10-Q 1 vrsk-201863010q.htm 10-Q Document

 
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 June 30, 2018
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)
 ___________________________________
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 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  ☒    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
 
☐  (Do not check if a smaller reporting company)
 
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 July 27, 2018, there were 164,708,411 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
As of June 30, 2018 and December 31, 2017
 
2018
 
2017
 
 
 
 
 
 
 
(In millions, except for
share and per share data)
ASSETS
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
132.0

 
$
142.3

Available-for-sale securities
 
3.8

 
 
3.8

Accounts receivable, net of allowance for doubtful accounts of $5.2 and $4.6,
respectively
 
347.8

 
 
345.5

Prepaid expenses
 
61.1

 
 
38.1

Income taxes receivable
 
22.4

 
 
28.8

Other current assets
 
58.0

 
 
39.1

Total current assets
 
625.1

 
 
597.6

Noncurrent assets:
 
 
 
 
 
Fixed assets, net
 
501.9

 
 
478.3

Intangible assets, net
 
1,289.5

 
 
1,345.3

Goodwill, net
 
3,372.7

 
 
3,368.7

Deferred income tax assets
 
15.7

 
 
15.9

Other assets
 
234.7

 
 
214.5

Total assets
$
6,039.6

 
$
6,020.3

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
 
Accounts payable and accrued liabilities
$
216.4

 
$
225.4

Short-term debt and current portion of long-term debt
 
736.9

 
 
724.4

Deferred revenues
 
513.0

 
 
384.7

Income taxes payable
 

 
 
3.1

Total current liabilities
 
1,466.3

 
 
1,337.6

Noncurrent liabilities:
 
 
 
 
 
Long-term debt
 
2,044.2

 
 
2,284.4

Deferred income tax liabilities
 
349.6

 
 
337.8

Other liabilities
 
105.9

 
 
135.1

Total liabilities
 
3,966.0

 
 
4,094.9

Commitments and contingencies
 

 
 

Stockholders’ equity:
 
 
 
 
 
Common stock, $0.001 par value per share; 2,000,000,000 shares authorized;
544,003,038 shares issued and 164,724,043 and 164,878,930 shares outstanding,
respectively
 
0.1

 
 
0.1

Additional paid-in capital
 
2,235.0

 
 
2,180.1

Treasury stock, at cost, 379,278,995 and 379,124,108 shares, respectively
 
(3,317.7
)
 
 
(3,150.5
)
Retained earnings
 
3,630.4

 
 
3,308.0

Accumulated other comprehensive losses
 
(474.2
)
 
 
(412.3
)
Total stockholders’ equity
 
2,073.6

 
 
1,925.4

Total liabilities and stockholders’ equity
$
6,039.6

 
$
6,020.3







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

1


VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three and Six Months Ended June 30, 2018 and 2017
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except for share and per share data)
Revenues
$
601.3

 
$
523.2

 
$
1,182.5

 
$
1,025.8

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues (exclusive of items shown
separately below)
 
222.4

 
 
193.7

 
 
443.6

 
 
376.6

Selling, general and administrative
 
93.0

 
 
78.8

 
 
184.9

 
 
154.7

Depreciation and amortization of fixed assets
 
41.6

 
 
31.8

 
 
82.0

 
 
65.6

Amortization of intangible assets
 
32.0

 
 
23.9

 
 
65.2

 
 
46.2

Total expenses
 
389.0

 
 
328.2

 
 
775.7

 
 
643.1

Operating income
 
212.3

 
 
195.0

 
 
406.8

 
 
382.7

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Investment income and others, net
 
4.6

 
 
3.4

 
 
5.3

 
 
5.3

Interest expense
 
(31.9
)
 
 
(28.5
)
 
 
(64.8
)
 
 
(56.9
)
Total other expense, net
 
(27.3
)
 
 
(25.1
)
 
 
(59.5
)
 
 
(51.6
)
Income before income taxes
 
185.0

 
 
169.9

 
 
347.3

 
 
331.1

Provision for income taxes
 
(31.5
)
 
 
(48.9
)
 
 
(60.8
)
 
 
(101.3
)
Net income
$
153.5

 
$
121.0

 
$
286.5

 
$
229.8

Basic net income per share
$
0.93

 
$
0.73

 
$
1.74

 
$
1.39

Diluted net income per share
$
0.91

 
$
0.72

 
$
1.70

 
$
1.36

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
165,015,642

 
 
164,922,237

 
 
165,029,345

 
 
165,682,614

Diluted
 
168,651,202

 
 
168,314,296

 
 
168,821,869

 
 
169,232,579













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)
For The Three and Six Months Ended June 30, 2018 and 2017
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
Net income
$
153.5

 
$
121.0

 
$
286.5

 
$
229.8

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
(165.6
)
 
 
89.6

 
 
(62.9
)
 
 
122.7

Available-for-sale securities adjustment
 

 
 
0.1

 
 

 
 
0.2

Pension and postretirement liability adjustment
 
0.7

 
 
0.8

 
 
1.7

 
 
1.5

Total other comprehensive (loss) income
 
(164.9
)
 
 
90.5

 
 
(61.2
)
 
 
124.4

Comprehensive (loss) income
$
(11.4
)
 
$
211.5

 
$
225.3

 
$
354.2























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 Year Ended December 31, 2017 and The Six Months Ended June 30, 2018
 
Common Stock
Issued
 
Par 
Value
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other Comprehensive
Losses
 
Total
Stockholders’
Equity 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except for share data)
Balance, January 1, 2017
544,003,038

 
$
0.1

 
$
2,121.6

 
$
(2,891.4
)
 
$
2,752.9

 
$
(650.8
)
 
$
1,332.4

Net income

 
 

 
 

 
 

 
 
555.1

 
 

 
 
555.1

Other comprehensive income

 
 

 
 

 
 

 
 

 
 
238.5

 
 
