REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Retirement Committee of
Arbitron Inc. and Participants
of the Arbitron 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits of the Arbitron
401(k) Plan (the Plan) as of December 31, 2006 and 2005, and the related statements of changes in
net assets available for benefits for the years ended December 31, 2006 and 2005. These financial
statements are the responsibility of the Plans management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States of America). 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 financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31, 2006 and 2005, and
the changes in net assets available for benefits for the years ended December 31, 2006 and 2005, in
conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31,
2006 is presented for the purpose of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the Department of Labors Rules
and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plans management. The supplemental
schedule has been subjected to auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
Baltimore, Maryland
June 28, 2007
3
ARBITRON 401(k) PLAN
Statements of Net Assets Available for Benefits
December 31, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
Investments, at fair value: |
|
|
|
|
|
|
|
|
Common stock |
|
$ |
1,854,472 |
|
|
$ |
1,770,450 |
|
Mutual funds |
|
|
60,627,371 |
|
|
|
51,410,663 |
|
|
|
|
|
|
|
|
|
|
|
62,481,843 |
|
|
|
53,181,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participant loans |
|
|
704,910 |
|
|
|
672,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables: |
|
|
|
|
|
|
|
|
Participant contributions |
|
|
216,145 |
|
|
|
185,341 |
|
Employer contributions |
|
|
806,205 |
|
|
|
666,632 |
|
|
|
|
|
|
|
|
|
|
|
1,022,350 |
|
|
|
851,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits |
|
$ |
64,209,103 |
|
|
$ |
54,705,833 |
|
|
|
|
|
|
|
|
See the accompanying notes to the financial statements.
4
ARBITRON 401(k) PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
Additions to net assets attributed to: |
|
|
|
|
|
|
|
|
Investment income: |
|
|
|
|
|
|
|
|
Net appreciation in fair value of investments |
|
$ |
3,993,032 |
|
|
$ |
1,572,839 |
|
Interest |
|
|
40,399 |
|
|
|
30,307 |
|
Dividends |
|
|
2,980,947 |
|
|
|
1,838,628 |
|
|
|
|
|
|
|
|
|
|
|
7,014,378 |
|
|
|
3,441,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions: |
|
|
|
|
|
|
|
|
Participant |
|
|
5,269,026 |
|
|
|
4,909,071 |
|
Rollovers |
|
|
510,354 |
|
|
|
432,197 |
|
Employer |
|
|
2,360,673 |
|
|
|
2,108,451 |
|
|
|
|
|
|
|
|
|
|
|
8,140,053 |
|
|
|
7,449,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total additions |
|
|
15,154,431 |
|
|
|
10,891,493 |
|
|
|
|
|
|
|
|
|
|
Deductions from net assets attributed to: |
|
|
|
|
|
|
|
|
Benefits paid to participants |
|
|
5,651,161 |
|
|
|
4,657,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase |
|
|
9,503,270 |
|
|
|
6,234,004 |
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits: |
|
|
|
|
|
|
|
|
Beginning of year |
|
|
54,705,833 |
|
|
|
48,471,829 |
|
|
|
|
|
|
|
|
End of year |
|
$ |
64,209,103 |
|
|
$ |
54,705,833 |
|
|
|
|
|
|
|
|
See the accompanying notes to the financial statements.
5
ARBITRON 401(k) PLAN
Notes to the Financial Statements
December 31, 2006 and 2005
General
The following description of Arbitron Inc.s 401(k) plan (the Plan) provides general information
only. Participants should refer to the Plan agreement for a more complete description of the
Plans provisions.
The Plan is a defined contribution plan, qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (IRC), which includes provisions under Section 401(k) allowing an
eligible participant to direct the employer to contribute a portion of the participants
compensation to the Plan on a pre-tax basis through payroll deductions. Qualified employees, as
defined by the Plan, who are U.S. citizens or resident aliens paid under the U.S. domestic payroll
and who perform services for Arbitron Inc. (Arbitron or the Company) primarily within the
United States or on a temporary foreign assignment, are eligible to participate in the Plan. The
Plan is administered by Arbitron through its Retirement Plan Administrator and through its
Retirement Committee, which is appointed by the Chief Executive Officer of the Company. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Description of the Company
Arbitron is an international media and marketing information services firm primarily serving radio,
cable television, advertising agencies, advertisers, out-of-home media, online media and, through
its Scarborough Research joint venture with The Nielsen Company, formerly known as VNU, Inc.,
broadcast television and print media.
