason for such termination, has the
consequences provided for under the Plan. |
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No Effect on
Running Business
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You understand and agree that the existence of the DSU will not affect in any way the
right or power of the Company or its stockholders to make or authorize any adjustments, recapitalizations,
reorganizations, or other changes in the Companys capital structure or its business, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, preferred or other stock, with preference
ahead of or convertible into, or otherwise affecting the Companys common stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether or not of a similar character to those described
above. |
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Section 409A
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This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and
must be construed consistently with that section. Notwithstanding anything in the Plan or this Agreement to
the contrary, if (x) you are a specified employee within the meaning of Section 409A at the time of your
separation from service (as determined by the Company, by which determination you agree you are bound) and (y)
the payment under the DSUs will result in the imposition of additional tax under Section 409A if paid to you
within the six month period following your separation from service, then the payment under such accelerated
DSUs will not be made until the earlier of (i) the date six months and one day following the date of your
separation from service or (ii) the 10th day after your date of death, and will be paid within 10
days thereafter. Neither the Company nor you shall have the right to accelerate or defer the delivery of any
such payments or benefits except to the extent specifically permitted or required by Section 409A. In any
event, the Company makes no representations or warranty and shall have no liability to you or any other
person, if any provisions of or payments under this Agreement are determined to constitute deferred
compensation subject to Code Section 409A but not to satisfy the conditions of that section. |
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Unsecured
Creditor
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This Agreement creates a contractual obligation on the part of the Company to make
payment under the DSUs credited to your account at the time provided for in this Agreement. Neither you nor
any other party claiming an interest in deferred compensation hereunder shall have any interest whatsoever in
any specific assets of the Company. Your right to receive payments hereunder is that of an unsecured general
creditor of Company. |
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Governing Law
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The laws of the State of Delaware will govern all matters relating to this Agreement, without regard to the
principles of conflict of laws. |
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Notices
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Any notice you give to the Company must follow the procedures then in effect. If no other procedures apply,
you must send your notice in writing by hand or by mail to the office of the Companys Secretary. If mailed,
you should address it to the Companys Secretary at the Companys then corporate headquarters, unless the
Company directs participants to send notices to another corporate department or to a third party administrator
or specifies another method of transmitting notice. The Company and the Administrator will address any
notices to you at your office or home address as reflected on the Companys business records. You and the
Company may change the address for notice by like notice to the other, and the Company can also change the
address for notice by general announcements to participants. |
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Plan Governs
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Wherever a conflict may arise between the terms of this Agreement and the terms of the Plan, the terms of the
Plan will control. |
-3-
ACKNOWLEDGMENT
I acknowledge I received a copy of the Plan. I represent that I have read and am familiar
with the Plans terms. I accept the Grant subject to all of the terms and provisions of this
Agreement and of the Plan under which the Grant is made, as the Plan may be amended in accordance
with its terms. I agree to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator concerning any questions arising under the Plan with respect
to the Grant.
No one may sell, transfer, or distribute the securities covered by the Grant without an
effective registration statement relating thereto or an opinion of counsel satisfactory to the
Company or other information and representations satisfactory to the Company that such registration
is not required.
-4-
Grant No.
Arbitron Inc.
2008 Equity Compensation Plan
Deferred Stock Unit Annual Grant
Exhibit A
Recipient Information:
Grant Information:
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Distribution Dates |
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Your Distribution Dates will be determined by your
deferral election in effect before the Date of Grant. |
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The Distribution Dates will be |
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___
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a date within 30 days after
the six month anniversary of
my ceasing to serve as a
director of the Company, at
which point I will receive
all Shares covered by the
DSUs or |
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___
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January 1 of each of the ___
years following the year in
which I cease to serve as a
director of the Company
(provided that the first
years installment will be
delayed to the six month
anniversary of my ceasing to
be director if the first
January 1 is within that six
month period), at which dates
I will receive the portion of
the Shares covered by the
DSUs as represents the result
of dividing all of the Shares
by the number of years for
which I will receive Shares
and carrying any fractional
Shares forward until they add
to a whole Share, with any
fractional share remaining in
the final year being cashed
out. |
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If a Change in Control Event (as defined in the Plan) occurs before
the final or sole Distribution Date and the Change in Control Event
also would be an event described in Treas. Reg. Section
1.409A-3(i)(5), full payment will be made in connection with the
closing of the Change in Control Event. A Change in Control Event
that does not comport with that regulation will not affect the
payment timing. The payment will be in cash (unless the Board
determines otherwise) equal to the value per share of the
consideration received in the Change in Control Event multiplied by
the number of DSUs, at which point the DSUs will expire without
further obligation to you. The Board will have the authority to
value any consideration received in the Change in Control Event to
the extent neither cash nor readily marketable securities. |
-5-
EXHIBIT 10.38
SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE (the Agreement) is made and entered into by
and between Arbitron Inc., its subsidiaries and affiliates (the Company), and Michael P.
Skarzynski (Skarzynski).
WHEREAS, Skarzynskis employment in any capacity with the Company and/or with any of its
subsidiaries or related or affiliated companies (together, the Company) and his role as a member
of the Board of Directors of the Company will terminate on January 11, 2010 (Termination Date);
WHEREAS, Skarzynski and the Company desire to enter into this Agreement to resolve all issues
between them including, but not limited to, those relating to Skarzynskis employment with the
Company, and the termination thereof;
WHEREAS, January 11, 2010 is the Effective Date of this Agreement; and
WHEREAS, if Skarzynski does not revoke his waiver of ADEA claims in this Agreement within
seven (7) days of executing the attached ADEA Waiver, then his ADEA Waiver will become effective
and irrevocable on the eighth day after Skarzynski has executed this Agreement (the ADEA Waiver
Effective Date);
NOW, THEREFORE, for and in consideration of the above Recitals and of the covenants and
agreements contained herein, the receipt and sufficiency of which are hereby acknowledged by the
parties, the parties agree as follows:
1. Promises by the Company.
In full settlement of all claims, the Company agrees to provide the following:
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(a) |
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Cash Payment: The Company will pay the total sum of $750,000.00, less
all applicable taxes, deductions, and withholdings required by law. Twenty percent
(20%) of the foregoing gross amount, $150,000.00, is being paid to Skarzynski for
waiving any claims he may have under the Age Discrimination in Employment Act (ADEA).
Within thirty (30) days of the Effective Date of this Agreement, the Company will
deliver a check made payable to Skarzynski for $600,000.00, less all applicable taxes,
deductions, and withholdings required by law. If the ADEA Waiver is signed by
Skarzynski and not revoked by him, then the Company will deliver a check made payable
to Skarzynski for the remaining $150,000.00 less all applicable taxes, deductions, and
withholdings required by law, within twenty-two (22) days of the ADEA Waiver becoming
effective and irrevocable. Skarzynski understands and agrees that the Company will
report amounts paid under this Agreement to the IRS by way of IRS Form W-2. The cash
severance payment does not include the monies the Company has paid or will pay
Skarzynski for all earned but unpaid wages through |
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the Termination Date and all unused
paid days off in the
amount of $28,500.00, less all applicable taxes, deductions, and withholdings
required by law. |
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(b) |
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Compensation and Benefit Plans: Skarzynski will cease to be eligible
to participate under any stock option, bonus, incentive compensation, commission,
medical, dental, life insurance, retirement, and other compensation or benefit plans of
the Company or any affiliate following his termination of employment. Thereafter,
Skarzynski will have no rights under any of those plans, except as follows: Eligibility
for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act
(COBRA) will not be altered by this Agreement. If Skarzynski and/or his dependents
become eligible for continuation coverage under COBRA as a result of Skarzynskis
termination, COBRAs procedures and rules will apply. If Skarzynski and/or his
eligible dependents timely take the necessary steps to initiate COBRA coverage under
the Companys group health plan(s), the Company will pay the cost of such COBRA
coverage for Skarzynski and/or his eligible dependents until the earlier of December
31, 2010 or until none of Skarzynski or his eligible dependents no longer qualifies for
COBRA coverage or until Skarzynski and/or his eligible dependents are eligible for
group health plan coverage offered by a subsequent employer of Skarzynski or the
employer of his spouse or domestic partner or, in the case of his eligible dependents,
the date on which such dependents cease to be eligible dependents under the terms of
the Companys group health plan(s), whichever shall first occur. If Skarzynski and/or
his eligible dependents wish to continue COBRA coverage for the remainder of the
eligibility period, if any, at Skarzynskis own expense, it is Skarzynskis sole
responsibility to arrange for such continued coverage by timely paying the required
premiums. If Skarzynski receives the COBRA subsidy under the American Recovery and
Reinvestment Act (ARRA), the period of subsidized coverage under ARRA will run
concurrent with any period of COBRA coverage subsidized by the Company. |
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(c) |
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No Repayment Of Relocation Monies: The Company agrees that it shall
not seek repayment of $125,000.00, which is the relocation amount Skarzynski would owe
the Company upon the resignation of his employment at this time pursuant to Section
4.(d) of his Executive Employment Agreement. |
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(d) |
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Attorneys Fees: The Company agrees to indemnify Skarzynski for
reasonable attorneys fees and costs incurred up through the effective date of the
Agreement in connection with the matters that culminated with his resignation for an
amount up to $100,000.00. |
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(e) |
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Continuing D&O Coverage & Indemnity: The Company will continue to
cover Skarzynski under its Directors & Officers (D&O) insurance policies for
actions/inactions taken by Skarzynski in Skarzynskis capacity as an officer and
director of the Company. The Company agrees to indemnify Skarzynski for
actions/inactions taken by Skarzynski in his capacity as an officer and director of the
Company with respect to any third-party claims or investigations (including but not
limited to any claims or investigations arising out of the events leading to
Skarzynskis resignation), consistent with applicable corporate governance documents
and current D&O policies. |
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2. Complete Waiver and Release by Skarzynski.
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(a) |
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Release: In exchange for the consideration stated above and provided
to Skarzynski by the Company, the adequacy of which Skarzynski hereby acknowledges,
Skarzynski irrevocably and unconditionally releases all the claims described below in
Subparagraph 2(b) of this Agreement that Skarzynski may have against the following
persons or entities (the Releasees): the Company, all of the Companys subsidiaries,
related or affiliated companies, and all of the Companys and its subsidiaries and
related or affiliated companies predecessors and successors; and, with respect to each
such entity, all of its past and present employees, officers, directors, stockholders,
owners, representatives, assigns, attorneys, agents, insurers, employee benefit
programs (and the trustees, administrators, fiduciaries and insurers of such programs)
and any other persons acting by, through, under or in concert with any of the persons
or entities listed in this Subparagraph. |
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(b) |
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Claims Released: The claims released include all claims, promises,
offers, debts, causes of action or similar rights of any type or nature Skarzynski has
or had against Releasees, including but not limited to (i) those which in any way
relate to Skarzynskis employment with the Company or the termination of Skarzynskis
employment, or Skarzynskis service to the Company as a director; (ii) any claims to
attorneys fees or other indemnities; (iii) any claims relating to stock options and
restricted stock units that have ever been awarded, including but not limited to those
that otherwise would have vested on January 13, 2010; and (iv) any other claims or
demands Skarzynski may have on any basis, including but not limited to common law
contract or tort, or other claims that may have arisen under any of the
anti-discrimination statutes or laws, such as Title VII of the Civil Rights Act of
1964, § 1981 of the Civil Rights Act of 1866 and Executive Order 11246, which prohibit
discrimination based on race, color, national origin, religion or sex; the Equal Pay
Act, which prohibits paying men and women unequal pay for equal work; the Americans
With Disabilities Act and § 503 and § 504 of the Rehabilitation Act of 1973, which
prohibit discrimination against the disabled; the Genetic Information Nondiscrimination
Act of 2008, which prohibits discrimination based on genetic information; the Maryland
Fair Employment Practices Act, the Maryland Equal Pay Law, and the Maryland
Discrimination on the Basis of Medical Information Act, and any other federal, state or
local law or regulation prohibiting retaliation or discrimination on the basis of race,
color, national origin, religion, gender, disability, age, marital status, sexual
orientation, gender identity, genetic information or any other protected
characteristic. |
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(c) |
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No Existing Litigation or Charges: Skarzynski represents that (a)
Skarzynski has not filed, submitted or caused to be filed any lawsuit, complaint or
charge pertaining in any way to Skarzynskis employment or encompassing any claim
released by this Agreement, or (b) if Skarzynski has filed, submitted or caused to be
filed or submitted any such charge, claim or complaint, Skarzynski has, on or before
the date when Skarzynski signs this Agreement, submitted a written request to the court
or agency requesting the dismissal or withdrawal of that charge, claim or complaint
with prejudice, and Skarzynski has attached a copy of the request for dismissal or
withdrawal hereto. |
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(d) |
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Release Extends to Both Known and Unknown Claims, Suspected and Unsuspected
Claims: This Agreement covers both claims that Skarzynski knows about or suspects
as well as those Skarzynski does not know about or does not suspect. Skarzynski
understands the significance of Skarzynskis release of unknown and unsuspected claims
and Skarzynskis waiver of statutory protection against a release of unknown claims
and/or unsuspected claims. Skarzynski expressly waives all rights afforded by any
statute which limits the effect of a release with respect to unknown and unsuspected
claims. |
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(e) |
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Claims Not Released: This Agreement does not release Skarzynskis
right to enforce this Agreement. This Agreement also does not release any other claim
or abridge any legal right that as a matter of law cannot be released or abridged by
private agreement between the Company and Skarzynski. |
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(f) |
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Ownership of Claims: Skarzynski represents that Skarzynski has not
assigned or transferred, or purported to assign or transfer, all or any part of any