238.5

Treasury stock acquired (3,356,360 shares)

 
 

 
 

 
 
(269.8
)
 
 

 
 

 
 
(269.8
)
Stock options exercised (1,125,004 shares reissued from treasury stock)

 
 

 
 
28.7

 
 
9.2

 
 

 
 

 
 
37.9

Restricted stock lapsed (143,557 shares reissued from treasury stock)

 
 

 
 
(1.1
)
 
 
1.1

 
 

 
 

 
 

Employee stock purchase plan (29,605 shares reissued from treasury
stock)

 
 

 
 
2.2

 
 
0.2

 
 

 
 

 
 
2.4

Stock-based compensation

 
 

 
 
31.8

 
 

 
 

 
 

 
 
31.8

Net share settlement from restricted stock awards (36,067 shares
withheld for tax settlement)

 
 

 
 
(2.9
)
 
 

 
 

 
 

 
 
(2.9
)
Other stock issuances (21,352 shares reissued from treasury stock)

 
 

 
 
(0.2
)
 
 
0.2

 
 

 
 

 
 

Balance, December 31, 2017
544,003,038

 
 
0.1

 
 
2,180.1

 
 
(3,150.5
)
 
 
3,308.0

 
 
(412.3
)
 
 
1,925.4

Adjustments to opening retained earnings related to Topic 606 and
ASU 2016-01

 
 

 
 

 
 

 
 
35.9

 
 
(0.7
)
 
 
35.2

Net income

 
 

 
 

 
 

 
 
286.5

 
 

 
 
286.5

Other comprehensive loss

 
 

 
 

 
 

 
 

 
 
(61.2
)
 
 
(61.2
)
Treasury stock acquired (1,711,166 shares)

 
 

 
 

 
 
(180.4
)
 
 

 
 

 
 
(180.4
)
Stock options exercised (1,369,268 shares reissued from treasury stock)

 
 

 
 
38.7

 
 
11.6

 
 

 
 

 
 
50.3

Restricted stock lapsed (167,072 shares reissued from treasury stock)

 
 

 
 
(1.4
)
 
 
1.4

 
 

 
 

 
 

Employee stock purchase plan (14,779 shares reissued from treasury
stock)

 
 

 
 
1.4

 
 
0.1

 
 

 
 

 
 
1.5

Stock-based compensation

 
 

 
 
19.8

 
 

 
 

 
 

 
 
19.8

Net share settlement from restricted stock awards (33,499 shares
withheld for tax settlement)

 
 

 
 
(3.5
)
 
 

 
 

 
 

 
 
(3.5
)
Other stock issuances (5,160 shares reissued from treasury stock)

 
 

 
 
(0.1
)
 
 
0.1

 
 

 
 

 
 

Balance, June 30, 2018
544,003,038

 
$
0.1

 
$
2,235.0

 
$
(3,317.7
)
 
$
3,630.4

 
$
(474.2
)
 
$
2,073.6


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

4


VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Six Months Ended June 30, 2018 and 2017
 
2018
 
2017
 
 
 
 
 
 
 
(In millions)
Cash flows from operating activities:
 
 
 
 
 
Net income
$
286.5

 
$
229.8

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization of fixed assets
 
82.0

 
 
65.6

Amortization of intangible assets
 
65.2

 
 
46.2

Amortization of debt issuance costs and original issue discount
 
2.1

 
 
2.1

Provision for doubtful accounts
 
2.8

 
 
0.8

Stock-based compensation
 
19.8

 
 
15.4

Realized gain on available-for-sale securities, net
 
(0.1
)
 
 

Deferred income taxes
 
(1.1
)
 
 
(0.1
)
Loss on disposal of fixed assets, net
 
0.1

 
 

 
 
 
 
 
 
Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
 
 
Accounts receivable
 
(2.8
)
 
 
6.3

Prepaid expenses and other assets
 
(20.0
)
 
 
(18.2
)
Income taxes
 
3.2

 
 
(3.3
)
Accounts payable and accrued liabilities
 
1.8

 
 
(16.6
)
Deferred revenues
 
123.8

 
 
111.0

Other liabilities
 
(29.1
)
 
 
(9.2
)
Net cash provided by operating activities
 
534.2

 
 
429.8

Cash flows from investing activities:
 
 
 
 
 
Acquisitions, net of cash acquired of $3.1 and $4.0, respectively
 
(61.4
)
 
 
(109.8
)
Escrow funding associated with acquisitions
 
(6.3
)
 
 
(12.5
)
Capital expenditures
 
(99.3
)
 
 
(72.5
)
Purchases of available-for-sale securities
 
(0.1
)
 
 
(0.2
)
Proceeds from sales and maturities of available-for-sale securities
 
0.2

 
 
0.3

Other investing activities, net
 
(3.1
)
 
 

Net cash used in investing activities
 
(170.0
)
 
 
(194.7
)
Cash flows from financing activities:
 
 
 
 
 
(Repayments) proceeds of short-term debt, net
 
(235.0
)
 
 
20.0

Payment of debt issuance costs
 

 
 
(0.5
)
Repurchases of common stock
 
(179.4
)
 
 
(266.1
)
Proceeds from stock options exercised
 
47.0

 
 
22.4

Net share settlement from restricted stock awards
 
(3.5
)
 
 
(2.9
)
Other financing activities, net
 
(6.2
)
 
 
(5.7
)
Net cash used in financing activities
 
(377.1
)
 
 
(232.8
)
Effect of exchange rate changes
 
2.6

 
 
3.3

(Decrease) increase in cash and cash equivalents
 
(10.3
)
 
 
5.6

Cash and cash equivalents, beginning of period
 
142.3

 
 
135.1

Cash and cash equivalents, end of period
$
132.0

 
$
140.7

Supplemental disclosures:
 
 
 
 
 
Income taxes paid
$
58.0

 
$
105.7

Interest paid
$
63.9

 
$
54.7

Non-cash investing and financing activities:
 
