0001442145 Verisk Analytics, Inc. false --12-31 Q1 2023 14.6 14.3 0.001 0.001 2,000,000,000 2,000,000,000 544,003,038 544,003,038 144,551,559 154,701,136 399,451,479 389,301,902 1.1 2.4 10,902,788 631,334 27,771 85,922 67,807 8,184 3,052,561 164,742 48,449 47,191 53,180 9,696 1.0 17.4 0 1 2 30.2 146.2 3.625 3.625 9.9 10.0 4.125 4.125 9.0 9.4 4.00 4.00 2.6 2.8 5.500 5.500 3.9 4.0 5.750 5.750 10.2 0 2,000,000,000 0 0 10 3 1 4 4 3 0 0 49.5 3.8 This adjustment relates to a segment reclassification; refer to Note 19. Segment Reporting Includes estimated performance achievement Included in "Depreciation and amortization of fixed assets" in our accompanying condensed consolidated statements of operations Included in "Interest expense" in our accompanying condensed consolidated statements of operations Refer to Note 5. Leases These accumulated other comprehensive loss components, before tax, are included under "Cost of revenues" and "Selling, general and administrative" in our accompanying consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (See Note 18. Pension and Postretirement Benefits for additional details). Refer to Note 16. 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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

Commission File Number: 001-34480

 


VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

 


Delaware

26-2994223

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

  

545 Washington Boulevard

 

Jersey City

 

NJ

07310-1686

(Address of principal executive offices)

(Zip Code)

 

(201) 469-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange where registered

Common Stock $.001 par value

VRSK

NASDAQ Global Select Market

 


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 that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

 

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," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

       

Non-accelerated filer

 

 

Smaller reporting company

 

       
    

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

As of April 28, 2023, there were 144,791,178 shares outstanding of the registrant's Common Stock, par value $.001.

 



 

 

 

 

Verisk Analytics, Inc.

Index to Form 10-Q

 

Table of Contents

 

 

 

Page Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

 

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations

2

Condensed Consolidated Statements of Comprehensive Income (Loss)

3

Condensed Consolidated Statements of Changes in Stockholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

35

Item 4. Controls and Procedures

35

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3. Defaults Upon Senior Securities

36

Item 4. Mine Safety Disclosures

36

Item 5. Other Information

36

Item 6. Exhibits

36

SIGNATURES

38

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 32.1

 

 

 

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

  

March 31, 2023

  

December 31, 2022

 
  

(in millions, except for share and per share data)

 

ASSETS

 

Current assets:

        

Cash and cash equivalents

 $231.9  $112.5 

Accounts receivable, net of allowance for doubtful accounts of $14.6 and $14.3, respectively

  433.3   290.1 

Prepaid expenses

  80.1   83.7 

Income taxes receivable

     44.2 

Other current assets

  45.5   32.0 

Current assets held-for-sale

     362.6 

Total current assets

  790.8   925.1 

Noncurrent assets:

        

Fixed assets, net

  561.1   541.5 

Operating lease right-of-use assets, net

  202.5   182.0 

Intangible assets, net

  505.9   504.8 

Goodwill

  1,705.5   1,676.0 

Deferred income tax assets

  32.4   31.7 

Other noncurrent assets

  391.8   371.4 

Noncurrent assets held-for-sale

     2,728.6 

Total assets

 $4,190.0  $6,961.1 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

        

Accounts payable and accrued liabilities

 $257.4  $292.8 

Short-term debt and current portion of long-term debt

  2.6   1,392.9 

Deferred revenues

  549.5   321.7 

Operating lease liabilities

  36.0   29.5 

Income taxes payable

  44.6    

Current liabilities held-for-sale

     282.3 

Total current liabilities

  890.1   2,319.2 

Noncurrent liabilities:

        

Long-term debt

  2,837.9   2,343.2 

Deferred income tax liabilities

  141.4   145.6 

Operating lease liabilities

  204.0   189.9 

Other noncurrent liabilities

  37.0   17.9 

Noncurrent liabilities held-for-sale

     177.6 

Total liabilities

  4,110.4   5,193.4 

Commitments and contingencies (Note 16)

          

Stockholders’ equity:

        

Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038 shares issued; 144,551,559 and 154,701,136 shares outstanding, respectively

  0.1   0.1 

Additional paid-in capital

  2,315.5   2,720.8 

Treasury stock, at cost, 399,451,479 and 389,301,902 shares, respectively

  (8,283.3)  (6,239.5)

Retained earnings

  6,006.7   5,999.1 

Accumulated other comprehensive losses

  29.4   (731.2)

Total Verisk stockholders' equity

  68.4   1,749.3 

Noncontrolling interests

  11.2   18.4 

Total stockholders’ equity

  79.6   1,767.7 

Total liabilities and stockholders’ equity

 $4,190.0  $6,961.1 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

1

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

  

Three Months Ended March 31,

 
  

2023

  

2022

 
  

(in millions, except for share and per share data)

 

Revenues

 $651.6  $643.6 

Operating expenses (income):

        

Cost of revenues (exclusive of items shown separately below)

  216.2   228.7 

Selling, general and administrative

  79.0   107.9 

Depreciation and amortization of fixed assets

  44.6   40.1 

Amortization of intangible assets

  17.7   21.2 

Other operating income, net

     (377.1)