claim released by this Agreement. |
3. Skarzynskis Promises.
In addition to the waiver and release of claims provided for in Paragraph 2, Skarzynski also agrees
to the following:
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(a) |
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No Liability Admitted: Skarzynski understands and agrees that this
Agreement and the payments and benefits described in this Agreement do not constitute
an admission by the Company or any Releasee, or any of their present or former
officers, directors, members, employees, consultants, representatives, independent
contractors or related entities, of any liability to Skarzynski or wrongdoing
whatsoever and that this Agreement is not admissible as evidence in any proceeding
other than for enforcement of its provisions. |
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(b) |
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No Future Employment: Skarzynski understands that Skarzynskis
employment with the Company will terminate forever as of the Termination Date, and
Skarzynski promises never to seek employment with the Company in the future (including
but not limited to employment as an employee or engagement as a consultant, temporary
employee, or contractor). |
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(c) |
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References/Inquiries: In accordance with Company policy, the Company
shall confirm only dates of employment and position held. |
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(d) |
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No Disparagement: Skarzynski agrees to refrain from criticizing,
denigrating or otherwise disparaging the Company or any Releasee in any private or
public forum, including but not limited to newspapers, television, radio, or the
internet or other internet feature such as a blog, and agrees to refrain from making
statements about
any Releasee, Skarzynskis employment with the Company, or any general matter
concerning any Releasees reputation, standing in the business community, business
practices, or products; provided, however, that nothing in this Agreement will
prohibit Skarzynski from (1) complying with any valid subpoena or court order; or |
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(2) initiating or cooperating with any official investigation conducted by a law
enforcement or other governmental agency. The Company and its directors and officers
agree not to disparage Skarzynski in any public statement. |
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(e) |
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Non-Disclosure of Confidential Information and Non-Competition:
Skarzynski acknowledges that Sections 8 and 9 of his Executive Employment Agreement
survive the termination of his employment and that he agrees to continue to abide by
the provisions therein. Skarzynski further acknowledges that Sections 8 and 9 of his
Executive Employment Agreement are specifically incorporated herein. |
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(f) |
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Agreement to Cooperate With the Company: Skarzynski agrees to assist
the Company in any formal or informal legal matters in which Skarzynski is named as a
party or has knowledge relevant to the matter. Skarzynski shall fully cooperate with
the Company in the defense of any pending and/or future litigation, claim, charge or
investigation commenced by a third party against the Company, where the litigation or
investigation relates to or arises from Skarzynskis employment, consistent with any
applicable common law or constitutional principles, to the reasonable satisfaction of
the Company. Such assistance and cooperation may include, but will not be limited to,
providing background information regarding any matter on which Skarzynski previously
worked, aiding in the drafting of declarations, executing declarations or similar
documents, testifying or otherwise appearing at investigation interviews, depositions,
arbitrations or court hearings and preparing for the above-described or similar
activities. Skarzynski understands that Skarzynski will be reimbursed for all
reasonable out-of-pocket expenses for Skarzynskis cooperation under this Subparagraph,
and that Skarzynski in rendering such services will be acting as a bona fide
independent contractor. |
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(g) |
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Promise Not to Facilitate Claims Against the Company: Skarzynski
recognizes that the Company has many legitimate protectable interests, including but
not limited to confidential proprietary, business process and personal information.
Accordingly, Skarzynski promises not to voluntarily encourage, counsel or assist
(directly or indirectly) any current or former employee or third party (excluding
government law enforcement agencies) in the preparation or prosecution of any civil
dispute, difference, grievance, claim, charge or complaint against the Company and/or
any Releasee (in such Releasees Company capacity) unless Skarzynski is compelled to do
so by valid legal process. Nothing in this provision is intended to prevent or
prohibit Skarzynski from assisting another individual in filing a charge with the EEOC
or in participating in an EEOC investigation or proceeding. In the event Skarzynski
receives notice that Skarzynski is required to provide testimony or information in any
context about the Company and/or any Releasee (related to his/her work for the Company)
to any third party (excluding government law enforcement agencies), Skarzynski agrees
to inform the Companys Chief Legal Officer in writing within 24 hours of receiving
such notice. Skarzynski, thereafter,
agrees to cooperate with the Company in responding (if necessary) to such legal
process. Skarzynski also agrees not to testify or provide any information in any
context if the Company has informed Skarzynski of its intent to contest the validity
or enforceability of any request, subpoena or court order until such time as the
Company has informed Skarzynski in writing that it consents to Skarzynskis
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testimony or has fully exhausted its efforts to challenge any request, subpoena or
court order requiring Skarzynskis testimony. If Skarzynski is required to provide
testimony in any context about the Company (with the Companys consent or after the
Company completes its challenges), Skarzynski shall testify truthfully at all times.
Nothing in this Agreement will prohibit Skarzynski from (a) complying with any
valid subpoena or court order, or (b) cooperating with any official investigation
conducted by a law enforcement agency. |
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(h) |
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Resignation Of Officer and Director Positions. Skarzynski will resign
as President and Chief Executive Officer of Arbitron Inc. and any Arbitron subsidiaries
or affiliates or related companies and as a member of the Arbitron Board of Directors.
In connection with resigning as an officer and director, Skarzynski agrees to execute
and return to the Company on January 11, 2010 two signed, original resignation letters
with an effective date of January 11, 2010 (the Resignation Letters) on Skarzynskis
Company letterhead in the form provided in Appendix A to this Agreement. Appendix A is
hereby incorporated into and made part of this Agreement by reference. In addition,
Skarzynski agrees to take all such further steps as the Company may deem necessary or
appropriate in order to accomplish the resignation of any officer and director
positions that Skarzynski holds with the Company. |
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(i) |
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Return of Property: Skarzynski agrees to return to the Company all
files, memoranda, documents, records, copies of the foregoing, Company-provided credit
cards, keys, building passes, security passes, access or identification cards, and any
other property of the Company or any Releasee in his possession or control by January
15, 2010. , Skarzynski agrees to submit all expense reports by February 28, 2010.
Skarzynski agrees that he will have repaid everything he owes to the Company or any
Releasee, paid all amounts he owes on Company-provided credit cards or accounts (such
as cell phone accounts), and canceled or personally assumed any such credit cards or
accounts by January 15, 2010. Skarzynski agrees not to incur any other expenses,
obligations, or liabilities on behalf of the Company. Skarzynski agrees to deliver his
laptop, desktop, Blackberry and printer to the Company by January 15, 2010, so that the
Company can image those materials and/or remove the existing hard drives from such
media, as it deems appropriate. The Company will then return such media to him to
retain for his own use. Skarzynski will receive a copy of his Outlook contacts. |
4. Consequences of Skarzynskis Violation of Promises.
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(a) |
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General Consequences: If Skarzynski breaks any of Skarzynskis
promises in this Agreement, for example, by filing or prosecuting a lawsuit based on
claims that Skarzynski has released, or if any representation made by Skarzynski in
this Agreement was false when made, or if Skarzynski breaches Sections 8 or 9 of his
Executive Employment Agreement that contain obligations which survive the
termination of Skarzynskis employment with the Company, Skarzynski (a) shall
forfeit all right to future benefits under this Agreement; (b) must repay all
benefits previously received, pursuant to this Agreement, upon the Companys demand;
and (c) must pay reasonable attorneys fees and all other costs incurred as a result
of |
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Skarzynskis breach or false representation, such as the cost of defending any
suit brought with respect to a released claim by Skarzynski or other owner of a
released claim. |
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(b) |
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Injunctive Relief: Skarzynski further agrees that the Company would be
irreparably harmed by any actual or threatened violation of Subparagraphs 3(d) and
3(e), and that the Company shall be entitled to an injunction prohibiting Skarzynski
from committing any such violation. |
5. Binding Nature of Agreement. This Agreement shall be binding on Skarzynskis heirs,
legal representatives, administrators, executors, and assigns, and shall inure to the benefit of
the Released Parties and their heirs, legal representatives, administrators, executors, and
assigns.
6. No Assignment. Skarzynskis rights, duties or obligations under this Agreement may not
be assigned, delegated or transferred.
7. Interpretation. This Agreement will be construed as a whole according to its fair
meaning, and not strictly for or against any of the parties. Unless the context indicates
otherwise, the term or will be deemed to include the term and and the singular or plural number
will be deemed to include the other. Paragraph headings used in this Agreement are intended solely
for convenience of reference and will not be used in the interpretation of any of this Agreement.
8. Dispute Resolution.
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(a) |
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Arbitrable Disputes: Any dispute (an Arbitrable Dispute) arising
between the parties, including but not limited to those concerning the formation,
validity, interpretation, effect, or alleged violations of this Agreement, the
arbitrability of any dispute, any federal, state or local statutory claim (including
discrimination or retaliation statutes), contract claims, tort claims, and claims of
any other sort, must be submitted to arbitration before a retired judge or an
experienced employment arbitrator selected in accordance with the then-current JAMS
Employment Rules and Procedures. The arbitrator may not modify or change this
Agreement in any way except as provided in Paragraph 11. Skarzynski also agrees to
arbitrate any claim against any Releasee. The arbitration shall be held in or near
Columbia, Maryland. |
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Costs of Arbitration: Each party will pay the fees of its respective
attorneys, the expenses of its witnesses and any other expenses connected with the
arbitration, but all other costs of the arbitration, including the fees of the
arbitrator, cost of any record or transcript of the arbitration, administrative fees
and other fees and costs will be paid by the Company. The arbitrator may award
prevailing party costs and fees to the prevailing party under the standards provided by
law. The arbitrator may
resolve any dispute as to who is the prevailing party and as to the reasonableness
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Exclusive Remedy: Arbitration in this manner will be the exclusive
remedy for any Arbitrable Dispute. The arbitrators decision or award will be fully
enforceable and subject to an entry of judgment by a court of competent jurisdiction.