 
 
 
 
Repurchases of common stock included in accounts payable and accrued liabilities
$
1.0

 
$

Deferred tax liability established on date of acquisition
$
5.1

 
$
8.0

Capital lease obligations
$
11.4

 
$
0.5

Fixed assets included in accounts payable and accrued liabilities
$
0.9

 
$
2.3










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. and its consolidated subsidiaries (“Verisk” or the “Company”) is a data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using various technologies to collect and analyze billions of records, Verisk draws on numerous data assets and domain expertise to provide first-to-market innovations that are integrated into customer workflows. Verisk offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. Around the world, Verisk helps customers protect people, property, and financial assets.
Verisk was established to serve as the parent holding company of Insurance Services Office, Inc. (“ISO”) upon completion of the initial public offering (“IPO”), which occurred on October 9, 2009. ISO was formed in 1971 as an advisory and rating organization for the property and casualty ("P&C") insurance industry to provide statistical and actuarial services, to develop insurance programs and to assist insurance companies in meeting state regulatory requirements. For over the past decade, the Company broadened its data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. Verisk trades under the ticker symbol “VRSK” on the Nasdaq Global Select Market.
2. Basis of Presentation and Summary of Significant Accounting Policies:
The 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, the realization of deferred tax assets and liabilities, acquisition related liabilities, fair value of stock-based compensation for stock options granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates.
The condensed consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly the Company’s financial position, results of operations and cash flows. The operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year. Other than adopting Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (“Topic 606”) and ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU No. 2016-01”) as of January 1, 2018, the condensed consolidated financial statements and related notes for the three and six months ended June 30, 2018 have been prepared on the same basis as and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2017. 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 Securities and Exchange Commission (“SEC”). The Company believes the disclosures made are adequate to keep the information presented from being misleading.

Effective for the first quarter of 2018, the operating segments of the Company are Insurance, Energy and Specialized Markets, and Financial Services. Previously, its operating segments were Decision Analytics and Risk Assessment. (See Note 13).
(a) Revenue Recognition
The following describes the Company’s primary types of revenues and the applicable revenue recognition policies. The Company’s revenues are primarily derived from the sales of services and revenue is recognized when control of the promised services is transferred to our customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those services. Revenue is recognized net of applicable sales tax withholdings.
The Company recognizes revenues through subscriptions, long-term agreements and on a transactional basis, recurring and nonrecurring. Subscriptions for the solutions are generally paid in advance of rendering services either quarterly or in full upon commencement of the subscription period, which is usually for one year and automatically renewed each year. The long-term agreements are generally for periods of three to five years. The Company recognizes revenue from subscriptions ratably over the term of the subscription and most long-term agreements are recognized ratably over the term of the agreement. As the

6


Company offers most of its solutions through a hosting environment, revenue on the majority of the contracts is recognized over time because of the customer's continuous right to use the solutions as soon as access is provided.
In addition, the Company performs certain discrete project based consulting services which are recognized over time by measuring the progress toward complete satisfaction of the performance obligation, based on the input method of consulting hours worked; this aligns with the results achieved and value transferred to the customer. The hours consumed are best reflective of the measure of progress towards satisfying the performance obligation, as the resources hours worked directly tie to the progress of the services to be provided.
Certain solutions are also paid for by customers on a transactional basis. The Company recognizes these revenues as the solutions are delivered or services performed. In general, they are billed monthly at the end of each month.
Insurance Revenue
Industry-standard insurance programs, statistical agent and data services and actuarial services are sold to participating insurance company customers under annual agreements covering a calendar year where the price is determined at the inception of the agreement. These arrangements include a series of distinct services that have the same pattern of transfer to the customer. In accordance with Topic 606, the Company recognizes revenue ratably over the term of these annual agreements under the series guidance, as services are performed and continuous access to information is provided over the entire term of the agreements.
Also within the Insurance segment, the Company licenses hosting solutions that provide continuous access to information in the areas of fraud detection, catastrophe modeling, loss estimation, and underwriting. These arrangements include a series of distinct services that have the same pattern of transfer to the customer. The Company recognizes revenue ratably over the term of these annual agreements under the series guidance, as services are performed and continuous access to information is provided over the entire term of the agreements.
There are also services within insurance, which are comprised of transaction-based fees for which revenue is recognized as information is delivered to customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those services.
Energy and Specialized Markets Revenue
The Company licenses hosting solutions that provide continuous access to research information such as data analytics and commercial intelligence for the energy, chemicals, metals and mining verticals. These arrangements include a series of distinct services that have the same pattern of transfer to the customer. The Company recognizes revenue ratably over the term of these annual agreements. Furthermore, the Company performs certain discrete project based services; in these instances, revenue is recognized as control of the promised services is transferred to our customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for these services.
Financial Services Revenue
Financial services provide competitive benchmarking, scoring solutions, analytics, and customized service to financial services institutions. The Company primarily recognizes revenue ratably for these services over the term of the agreements, as services are performed and continuous service is provided over the entire term of the agreements. In addition, the Company performs certain discrete project based services that are unrelated and independent of the aforementioned continuous services; in these instances, revenue is recognized as control of the promised services is transferred to our customers, in an amount that reflects the consideration that the Company expects to be entitled to in exchange for these services.

Practical Expedient and Exemption

The Company generally recognizes revenues, provided that all other revenue recognition criteria are met, and related costs when incurred in accordance with Topic 606 because the period of recognition would have been one year or less. These costs are recorded within “Cost of revenues” and “Selling, general and administrative” expenses in the condensed consolidated statements of operations.
Accounts Receivables and Allowance for Doubtful Accounts
Accounts receivables is generally recorded at the invoiced amount. The allowance for doubtful accounts is estimated based on an analysis of the aging of the accounts receivable, historical write-offs, customer payment patterns, individual customer credit worthiness, current economic trends, and/or establishment of specific reserves for customers in adverse financial condition. The Company assesses the adequacy of the allowance for doubtful accounts on a quarterly basis.