Total operating expenses, net

  357.5   20.8 

Operating income

  294.1   622.8 

Other expense:

        

Investment loss and others, net

  (1.1)  (1.9)

Interest expense, net

  (26.4)  (31.3)

Total other expense, net

  (27.5)  (33.2)

Income from continuing operations before income taxes

  266.6   589.6 

Provision for income taxes

  (72.2)  (102.6)

Income from continuing operations

  194.4   487.0 

(Loss) income from discontinued operations, net of tax expense of $1.1, and $2.4, respectively (Note 7)

  (138.0)  18.8 

Net income

  56.4   505.8 

Less: Net income attributable to noncontrolling interests

  (0.1)  (0.1)

Net income attributable to Verisk

 $56.3  $505.7 

Basic net income per share attributable to Verisk:

        

Income from continuing operations

 $1.28  $3.03 

(Loss) income from discontinued operations

  (0.91)  0.12 

Basic net income per share attributable to Verisk:

 $0.37  $3.15 

Diluted net income per share attributable to Verisk:

        

Income from continuing operations

 $1.27  $3.01 

(Loss) income from discontinued operations

  (0.90)  0.12 

Diluted net income per share attributable to Verisk:

 $0.37  $3.13 

Weighted-average shares outstanding:

        

Basic

  152,032,255   160,680,955 

Diluted

  152,709,319   161,638,617 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 

   

Three Months Ended March 31,

 
   

2023

   

2022

 
                 

Net income

  $ 56.4     $ 505.8  

Other comprehensive income (loss), net of tax:

               

Foreign currency translation adjustment

    759.2       (71.6 )

Pension and postretirement liability adjustment

    0.7       0.6  

Total other comprehensive income (loss)

    759.9       (71.0 )

Comprehensive income

    816.3       434.8  

Less: Comprehensive income attributable to noncontrolling interests

    0.7       0.5  

Comprehensive income attributable to Verisk

  $ 817.0     $ 435.3  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For The Three Months Ended March 31, 2023 and 2022

 

  

Common Stock Issued

  

Par Value

  

Additional Paid-in Capital

  

Treasury Stock

  

Retained Earnings

  

Accumulated Other Comprehensive Income/Loss

  

Total Verisk Stockholders' Equity

  

Noncontrolling Interests

  

Total Stockholders’ Equity

 
  

(in millions, except for share data)

     

Balance, January 1, 2023

  544,003,038  $0.1  $2,720.8  $(6,239.5) $5,999.1  $(731.2) $1,749.3  $18.4  $1,767.7 

Net income

              56.3      56.3   0.1   56.4 

Other comprehensive income

                 759.9   759.9   (0.7)  759.2 

Investment in noncontrolling interests

        (3.9)        0.7   (3.2)  (6.6)  (9.8)

Common stock dividend (1)

              (48.7)     (48.7)     (48.7)

Treasury stock acquired (10,902,788 shares)

        37.5   (2,557.9)        (2,520.4)     (2,520.4)

Share repurchases via accelerated share repurchase program not yet settled

        (500.3)  500.3                

Stock options exercised (631,334 shares transferred from treasury stock)

        50.7   11.8         62.5      62.5 

Performance share units ("PSU") lapsed (27,771 shares transferred from treasury stock)

        (0.4)  0.4                

Restricted stock ("RSA") lapsed (85,922 shares transferred from treasury stock)

        (1.4)  1.4                

Stock-based compensation expense

        23.9            23.9      23.9 

Net share settlement from RSAs (67,807 shares withheld for tax settlement)

        (12.3)           (12.3)     (12.3)

Other stock issuances (8,184 shares transferred from treasury stock)

        0.9   0.2         1.1      1.1 

Balance, March 31, 2023

  544,003,038  $0.1  $2,315.5  $(8,283.3) $6,006.7  $29.4  $68.4  $11.2  $79.6 
                                     

Balance, January 1, 2022

  544,003,038  $0.1  $2,608.7  $(4,638.1) $5,240.4  $(394.6) $2,816.5  $26.0  $2,842.5 

Net income

              505.7      505.7   0.1   505.8 

Other comprehensive loss

                 (70.4)  (70.4)  (0.6)  (71.0)

Investment in noncontrolling interests

                       (8.2)  (8.2)

Common stock dividend (1)

              (49.2)     (49.2)     (49.2)

Treasury stock acquired (3,052,561 shares)

           (571.3)        (571.3)     (571.3)

Stock options exercised (164,742 shares transferred from treasury stock)

        14.4   2.2         16.6      16.6 

PSUs lapsed (48,449 shares transferred from treasury stock)

        (0.6)  0.6                

RSAs lapsed (47,191 shares transferred from treasury stock)

        (0.6)  0.6                

Stock-based compensation expense

        20.5            20.5      20.5 

Net share settlement from PSUs and RSAs (53,180 shares withheld for tax settlement)

        (11.3)           (11.3)     (11.3)

Other stock issuances (9,696 shares transferred from treasury stock)

        1.4   0.1         1.5      1.5 

Balance, March 31, 2022

  544,003,038  $0.1  $2,632.5  $(5,205.9) $5,696.9  $(465.0) $2,658.6  $17.3  $2,675.9 