Should Skarzynski or the Company, without the consent of the other party, attempt to |
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resolve an Arbitrable Dispute by any method other than arbitration pursuant to this
Paragraph, the responding party will be entitled to recover from the initiating party
all damages, costs, expenses and attorneys fees incurred as a result. |
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Sole Exception: Notwithstanding Subparagraphs 8(a) through 8(c), an
otherwise Arbitrable Dispute relating to alleged violations of Subparagraphs 3(d) or
3(e) (involving the criticism, denigration or disparagement of the Company, any other
Releasee, or any of the Companys products, processes, experiments, policies,
practices, standards of business conduct or areas or techniques of research and/or the
violation of non-disclosure and non-competition provisions) may be resolved through a
means other than arbitration, at the Companys sole option. Such means shall be
permitted pending and in aid of arbitration only. |
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Effect on Previous Arbitration Agreements: The arbitration agreement
contained in this Paragraph supersedes any arbitration agreement previously entered
into by Skarzynski and the Company to the extent, but only to the extent, that an
Arbitrable Dispute under this Agreement would have been covered by any preexisting
arbitration agreement; and provided, however, that if the arbitration agreement in this
Paragraph for any reason is held unenforceable, the prior arbitration agreement will
apply, as it is the parties intention and desire that all disputes between them will
be arbitrated. |
9. Law Governing. This Agreement shall be governed by and construed under the laws of the
State of Maryland other than its conflict of laws provisions; provided, however, that the dispute
resolution process referenced in Paragraph 8 of this Agreement shall be governed by the Federal
Arbitration Act unless it is found by a decisionmaker of competent jurisdiction not to be governed
by the Federal Arbitration Act, in which case it will be governed by Maryland law.
10. Entire Agreement. This Agreement comprises the entire agreement between the parties
regarding the matters contained herein. This Agreement has been entered into by Skarzynski with a
full understanding of its terms, with an opportunity to consult with counsel and without inducement
or duress. Skarzynski acknowledges that no promise or agreement not expressed in this Agreement
has been made to Skarzynski. This Agreement may be executed in counterparts, each of which shall
be considered an original, but all of which together shall constitute one and the same instrument.
This Agreement may not be changed orally. This Agreement supersedes any prior or contemporaneous
agreement, arrangement or understanding on its subject matter.
11. Severability. The provisions of this Agreement are severable. If any provision in
this Agreement is found to be unenforceable, all other provisions will remain fully enforceable.
[SIGNATURE PAGE FOLLOWS]
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SIGNATURE PAGE
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN, SUSPECTED
AND UNSUSPECTED CLAIMS.
Acknowledged and Agreed:
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Micheal P. Skarzynski
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/Michael P. Skarzynski
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January 11, 2010 |
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Signature
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FOR ARBITRON INC. |
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/s/ Philip Guarascio
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January 12, 2010 |
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Philip Guarascio
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Chairman of the Board of Directors |
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ADEA WAIVER AND SIGNATURE PAGE
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Your waiver of ADEA claims is separate from the agreement to waive all other claims. Separate
consideration is being provided for your ADEA Waiver. |
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You may not make any changes to this ADEA Waiver. |
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You have up to twenty-one (21) days after receiving the ADEA Waiver to consider and sign this
ADEA Waiver, although you may waive this time period by signing this ADEA Waiver sooner. |
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You have seven (7) days after signing this ADEA Waiver in which to revoke your waiver of ADEA
claims in this Agreement, and your waiver of ADEA claims does not take effect until that seven-day
period has ended. |
12. Age Discrimination In Employment Act:
In exchange for the consideration stated above in Subparagraphs 1(a), 1(b), 1(c), 1(d) and 1(e)
that is allocated to Skarzynskis ADEA Waiver and provided to Skarzynski by the Company, the
adequacy of which Skarzynski hereby acknowledges, Skarzynski irrevocably and unconditionally
releases all the claims described below in Subparagraph 12(a) that Skarzynski may have against any
of the Releasees set forth in Subparagraph 2(a).
(a) Skarzynski acknowledges and agrees that by signing this ADEA Waiver, Skarzynski is
waiving and releasing any and all claims or rights Skarzynskis may have under the Age
Discrimination in Employment Act of 1967, as amended (ADEA), that his waiver and release is
knowing and voluntary, and that the consideration given for this waiver and release is in addition
to anything of value to which Skarzynski was already entitled as an employee of the Company.
Skarzynski further acknowledges that Skarzynski is advised that: (i) Skarzynski should consult
with an attorney (at Skarzynskis own expense) prior to executing the ADEA Waiver (Skarzynski
understands that whether Skarzynski consults an attorney or not is Skarzynskis decision); (ii) the
ADEA Waiver does not waive or release any rights or claims Skarzynski may have under the ADEA which
may arise after Skarzynski executes the ADEA Waiver; and (iii) (a) Skarzynski has at least
twenty-one (21) days in which to consider the ADEA Waiver (although Skarzynski may choose to
execute the ADEA Waiver earlier than that; (b) Skarzynski has seven (7) days following execution of
the ADEA Wavier to revoke this Agreement (to be effective, any revocation must be actually received
in writing by the Company by 12:00 a.m. on the eighth day); and (c) the ADEA Waiver shall not be
effective until the revocation period has expired.
(b) Skarzynski acknowledges and agrees that Skarzynski was given a copy of the ADEA Waiver and
has carefully read it and understands it, that Skarzynski has been given the opportunity to consult
with his attorney regarding this ADEA Waiver and that Skarzynski has entered into this ADEA Waiver
voluntarily and with full knowledge of its final and binding effect.
PLEASE READ THIS ADEA WAIVER CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN, SUSPECTED
AND UNSUSPECTED CLAIMS.
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Acknowledged and Agreed:
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Micheal P. Skarzynski |
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/s/ Michael P. Skarzynski
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January 11, 2010 |
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Signature
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FOR ARBITRON INC. |
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/s/ Philip Guarascio
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January 12, 2010 |
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Philip Guarascio
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Chairman of the Board of Directors |
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11 of 13
RESIGNATION
The undersigned hereby resigns his employment in any capacity with Arbitron Inc. and/or with
any other of Arbitron Inc.s subsidiaries or affiliates or related companies, including but not
limited to his position of President and Chief Executive Officer and his role as a member of the
Arbitron Board of Directors.
DATED: Effective as of January 11, 2010
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/s/ Michael P. Skarzynski
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Micheal P. Skarzynski |
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EXHIBIT 10.43
Execution Copy
ARBITRON INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this Agreement) is made February 11, 2010 by and between Arbitron
Inc., a Delaware corporation (the Company), and William T. Kerr, an individual (you) (and,
together, Parties).
NOW THEREFORE, in consideration of your acceptance of employment, the Parties agree to be
bound by the terms contained in this Agreement as follows:
1. Engagement. Beginning January 10, 2010 (the Effective Date), the Company has employed
you as President and Chief Executive Officer. You will report directly to the Board of Directors
of the Company (the Board). You will be responsible for general management of the affairs of the
Company. You will at all times comply with all written policies of the Company then in effect.
2. Commitment. During and throughout the Employment Term, you must devote substantially all
of your full working time and attention to the Company. During the Employment Term, you must not
engage in any employment, occupation, consulting or other similar activity for direct or indirect
financial remuneration unless approved by the Board; provided, however, that you may, subject to
compliance with the notice and consent requirements set forth in the Companys Corporate Governance
Policies and Guidelines, (i) serve in any capacity with any professional, community, industry,
civic (including governmental boards), educational or charitable organization, (ii) serve on
for-profit entity board(s) having obtained prior consent and written approval from the Boards
Nominating and Corporate Governance Committee, and (iii) subject to the Companys conflict of
interest policies applicable to all employees, make investments in other businesses and manage your
and your familys personal investments and legal affairs; provided that any such activities
described in clauses (i)-(iii) above do not materially interfere with the performance of your
duties for the Company. You will perform your services under this Agreement primarily at the
Companys headquarters in Columbia, Maryland. You understand and agree that your employment may
require travel from time to time. The Company intends to support your election as a member of the
Board so long as you remain employed as the Chief Executive Officer.
3. Employment Term. The Company hereby agrees to employ you and you hereby accept employment
with the Company upon the terms set forth in this Agreement, for the period commencing on the
Effective Date and ending on the second anniversary of the Effective Date (the Initial Term),
unless sooner terminated in accordance with the provisions of Section 6 (such period, as it also
may be extended, the Employment Term).
4. Cash and Stock Compensation.
(a) Base Salary. Beginning as of the Effective Date, you will receive a base salary at a
monthly rate of $66,666.67, annualizing to $800,000 (Base Salary). The Company will pay your
Base Salary in accordance with the Companys regular payroll practices, but no less frequently than
monthly. The Board will review your Base Salary no less frequently than annually, beginning in
2011. If increased, the increased Base Salary will become the Base Salary for all purposes of this
Agreement. Your Base Salary will not be decreased without your written consent.
(b) Incentive Bonus. Upon meeting the applicable performance criteria established by the
Companys Compensation and Human Resources Committee of the Board (the Compensation Committee) in
its sole discretion, you will be eligible to receive an annual incentive bonus (the Annual Bonus)
for a given fiscal year of the Company targeted at an amount equal to 100% of your Base Salary in
effect at the Effective Date or, for subsequent years, at the beginning of such fiscal year
(Target Bonus). For performance exceeding such applicable performance criteria in the sole
judgment of the Compensation Committee, the Annual Bonus will be increased to an amount in excess
of the Target Bonus up to a maximum of 200% of your Base Salary in effect at the beginning of such
fiscal year, which additional bonus amount the Compensation Committee will determine in its sole
discretion. The Annual Bonus, if any, will be paid when other executives receive their bonuses
under comparable arrangements but, in any event, between January 1 and April 30 of the year
following the year with respect to which it is earned.
(c) Equity Compensation.
(i) Initial Stock Awards. Subject to the Compensation Committees approval, on or as
soon as administratively practicable following the Effective Date, the Company will grant
you an equity award to be valued at $1.85 million on the date of grant, consisting of
$350,000 in the form of stock options and $1.5 million in the form of deferred stock units
(DSUs), each with respect to the Companys common stock, par value $0.50 (the Common
Stock). The value for the options will be determined using the Companys standard
Black-Scholes assumptions applied as of the date of grant and the value for the DSUs will be
determined by dividing the target value for the DSUs by the Common Stocks fair market value
on the date of grant. The equity grants will be under the Companys 2008 Equity
Compensation Plan (the 2008 Plan). Assuming continued employment, the options under the
grant will vest in equal amounts on an annual basis over a three year period following the
date of grant (beginning with one-third on the first anniversary), and otherwise will
contain the Companys customary terms and conditions for such grants, except as modified by
this Agreement. Assuming continued employment, the DSUs under the grant will vest in equal
amounts on an annual basis over a four year period following the date of grant (beginning
with 25% on the first anniversary), will result in distribution of the vested Shares of
Common Stock within the 30 day period following your termination of employment for any
reason (except for any delay required by Section 7 for compliance with Section 409A of the
Internal Revenue Code of 1986, as amended (the Code), and otherwise will contain the
Companys
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customary terms and conditions for such grants, but subject to the provisions of
Section 4(c)(iii) below.
(ii) Ongoing Grants. In addition to the awards in Section 4(c)(i), the Company will
ask the Compensation Committee to grant you long-term incentives shortly after the Effective
Date with a grant date equivalent value of $1.5 million, to be divided into the same mix of
stock options, performance-based cash, and restricted stock units (RSUs) as apply to other
senior executives (and with the RSUs also performance-based to the extent grants to other
senior executives are subject to performance hurdles), but with the RSUs in the form of DSUs
payable only after your separation from service and subject to the provisions of Section
4(c)(iii) below. The Company will also ask the Compensation Committee to make a grant of
long-term incentives for 2011 of similar size on or after the first anniversary of the
Effective Date, subject to the same criteria as for other members of senior management (and
subject to the Compensation Committees ultimate discretion with respect to making the
grants and using DSUs in place of RSUs). The Compensation Committee at its sole discretion
will consider the grant of additional compensatory stock awards in future years while you
remain employed.