7


Deferred Commissions
The incremental costs of obtaining a contract with a customer, which primarily consists of sales commissions, are deferred and amortized over a useful life of 5 years that is consistent with the transfer to the customer the services to which the asset relates. The Company classifies deferred commissions as current or noncurrent based on the timing of expense recognition. The current and noncurrent portions of deferred commissions are included in prepaid expenses and other assets, respectively, in the condensed consolidated balance sheets as of June 30, 2018. Amortization expense related to deferred commissions is computed on a straight-line basis over its estimated useful lives and included in the condensed consolidated statements of operations.
Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases ("ASU No. 2016-02"). This ASU amends the existing accounting considerations and treatments for leases through the creation of Topic 842, Leases, to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about lease arrangements. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from such leases.
The Company established a corporate implementation team, which engages with cross-functional representatives from all of its business verticals. The Company is utilizing a bottom-up approach to analyze the impact of the standard on its lease contract portfolio by reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to lease arrangements. In addition, the Company is in the process of identifying and/or implementing the appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new standard.
    The amendments in ASU No. 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and allows for modified retrospective adoption with early adoption permitted. The Company has decided not to early adopt the amendments. The Company is also assessing the impact associated with the adoption of ASU No. 2016-02 on the condensed consolidated balance sheet, which is expected to be material based upon review of the future contractual obligations.
In June 2018, the FASB issued an ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting ("ASU No. 2018-07") intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. This ASU expands the scope of Topic 718, Compensation - Stock Compensation ("Topic 718"), to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company has decided not to early adopt the amendments. The adoption of ASU No. 2018-07 is not expected to have a material impact on the Company's condensed consolidated financial statements.

8


3. Revenues:
In May 2014, the Financial Accounting Standards Board ("FASB") issued Topic 606, which replaces numerous requirements under Topic 605, Revenue Recognition ("Topic 605"), in U.S. GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Revenue is recognized in a five-step model: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; and 5) recognize revenue when or as the company satisfies a performance obligation. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. Effective January 1, 2018, the Company adopted the requirements of Topic 606 using the modified retrospective method. The results of operations for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605. The accounting policies related to Topic 605 were presented in the Form 10-K for the year ended December 31, 2017, for which the Company recognized revenue when the following four criteria were met: persuasive evidence of an arrangement existed, delivery had occurred or services had been rendered, fees and/or price was fixed or determinable, and collectability was reasonably assured.
The following table shows cumulative effect of the changes made to the January 1, 2018 condensed consolidated balance sheet for the adoption of Topic 606 related to contracts that were entered into prior to and remained in progress subsequent to the adoption:

December 31, 2017

Adjustments due to Topic 606

January 1, 2018
Accounts receivable
$
345.5

 
$
3.0

(1) 
 
$
348.5

Prepaid expenses 
$
38.1


$
14.9

(2) 
 
$
53.0

Other assets
$
214.5

 
$
27.0

(2) 
 
$
241.5

Deferred revenues
$
384.7


$
(1.5
)
 
 
$
383.2

Deferred income tax liabilities
$
337.8


$
11.2

 
 
$
349.0

Retained earnings
$
3,308.0


$
35.2

 

$
3,343.2

_______________
(1)Relates to unbilled receivables
(2)Relates to deferred commissions current and non-current, respectively
In accordance with Topic 606, the disclosure of the impact of adoption on the unaudited condensed consolidated statement of operations and the condensed consolidated balance sheet for and as of the three and six months ended June 30, 2018 are as follows:
 
Three months ended June 30, 2018 under Topic 605
 
Adjustments due to Topic 606
 
Three months ended June 30, 2018 under Topic 606
Revenues
$
601.3


$


$
601.3

Selling, general and administrative
$
94.9


$
(1.9
)

$
93.0

Provision for income taxes
$
(31.0
)

$
(0.5
)

$
(31.5
)
Net income
$
152.1


$
1.4


$
153.5

 
Six months ended June 30, 2018 under Topic 605
 
Adjustments due to Topic 606
 
Six months ended June 30, 2018 under Topic 606
Revenues
$
1,182.1

 
$
0.4

 
$
1,182.5

Selling, general and administrative
$
187.8

 
$
(2.9
)
 
$
184.9

Provision for income taxes
$
(60.0
)
 
$
(0.8
)
 
$
(60.8
)
Net income
$
284.0

 
$
2.5

 
$
286.5


9


 
As of June 30, 2018 under Topic 605
 
Adjustments due to Topic 606
 
As of June 30, 2018 under Topic 606
Accounts receivable
$
343.1

 
$
4.7

 
$
347.8

Prepaid expenses 
$
45.2


$
15.9


$
61.1

Other assets
$
204.7


$
30.0


$
234.7

Accounts payable and accrued liabilities
$
215.3

 
$
1.1

 
$
216.4

Deferred revenues
$
513.2

 
$
(0.2
)
 
$
513.0

Deferred income tax liabilities
$
337.6


$
12.0


$
349.6

Retained earnings
$
3,592.7


$
37.7


$
3,630.4

Disaggregated revenues by type of service and by country are provided below for the three and six months ended June 30, 2018 and 2017. No individual country outside of the U.S. accounted for 10.0% or more of the Company's consolidated revenues for the three and six months ended June 30, 2018 or 2017.

Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Insurance:
 


 

 
 
 
 
 
 
Underwriting & rating
$
288.9

 
$
262.0

 
$
569.6

 
$
515.2

Claims
 
140.5

 
 
120.4

 
 
272.5

 
 
234.1

Total Insurance
 
429.4

 
 
382.4

 
 
842.1

 
 
749.3

Energy and Specialized Markets
 
129.9


 
110.3

 
 
255.4

 
 
216.6

Financial Services
 
42.0


 
30.5

 
 
85.0

 
 
59.9

Total revenues
$
601.3


$
523.2

 
$
1,182.5

 
$
1,025.8


Three Months Ended June 30,
 
Six Months Ended June 30,

2018

2017
 
2018
 
2017
Revenues:
 


 

 
 
 
 
 
 
U.S.
$
460.4


$
409.0

 
$
909.9

 
$
805.0

U.K.
 