_______________

(1) Refer to Note 11. Stockholders' Equity for discussion related to quarterly cash dividends declared per share

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

  

Three Months Ended March 31,

 
  

2023

  

2022

 
  

(in millions)

 

Cash flows from operating activities:

        

Net income

 $56.4  $505.8 

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

        

Depreciation and amortization of fixed assets

  44.6   49.6 

Amortization of intangible assets

  17.7   44.6 

Amortization of debt issuance costs and original issue discount, net of original issue premium

  0.1   0.3 

Provision for doubtful accounts

  2.6   1.7 

Loss (gain) on sale of assets

  128.4   (450.8)

Stock-based compensation expense

  23.9   20.5 

Impairment of long-lived assets

     73.7 

Deferred income taxes

  (19.0)  (37.1)

Loss on disposal of fixed assets

  (0.1)   

Changes in assets and liabilities, net of effects from acquisitions:

        

Accounts receivable

  (185.4)  (133.1)

Prepaid expenses and other assets

  (32.9)  1.4 

Operating lease right-of-use assets, net

  2.9   10.4 

Income taxes

  82.2   131.0 

Accounts payable and accrued liabilities

  (32.4)  (70.0)

Deferred revenues

  261.3   266.1 

Operating lease liabilities

  (2.6)  (10.3)

Other liabilities

  17.6   (4.2)

Net cash provided by operating activities

  365.3   399.6 

Cash flows from investing activities:

        

Acquisitions and purchase of additional controlling interest, net of cash acquired of $1.0 and $17.4 respectively

  (37.2)  (445.4)

Proceeds from sale of assets

  3,066.4   575.0 

Investments in nonpublic companies

  (0.8)  (41.0)

Capital expenditures

  (61.2)  (60.0)

Escrow funding associated with acquisitions

     (2.3)

Other investing activities, net

  (0.1)   

Net cash provided by investing activities

  2,967.1   26.3 

Cash flows from financing activities:

        

(Repayment) proceeds from short-term debt

  (1,265.0)  200.0 

Proceeds from issuance of long-term debt, net of original issue discount

  495.2    

Payment of debt issuance costs

  (5.5)   

Proceeds from issuance of short-term debt with original maturities less than three months

     125.0 

Repayment of short-term debt with original maturities greater than three months

  (125.0)   

Repurchases of common stock

  (2,000.0)  (571.3)

Share repurchases not yet settled

  (500.0)   

Proceeds from stock options exercised

  58.4   15.8 

Net share settlement of taxes from restricted stock and performance share awards

  (12.3)  (11.3)

Dividends paid

  (49.2)  (49.4)

Other financing activities, net

  (1.6)  (2.4)

Net cash used in financing activities

  (3,405.0)  (293.6)

Effect of exchange rate changes

  11.8   (6.6)

Net (decrease) increase in cash and cash equivalents

  (60.8)  125.7 

Cash and cash equivalents, beginning of period

 $292.7  $280.3 

Cash and cash equivalents, end of period

 $231.9  $406.0 

Supplemental disclosures:

        

Income taxes paid

 $10.0  $11.7 

Interest paid

 $16.3  $21.1 

Noncash investing and financing activities:

        

Deferred tax liability established on date of acquisition

 $3.1  $16.1 

Net assets sold as part of disposition

 $3,211.8  $124.2 

Finance lease additions

 $6.2  $2.1 

Operating lease additions, net

 $26.3  $1.7 

Fixed assets included in accounts payable and accrued liabilities

 $0.2  $0.3 

  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5

 

VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in millions, except for share and per share data, unless otherwise stated)

 

 

1. Organization:

 

Verisk Analytics, Inc. is a strategic data analytics and technology partner to the global insurance industry. We empower clients to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global risks, including climate change, extreme events, ESG (environmental, social, and governmental) and political issues. Through advanced data analytics, software, scientific research, and deep industry knowledge, we help build global resilience for individuals, communities and businesses. We trade under the ticker symbol "VRSK" on the Nasdaq Global Select Market.

 

 

2. Basis of Presentation and Summary of Significant Accounting Policies:

 

Our accompanying unaudited condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. ("U.S. GAAP"). The preparation of financial statements in conformity with these accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill and intangibles, the realization of deferred tax assets and liabilities, acquisition-related liabilities, fair value of stock-based compensation for stock options and performance share units granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates.

 

Our condensed consolidated financial statements as of  March 31, 2023 and for the three months ended March 31, 2023 and 2022, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly our financial position, results of operations, and cash flows. Our operating results for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year. Our condensed consolidated financial statements and related notes as of and for the three months ended March 31, 2023 have been prepared on the same basis as and should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the SEC. We believe the disclosures made are adequate to keep the information presented from being misleading.

 

On October 28, 2022, we entered into an equity purchase agreement to sell our Energy business. We determined that the sale of our Energy business met the “held for sale” criteria and the “discontinued operations” criteria in accordance with Financial Accounting Standard Boards (“FASB”) Accounting Standards Codification (“ASC”) 205-20, Discontinued Operations (“ASC 205-20”) in the fourth quarter of 2022 due to its relative size and strategic rationale. The consolidated balance sheets, consolidated statements of operations, and the notes to the consolidated financial statements were recasted for all periods presented to reflect the discontinuation of the Energy business, in accordance with ASC 205-20. The discussion in the notes to these consolidated financial statements, unless otherwise noted, relate solely to our continuing operations. On  February 1, 2023, we completed the sale of our Energy business. Refer to Note 7. Dispositions and Discontinued Operations for further discussion.