(iii) Special Acceleration. The awards described in Section 4(c)(i) and (ii) will vest
and/or become exercisable in accordance with the Companys customary terms. However, to the
extent more favorable to you (except as described for Cause) and to the extent that there
is no termination of options or other awards for reasons provided in the 2008 Plan, such as
a change in control of the Company, the following terms will also apply, subject, where
applicable, to Sections 6(d) (requiring a release) and 7 (relating to Section 409A):
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Awards will accelerate on death or disability
(as the latter is determined under Section 6(c) and except to the
extent acceleration would trigger taxes under Code Section 409A), with
continued exercisability of options for one year following termination
of employment. |
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On a termination by the Company without Cause
or your Retirement: (x) any performance-based awards will require
satisfaction of the applicable performance objectives but will not be
prorated for partial years or periods of service; (y) any stock options
will continue to vest as though you remained employed and remain
exercisable for three years following termination of employment, and
(z) any DSUs not subject to performance criteria will continue to vest
as though you remained employed. |
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Your resignation other than through Retirement
will cause unvested awards to be forfeited. Vested portions of the
stock options will remain exercisable for 90 days following termination
in that situation. |
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Termination for Cause will cause forfeiture of
vested and unvested awards. |
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Vesting, acceleration, and other compensation
may be delayed or eliminated if you would be subject to a golden
parachute tax (under Code Section 4999), as set forth on Exhibit A to
this Agreement. |
5. Employee Benefits.
(a) Employee Welfare and Retirement Plans. You will, to the extent eligible, be entitled to
participate at a level commensurate with your position in all employee welfare benefit and
retirement plans and programs the Company provides to its executives in accordance with the terms
thereof as in effect from time to time. You will be covered under the Companys Director and
Officer liability insurance policy, to the same extent as other officers.
(b) Business Expenses. Upon submission of appropriate documentation in accordance with
Company policies, the Company will promptly pay, or reimburse you for, all reasonable business
expenses that you incur in performing your duties under this Agreement, including, but not limited
to, travel, entertainment, professional dues and subscriptions, as long as such expenses are
reimbursable under the Companys policies. Any payments or expenses provided in this Section 5(b)
will be paid in accordance with Section 7(c).
6. Termination of At-Will Employment.
(a) General. Subject in each case to the provisions of this Section 6, nothing in this
Agreement interferes with or limits in any way the Companys right to terminate your employment at
any time, for any reason or no reason, with or without notice, and nothing in this Agreement
confers on you any right to continue in the Companys employ. If your employment ceases for any or
no reason, you (or your estate, as applicable) will be entitled to receive (in addition to any
compensation and benefits you are entitled to receive under Section 4(c)(iii)): (i) any earned but
unpaid Base Salary through and including the date of termination of your employment, to be paid in
accordance with the Companys regular payroll practices no later than the next regularly scheduled
pay date; (ii) any earned but unpaid Annual Bonus for the calendar year preceding the year in which
your employment ends, to be paid on the date such Annual Bonus otherwise would have been paid if
your employment had continued; (iii) unreimbursed business expenses in accordance with the
Companys policies; to be paid in accordance with Section 7(c); (iv) the amount of any accrued but
unused paid time off; and (v) any amounts or benefits to which you are then entitled under the
terms of the benefit plans then sponsored by the Company in accordance with their terms (and not
accelerated to the extent acceleration does not satisfy Section 409A of the Code). Notwithstanding
any other provision in this Agreement to the contrary, any severance benefits to which you may be
entitled will be provided exclusively through the terms of Sections 4(c)(iii) and 6.
(b) Termination Without Cause; Retirement. If, during the Employment Term, the Company
terminates your employment without Cause or your Retirement occurs, the Company will pay to you in
cash, subject to compliance with Section 6(d):
(i) an amount equal to the Base Salary due for the remainder of the Initial Term, paid
in equal installments over the remainder of the Initial Term following the Release Effective
Date in accordance with the Companys standard payroll policies
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and procedures, beginning no later than 30 days after the Release Effective Date
(except as Section 7 requires); provided, however, that if the last day of the 60 day period
for an effective release falls in the calendar year following the year of your date of
termination, the severance payments will be paid or begin no earlier than January 1 of such
subsequent calendar year; and
(ii) a bonus component (the Bonus Component). If the Annual Bonus for your year of
termination is determined under a program intended to qualify as performance-based for
purposes of Section 162(m) (an Exempt Bonus), you will be paid the Bonus Component under
the timing provided in Section 4(b) of this Agreement as though you had remained employed,
with the Bonus Component determined under the factors for such Annual Bonus, with such
adjustments as the Compensation Committee makes under such factors (using its negative
discretion) and with the result prorated for your months of employment during the year of
termination. If the Annual Bonus for your year of termination is not intended to be an
Exempt Bonus, the Bonus Component will be the Target Bonus paid in the timing provided in
Section 4(b) of this Agreement, prorated for your months of employment during the year of
termination. Payment under this clause (ii) will be delayed if the Release Effective Date
has not occurred by the time the Annual Bonus is due. The Bonus Component shall not be pro
rated as otherwise described in this section for a termination without Cause or Retirement
occurring before December 31, 2010.
You must continue to comply with the covenants under Sections 8 and 9 below to continue to receive
severance benefits.
(c) Death or Disability. Your employment hereunder will terminate immediately upon your
death, or if the Board, based upon appropriate medical evidence, determines you have become
physically or mentally incapacitated so as to render you incapable of performing your usual and
customary material duties even with a reasonable accommodation for a continuous period in excess of
180 days. Termination under this subsection is not covered by Section 6(b).
(d) Release Requirement. The severance in Section 6(b) and the continued vesting described in
Section 4(c)(iii)(b) will occur only after and if you sign a release of claims and separation
agreement (the Release) to be provided by the Company and any revocation period expires (the
Release Effective Date), unless, for the equity compensation in the context of a change in
control as determined by the Board, the equity compensation will not exist after the change in
control event, in which case the equity compensation will accelerate on or in connection with the
change in control, subject to your requirement to comply with the following provisions if you do
not sign the Release or it does not become irrevocable by the 60th day after your
employment ends. With respect to the continued vesting, you agree that, within 10 days after
receiving from the Company written notification that the Compensation Committee has determined that
you have received the benefits of continued vesting but have failed to meet the Release requirement
of this Section 6(d), you will pay to the Company for each share of Company stock you receive (or
become vested in) under Section 4(c)(iii)(b) whichever of the following is applicable:
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(i) For stock options, the gain equaling the excess, if any, of the fair market value
on the exercise date (as determined under the applicable equity incentive plan) of the
shares received on exercise over the exercise price paid for such shares, without regard to
any market price increase or decrease after exercise (or, if higher, the proceeds received
on disposition of the shares).
(ii) For DSUs or equivalent equity, the fair market value of the shares issued to you
(or, if higher, the proceeds received on disposition of the shares); and
(iii) For any other form of award, such amount as the Compensation Committee may
determine, applying similar principles.
Payment is due in cash or cash equivalents within ten days after the Compensation Committee
provides notice to you that it is enforcing this Section. Any equity awards not already
vested or exercised will then be immediately forfeited. Payment will be calculated on a
gross basis, without reduction for taxes or commissions. The Compensation Committee may,
but is not required to, accept retransfer of shares in lieu of cash payments. For purposes
of this recoupment, the Board will determine the fair market value in good faith using
either trading prices, deal prices, or other measures of value. |
(e) Definitions.
(i) Cause. For purposes of this Agreement, Cause means termination of your
employment because of (i) fraud; (ii) misrepresentation; (iii) theft or embezzlement of
assets of the Company; (iv) your conviction, or plea of guilty or nolo contendere to any
felony (or to a felony charge reduced to a misdemeanor), or, with respect to your
employment, to any misdemeanor (other than a traffic violation), or your intentional
violations of law involving moral turpitude; (v) material failure to follow the Companys
conduct and ethics policies that continues for 10 days after a written demand for your
compliance that specifically identifies the manner in which it is alleged you have not
attempted in good faith to comply; and/or (vi) your continued failure to attempt in good
faith to perform your duties as reasonably assigned by the Board to you for a period of
60 days after a written demand for such performance that specifically identifies the manner
in which it is alleged you have not attempted in good faith to perform such duties. The
Company will not treat your termination of employment with the Company as a termination for
Cause for purposes of this Agreement if the termination occurred because of any act or
omission you reasonably believed in good faith to have been in, or not opposed to, the
Companys interests.
(ii) Retirement. For purposes of this Agreement, Retirement means your voluntary
resignation (i) at or after the completion of the Initial Term or (ii) earlier upon your
replacement as Chief Executive Officer and your completion of a post-replacement transition
period of the shorter of 90 days or such period as the Board requests; provided, however,
that you may not initiate your resignation under clause (ii) before the Board approves your
replacement and have such resignation treated as Retirement.
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(f) Further Effect of Termination on Board and Officer Positions. If your employment ends for
any reason, you agree that you will cease immediately to hold any and all officer or director
positions you then have with the Company or any affiliate, absent a contrary direction from the
Board (which may include either a request to continue such service or a direction to cease serving
upon notice without regard to whether your employment has ended), except to the extent that you
reasonably and in good faith determine that ceasing to serve as a director would breach your
fiduciary duties to the Company or such affiliate. You hereby irrevocably appoint the Company to be
your attorney-in-fact to execute any documents and do anything in your name to effect your ceasing
to serve as a director and officer of the Company and any affiliate, should you fail to resign
following a request from the Company to do so. A written notification signed by a director or duly
authorized officer of the Company that any instrument, document or act falls within the authority
conferred by this subsection will be conclusive evidence that it does so. The Company will prepare
any documents, pay any filing fees, and bear any other expenses related to this section.
7. Effect of Section 409A of the Code.
(a) Six Month Delay. For purposes of this Agreement, a termination of employment shall mean a
separation from service as defined in Section 409A of the Code. If and to the extent any portion
of any payment, compensation or other benefit provided to you in connection with your separation
from service (as defined in Section 409A of Code) is determined to constitute nonqualified
deferred compensation within the meaning of Section 409A and you are a specified employee as
defined in Section 409A(a)(2)(B)(i) of the Code, as determined by the Company in accordance with
its procedures, by which determination you hereby agree that you are bound, such portion of the
payment, compensation or other benefit will not be paid before the earlier of (i) the day that is
six months plus one day after the date of separation from service (as determined under Section
409A) or (ii) the tenth (10th) day after the date of your death (as applicable, the New Payment
Date). The aggregate of any payments that otherwise would have been paid to you during the period
between the date of separation from service and the New Payment Date will be paid to you in a lump
sum in the first payroll period beginning after such New Payment Date (together with simple
interest at the short-term AFR in effect on the date your employment ended), and any remaining
payments will be paid on their original schedule.
(b) General 409A Principles. For purposes of this Agreement, each amount to be paid or
benefit to be provided will be construed as a separate identified payment for purposes of Section
409A, and any payments that are due within the short term deferral period as defined in Section
409A or are paid in a manner covered by Treas. Reg. Section 1.409A-1(b)(9)(iii) will not be treated
as deferred compensation unless applicable law requires otherwise. Neither the Company nor you
will have the right to accelerate or defer the delivery of any such payments or benefits except to
the extent specifically permitted or required by Section 409A. This Agreement is intended to
comply with the provisions of Section 409A and this Agreement will, to the extent practicable, be
construed in accordance therewith. Terms defined in this Agreement will have the meanings given
such terms under Section 409A if and to the extent required to comply with Section 409A. In any
event, the Company makes no representations or warranty and will have no liability to you or any
other person, other than with respect to payments made by the Company in violation of the
provisions of this Agreement, if
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any provisions of or payments under this Agreement are determined to constitute deferred
compensation subject to Code Section 409A but not to satisfy the conditions of that section.