36.0


 
26.1

 
 
71.0

 
 
49.8

Other countries
 
104.9


 
88.1

 
 
201.6

 
 
171.0

Total revenues
$
601.3


$
523.2

 
$
1,182.5

 
$
1,025.8

The Company's remaining performance obligations represent future revenues not yet recorded for services that have not yet been performed. The Company’s most significant remaining performance obligations relate to providing customers with the right to use content over the remaining contract term. Revenues expected to be recognized in the future related to performance obligations, included within our deferred revenue and other liabilities, that are unsatisfied at June 30, 2018 are $515.6 million. 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 and greater than one year, comprised 98.0% and 2.0% of the balance at June 30, 2018, respectively.
4. Contract Assets and Contract Liabilities
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 June 30, 2018 and January 1, 2018, the Company had no contract assets. As of June 30, 2018 and January 1, 2018, the Company had contract liabilities of $515.6 million and $386.7 million, respectively. The $128.9 million increase in contract liabilities from January 1, 2018 to June 30, 2018 was primarily due to billings of $376.2 million that were paid in advance, offset by $246.8 million of revenue recognized in the six months ended June 30, 2018. Contract liabilities are included in "Deferred revenues" and "Other liabilities" in the condensed consolidated balance sheet as of June 30, 2018 and January 1, 2018.

10


5. Fair Value Measurements:
Certain assets and liabilities of the Company are reported at fair value in the accompanying condensed consolidated balance sheets. To increase consistency and comparability of assets and liabilities recorded at fair value, 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, the Company 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 and 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.
The following table summarizes fair value measurements by level for registered investment companies that were measured at fair value on a recurring basis:
 
Quoted Prices
in Active Markets
for Identical
Assets (Level 1)
June 30, 2018
 
 
Registered investment companies (1)
$
3.8

December 31, 2017
 
 
Registered investment companies (1)
$
3.8

_______________
(1) 
Registered investment companies are classified as available-for-sale securities and are valued using quoted prices in active markets multiplied by the number of shares owned.
The Company has not elected to carry its subordinated promissory note receivable and long-term debt at fair value. The carrying value of the subordinated promissory note receivable represents amortized cost and has been included in "Other assets" in the accompanying condensed consolidated balance sheets. The subordinated promissory note has a face value of $100.0 million and an eight year maturity. The carrying value of the long-term debt represents amortized cost less unamortized discount and debt issuance costs. The Company assesses the fair value of these financial instruments based on an estimate of interest rates available to the Company for financial instruments with similar features, the Company’s current credit rating and spreads applicable to the Company. The following table summarizes the carrying value and estimated fair value of these financial instruments as of June 30, 2018 and December 31, 2017, respectively:
 
 
 
2018
 
2017
 
Fair Value Hierarchy
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial instruments not carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated promissory note receivable
Level 2
 
$
106.2

 
$
111.0

 
$
95.3

 
$
83.3

Long-term debt excluding capitalized
leases and credit facility
Level 2
 
$
2,282.3

 
$
2,335.0

 
$
2,280.6

 
$
2,439.8

The Company received a 10.0% non-participating interest in VCVH Holdings LLC in 2016 with the sale of the Company's healthcare business.  As of June 30, 2018, the balance of this investment was $8.4 million and accounted for as a cost based investment under ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25"), because the interest is currently non-participating, and the Company does not have the ability to exercise significant influence over the investees’ operating and financial policies.   As of June 30, 2018, the Company also had an investment in a limited partnership of $7.1 million accounted for in accordance with ASC 323-10-25 as an equity method investment.

11


6. Acquisitions:
2018 Acquisitions
On June 20, 2018, the Company acquired 100 percent of the stock of Validus-IVC Limited ("Validus"), a provider of claims management solutions and developer of the subrogation portal in the UK, verifyTM, for a net cash purchase price of $46.1 million, of which $5.9 million represents contingent escrows. Validus has become part of the claims category within the Company's Insurance segment. The integration of Validus' verifyTM platform with the Company's global claims analytic services allows insurers to take advantage of enhanced analytic and technology tools to help improve and automate the claims settlement process. The preliminary purchase price allocation of the acquisition is presented in the table below.
On February 21, 2018, the Company acquired 100 percent of the stock of Business Insight Limited (“Business Insight”), a provider of predictive analytics for insurers in the U.K. and Ireland, for a net cash purchase price of $17.1 million, including a holdback of $0.9 million. Business Insight has become part of the underwriting and ratings category within the Insurance segment. Business Insight offers a comprehensive set of peril models to support underwriting and rating for the commercial property and homeowners insurance market. The preliminary purchase price allocation of the acquisition is presented as part of "Others" in the table below.
On January 5, 2018, the Company acquired 100 percent of the stock of Marketview Limited ("Marketview") for a net cash purchase price of $4.0 million, of which $0.4 million represents indemnity escrows. Marketview is a provider of consumer spending analysis and insights across the retail, hospitality, property, and government sectors in New Zealand. Marketview has become part of the Financial Services segment. The acquisition helps expand the Company's solutions related to consumer spending analytics across the Australasia and Oceania regions by combining its domain expertise and proprietary data assets with those of Marketview. The preliminary purchase price allocation of the acquisition is presented as part of "Others" in the table below.
The preliminary purchase price allocations of the 2018 acquisitions resulted in the following:
 
Validus
 
Others
 
Total
Cash and cash equivalents
$
0.9

 
$
2.2

 
$
3.1

Accounts receivable
 
1.3

 

1.1

 