 

Recent Accounting Pronouncements

 

Accounting Standard

Description

Effective Date

Effect on Consolidated Financial Statements or Other Significant Matters

Leases (Topic 842) In March 2023, the FASB issued Accounting Standards Update "ASU" No. 2023-08, Common Control Arrangements ("ASU No. 2023-01")

This update amends the accounting for leasehold improvements in common-control arrangements for all entities. The amendment requires a lessee in a common-control lease arrangement to amortize leasehold improvements that it owns over the improvements’ useful life to the common control group, regardless of the lease term, if the lessee continues to control the use of the underlying asset through a lease.

ASU No. 2023-01 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted in any annual or interim period as of the beginning of the related fiscal year.

The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

 

 

6

 
 

3. Revenues:

 

Disaggregated revenues by type of service and by country are provided below for the three months ended March 31, 2023 and 2022. No individual customer or country outside of the U.S. accounted for 10.0% or more of our consolidated revenues for the three months ended March 31, 2023 or 2022.

 

  

Three Months Ended March 31,

 
  

2023

  

2022

 
         

Insurance:

        

Underwriting & rating

 $460.5  $416.0 

Claims

  191.1   170.4 

Total Insurance

  651.6   586.4 

Energy and Specialized Markets

     22.4 

Financial Services

     34.8 

Total revenues

 $651.6  $643.6 

 

 

  

Three Months Ended March 31,

 
  

2023

  

2022

 

Revenues:

        

United States

 $551.8  $534.7 

United Kingdom

  46.9   45.1 

Other countries

  52.9   63.8 

Total revenues

 $651.6  $643.6 
7

 

Contract assets are defined as an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time. As of March 31, 2023 and December 31, 2022, we had no contract assets. Contract liabilities are defined as an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (or an amount of consideration is due) from the customer. As of March 31, 2023 and December 31, 2022, we had contract liabilities that primarily related to unsatisfied performance obligations to provide customers with the right to use and update the online content over the remaining contract term of $549.5 million and $321.7 million, respectively. Contract liabilities, which are current and noncurrent, are included in "Deferred revenues" and "Other noncurrent liabilities" in our condensed consolidated balance sheets, respectively, as of March 31, 2023 and December 31, 2022.

 

The following is a summary of the change in contract liabilities from December 31, 2022 through March 31, 2023:

 

   Amount 

Contract Liabilities at December 31, 2022

 $321.7 

Revenue

  (651.6)

Acquisitions

  0.1 

Foreign currency translation adjustment

  2.7 

Billings

  876.6 

Contract Liabilities at March 31, 2023

 $549.5 

 

Our most significant remaining performance obligations relate to providing customers with the right to use and update the online content over the remaining contract term. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. These performance obligations, which are expected to be satisfied within one year, comprised approximately 99% and 98% of the balance at March 31, 2023 and December 31, 2022.

 

We recognize an asset for incremental costs of obtaining a contract with a customer if we expect the benefits of those costs to be longer than one year. As of March 31, 2023 and December 31, 2022, we had deferred commissions of $75.6 million and $69.7 million, respectively, which have been included in "Prepaid expenses" and "Other noncurrent assets" in our accompanying condensed consolidated balance sheets.

  

 

4. Investments and Fair Value Measurements:

 

We have certain assets and liabilities that are reported at fair value in our accompanying condensed consolidated balance sheets. To increase consistency and comparability of assets and liabilities recorded at fair value, Accounting Standards Codification ("ASC") 820-10, Fair Value Measurements ("ASC 820-10"), established a three-level fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. ASC 820-10 requires disclosures detailing the extent to which companies measure assets and liabilities at fair value, the methods and assumptions used to measure fair value, and the effect of fair value measurements on earnings. In accordance with ASC 820-10, we applied the following fair value hierarchy:

 

Level 1 -

Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments.

  

Level 2 -

Assets or liabilities valued based on observable market data for similar instruments.

  

Level 3 -

Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which are internally-developed, and considers risk premiums that market participants would require.

 

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and short-term debt approximate their carrying amounts, because of the short-term nature of these instruments. Our investments in registered investment companies, which are Level 1 assets measured at fair value on a recurring basis, were $3.4 million and $4.0 million as of March 31, 2023 and December 31, 2022, respectively. Our investments in registered investment companies are valued using quoted prices in active markets multiplied by the number of shares owned and were included in "Other current assets" in our accompanying condensed consolidated balance sheets. 