(c) Expense Timing. Payments with respect to reimbursements of business expenses will be made
in the ordinary course of business and in any case on or before the last day of the calendar year
following the calendar year in which the relevant expense is incurred. The amount of expenses
eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the
expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar
year. The right to reimbursement or in-kind benefits is not subject to liquidation or exchange for
another benefit.
8. Confidentiality, Disclosure, and Assignment
(a) Confidentiality. You will not, during or after the Employment Period, publish, disclose,
or utilize in any manner any Confidential Information obtained while employed by the Company other
than on the Companys behalf. If your employment with the Company ends, you will not, without the
Companys prior written consent, retain or take away any drawing, writing, or other record in any
form containing any Confidential Information. For purposes of this Agreement, Confidential
Information means information or material of the Company that is not generally available to or
used by others unaffiliated with the Company, or the utility or value of which is not generally
known or recognized as standard practice, whether or not the underlying details are in the public
domain, including:
(i) information or material relating to the Company and its business as conducted or
anticipated to be conducted; business plans; operations; past, current or anticipated
software, products or services; customers or prospective customers; or research,
engineering, development, manufacturing, purchasing, accounting, or marketing activities;
(ii) information or material relating to the Companys inventions, improvements,
discoveries, know-how, technological developments, or unpublished writings or other works
of authorship, or to the materials, apparatus, processes, formulae, plans or methods used in
the development, manufacture or marketing of the Companys software, products or services;
(iii) information on or material relating to the Company that when received is marked
as proprietary, private, or confidential;
(iv) the Companys trade secrets;
(v) software of the Company in various stages of development, including computer
programs in source code and binary code form, software designs, specifications, programming
aids (including library subroutines and productivity tools), interfaces, visual displays,
technical documentation, user manuals, data files and databases of the Company; and
(vi) any similar information of the type described above that the Company obtained from
another party and that the Company treats as or designates as
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being proprietary, private or confidential, whether or not owned or developed by the
Company.
Notwithstanding the foregoing, Confidential Information does not include any information that is
properly published or in the public domain; provided, however, that information that is published
by or with your aid outside the scope of employment or contrary to the requirements of this
Agreement will not be considered to have been properly published, and therefore will not be in the
public domain for purposes of this Agreement.
(b) Business Conduct and Ethics. During your employment with the Company, you will not engage
in any activity that may conflict with the Companys interests, and you will comply with the
Companys policies and guidelines pertaining to business conduct and ethics.
(c) Disclosure. You will disclose promptly in writing to the Company all inventions,
discoveries, software, writings and other works of authorship that you conceived, made, discovered,
or wrote jointly or singly on Company time or on your own time during the period of your employment
by the Company, provided that the invention, improvement, discovery, software, writing or other
work of authorship is capable of being used by the Company in the normal course of business, and
all such inventions, improvements, discoveries, software, writings and other works of authorship
shall belong solely to the Company.
(d) Instruments of Assignment. You will sign and execute all instruments of assignment and
other papers to evidence vestiture of your entire right, title and interest in such inventions,
improvements, discoveries, software, writings or other works of authorship in the Company, at the
Companys request and expense, and you will do all acts and sign all instruments of assignment and
other papers the Company may reasonably request relating to applications for patents, patents,
copyrights, and the enforcement and protection thereof. If you are needed, at any time, to give
testimony, evidence, or opinions in any litigation or proceeding involving any patents or
copyrights or applications for patents or copyrights, both domestic and foreign, relating to
inventions, improvements, discoveries, software, writings or other works of authorship you
conceived, developed or reduced to practice, you hereby agree to do so, and if your employment
ends, the Company will pay you at an hourly rate mutually agreeable to the Company and you, plus
reasonable traveling or other expenses, subject to Section 7(c) of this Agreement.
(e) Additional Post-Employment Provisions. When your employment ends, you must (x) cease and
not thereafter commence use of any Confidential Information or intellectual property (including any
patent, invention, copyright, trade secret, trademark, trade name, logo, domain name or other
source indicator) if such property is owned or exclusively used by the Company; (y) immediately
destroy, delete, or return to the Company, at the Companys option, all originals and copies in any
form or medium (including memoranda, books, papers, plans, computer files, letters and other data)
in your possession or control (including any of the foregoing stored or located in your office,
home, laptop or other computer, whether or not Company property) that contain Confidential
Information or otherwise relate to the business of the Company, except that you may retain only
those portions of any personal notes, notebooks and diaries that do not contain Confidential
Information; and (z) notify and
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fully cooperate with the Company regarding the delivery or destruction of any other
Confidential Information of which you are or become aware to the extent such information is in your
possession or control. Notwithstanding anything elsewhere to the contrary, you may retain (and not
destroy) (x) information showing your compensation or relating to reimbursement of expenses that
you reasonably believe are necessary for tax purposes and (y) copies of plans, programs, policies
and arrangements of, or other agreements with, the Company addressing your compensation or
employment or termination thereof.
(f) Survival. The obligations of this Section 8 (except for Section 8(b)) will survive the
expiration or termination of this Agreement and your employment.
9. Non-Competition, Non-Recruitment, and Non-Disparagement.
(a) General. The Parties recognize and agree that (a) you are becoming a senior executive of
the Company, (b) you have received and will in the future receive substantial amounts of the
Companys Confidential Information, (c) the Companys business is conducted on a worldwide basis,
and (d) provision for non-competition, non-recruitment and non-disparagement obligations by you is
critical to the Companys continued economic well-being and protection of the Companys
Confidential Information. In light of these considerations, this Section 9 sets forth the terms
and conditions of your obligations of non-competition, non-recruitment, and non-disparagement
during and subsequent to the termination of this Agreement and/or the cessation of your employment
for any reason.
(b) Non-Competition.
(i) Unless the Company waives or limits the obligation in accordance with Section
9(b)(ii), you agree that during employment and for 12 months following your cessation of
employment for any reason (the Noncompete Period), you will not directly or indirectly,
alone or as a partner, officer, director, shareholder or employee of any other firm or
entity, engage in any commercial activity in competition with any part of the Companys
business as conducted as of the date of such termination of employment or with any part of
the Companys contemplated business with respect to which you have Confidential Information.
For purposes of this clause (i), shareholder does not include beneficial ownership of
less than 5% of the combined voting power of all issued and outstanding voting securities of
a publicly held corporation whose stock is traded on a major stock exchange. Also for
purposes of this clause (i), the Companys business includes business conducted by the
Company, its subsidiaries, or any partnership or joint venture in which the Company directly
or indirectly has ownership of at least one third of the voting equity. The Noncompete
Period will be further extended by any period of time during which you are in violation of
Section 9(b). For purposes of this Section 9, competitors of the Company currently include
but are not limited to GfK AG, Integrated Media Measurement, Inc., The Nielsen Company B.V.,
and WPP PLC.
(ii) At its sole option the Company may, by written notice to you at any time within
the Noncompete Period, waive or limit the time and/or geographic area in which you cannot
engage in competitive activity.
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(iii) During the Noncompete Period, before accepting employment with or agreeing to
provide consulting services to, any firm or entity that offers competitive products or
services, you must give 30 days prior written notice to the Company. Such written notice
must be sent by certified mail, return receipt requested (attention: Office of the Chief
Legal Officer with a required copy to the Chair of Compensation Committee), must describe
the firm or entity and the employment or consulting services to be rendered to the firm or
entity, and must include a copy of the written offer of employment or engagement of
consulting services. The Company must respond or object to such notice within 30 days after
receipt, and the absence of a response will constitute acquiescence or waiver of the
Companys rights under this Section 9.
(c) Non-Recruitment. During employment and for a period of 12 months following cessation of
employment for any reason, you will not initiate or actively participate in any other employers
recruitment or hiring of the Companys employees.
(d) Non-Disparagement. You will not, during employment or after the termination or expiration
of this Agreement, make disparaging statements, in any form, about the Company, its officers,
directors, agents, employees, products or services that you know, or have reason to believe, are
false or misleading.
(e) Enforcement. If you fail to provide notice to the Company under Section 9(b)(iii) and/or
in any way violate your obligations under Section 9, the Company may enforce all of its rights and
remedies provided to it under this Agreement, or in law and in equity, without the requirement to
post a bond, including without limitation ceasing any further payments to you under this Agreement,
and you will be deemed to have expressly waived any rights you may have had to payments under
Section 4(c)(iii).
(f) Survival. The obligations of this Section 9 survive the expiration or termination of this
Agreement and your employment.
10. Miscellaneous.
(a) Notices. All notices, demands, requests or other communications required or permitted to
be given or made hereunder must be in writing and must be delivered, telecopied or mailed by first
class registered or certified mail, postage prepaid, addressed as follows:
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If to the Company:
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Arbitron Inc.
Office of Chief Legal Officer |
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9705 Patuxent Woods Drive |
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Columbia, MD 21046 |
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If to you:
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At your last address on file with the Company |
or to such other address as either party may designate in a notice to the other. Each notice,
demand, request or other communication that is given or made in the manner described above will be
treated as sufficiently given or made for all purposes three days after it is deposited in the
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U.S. certified mail, postage prepaid, acceptance confirmation or at such time as it is delivered to
the addressee (with the return receipt, the delivery receipt, the answer back or the affidavit of
messenger being deemed conclusive evidence of such delivery) or at such time as delivery is refused
by the addressee upon presentation.
(b) No Mitigation/No Offset. You are not required to seek other employment or otherwise
mitigate the value of any severance benefits contemplated by this Agreement, nor will any such
benefits be reduced by any earnings or benefits that you may receive from any other source. The
amounts payable hereunder will not be subject to setoff, counterclaim, recoupment, defense or other
right which the Company may have against you or others. Notwithstanding any other provision of
this Agreement, any sum or sums paid under this Agreement will be in lieu of any amounts to which
you may otherwise be entitled under the terms of any severance plan, policy, program, agreement or
other arrangement sponsored by the Company or an affiliate of the Company.
(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE
WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,
DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDING ARISING
IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE RELEASE IT CONTEMPLATES,
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, THE
PARTIES AGREE THAT ANY PARTY MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE
OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE THEIR
RIGHTS TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS RELEASE OR TO
ANY OF THE MATTERS CONTEMPLATED UNDER THIS AGREEMENT, RELATING TO YOUR EMPLOYMENT, OR COVERED BY
THE CONTEMPLATED RELEASE.
(d) Severability. Each provision of this Agreement must be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Agreement. Moreover, if a court of competent jurisdiction
determines any of the provisions contained in this Agreement to be unenforceable because the
provision is excessively broad in scope, whether as to duration, activity, geographic application,
subject or otherwise, it will be construed, by limiting or reducing it to the extent legally
permitted, so as to be enforceable to the extent compatible with then applicable law to achieve the
intent of the Parties.
(e) Assignment. This Agreement will be binding upon and will inure to the benefit of your
heirs, beneficiaries, executors and legal representatives upon your death and this Agreement will
be binding upon any legal successor of the Company. Any legal successor of the Company will be
treated as substituted for the Company under the terms of this Agreement for all purposes. You
specifically agree that any assignment may include rights under the restrictive covenants of
Sections 8 and 9. As used herein, successor will mean any person, firm,
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corporation or other business entity that at any time, whether by purchase or merger or
otherwise, directly or indirectly acquires all or substantially all of the assets or business of
the Company.