Arbitron currently provides four main services: measuring radio audiences in local markets in the
United States; measuring national radio audiences and the audience size and composition of network
radio programs and commercials; providing application software used for accessing and analyzing
media audience and marketing information data; and providing consumer, shopping and media usage
information services to radio, cable television, advertising agencies, advertisers, retailers,
out-of-home media, online industries and, through its Scarborough joint venture, broadcast
television and print media.
Trust Agreement
Under the terms of a trust agreement between T. Rowe Price Retirement Plan Services, Inc., (the
Trustee) and the Company, the Trustee holds, manages and invests contributions to the Plan and
income therefrom in funds selected by the Companys Retirement Committee to the extent directed by
participants in the Plan. The Trustee carries its own bankers blanket bond insuring against
losses caused, among other things, by dishonesty of employees, burglary, robbery, misplacement,
forgery and counterfeit money.
Contributions
Participants may contribute up to 17% of eligible earnings, as defined by the Plan, subject to
certain limitations. During 2006 and 2005, the Plan administrator, in accordance with the terms of
the Plan, limited participant contributions on behalf of highly compensated participants, as
defined by the Plan, to 8% of their eligible earnings. For 2006 and 2005, the IRC limited the
total salary deferral contributions of any participant to $15,000 and $14,000, respectively for
participants under age 50, and $20,000 and $18,000, respectively for participants age 50 and over.
6
ARBITRON 401(k) PLAN
Notes to the Financial Statements-Continued
December 31, 2006 and 2005
Company matching contributions were determined on the basis of 50% for 2006 and 2005 of a
participants contributions, up to a maximum of 6% of eligible earnings (3% for participants who
also participated in the Companys defined benefit pension plan), and did not require the satisfaction of performance
criteria. The year-end performance-based contribution resulted from the achievement of certain
Company performance criteria and amounted to 22.0% and 20.0% of a participants contribution during
2006 and 2005, respectively, up to a maximum of 6% of eligible compensation (3% for participants
who also participated in the Companys defined benefit pension plan), for participants who were
employees at the respective year ends. The Company made basic monthly matching contributions
totaling $1,673,119 and $1,547,976, for the years ended December 31, 2006 and 2005, respectively.
The Company also declared a year-end performance matching contribution of $687,554 and $560,475,
for 2006 and 2005, respectively. Contributions to participant accounts are limited to the lesser
of $44,000 or 100% of a participants annual salary for 2006.
Participant Accounts and Vesting
The Trustee maintains an account for each participant, including participant directed allocations
to each investment fund. Each participants account is credited with the participants contribution
and allocations of any employer contribution and Plan earnings, less loans and withdrawals, based
on the direction of the participant. Participants in the Plan who also participate in the
Companys defined benefit pension plan are immediately vested in their contributions and employer
contributions, plus actual earnings thereon. Participants in the Plan who do not participate in
the Companys defined benefit pension plan are immediately vested in their pretax contributions and
employer basic matching contributions, plus earnings thereon, and generally will acquire an
interest in performance-based matching contributions in accordance with years of service as noted
in the following schedule:
|
|
|
|
|
Less than two years |
|
|
0 |
% |
Two years |
|
|
40 |
% |
Three years |
|
|
60 |
% |
Four years |
|
|
80 |
% |
Five or more years |
|
|
100 |
% |
Forfeitures of employer performance-based matching contributions are used to reduce future employer
contributions and can be used to pay expenses of administering the Plan. Forfeitures for the
years ended December 31, 2006 and 2005 were $32,875 and $25,190, respectively. The amounts of
forfeited nonvested accounts not allocated to participant accounts as of December 31, 2006 and
2005, were $75,745 and $40,266, respectively.
Withdrawals
Participants who are age 59 1/2 or older may withdraw from their vested account balance.
Additionally, participants who are employed by the Company may withdraw from their vested account
balance for financial hardship, as defined by federal regulations or for total disability.
Participants may also withdraw their rollover contributions and investment earnings on these
contributions. Withdrawals are also permitted pursuant to a qualified domestic relations order or
in the event of termination of employment, retirement or death.