 

8

 

    

We elected not to carry our long-term debt at fair value. The carrying value of the long-term debt represents amortized cost, inclusive of unamortized premium, and net of unamortized discount and debt issuance costs. We assess the fair value of these financial instruments based on an estimate of interest rates available to us for financial instruments with similar features, our current credit rating, and spreads applicable to us. The following table summarizes the carrying value and estimated fair value of these financial instruments as of March 31, 2023 and December 31, 2022, respectively:

 

   

2023

  

2022

 
 

Fair Value

 

Carrying

  

Estimated

  

Carrying

  

Estimated

 
 

Hierarchy

 

Value

  

Fair Value

  

Value

  

Fair Value

 

Financial instruments not carried at fair value:

                 

Senior notes (Note 10)

Level 2

 $2,832.4  $2,677.0  $2,342.6  $2,113.3 

 

As of March 31, 2023 and December 31, 2022, we had securities without readily determinable market values of $208.0 million and $201.5 million, respectively, which were accounted for at cost. We do not have the ability to exercise significant influence over the investees’ operating and financial policies and do not hold investments in common stock or in-substance common stock in such entities. As of March 31, 2023 and December 31, 2022, we also had investments in private companies of $29.1 million and $28.3 million, respectively, accounted for in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25") as equity method investments. All such investments were included in "Other noncurrent assets" in our accompanying condensed consolidated balance sheets. For the three months ended March 31, 2023, there was no provision for credit losses related to these investments.

 

9

 
 

5. Leases:

 

We have operating and finance leases for corporate offices, data centers, and certain equipment that are accounted for under ASC 842, Leases ("ASC 842"). The lease term for our corporate headquarters ends in 2033 and includes the options to extend for one 10-year renewal period and two 5-year renewal periods. Extension and termination options are considered in the calculation of our right-of-use ("ROU") assets and lease liabilities when we determine it is reasonably certain that we will exercise those options.

 

The following table presents the consolidated lease cost and cash paid for amounts included in the measurement of lease liabilities for finance and operating leases for the three months ended March 31, 2023 and 2022, respectively:

 

  

Three Months Ended March 31,

 
  

2023

  

2022

 

Lease cost:

        

Operating lease cost (1)

 $9.0  $13.3 

Sublease income

  (0.4)  (0.5)

Finance lease costs

        

Depreciation of finance lease assets (2)

  3.7   3.3 

Interest on finance lease liabilities (3)

  0.1   0.2 

Total lease cost

 $12.4  $16.3 
         

Other information:

        

Cash paid for amounts included in the measurement of lease liabilities

        

Operating cash outflows from operating leases

 $(9.0) $(12.9)

Operating cash outflows from finance leases

 $(0.1) $(0.2)

Financing cash outflows from finance leases

 $(1.6) $(2.4)

  _______________

(1) Included in "Cost of revenues" and "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations

(2) Included in "Depreciation and amortization of fixed assets" in our accompanying condensed consolidated statements of operations

(3) Included in "Interest expense" in our accompanying condensed consolidated statements of operations

 

The following table presents weighted-average remaining lease terms and weighted-average discount rates for the consolidated finance and operating leases as of March 31, 2023 and 2022, respectively:  

 

  

March 31,

 
  

2023

  

2022

 

Weighted-average remaining lease term - operating leases (in years)

  8.5   8.4 

Weighted-average remaining lease term - finance leases (in years)

  4.0   1.5 

Weighted-average discount rate - operating leases

  3.9%  3.7%

Weighted-average discount rate - finance leases

  3.3%  3.7%

 

Our ROU assets and lease liabilities for finance leases were $13.0 million and $8.7 million, respectively, as of March 31, 2023. Our ROU assets and lease liabilities for finance leases were $10.7 million and $4.2 million, respectively, as of December 31, 2022. Our ROU assets for finance leases were included in "Fixed assets, net" in our accompanying condensed consolidated balance sheets. Our lease liabilities for finance leases were included in the "Short-term debt and current portion of long-term debt" and "Long-term debt" in our accompanying condensed consolidated balance sheets (see Note 10. Debt).

 

Maturities of lease liabilities for the remainder of 2023 and the years through 2028 and thereafter are as follows:

 

  

March 31, 2023

 

Years Ending

 

Operating Leases

  

Finance Leases

 

2023

 $32.7  $2.9 

2024

  40.4   2.1 

2025

  39.5   1.5 

2026

  36.6   1.1 

2027

  34.1   1.0 

2028 and thereafter

  105.1   0.7 

Total lease payments

  288.4   9.3 

Less: Amount representing interest

  (48.4)  (0.6)

Present value of total lease payments

 $240.0  $8.7 

 

10

 
 

6. Acquisitions:

 

2023 Acquisitions

 

On  February 1, 2023, we acquired 100 percent of the stock of Mavera Holding AB ("Mavera") for a net cash purchase price of $28.3 million excluding working capital adjustments, of which $4.2 million represents indemnity escrows. Mavera, a Sweden-based InsurTech firm with a regional presence and established customer base for its personal injury claims management platform, has become a part of the claims category within our Insurance segment. Mavera will support our expansion in continental Europe and our continued growth as a technology and analytics partner to the global insurance industry.

 

For the three months ended March 31, 2023 and 2022 we incurred transaction costs of $1.0 million and $1.4 million, respectively. The transaction costs were included within "Selling, general and administrative" expenses in our accompanying condensed consolidated statements of operations. The 2023 acquisition was immaterial to our condensed consolidated statement of operations for the three months ended March 31, 2023 and 2022, and therefore, supplemental information disclosure on an unaudited pro forma basis is not presented.