2.4

Current assets
 
6.2

 

0.3

 

6.5

Fixed assets
 
0.5

 

0.2

 

0.7

Intangible assets
 
20.7

 

8.3

 

29.0

Goodwill
 
25.3

 

15.8

 

41.1

Other assets
 

 

0.4

 

0.4

Total assets acquired
 
54.9

 

28.3

 

83.2

Current liabilities
 
4.1

 

1.0

 

5.1

Deferred revenues
 
0.1

 

1.1

 

1.2

Deferred income taxes, net
 
3.5

 

1.6

 

5.1

Other liabilities
 
0.2

 

1.3

 

1.5

Total liabilities assumed
 
7.9

 

5.0

 

12.9

Net assets acquired
 
47.0

 

23.3

 

70.3

Cash acquired
 
(0.9
)
 

(2.2
)
 

(3.1
)
Net cash purchase price
$
46.1

 
$
21.1

 
$
67.2

The preliminary amounts assigned to intangible assets by type for the 2018 acquisitions are summarized in the table below:
 
Weighted Average Useful Life
 
Total
Technology-related
6 years
 
$
12.6

Marketing-related
8 years
 
 
1.1

Customer-related
10 years
 
 
15.3

Total intangible assets
 
 
$
29.0


12


The preliminary allocations of the purchase price for the 2017 and 2018 acquisitions with less than a year ownership are subject to revisions as additional information is obtained about the facts and circumstances that existed as of each acquisition date. The revisions may have a significant impact on the condensed consolidated financial statements. The allocations of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to operating leases, income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill. The preliminary amounts assigned to intangible assets by type for these acquisitions were based upon the Company's valuation model and historical experiences with entities with similar business characteristics.
For the six months ended June 30, 2018, the Company finalized the purchase accounting for the acquisitions of Arium Limited ("Arium"), Healix International Holdings Limited ("Healix"), Emergent Network Intelligence Limited ("ENI"), Fintellix Solutions Private Limited ("Fintellix"), MAKE Consulting A/S ("MAKE"), and the net assets of Blue Skies Consulting, LLC, ControlCam, LLC, Krawietz Aerial Photography, LLC, Richard Crouse & Associates, Inc., Rocky Mountain Aerial Surveys, Inc., Skyview Aerial Photo, Inc., and Valley Air Photos, LLC (collectively referred to as "Aerial Imagery acquisitions") during the measurement periods in accordance with ASC 805, Business Combinations. The impact of finalization of the purchase accounting associated with these acquisitions were not material to the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2017.
For the three and six months ended June 30, 2018, the Company incurred transaction costs of $0.5 million and $1.2 million, respectively for the 2018 acquisitions. For the three and six months ended June 30, 2017, the Company incurred transaction costs of $1.4 million and $2.7 million, respectively, related to the 2017 acquisitions. The transaction costs were included within "Selling, general and administrative" expenses in the accompanying condensed consolidated statements of operations. For the 2018 acquisitions, the goodwill of $41.1 million associated with the stock purchases of Marketview, Business Insight and Validus is not deductible for tax purposes.
The 2018 acquisitions were immaterial, both individually and in the aggregate, to the Company's condensed consolidated financial statements for the three and six months ended June 30, 2018 and 2017 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, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition date, as well as a portion of the contingent payments. At June 30, 2018 and December 31, 2017, the current portion of the escrows amounted to $44.9 million and $22.9 million, and the noncurrent portion of the escrows amounted to zero and $26.3 million, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and "Other assets" in the accompanying condensed consolidated balance sheets, respectively.

The acquisitions of PowerAdvocate and Validus include acquisition related contingencies, for which the sellers of PowerAdvocate and Validus could receive additional payments by achieving the specific predetermined revenue and EBITDA earn-out targets for exceptional performance. As of each respective acquisition date, the Company recorded acquisition related liabilities and goodwill of $34.2 million associated with PowerAdvocate and $3.1 million associated with Validus. The Company believes that the liabilities recorded as of June 30, 2018 reflect the best estimate of acquisition contingent payments. The acquisition related liabilities of these acquisitions of $7.5 million and $29.8 million have been included in “Accounts payable and accrued liabilities” and “Other liabilities” in the accompanying condensed consolidated balance sheets as of June 30, 2018, respectively.

13


7. Goodwill and Intangible Assets:
The following is a summary of the change in goodwill from December 31, 2017 through June 30, 2018, both in total and as allocated to the Company’s operating segments:
 
Insurance
 
Energy and Specialized Markets
 
Financial Services
 
Total
Goodwill, net at December 31, 2017 (1)
$
749.5

 
$
2,149.6

 
$
469.6

 
$
3,368.7

Current period acquisitions
 
38.3

 
 

 
 
2.8

 
 
41.1

Purchase accounting reclassification
 
4.7

 
 
(1.9
)
 
 
2.7

 
 
5.5

Foreign currency translation
 
(7.3
)
 
 
(34.3
)
 
 
(1.0
)
 
 
(42.6
)
Goodwill, net at June 30, 2018 (1)
$
785.2

 
$
2,113.4

 
$
474.1

 
$
3,372.7

_______________
(1) 
These balances are net of accumulated impairment charges of $3.2 million that occurred prior to December 31, 2017.
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 the Company will determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss is recorded for the difference between the carrying amount and the implied fair value of goodwill. The Company completed the required annual impairment test as of June 30, 2018, and concluded that there was no impairment of goodwill.
The Company’s intangible assets and related accumulated amortization consisted of the following: 
 
Weighted
Average
Useful Life
 
Cost
 
Accumulated
Amortization
 
Net
June 30, 2018
 
 
 
 
 
 
 
 
 
 
Technology-based
8 years
 
$
429.8

 
$
(239.2
)
 
$
190.6

Marketing-related
16 years
 
 
260.4

 
 
(70.4
)
 
 
190.0

Contract-based
6 years
 
 
5.0

 
 