7
ARBITRON 401(k) PLAN
Notes to the Financial Statements-Continued
December 31, 2006 and 2005
Reconciliation of Financial Statements to Form 5500
The amount, if any, allocated to withdrawing participants should be recorded on the Form 5500 for
benefit claims that were processed and approved for payment prior to year end, but not yet paid as
of that date. There were no such claims processed and approved prior to the years ended December
31, 2006 and 2005, but not yet paid as of those dates. See reconciliation below to Form 5500.
The following is a reconciliation of benefits paid to participants per the financial statements for
the years ended December 31, 2006, and 2005, to the Form 5500:
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
Benefits paid to participants per the financial statements |
|
$ |
5,651,161 |
|
|
$ |
4,657,489 |
|
Less: Amounts allocated to withdrawing participants |
|
|
|
|
|
|
(29,246 |
) |
|
|
|
|
|
|
|
Benefits paid to participants per the Form 5500 |
|
$ |
5,651,161 |
|
|
$ |
4,628,243 |
|
|
|
|
|
|
|
|
Loans
Participants may borrow up to 50% of their before-tax salary deferral contributions, rollover
contributions, and investment earnings on those contributions. Loans must be in a multiple of
$100, be at least $1,000, and not be more than $50,000 less the amount of the highest loan balance
outstanding during the 12-month period that ends the day before the loan is made. Participants may
not have more than two short-term loans (maturity of five years or less) and one long-term loan
(maturity over five and not to exceed ten years) outstanding. Effective January 1 and July 1, the
Plan administrator sets the interest rate to be charged on all Plan loans made during the
subsequent six-month period and the interest rate is based on the prime interest rate charged by
major national banks. The Plan administrator or a delegate approves each loan, and the Trustee
maintains a loan receivable account for any participant with an outstanding loan.
Income Tax Status
The Plan obtained its latest determination letter on April 23, 2003, in which the Internal Revenue
Service stated that the Plan, as then designed, was in compliance with the applicable requirements
of the IRC. The Plan has been amended since receiving the determination letter. However, the Plan
administrator and Company management believe that the Plan is currently designed and being operated
in compliance with the applicable requirements of the IRC and that the trust established thereunder
is exempt from federal income taxes under Section 501(a) of the IRC. Contributions to the Plan are
not included in the participants taxable income for federal and, in most states, state income tax
purposes until distributed or withdrawn. Each participants portion of earnings from the
investments made with contributions under the Plan are not taxable until distributed or withdrawn.
Related Party Transactions
The Trustee is a party-in-interest with respect to the Plan since the Trustee manages certain Plan
investments. In the opinion of the Trustee and management of the Company, transactions between the
Plan and the Trustee are exempt from being considered as prohibited transactions under ERISA
section 408(b). The Plan, through the Trustee, has invested in the shares of the Companys common
stock. As of December 31, 2006 and 2005, the Plans investment in the Companys common stock
consisted of 42,690 and 46,615 shares, respectively, with a fair market value of $1,854,472 and
$1,770,450, respectively. The Company pays the cost of administrating the Plan.
8
ARBITRON 401(k) PLAN
Notes to the Financial Statements-Continued
December 31, 2006 and 2005
|
|
|
2. |
|
Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying financial statements of the Plan have been prepared on the accrual basis of
accounting.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires Plan management to make estimates and assumptions that affect the reported
amounts of net assets available for benefits and changes therein, and disclosure of any contingent
assets and liabilities at the date of the financial statements. Actual results could differ from
those estimates.
Investment Valuation and Income Recognition
Investments are stated at fair value. Investments in the Companys common stock are valued at
closing prices published in the Consolidated Transaction Reporting System of the New York Stock
Exchange. Investments in mutual funds are valued using daily net asset value calculations
performed by the funds and published by the National Association of Securities Dealers.
Participant loans are valued at the principal amount plus accrued interest, which approximates fair
value. Net realized gains or losses are recognized by the Plan upon the sale of its investments or
portions thereof on the basis of average cost to each investment program. Purchases and sales of
securities are recorded on a trade date basis. Dividends are recorded on the ex-dividend date.
Interest is recognized when earned.
The Plans investments are exposed to certain risks such as interest rate, credit and overall
market volatility. Due to the level of risk associated with certain investment securities, changes
in the value of investment securities could occur in the near term, and these changes could
materially affect the amounts reported in the statements of net assets available for benefits and
the statements of changes in net assets available for benefits.