 

Acquisition Escrows and Related Liabilities

 

Pursuant to the related acquisition agreements, we have funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the applicable acquisition dates. At  March 31, 2023 and December 31, 2022, there were no current and noncurrent portions of the escrows, respectively.

 

As of March 31, 2023, the acquisitions of Data Driven Safety, LLC, and Infutor Data Solutions, LLC included acquisition-related contingent payments, for which the sellers of these acquisitions could receive additional payments by achieving the specific predetermined revenue, EBITDA, and/or EBITDA margin earn-out targets for exceptional performance. We believe that the liabilities recorded as of  March 31, 2023 and  December 31, 2022 reflect the best estimate of acquisition-related contingent payments. The associated current portion of contingent payments were $15.0 million and $29.9 million as of  March 31, 2023 and  December 31, 2022, respectively. The associated noncurrent portion of contingent payments were $1.6 million and $0.0 million as of  March 31, 2023 and  December 31, 2022, respectively.

 

 

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7. Dispositions and Discontinued Operations:

 

On  February 1, 2023, we completed the sale of our Energy business to Planet Jersey Buyer Ltd, an entity that was formed on behalf of, and is controlled by, The Veritas Capital Fund VIII, L.P. and its affiliated funds and entities (“Veritas Capital”), for a net cash sale price of $3,066.4 million paid at closing (reflecting a base purchase price of $3,100.0 million, subject to customary purchase price adjustments for, among other things, the cash, working capital, and indebtedness of the Companies as of the closing) and up to $200.0 million of additional contingent cash consideration based on Veritas Capital’s future return on its investment paid through a Class C Partnership interest.

 

The Energy business, which was part of our Energy and Specialized Markets segment, was classified as discontinued operations per ASC 205-20, Discontinued Operations, as we determined, qualitatively and quantitatively, that this transaction represents a strategic shift that has or will have a major effect on our operations and financial results. Accordingly, all results of the Energy business have been removed from continuing operations and presented as discontinued operations in our consolidated statements of operations for all periods presented. Additionally, all assets and liabilities of the Energy business were classified as assets and liabilities held for sale within our consolidated balance sheet as of December 31, 2022. In connection with the held for sale classification, we recognized an impairment of $303.7 million on the remeasurement of the disposal group held for sale, which has been included in discontinued operations in our consolidated statement of operations. Upon classification of the Energy business as held for sale, its cumulative foreign currency translation adjustment within shareholders’ equity was included with its carrying value, which primarily resulted in the impairment. On  February 1, 2023, we closed on and completed the sale of our Energy business. As a result of the sale, we recognized a loss of $128.4 million. We do not expect to have any continuing involvement in the Energy business subsequent to closing.

 

The following table presents financial results from discontinued operations, net of income taxes in our consolidated statement of income for the periods indicated:

 

  

For the Three Months Ended March 31,

 
  

2023

  

2022

 

Revenues

 $46.8  $131.9 

Operating expenses:

        

Cost of revenues (exclusive of items shown separately below)

  18.3   51.9 

Selling, general and administrative

  33.0   27.3 

Depreciation and amortization of fixed assets

  -   9.5 

Amortization of intangible assets

  -   23.4 

Other operating loss, net

  128.4   - 

Total operating expenses

  179.7   112.1 

Operating (loss) income

  (132.9)  19.8 

Other income (expense):

        

Investment (loss) income and others, net

  (4.0)  1.4 

(Loss) income from discontinued operations before income taxes

  (136.9)  21.2 

Income tax benefit expense

  (1.1)  (2.4)

(Loss) income from discontinued operations, net of income taxes

 $(138.0) $18.8 

 

The following table presents the aggregate carrying amounts of  the held for sale assets and liabilities of the Energy business prior to the disposition on February 1, 2023 and as of December 31, 2022:

 

  

February 1, 2023

  

December 31, 2022

 

Cash and cash equivalents

 $86.3  $180.2 

Accounts receivable, net

  187.1   150.8 

Prepaid expenses

  17.6   17.8 

Other current assets

  13.8   13.8 

Total current assets:

  304.8   362.6 

Fixed assets, net

  165.2   157.1 

Operating lease right-of-use assets, net

  29.7   29.8 

Intangible assets, net

  625.9   616.9 

Goodwill

  2,165.7   2,136.3 

Other noncurrent assets

  18.9   16.3 

Total noncurrent assets

  3,005.4   2,956.4 

Total assets held for sale:

  3,310.2   3,319.0 

Net impairment of asset group(1)

  (227.8)  (227.8)

Total assets held for sale, net

 $3,082.4  $3,091.2 
         

Accounts payable and accrued liabilities

 $77.6  $68.6 

Operating lease liabilities

  7.6   6.9 

Deferred revenues

  207.4   176.6 

Income taxes payable

  13.6   30.2 

Current liabilities held-for-sale:

  306.2   282.3 

Deferred income tax liabilities

  146.2   144.1 

Noncurrent lease liabilities

  30.0   30.8 

Other noncurrent liabilities

  2.5   2.7 

Noncurrent liabilities held-for-sale

  178.7   177.6 

Total liabilities held for sale

 $484.9  $459.9 

 