(5.0
)
 
 

Customer-related
14 years
 
 
711.9

 
 
(199.2
)
 
 
512.7

Database-related
19 years
 
 
465.6

 
 
(69.4
)
 
 
396.2

Total intangible assets
 
 
$
1,872.7

 
$
(583.2
)
 
$
1,289.5

December 31, 2017
 
 
 
 
 
 
 
 
 
 
Technology-based
8 years
 
$
421.0

 
$
(222.9
)
 
$
198.1

Marketing-related
17 years
 
 
263.9

 
 
(62.9
)
 
 
201.0

Contract-based
6 years
 
 
5.0

 
 
(5.0
)
 
 

Customer-related
14 years
 
 
704.2

 
 
(174.0
)
 
 
530.2

Database-related
19 years
 
 
474.7

 
 
(58.7
)
 
 
416.0

Total intangible assets
 
 
$
1,868.8

 
$
(523.5
)
 
$
1,345.3


14


Amortization expense related to intangible assets for the three months ended June 30, 2018 and 2017 was $32.0 million and $23.9 million, respectively. Amortization expense related to intangible assets for the six months ended June 30, 2018 and 2017 was $65.2 million and $46.2 million, respectively. Estimated amortization expense for the remainder of 2018 and the years through 2023 and thereafter for intangible assets subject to amortization is as follows:
Year
Amount
2018
$
64.9

2019
 
129.2

2020
 
127.2

2021
 
116.7

2022
 
105.4

2023 and thereafter
 
746.1

 
$
1,289.5

8. Income Taxes:
The Company’s effective tax rate for the three and six months ended June 30, 2018 was 17.03% and 17.50%, compared to the effective tax rate for the three and six months ended June 30, 2017 of 28.80% and 30.59%. The effective tax rate for the three and six months ended June 30, 2018 is lower than the effective tax rate for the three and six months ended June 30, 2017 primarily due to the impact of tax reform lowering the U.S. tax rate from 35.0% to 21.0%, as well as the impact of greater tax benefits from equity compensation in the current period versus the prior period. The difference between statutory tax rates and the Company’s effective tax rate is primarily due to tax benefits attributable to equity compensation, offset by additional state and local income taxes.

15


9. Debt:
The following table presents short-term and long-term debt by issuance as of June 30, 2018 and December 31, 2017: 
 
Issuance
Date
 
Maturity
Date
 
2018
 
2017
Short-term debt and current portion of long-term debt:
 
 
 
 
 
 
 
 
 
Syndicated revolving credit facility
Various
 
Various
 
$
480.0

 
$
715.0

Capital lease obligations
Various
 
Various
 
 
7.2

 
 
9.4

4.875% senior notes, less unamortized discount
and debt issuance costs of $0.3 in 2018
12/8/2011
 
1/15/2019
 
 
249.7

 
 

Short-term debt and current portion of long-term
debt
 
 
 
 
 
736.9

 
 
724.4

Long-term debt:
 
 
 
 
 
 
 
 
 
Senior notes:
 
 
 
 
 
 
 
 
 
4.000% senior notes, less unamortized discount
and debt issuance costs of $8.5 and $9.1,
respectively
5/15/2015

6/15/2025
 
 
891.5

 
 
890.9

5.500% senior notes, less unamortized discount
and debt issuance costs of $4.8 and $4.9,
respectively
5/15/2015

6/15/2045
 
 
345.2

 
 
345.1

4.125% senior notes, less unamortized discount
and debt issuance costs of $2.6 and $2.9,
respectively
9/12/2012
 
9/12/2022
 
 
347.4

 
 
347.1

4.875% senior notes, less unamortized discount
and debt issuance costs of $0.7 in 2017
12/8/2011
 
1/15/2019
 
 

 
 
249.3

5.800% senior notes, less unamortized discount
and debt issuance costs of $1.5 and $1.8,
respectively
4/6/2011

5/1/2021
 
 
448.5

 
 
448.2

Capital lease obligations
Various
 
Various
 
 
15.0

 
 
7.6

Syndicated revolving credit facility debt issuance
costs
Various

Various
 
 
(3.4
)
 
 
(3.8
)
Long-term debt
 
 
 
 
 
2,044.2

 
 
2,284.4

Total debt
 
 
 
 
$
2,781.1

 
$
3,008.8

As of June 30, 2018 and December 31, 2017, the Company had senior notes with an aggregate principal amount of $2,300.0 million outstanding and was in compliance with their financial debt covenants.
As of June 30, 2018, the Company had a borrowing capacity of $1,500.0 million under the committed senior unsecured Syndicated Revolving Credit Facility (the "Credit Facility") with Bank of America N.A., JP Morgan Chase, N.A., and a syndicate of banks. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program (the "Repurchase Program"). The Company was in compliance with all financial debt covenants under the Credit Facility as of June 30, 2018. As of June 30, 2018 and December 31, 2017, the Company had outstanding borrowings under the Credit Facility of $480.0 million and $715.0 million, respectively. Subsequent to June 30, 2018, the Company had borrowings of $50.0 million and repayments of $95.0 million under the Credit Facility.
10. Stockholders’ Equity:
The Company's 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 twelve members of the Board.
The Company has 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. The Company did not issue any preferred shares as of June 30, 2018.