None of your rights to receive any form of compensation payable under this Agreement will be
assignable or transferable except through a testamentary disposition or by the laws of descent and
distribution upon your death or as provided in Section 10(h) hereof. Any attempted assignment,
transfer, conveyance or other disposition (other than as aforesaid) of any interest in your rights
to receive any form of compensation hereunder will be null and void; provided, however, that
notwithstanding the foregoing, you will be allowed to transfer vested shares subject to stock
options or the vested portion of other equity awards (other than incentive stock options within the
meaning of Section 422 of the Code) consistent with the rules for transfers to family members as
defined in Securities Act Form S-8.
(f) No Oral Modification, Cancellation or Discharge. This Agreement may only be amended,
canceled or discharged in writing signed both by you and the Chair of the Compensation Committee.
(g) Other Agreements. You hereby represent that your performance of all the terms of this
Agreement and the performance of your duties as an employee of the Company does not and will not
breach any agreement to keep in confidence proprietary information, knowledge or data acquired by
you in confidence or in trust prior to your employment with the Company and that you will not
disclose to the Company or induce the Company to use any confidential or proprietary information,
knowledge or material belonging to any previous employer or others. You also represent that you
are not a party to or subject to any restrictive covenants, legal restrictions, policies,
commitments or other agreements in favor of any entity or person that would in any way preclude,
inhibit, impair or limit your ability to perform your obligations under this Agreement, including
non-competition agreements or non-solicitation agreements, and you further represent that your
performance of the duties and obligations under this Agreement does not violate the terms of any
agreement to which you are a party. You agree that you will not enter into any agreement or
commitment or agree to any policy that would prevent or hinder your performance of duties and
obligations under this Agreement.
(h) Survivorship. The respective rights and obligations of the Company and you hereunder will
survive any termination of your employment to the extent necessary to the intended preservation of
such rights and obligations.
(i) Beneficiaries. You will be entitled, to the extent applicable law permits, to select and
change the beneficiary or beneficiaries to receive any compensation or benefit payable hereunder
upon your death by giving the Company written notice thereof in a manner consistent with the terms
of any applicable plan documents. If you die, severance then due or other amounts due hereunder
will be paid to your designated beneficiary or beneficiaries, or, if none are designated or none
survive you, your estate.
(j) Withholding. The Company will be entitled to withhold, or cause to be withheld, any
amount of federal, state, city or other withholding taxes or other amounts either
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required by law or authorized by you with respect to payments made to you in connection with
your employment.
(k) Company Policies. References in the Agreement to Company policies and procedures are to
those policies as they may be amended from time to time by the Company.
(l) Governing Law. This Agreement must be construed, interpreted, and governed in accordance
with the laws of Maryland, without reference to rules relating to conflicts of law.
(m) Entire Agreement. This Agreement and any documents referred to herein represent the
entire agreement of the Parties and will supersede any and all previous contracts, arrangements or
understandings between the Company and you.
Signatures on Page Following
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and you have
hereunto set your hand, as of the day and year first above written, to be effective as of the
Effective Date.
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ARBITRON INC.: |
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By:
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/s/ Philip Guarascio
Philip Guarascio
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Chairman of the Board of Directors |
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EXECUTIVE: |
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/s/ William T. Kerr
William T. Kerr
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Exhibit 10.44
Kerr Initial Grant
ARBITRON INC. 2008 EQUITY COMPENSATION PLAN
NON-STATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT evidences the grant by Arbitron Inc. (the Company) on February 11, 2010
(the Date of Grant) to William T. Kerr (the Optionee) of an option to purchase shares of the
Companys common stock.
A. The Company has adopted the Arbitron Inc. 2008 Equity Compensation Plan (as may be amended
or supplemented, the Plan) authorizing the Board of Directors of the Company, or a committee as
provided for in the Plan (the Board or such a committee to be referred to as the Committee), to
grant stock options to employees of the Company and its Subsidiaries (as defined in the Plan).
B. The Company desires to give the Optionee an inducement to acquire a proprietary interest in
the Company and an added incentive to advance the interests of the Company by granting to the
Optionee an option to purchase shares of common stock of the Company pursuant to the Plan.
Accordingly, the parties agree as follows:
1. Grant of Option.
The Company has granted to the Optionee the right, privilege and option (the Option) to
purchase 45,254 shares (the Option Shares) of the Companys common stock, $0.50 par value (the
Common Stock), according to the terms and subject to the conditions hereinafter set forth and as
set forth in the Plan. The Option is not intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code).
2. Option Exercise Price.
The per share price to be paid by Optionee in the event of an exercise of the Option will be
$24.94.
3. Duration of Option and Time of Exercise.
3.1 Initial Period of Exercisability. Except as provided in Sections 3.2 and 3.3
hereof, the Option shall become exercisable with respect to one-third of the Option Shares on each
of the first, second and third anniversaries of the Date of Grant, assuming the Optionees
continued employment. The foregoing rights to exercise the Option will be cumulative with respect
to the Option Shares becoming exercisable on each such date, but in no event will the Option be
exercisable after, and the Option will become void and expire as to all unexercised Option Shares
at, 5:00 p.m. (Eastern Standard Time) on the tenth anniversary of the Date of Grant (the Time of
Option Termination).
3.2 Termination of Employment.
(a) Termination Due to Death or Disability. In the event the Optionees
employment with the Company and all Subsidiaries is terminated by reason of death or
Disability (as the latter is defined in the Optionees employment agreement with the
Company dated February 11,
2010 (the Employment Agreement), the Option will become immediately exercisable in full
and remain exercisable until the earlier of the first anniversary of such employment
termination or the Time of Option Termination.
(b) Termination by the Company without Cause or by Optionee as Retirement. In
the event the Optionees employment with the Company and all Subsidiaries is terminated by
the Company without Cause or through the Optionees Retirement (each as determined
under Section 6(b) of the Employment Agreement and as defined in Section 6(e) thereof), the
Option will become continue to vest as though the Optionee remained employed and will remain
exercisable as of and after such vesting until the earlier of the third anniversary of such
employment termination or the Time of Option Termination.
(c) Termination for Voluntary Resignation other than on Retirement. In the
event that the Optionees employment with the Company and all Subsidiaries is ends with his
resignation other than on a Retirement, any unvested portions of the Option will expire on
employment termination and the vested portions of the Option will remain exercisable as of
and after such vesting until the earlier of the 90th day following such
resignation or the Time of Option Termination.
(d) Termination by the Company for Cause. In the event that the Optionees
employment with the Company and all Subsidiaries is terminated by the Company for Cause, any
vested or unvested portions of the Option will immediately expire and be forfeited.
(e) 280G; Release Requirement. Any acceleration, vesting, or extension under
this Section 3.2 is subject, as applicable, to Section 4(c)(iii)(e) of the Employment
Agreement with the Company and to the release requirement of Section 6(d) of the Employment
Agreement.
3.3 Change in Control.
(a) Impact of Change in Control. If a Change in Control Event of the Company
occurs, the Committee, in its sole discretion and without the consent of the Optionee, may
determine that the Optionee will receive, with respect to some or all of the Option Shares,
as of the effective date of any such Change in Control Event of the Company, cash in an
amount equal to the excess of the Fair Market Value (as defined in the Plan) of such Option
Shares as determined by taking into account such Change in Control Event of the Company over
the option exercise price per share of the Option. Change in Control Event will have the
meaning set forth in the Plan plus such other event or transaction as the Board shall
determine constitutes a Change in Control, or such other meaning as may be adopted by the
Committee from time to time in its sole discretion.
(b) Authority to Modify Change in Control Provisions. Prior to a Change in
Control Event, the Optionee will have no rights under this Section 3.3, and the Committee
will have the authority, in its sole discretion, to rescind, modify, or amend this
Section 3.3 without the consent of the Optionee.
4. Manner of Option Exercise.
4.1 Notice. This Option may be exercised by the Optionee in whole or in part from
time to time, subject to the conditions contained in the Plan and in this Agreement, by delivery,
in person, by facsimile or electronic transmission or through the mail, to the Company at its
principal executive office
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in Columbia, Maryland (Attention: Corporate Secretary), of a written notice of exercise. Such
notice must be in a form satisfactory to the Committee, must identify the Option, must specify the
number of Option Shares with respect to which the Option is being exercised, and must be signed by
the person or persons so exercising the Option. In the event that the Option is being exercised,
as provided by the Plan and Section 3.2 of this Agreement, by any person or persons other than the
Optionee, the notice must be accompanied by appropriate proof of right of such person or persons to
exercise the Option. If the Optionee retains the Option Shares purchased, as soon as practicable
after the effective exercise of the Option, the Optionee will be recorded on the stock transfer
books of the Company as the owner of the Option Shares purchased.
4.2 Payment. At the time of exercise of the Option, the Optionee must pay the total
exercise price of the Option Shares to be purchased entirely in cash (including a check, bank draft
or money order, payable to the order of the Company), though a cashless exercise as described in
Section 5(f)(2) of the Plan, by such other method approved by the Committee, or by a combination
of such methods.
5. Rights and Restrictions of Optionee; Transferability.
5.1 Employment. Nothing in this Agreement will interfere with or limit in any way the
right of the Company or any Subsidiary to terminate the employment of the Optionee at any time, nor
confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary at
any particular position or rate of pay or for any particular period of time.
5.2 Rights as a Stockholder; Effect on Running the Business. The Optionee will have
no rights as a stockholder unless and until all conditions to the effective exercise of the Option
(including, without limitation, the conditions set forth in Sections 4 and 6 of this Agreement)
have been satisfied and the Optionee has become the holder of record of such shares. No adjustment
will be made for dividends or distributions with respect to the Option Shares as to which there is
a record date preceding the date the Optionee becomes the holder of record of such Option Shares,
except as may otherwise be provided in the Plan or determined by the Committee in its sole
discretion. The Optionee understands and agrees that the existence of an Option will not affect in
any way the right or power of the Company or its stockholders to make or authorize any adjustments,
recapitalizations, reorganizations, or other changes in the Companys capital structure or its
business, or any merger or consolidation of the Company, or any issuance of bonds, debentures,
preferred or other stock, with preference ahead of or convertible into, or otherwise affecting the
Companys common stock or the rights thereof, or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other corporate act or
proceeding, whether or not of a similar character to those described above.
5.3 Restrictions on Transfer. Except pursuant to testamentary will or the laws of
descent and distribution or as otherwise expressly permitted by the Plan, no right or interest of
the Optionee in the Option prior to exercise may be assigned or transferred, or subjected to any
lien, during the lifetime of the Optionee, either voluntarily or involuntarily, directly or
indirectly, by operation of law or otherwise. The Optionee will, however, subject to applicable
laws be entitled to designate a beneficiary to receive the Option upon such Optionees death in the
manner provided by the Plan, and, in the event of the Optionees death, exercise of the Option (to
the extent permitted pursuant to Section 3.2(a) of this Agreement) may be made by the Optionees
designated beneficiary.
5.4 Restrictions Regarding Employment.
(a) The Optionee agrees that he or she will not take any Adverse Actions (as defined
below) against the Company or any Subsidiary at any time during the period that the Option
is or may yet become exercisable in whole or in part or at any time before one year
following the
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Optionees termination of employment with the Company or any Subsidiary, whichever is later
(the Restricted Period). The Optionee acknowledges that damages which may arise from a
breach of this Section 5.4 may be impossible to ascertain or prove with certainty.