(1) In connection with the held for sale classification, we recognized a $303.7 million impairment, partially offset by a deferred tax benefit of $75.9 million on the remeasurement of the disposal group held for sale. This impairment was charged to a contra asset account within "Other noncurrent assets" per ASC 205-20, Discontinued Operations

 

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The consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations. The following table presents selected cash flow information associated with our discontinued operations:

 

  

For the Three Months Ended March 31,

 
  

2023

  

2022

 

Significant non-cash operating activities:

        

Depreciation and amortization of fixed assets

 $-  $9.5 

Amortization of intangible assets

  -   23.4 

Impairment loss

  -   - 

Operating lease right-of-use assets, net

  0.1   0.8 

Investing activities:

        

Capital expenditures

  (6.5)  (12.8)

Fixed assets included in accounts payable and accrued liabilities

  -   5.0 

 

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8. Goodwill and Intangible Assets:

 

The following is a summary of the change in goodwill from December 31, 2022 through March 31, 2023, for our Insurance operating segment:

 

  

Amount

 

Goodwill at December 31, 2022

 $1,676.0 

Acquisitions(1)

  18.3 

Purchase accounting reclassifications

  (0.1)

Foreign currency translation adjustment

  11.3 

Goodwill at March 31, 2023

 $1,705.5 

_______________

(1) See Note 6. Acquisitions for more information.

 

Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of June 30, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill impairment testing compares the carrying value of each reporting unit to its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets, including goodwill assigned to that reporting unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets, including goodwill, exceeds the fair value of the reporting unit, then an impairment loss is recorded for the difference between the carrying amount and the fair value of the reporting unit. As of June 30, 2022, we completed the annual impairment review, in which goodwill impairment was tested at the reporting unit level. Subsequent to performing our annual impairment test, we continued to monitor for events that would trigger an interim impairment test; we did not identify any such events.

 

Impairments to long-lived assets for the three months ended  March 31, 2023 and 2022 were $0.0 million and $73.7 million, respectively, and are included within "Other operating loss (income), net" in our condensed consolidated statements of operations. 

 

Our intangible assets and related accumulated amortization consisted of the following:

 

 

Weighted Average Useful Life (in years)

 

Cost

  

Accumulated Amortization

  

Net

 

March 31, 2023

             

Technology-based

8

 $361.5  $(237.2) $124.3 

Marketing-related

6

  41.9   (36.4)  5.5 

Contract-based

6

  5.0   (5.0)   

Customer-related

13

  524.8   (157.4)  367.4 

Database-based

8

  15.1   (6.4)  8.7 

Total intangible assets

 $948.3  $(442.4) $505.9 

December 31, 2022

             

Technology-based

8

 $355.1  $(229.3) $125.8 

Marketing-related

6

  41.3   (35.5)  5.8 

Contract-based

6

  5.0   (5.0)   

Customer-related

13

  510.7   (146.7)  364.0 

Database-based

8

  15.0   (5.8)  9.2 

Total intangible assets

 $927.1  $(422.3) $504.8 

 

Amortization expense related to intangible assets for the three months ended  March 31, 2023 and 2022 was $17.7 million and $21.2 million, respectively. Estimated amortization expense for the remainder of 2023 and the years through 2028 and thereafter for intangible assets subject to amortization is as follows:

 

Years Ending

 

Amount

 

2023

 $53.5 

2024

  68.9 

2025

  60.0 

2026

  58.1 

2027

  50.6 

2028 and thereafter

  214.8 

Total

 $505.9 

 

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9. Income Taxes:

 

Our effective tax rate for the three months ended March 31, 2023 was 27.1% compared to the effective tax rate for the three months ended March 31, 2022 of 17.4%. The effective tax rate for the three months ended March 31, 2023 was higher than the effective tax rate for the three months ended March 31, 2022 primarily due to a 2022 tax rate benefit in connection with the sale of our environmental health and safety business for which a benefit was recognized for the difference between book and tax basis of our investment. In addition, the tax rate for the three months ended March 31, 2023 was higher than the prior period due to tax charges incurred in structuring the energy sale completed this quarter. Lastly, these tax impacts were partially offset by increased stock option exercises resulting in higher tax benefits from equity compensation in the current period versus the prior period. The difference between statutory tax rates and our effective tax rate is primarily due to tax benefits attributable to equity compensation, offset by additional state and local taxes.

 

10. Debt:

 

The following table presents short-term and long-term debt by issuance as of March 31, 2023 and December 31, 2022:

 

 

Issuance Date

 

Maturity Date

 

2023

  

2022

 

Short-term debt and current portion of long-term debt:

           

Syndicated revolving credit facility

Various

 

Various

 $  $990.0 

Bilateral revolving credit facility

Various

 

Various

     275.0 

Bilateral term loan facility

Various

 

Various

     125.0 

Finance lease liabilities (1)

Various

 

Various

  2.6   2.9 

Short-term debt and current portion of long-term debt

  2.6   1,392.9 

Long-term debt:

           

Senior notes:

           

3.625% senior notes, less unamortized discount and debt issuance costs of $(9.9) and $(10.0), respectively

5/13/2020

 

5/15/2050

  490.1   490.0 

4.125% senior notes, inclusive of unamortized premium, and net of unamortized discount and debt issuance costs of $9.0 and $9.4, respectively