Payment of Benefits
Benefits are recorded when paid.
Costs and Expenses
The Company pays costs and expenses of administering the Plan.
9
ARBITRON 401(k) PLAN
Notes to the Financial Statements-Continued
December 31, 2006 and 2005
The following table summarizes the Plans investments that represent 5% or more of the net Plan
assets available for benefits as of December 31, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2006 |
|
2005 |
T. Rowe Price Retirement Services Inc. Mutual Funds: |
|
|
|
|
|
|
|
|
Equity Income Fund |
|
$ |
9,526,311 |
|
|
$ |
8,384,656 |
|
Summit Cash Reserves Fund |
|
|
9,139,493 |
|
|
|
8,307,296 |
|
Small-Cap Value Fund |
|
|
6,910,995 |
|
|
|
5,824,410 |
|
New Horizons Fund |
|
|
6,821,537 |
|
|
|
6,737,440 |
|
Capital Appreciation Fund |
|
|
6,676,395 |
|
|
|
5,450,262 |
|
Equity Index 500 Fund |
|
|
5,020,799 |
|
|
|
4,104,603 |
|
International Stock Fund |
|
|
3,766,099 |
|
|
|
2,824,596 |
|
During the years ended December 31, 2006 and 2005, the Plans investments (including gains and
losses on investments bought and sold, as well as held during the period) appreciated in value by
$3,993,032 and $1,572,839, respectively, as follows:
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
Mutual funds appreciation |
|
$ |
3,742,621 |
|
|
$ |
1,613,353 |
|
Common stock appreciation (depreciation) |
|
|
250,411 |
|
|
|
(40,514 |
) |
|
|
|
|
|
|
|
Net appreciation |
|
$ |
3,993,032 |
|
|
$ |
1,572,839 |
|
|
|
|
|
|
|
|
Although it has not expressed any intent to do so, the Company has the right under the Plan to
discontinue its contributions at any time and to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.
Any unallocated net assets of the Plan shall be allocated to participant accounts and distributed
in such manner as the Company may determine.
10
ARBITRON 401(k) PLAN
Schedule H, Line 4i, Schedule of Assets (Held at End of Year)
December 31, 2006
|
|
|
|
|
Identity of Issue and Investment Description |
|
Current Value (1) |
|
|
Common stock: |
|
|
|
|
Arbitron Inc. * |
|
$ |
1,854,472 |
|
|
|
|
|
|
T. Rowe Price Retirement Services Inc.* mutual funds: |
|
|
|
|
Equity Income Fund |
|
|
9,526,311 |
|
Summit Cash Reserves Fund |
|
|
9,139,493 |
|
Small-Cap Value Fund |
|
|
6,910,995 |
|
New Horizons Fund |
|
|
6,821,537 |
|
Capital Appreciation Fund |
|
|
6,676,395 |
|
Equity Index 500 Fund |
|
|
5,020,799 |
|
International Stock Fund |
|
|
3,766,099 |
|
Balanced Fund |
|
|
3,132,938 |
|
New Income Fund |
|
|
3,033,652 |
|
International Discovery
Fund |
|
|
2,736,293 |
|
Science and Technology Fund |
|
|
1,197,669 |
|
|
|
|
|
|
|
|
57,962,181 |
|
|
|
|
|
|
|
|
|
|
Other mutual funds: |
|
|
|
|
Janus Growth and Income Fund |
|
|
2,665,190 |
|
|
|
|
|
|
Participant loans* (Cost =$0: No. of loans = 257)
with interest rates ranging from 5.00% to 9.25% |
|
|
704,910 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
63,186,753 |
|
|
|
|
|
|
|
|
(1) |
|
Current value is based on quoted market prices, except for participant loans, which are
based on principal and interest outstanding and approximate fair value. |
See the accompanying report of the independent registered public accounting firm.
11
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees
(or other persons who administer the employee benefit plan) have duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
ARBITRON 401(k) PLAN
|
|
|
By: |
/s/ SEAN R. CREAMER
|
|
|
|
Sean R. Creamer |
|
|
|
Executive Vice President of Finance and Planning
and Chief Financial Officer of Arbitron Inc.,
Chairman of the Retirement Committee of the
Arbitron 401(k) Plan
|
|
Date: June 28, 2007 |
|
|
|
12