Notwithstanding anything in this Agreement or the Plan to the contrary, in the event that
the Company determines in its sole discretion that the Optionee has taken Adverse Actions
against the Company or any Subsidiary at any time during the Restricted Period, in addition
to other legal remedies which may be available, (i) the Company will be entitled to an
immediate injunction from a court of competent jurisdiction to end such Adverse Action,
without further proof of damage, (ii) the Committee will have the authority in its sole
discretion to terminate immediately all rights of the Optionee under the Plan and this
Agreement without notice of any kind, and (iii) the Committee will have the authority in its
sole discretion to rescind the exercise of all or any portion of the Option to the extent
that such exercise occurred within six months prior to the date the Optionee first commences
any such Adverse Actions and require the Optionee to disgorge any profits (however defined
by the Committee) realized by the Optionee relating to such exercised portion of the Option
or any Option Shares issued or issuable upon such exercise. Such disgorged profits paid to
the Company must be made in cash (including check, bank draft or money order) or, with the
Committees consent, shares of Common Stock with a Fair Market Value on the date of payment
equal to the amount of such payment. The Company will be entitled to withhold and deduct
from future wages of the Optionee (or from other amounts that may be due and owing to the
Optionee from the Company or a Subsidiary) or make other arrangements for the collection of
all amounts necessary to satisfy such payment obligation.
(b) For purposes of this Agreement, an Adverse Action will mean any of the following:
(i) engaging in any commercial activity in competition with any part of the business of the
Company or any Subsidiary as conducted during the Restricted Period for which the Optionee
has or had access to trade secrets and/or confidential information; (ii) diverting or
attempting to divert from the Company or any Subsidiary any business of any kind, including,
without limitation, interference with any business relationships with suppliers, customers,
licensees, licensors, clients or contractors; (iii) participating in the ownership,
operation or control of, or being employed by, or connected in any manner with any person or
entity which solicits, offers or provides any services or products similar to those which
the Company or any Subsidiary offers to its customers or prospective customers, (iv) making,
or causing or attempting to cause any other person or entity to make, any statement, either
written or oral, or convey any information about the Company or any Subsidiary that is
disparaging or that in any way reflects negatively on the Company or any Subsidiary; or (v)
engaging in any other activity that is hostile, contrary or harmful to the interests of the
Company or any Subsidiary, including, without limitation, influencing or advising any person
who is employed by or in the service of the Company or any Subsidiary to leave such
employment or service to compete with the Company or any Subsidiary or to enter into the
employment or service of any actual or prospective competitor of the Company or any
Subsidiary, influencing or advising any competitor of the Company or any Subsidiary to
employ to otherwise engage the services of any person who is employed by or in the service
of the Company or any Subsidiary, or improperly disclosing or otherwise misusing any trade
secrets or confidential information regarding the Company or any Subsidiary.
(c) Should any provision of this Section 5.4 of the Agreement be held invalid or
illegal, such illegality shall not invalidate the whole of this Section 5.4 of the
Agreement, but, rather, the Agreement shall be construed as if it did not contain the
illegal part or narrowed to permit its enforcement, and the rights and obligations of the
parties shall be construed and enforced accordingly. In furtherance of and not in limitation
of the foregoing, the Optionee expressly agrees that should the duration of or business
activities covered by, any provision of this
4
Agreement be in excess of that which is valid or enforceable under applicable law, then such
provision shall be construed to cover only that duration, extent or activities that may
validly or enforceably be covered. The Optionee acknowledges the uncertainty of the law in
this respect and expressly stipulates that this Agreement shall be construed in a manner
that renders its provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law. This Section 5.4 of the Agreement does not
replace and is in addition to any other agreements the Optionee may have with the Company or
any of its Subsidiaries on the matters addressed herein.
6. Securities Law and Other Restrictions.
Notwithstanding any other provision of the Plan or this Agreement, the Company will not be
required to issue, and the Optionee may not sell, assign, transfer or otherwise dispose of, any
Option Shares, unless (a) there is in effect with respect to the Option Shares a registration
statement under the Securities Act of 1933, as amended, and any applicable state or foreign
securities laws or an exemption from such registration, and (b) there has been obtained any other
consent, approval or permit from any other regulatory body which the Committee, in its sole
discretion, deems necessary or advisable. The Company may condition such issuance, sale or
transfer upon the receipt of any representations or agreements from the parties involved, and the
placement of any legends on certificates representing Option Shares, as may be deemed necessary or
advisable by the Company in order to comply with such securities law or other restrictions.
7. Withholding Taxes.
The Company is entitled to (a) withhold and deduct from future wages of the Optionee (or from
other amounts that may be due and owing to the Optionee from the Company), or make other
arrangements for the collection of, all legally required amounts necessary to satisfy any federal
or provincial withholding tax requirements attributable to the Option, or (b) require the Optionee
promptly to remit the amount of such withholding to the Company before acting on the Optionees
notice of exercise of the Option. In the event that the Company is unable to withhold such
amounts, for whatever reason, the Optionee agrees to pay to the Company an amount equal to the
amount the Company would otherwise be required to withhold under federal, state or local law.
8. Subject to Plan.
The Option and the Option Shares granted and issued pursuant to this Agreement have been
granted and issued under, and are subject to the terms of, the Plan. The terms of the Plan are
incorporated by reference in this Agreement in their entirety, and the Optionee, by execution of
this Agreement, acknowledges having received a copy of the Plan. The provisions of this Agreement
will be interpreted in a manner consistent with the Plan, and any ambiguities in this Agreement
will be interpreted by reference to the Plan. In the event that any provision of this Agreement is
inconsistent with the terms of the Plan, the terms of the Plan will prevail.
9. Miscellaneous.
9.1 Binding Effect. This Agreement will be binding upon the heirs, executors,
administrators and successors of the parties to this Agreement.
9.2 Governing Law. This Agreement and all rights and obligations under this Agreement
will be construed in accordance with the Plan and governed by the laws of the State of Delaware,
without
5
regard to conflicts or choice of law rule or principle that might otherwise refer construction or
interpretation of this Agreement to the substantive laws of another jurisdiction.
9.3 Entire Agreement. This Agreement and the Plan set forth the entire agreement and
understanding of the parties to this Agreement with respect to the grant and exercise of the Option
and the administration of the Plan and supersede all prior agreements, arrangements, plans and
understandings relating to the grant and exercise of the Option and the administration of the Plan.
9.4 Amendment and Waiver. Other than as provided in the Plan, this Agreement may be
amended, waived, modified or canceled only by a written instrument executed by the parties to this
Agreement or, in the case of a waiver, by the party waiving compliance.
IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal
by its duly authorized officer. This option shall take effect as a sealed instrument.
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ARBITRON INC.
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By: |
/s/ Timothy T. Smith
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Name: |
Timothy T. Smith |
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Title: |
Executive Vice President, Chief
Legal
Officer and Secretary |
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6
PARTICIPANTS ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms and conditions
thereof. The undersigned hereby acknowledges receipt of a copy of the Plan.
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PARTICIPANT: |
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/s/ William T. Kerr |
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Address: |
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7
Exhibit 10.45
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Grant No. Kerr Initial Grant |
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o Kerrs Copy |
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o Companys Copy |
Arbitron Inc.
2008 Equity Compensation Plan
Deferred Stock Unit
Agreement Initial Grant
To William T. Kerr:
Arbitron Inc. (the Company) has granted you (the Grant) deferred stock units as set forth
on Exhibit A to this Agreement (the DSUs) under its 2008 Equity Compensation Plan (the Plan),
subject to the Vesting Schedule specified on Exhibit A.
The Grant is subject in all respects to the applicable provisions of the Plan. This Agreement
does not cover all of the rules that apply to the Grant under the Plan, and the Plan defines any
capitalized terms in this Agreement that this Agreement does not define.
In addition to the Plans terms and restrictions, the following terms and restrictions apply:
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Vesting Schedule
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The Grant becomes nonforfeitable (Vested) as to some or
all of the DSUs only as provided on Exhibit A. |
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Distribution
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You will receive a distribution of shares (the Shares)
of Company common stock (Common Stock) equivalent to
your DSUs as follows: |
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One-quarter of the initial DSUs within 45 days following each
anniversary of the Date of Grant, provided that (i) no DSUs will be
paid before they vest, (ii) no DSUs will be paid until 30 days after
you have a separation from service, except as the Plan may otherwise
require, and (iii) all DSUs will be distributed within 30 days after
and if your employment ends as a result of your death or Disability
(as the latter is defined in your employment agreement with the
Company dated February 11, 2010 (the Employment Agreement),
provided that the Disability will only accelerate the payment
schedule if it also satisfies the definition of Disability under
Section 409A of the Code. |
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Limited Status
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You understand and agree that the Company will not consider you a shareholder for any purpose with respect to
the Shares, unless and until the Shares have been issued to you on the Distribution Date(s). You will, however,
receive dividend equivalents (Dividend Equivalent Rights) with respect to the Vested DSUs, measured using the
Shares they represent, with the amounts convertible into full or fractional additional Vested DSUs based on
dividing the dividends by the Fair Market Value (as defined in the Plan) as of the date of dividend distribution
and holding the resulting additional Vested DSUs for distribution as provided for the DSUs with respect to which
they were issued. |
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Voting
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DSUs cannot be voted. You may not vote the Shares unless and until the Shares are distributed to you. |
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Transfer
Restrictions
and
Forfeiture
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You may not sell, assign, pledge, encumber, or otherwise transfer any
interest (Transfer) in the Shares until the Shares are distributed to you.
Any attempted Transfer that precedes the Distribution Date for such
Shares is invalid. |
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Unless the Administrator determines otherwise at any time or Exhibit A
provides otherwise, if your service with the Company terminates for any
reason before all of your DSUs are Vested, then you will forfeit such
unvested DSUs (and the Shares to which they relate) to the extent that such
DSUs do not otherwise vest as a result of the termination. The forfeited
DSUs will then immediately revert to the Company. You will receive no
payment for DSUs that you forfeit. |
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Additional
Conditions
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The Company may postpone issuing and delivering any Shares for so
long as the Company determines to be advisable to satisfy the following: |
to Receipt |
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its completing or amending any securities registration or qualification of the Shares or its or your
satisfying any exemption from registration under any Federal or state law, rule, or regulation; |
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its receiving proof it considers satisfactory that a person or entity seeking to receive the Shares after
your death is entitled to do so; |
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your complying with any requests for representations under the Grant and the Plan; and |
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its or your complying with any federal, state, or local tax withholding obligations. |
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Taxes and
Withholding
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The DSUs provide tax deferral, meaning that they are not taxable to you
for income tax purposes until you actually receive Shares on or around each Distribution Date. You will then owe
taxes at ordinary income tax rates as of each Distribution Date at the Shares value. |
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The Company is required to withhold (in cash from salary or other amounts
owed you) the applicable percentage of the value of the Shares on the
Distribution Date, regardless of whether you sell them. If the Company does
not choose to do so, you agree to arrange for payment of the withholding
taxes and/or confirm that the Company is arranging for appropriate
withholding. You will be subject to Social Security and Medicare taxation
as you vest in the DSUs, and the preceding provisions will apply to those
taxes as though the vesting date were a Distribution Date. |
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Additional
Representations
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If you receive Shares at a time when the Company does not have a
current registration statement (generally on Form S-8) under the Act that |
- 2 -
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from You
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covers issuances of Shares to you, you must comply with the following before the Company will release the
Shares to you. You must: |
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represent to the Company, in a manner satisfactory to the Companys counsel, that you are acquiring the
Shares for your own account and not with a view to reselling or distributing the Shares; and |
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agree that you will not sell, transfer, or otherwise dispose of the Shares unless: |
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a registration statement under the Act is effective at the time of disposition with respect to
the Shares you propose to sell, transfer, or otherwise dispose of; or |
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the Company has received an opinion of counsel or other information and representations it
considers satisfactory to the effect that, because of Rule 144 under the Act or otherwise, no registration
under the Act is required. |
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Additional
Restriction
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You will not receive the Shares if issuing the Shares would violate any
applicable federal or state securities laws or other laws or regulations. |
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No Effect on
Employment
or Other
Relationship
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Nothing in this Agreement restricts the Companys rights or those of any
of its affiliates to terminate your employment or other relationship at any
time, with or without cause. The termination of your relationship, whether
by the Company or any of its affiliates or otherwise, and regardless of the reason for such termination, has
the consequences provided for under the Plan and any applicable employment or severance agreement or plan. |
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No Effect on
Running Business
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You understand and agree that the existence of the DSU will not affect in
any way the right or power of the Company or its stockholders to make or authorize any adjustments,
recapitalizations, reorganizations, or other changes in the Companys capital structure or its business, or
any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or other stock,
with preference ahead of or convertible into, or otherwise affecting the Companys common stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether or not of a similar character to those
described above. |
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Section 409A
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This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and
must be construed consistently with that section. Notwithstanding anything in the Plan or this Agreement to
the contrary, if the Vested portion is increased in connection with your separation from service within the
meaning of Section 409A, as determined by the Company), other than due to death, and if (x) you are then a
specified employee within the meaning of Section 409A at the time of such separation from service (as
determined |
- 3 -
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by the Company, by which determination you agree you are bound) and (y) the
payment under such accelerated DSUs will result in the imposition of
additional tax under Section 409A if paid to you within the six month period
following your separation from service, then the payment under such
accelerated DSUs will not be made until the earlier of (i) the date six
months and one day following the date of your separation from service or
(ii) the 10th day after your date of death, and will be paid
within 10 days thereafter. Neither the Company nor you shall have the right
to accelerate or defer the delivery of any such payments or benefits except
to the extent specifically permitted or required by Section 409A. In any
event, the Company makes no representations or warranty and shall have no
liability to you or any other person, if any provisions of or payments under
this Agreement are determined to constitute deferred compensation subject to
Code Section 409A but not to satisfy the conditions of that section. |
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Unsecured
Creditor
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This Agreement creates a contractual obligation on the part of the
Company to make payment under the DSUs credited to your account at the time
provided for in this Agreement. Neither you nor any other party claiming an interest in
deferred compensation hereunder shall have any interest whatsoever in any specific assets
of the Company. Your right to receive payments hereunder is that of an unsecured general
creditor of Company. |
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Governing Law
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The laws of the State of Delaware will govern all matters relating to this
Agreement, without regard to the principles of conflict of laws. |
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Notices
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Any notice you give to the Company must follow the procedures then in effect. If
no other procedures apply, you must send your notice in writing by hand or by mail to the
office of the Companys Secretary. If mailed, you should address it to the Companys
Secretary at the Companys then corporate headquarters, unless the Company directs
participants to send notices to another corporate department or to a third party
administrator or specifies another method of transmitting notice. The Company and the
Administrator will address any notices to you at your office or home address as reflected
on the Companys personnel or other business records. You and the Company may change the
address for notice by like notice to the other, and the Company can also change the
address for notice by general announcements to participants. |
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Plan Governs
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Wherever a conflict may arise between the terms of this Agreement and the
terms of the Plan, the terms of the Plan will control. |
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Arbitron Inc.