3/6/2019

 

3/15/2029

  609.0   609.4 

4.000% senior notes, less unamortized discount and debt issuance costs of $(2.6) and $(2.8), respectively

5/15/2015

 

6/15/2025

  897.4   897.2 

5.500% senior notes, less unamortized discount and debt issuance costs of $(3.9) and $(4.0), respectively

5/15/2015

 

6/15/2045

  346.1   346.0 

5.750 senior notes, less unamortized discount and debt issuance costs of $(10.2) and $0, respectively

3/3/2023

 

4/1/2033

  489.8    

Finance lease liabilities (1)

Various

 

Various

  6.1   1.3 

Syndicated revolving credit facility debt issuance costs

Various

 

Various

  (0.6)  (0.7)

Long-term debt

  2,837.9   2,343.2 

Total debt

 $2,840.5  $3,736.1 

_______________

(1) Refer to Note 5. Leases

 

Senior Notes

 

As of March 31, 2023 and December 31, 2022, we had senior notes with an aggregate principal amount of $2,850.0 million and $2,350.0 million outstanding, respectively, and were in compliance with our financial and other covenants.

 

On March 3, 2023, we completed an issuance of $500.0 million aggregate principal amount of 5.75% senior notes due in 2033 (the "2033 Senior Notes"). The 2033 Senior Notes mature on April 1, 2033 and accrue interest at a fixed rate of 5.75% per annum. Interest is payable semiannually on April 1st and October 1st of each year, beginning October 1, 2023. The 2033 Senior Notes were issued at a discount of $4.7 million and we incurred debt issuance costs of $5.5 million. The original issuance discount and debt issuance costs were recorded in "Long-term debt" in the accompanying condensed consolidated balance sheets and these costs will be amortized to "Interest expense" in the accompanying consolidated statements of operations over the life of the 2033 Senior Notes. The net proceeds from the issuance of the 2033 Senior Notes were utilized to partially repay the Syndicated Revolving Credit Facility and for general corporate purposes. The indenture governing the 2033 Senior Notes restricts our ability to, among other things, create certain liens, enter into sale/leaseback transactions and consolidate with, sell, lease, convey or otherwise transfer all or substantially all of our assets, or merge with or into, any other person or entity.

 

Credit Facilities

 

We have a syndicated revolving credit facility ("Syndicated Revolving Credit Facility") with a borrowing capacity of $1,000.0 million with Bank of America N.A., HSBC Bank USA, N.A., JP Morgan Chase Bank, N.A., Wells Fargo Bank, National Association, Citibank, N.A., Morgan Stanley Bank, N.A., TD Bank, N.A., Goldman Sachs Bank USA, and the Northern Trust Company. The Syndicated Revolving Credit Facility  may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividend payments, and the share repurchase program (the "Repurchase Program"). As of March 31, 2023, we were in compliance with all financial and other debt covenants under our Syndicated Revolving Credit Facility. As of March 31, 2023 and December 31, 2022, the available capacity under the Syndicated Revolving Credit Facility was $995.5 million and $5.6 million, net of the letters of credit of $4.5 million and $4.4 million, respectively. 

 

We also maintain a $125.0 million Bilateral Term Loan Facility and a $275.0 million Bilateral Revolving Credit Facility (together the "Bilateral Credit Facilities") with maturity dates of September 9, 2023 and October 2, 2023, respectively. The Bilateral Credit Facilities carry an interest rate of 135 basis points plus the one-month BSBY and may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions, dividend payments and the Repurchase Program. As of March 31, 2023, we had no outstanding borrowings under our Bilateral Credit Facilities.

 

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11. Stockholders’ Equity:

 

We have 2,000,000,000 shares of authorized common stock as of  March 31, 2023 and December 31, 2022. Our common shares have rights to any dividend declared by the board of directors (the "Board"), subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all current members of the Board. At March 31, 2023 and December 31, 2022, the adjusted closing price of our common stock was $191.86 and $176.42 per share, respectively. 

 

We have 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the common shares with respect to dividends and net distribution upon liquidation. We did not issue any preferred shares as of March 31, 2023 and December 31, 2022. 

 

On February 14, 2023, our Board approved a cash dividend of $0.34 per share of common stock issued and outstanding to the holders of record as of March 15, 2023. Cash dividends of $49.2 million and $49.4 million were paid during the three months ended March 31, 2023 and 2022 and recorded as a reduction to retained earnings, respectively.

 

Share Repurchase Program

 

In December 2022, we entered into an accelerated share repurchase ("ASR") agreement to repurchase shares of our common stock for an aggregate purchase price of $250.0 million with Bank of America USA, N.A. The ASR agreements described in this paragraph and the next succeeding paragraph are accounted for as a treasury stock transaction and forward stock purchase agreement indexed to our common stock. The forward stock purchase agreement is classified as an equity instrument under ASC 815-40, Contracts in Entity's Own Equity ("ASC 815-40") and deemed to have a fair value of zero at the respective effective date. Upon payment of the aggregate purchase price on December 14, 2022, we received an aggregate delivery of 1,168,224 shares of our common stock at a price of $182.01 per share. Upon the final settlement of the ASR agreement in February 2023, we received an additional 247,487 shares as determined by the volume weighted ave