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Date: February 15, 2010 |
By: |
/s/ Timothy T. Smith
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Executive VP, Chief Legal Officer and |
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Secretary |
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- 4 -
ACKNOWLEDGMENT
I acknowledge I received a copy of the Plan. I represent that I have read and am familiar
with the Plans terms. I accept the Grant subject to all of the terms and provisions of this
Agreement and of the Plan under which the Grant is made, as the Plan may be amended in accordance
with its terms. I agree to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator concerning any questions arising under the Plan with respect
to the Grant.
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Date: February 18, 2010 |
/s/ William T. Kerr
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William T. Kerr |
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No one may sell, transfer, or distribute the securities covered by the Grant without an
effective registration statement relating thereto or an opinion of counsel satisfactory to the
Company or other information and representations satisfactory to the Company that such registration
is not required.
- 5 -
Grant No. Kerr Initial Grant
Arbitron Inc.
2008 Equity Compensation Plan
Deferred Stock Unit
Exhibit A
Recipient Information:
Name: William T. Kerr
Signature: X /s/ William T. Kerr
Grant Information:
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DSUs:
60,144
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Date of Grant: February 11, 2010 |
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Vesting Schedule
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The Grant is Vested as to one-fourth of the DSUs on
each of the next four one year anniversaries of the
Date of Grant (each a Vesting Date), assuming you
remain an individual service provider to the Company
through those dates. |
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Special Acceleration
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If your employment with the Company and all
Subsidiaries ends by death or Disability, the DSUs
will vest in full. |
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If your employment ends on a termination without Cause or Retirement
(each as determined under Section 6(b) of the Employment Agreement
and as defined in Section 6(e) thereof), any unvested portions of the
DSUs will be treated as fully vested and will continue to be paid out
according to the schedule in Distributions in the Grant agreement. |
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If your employment ends with your resignation other than under a
Retirement, you will immediately forfeit any unvested DSUs and the
Shares to which they relate and any vested DSUs will continue to be
paid out according to the schedule in Distributions in the Grant
Agreement. |
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If your employment ends on a termination by the Company for Cause,
you will immediately forfeit all DSUs and the Shares to which they
relate. |
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Any acceleration of vesting under this Employment Termination section
is subject, as applicable, to Section 4(c)(iii)(e) of the Employment
Agreement and to the release requirement of Section 6(d) of the
Employment Agreement. |
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Change in Control
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If a Change in Control Event (as defined in the Plan) occurs before the final
Distribution Date and the Change in Control Event also would be an event described in Treas.
Reg. Section 1.409A-3(i)(5), any unvested DSUs you then hold will fully Vest. A Change in
Control Event that does not comport with that regulation will not cause full Vesting unless
otherwise permitted by Section 409A. The payment will be in cash (unless the Board determines
otherwise) equal to the value per share of the consideration received in the Change in Control
Event multiplied by the number of DSUs, at which point the DSUs will expire without further
obligation to you. The Board will have the authority to value any consideration received in
the Change in Control Event to the extent neither cash nor readily marketable securities. |
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EXHIBIT 10.46
Arbitron Inc. 2010 Board of Director Compensation
The Arbitron Non-Employee Board of Directors receive the following compensation for 2010:
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Annual Retainer Fee
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$30,000 |
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Independent Chairman of the Board
Additional Annual Retainer
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$85,000 |
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Committee Chair Retainer
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Audit Committee: $20,000 |
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Technology Strategy Committee: |
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$20,000 |
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Other Committees: $10,000 |
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Board Meeting Fees (In person or by telephone)
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$1,500 |
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Committee Meeting Fees (In person)
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$1,500 |
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Committee Meeting Fees (By telephone)
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$750 |
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Initial Deferred Stock Unit Award
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Each newly elected non-employee
director will receive a
one-time grant of 4,500
deferred stock units, which
deferred stock units will vest
in three equal installments of
1,500 deferred stock units over
a three-year period and will be
payable no sooner than six
months following the directors
termination of service as a
director of the Company. |
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Annual Deferred Stock Unit Awards
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Beginning the year after
initial election to the board
of directors, each continuing
non-employee director will
receive an annual grant of
$100,000 worth of deferred
stock units, which deferred
stock units will vest in three
equal installments over a
three-year period and will be
payable no sooner than six
months following the directors
termination of service as a
director of the Company. |
All cash retainer fees and meeting fees payable to non-employee directors may be paid, at the
election of each director, in the form of deferred stock units, in lieu of cash.
Exhibit 21
ARBITRON INC.
SUBSIDIARIES
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State or |
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Other Jurisdiction |
Subsidiaries and Their Affiliates: |
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of Incorporation |
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Arbitron Holdings Inc.
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Delaware |
Arbitron International, LLC (1)
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Delaware |
Ceridian Infotech (India) Private Limited
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India |
Arbitron Technology Services India Private Limited (1)
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India |
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Is a subsidiary of Arbitron Inc. and Arbitron Holdings, Inc. |
Exhibit 23
Consent of Independent Registered Public Accounting Firm
The Board of Directors
Arbitron Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 33-61551,
33-56833, 33-54379, 33-56325, 33-62319, 33-64913, 333-01793, 333-01887, 333-03661, 333-28069,
333-58143, 333-66643, 333-50757, 333-83455, 333-89565, 333-39384, 333-56296, 333-56826, 333-85492,
333-124663, 333-149441, 333-155577, 333-155578) on Form S-8 of Arbitron Inc. of our reports dated March 1, 2010, with respect to the consolidated balance sheets of Arbitron Inc., as of December
31, 2009 and 2008, and the related consolidated statements of income, stockholders equity
(deficit), comprehensive income and cash flows for each of the years in the three-year period ended
December 31, 2009, and the related financial statement schedule and the effectiveness of internal
control over financial reporting as of December 31, 2009, which reports appear in the December 31,
2009 annual report on Form 10-K of Arbitron.
As
discussed in Note 14 of the notes to the consolidated financial statements, the Company adopted
the measurement date provisions of Statement of Financial Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans (included in FASB ASC Topic
715, Compensation-Retirement Benefits) as of December 31, 2008.
/s/ KPMG LLP
Baltimore, Maryland
March 1, 2010
Exhibit 24
POWER OF ATTORNEY
The undersigned, a Director of Arbitron Inc. (the Company), a Delaware corporation, does
hereby make, nominate and appoint SEAN R. CREAMER and TIMOTHY T. SMITH, and each of them, to be my
attorney-in-fact for six months from the date hereof, with full power and authority to execute for
and on behalf of the undersigned the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2009, to be filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended; provided that such Form 10-K is first reviewed by the
Audit Committee of the Board of Directors of the Company and by my attorney-in-fact, and his/her
name, when thus signed, shall have the same force and effect as though I had manually signed such
Form 10-K.
I have signed this Power of Attorney as of February 24, 2010.
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/s/ William T. Kerr
William T. Kerr
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/s/ Shellye L. Archambeau
Shellye L. Archambeau
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/s/ David W. Devonshire
David W. Devonshire
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/s/ John A. Dimling
John A. Dimling
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/s/ Philip Guarascio
Philip Guarascio
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/s/ Larry E. Kittelberger
Larry E. Kittelberger
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/s/ Luis G. Nogales
Luis G. Nogales
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/s/ Richard A. Post
Richard A. Post
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Exhibit 31.1
CERTIFICATION
I, William T. Kerr, certify that:
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I have reviewed this annual report on Form 10-K of Arbitron Inc.; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
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(b) |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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(c) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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(d) |
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Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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(b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Date: March 1, 2010
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/s/ William T. Kerr
William T. Kerr
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President and Chief Executive Officer |
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Exhibit 31.2
CERTIFICATION
I, Sean R. Creamer, certify that:
1. |
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I have reviewed this annual report on Form 10-K of Arbitron Inc.; |
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2. |
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Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report; |
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3. |
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Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report; |
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4. |
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The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
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Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being
prepared; |
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(b) |
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Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles; |
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(c) |
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Evaluated the effectiveness of the registrants disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such
evaluation; and |
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(d) |
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Disclosed in this report any change in the registrants internal control over financial
reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and |
5. |
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The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions): |
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(a) |
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All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
and |
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(b) |
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Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting. |
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Date: March 1, 2010
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/s/ Sean R. Creamer
Sean R. Creamer
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Executive Vice President of Finance and
Planning and Chief Financial Officer |
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Exhibit 32.1
WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive Officer and the Chief Financial Officer of Arbitron Inc. (the
Company), each hereby certifies that, to his knowledge, on the date hereof:
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(a) |
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the Annual Report on Form 10-K of the Company for the year ended December 31, 2009 filed on
the date hereof with the Securities and Exchange Commission (the Annual Report) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and |
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(b) |
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the information contained in the Annual Report fairly presents, in all material respects, the
financial condition and results of operations of the Company. |
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/s/ William T. Kerr
William T. Kerr
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Chief Executive Officer |
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Date: March 1, 2010 |
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/s/ Sean R. Creamer
Sean R. Creamer
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Chief Financial Officer |
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Date: March 1, 2010 |
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