16


Share Repurchase Program
Since May 2010, the Company has authorized repurchases of up to $3,300.0 million of its common stock through its Repurchase Program, including an additional authorization of $500.0 million approved on May 16, 2018. The Company has repurchased shares with an aggregate value of $2,614.2 million. The Company repurchased 1,711,166 shares of common stock with an aggregate value of $180.4 million during the six months ended June 30, 2018. As of June 30, 2018, the Company had $685.8 million available to repurchase shares through its Repurchase Program.
On June 15, 2018, the Company entered into an Accelerated Share Repurchase ("ASR") agreement to repurchase shares of its common stock for an aggregate purchase price of $50.0 million. The ASR agreement is accounted for as an initial treasury stock transaction and a forward stock purchase agreement indexed to the Company's own 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 was deemed to have a fair value of zero at the effective date. Upon payment of the aggregate purchase price on July 2, 2018, the Company received an initial delivery of 371,609 shares of its common stock at a price of $107.64 per share, representing approximately $40.0 million of the aggregate purchase price. The aggregate purchase price was recorded as a reduction to stockholders' equity, consisting of a $40.0 million increase in treasury stock and a $10.0 million decrease in additional paid-in capital, in the Company's condensed consolidated statements of changes in stockholders' equity subsequent to June 30, 2018. Upon the final settlement of the ASR agreement in September 2018, the Company may be entitled to receive additional shares of its common stock or, under certain limited circumstances, be required to deliver shares to the counterparty.
Treasury Stock
As of June 30, 2018, the Company’s treasury stock consisted of 379,278,995 shares of common stock. During the six months ended June 30, 2018, the Company reissued 1,556,279 shares of common stock from the treasury shares at a weighted average price of $8.47 per share.
Earnings Per Share (“EPS”)
Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding, using the treasury stock method, if the dilutive potential common shares, including stock options, nonvested restricted stock awards, nonvested restricted stock units, and nonvested deferred stock units, had been issued.
The following is a presentation of the numerators and denominators of the basic and diluted EPS computations for the three and six months ended June 30, 2018 and 2017:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Numerator used in basic and diluted EPS:
 
 
 
 
 
 
 
 
 
 
 
Net income
$
153.5

 
$
121.0

 
$
286.5

 
$
229.8

Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares used
in basic EPS
 
165,015,642

 
 
164,922,237

 
 
165,029,345

 
 
165,682,614

Effect of dilutive shares:
 
 
 
 

 
 
 
 
 

Potential common shares issuable from stock
options and stock awards
 
3,635,560

 
 
3,392,059

 
 
3,792,524

 
 
3,549,965

Weighted average number of common shares
and dilutive potential common shares used
in diluted EPS
 
168,651,202

 
 
168,314,296

 
 
168,821,869

 
 
169,232,579

The potential shares of common stock that were excluded from diluted EPS were 906,866 and 2,722,518 for the three months ended June 30, 2018 and 2017, and 455,292 and 2,002,341 for the six months ended June 30, 2018 and 2017, respectively, because the effect of including these potential shares was anti-dilutive.

17


Accumulated Other Comprehensive Losses
The following is a summary of accumulated other comprehensive losses as of June 30, 2018 and December 31, 2017:
 
2018

2017
Foreign currency translation adjustment
$
(397.3
)
 
 
$
(334.4
)
Unrealized holding gains on available-for-sale securities, net of tax
 

(1) 
 
 
0.7

Pension and postretirement adjustment, net of tax
 
(76.9
)
 
 
 
(78.6
)
Accumulated other comprehensive losses
$
(474.2
)
 
 
$
(412.3
)
_______________
(1) 
Includes an adjustment of $0.7 million to opening retained earnings related to adoption of ASU 2016-01 at January 1, 2018.
The before tax and after tax amounts of other comprehensive income for the three and six months ended June 30, 2018 and 2017 are summarized below:

Before Tax

Tax (Expense) Benefit

After Tax
For the Three Months Ended June 30, 2018








Foreign currency translation adjustment
$
(165.6
)

$


$
(165.6
)
Pension and postretirement adjustment before reclassifications

1.6



(0.2
)


1.4

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses
(1)

(0.9
)


0.2



(0.7
)
Pension and postretirement adjustment

0.7






0.7

Total other comprehensive loss
$
(164.9
)

$


$
(164.9
)
For the Three Months Ended June 30, 2017








Foreign currency translation adjustment
$
89.6


$


$
89.6

Unrealized holding gain on available-for-sale securities before
reclassifications
 (1)

0.1






0.1

Unrealized holding gain on available-for-sale securities

0.1






0.1

Pension and postretirement adjustment before reclassifications

2.7



(1.1
)


1.6

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses
(1)

(1.3
)


0.5



(0.8
)
Pension and postretirement adjustment

1.4



(0.6
)


0.8

Total other comprehensive gain
$
91.1


$
(0.6
)

$
90.5


18


 
Before Tax
 
Tax (Expense) Benefit
 
After Tax
For the Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
$
(62.9
)
 
$

 
$
(62.9
)
Pension and postretirement adjustment before reclassifications
 
3.7

 
 
(0.7
)
 
 
3.0

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses
(1)
 
(1.8
)
 
 
0.5

 
 
(1.3
)
Pension and postretirement adjustment
 
1.9

 
 
(0.2
)
 
 
1.7

Total other comprehensive loss
$
(61.0
)
 
$
(0.2
)
 
$
(61.2
)
For the Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
$
122.7

 
$

 
$
122.7

Unrealized holding gain on available-for-sale securities before
reclassifications
 
0.3

 
 
(0.1
)
 
 
0.2

Unrealized holding gain on available-for-sale securities
 
0.3

 
 
(0.1
)
 
 
0.2

Pension and postretirement adjustment before reclassifications
 
5.0

 
 
(2.0
)
 
 
3.0

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses
(1)
 
(2.5
)
 
 
1.0

 
 
(1.5
)
Pension and postretirement adjustment
 
2.5

 
 
(1.0
)
 
 
1.5

Total other comprehensive gain
$
125.5

 
$
(1.1
)
 
$
124.4

_______________
(1) 
These accumulated other comprehensive loss components, before tax, are included under “Cost of revenues” and “Selling, general and administrative” in the accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note 12 Pension and Postretirement Benefits for additional details).
11. Equity Compensation Plans:
Equity Compensation Plans
All of the Company’s outstanding stock options and restricted stock awards are covered under the 2013 Incentive Plan, 2009 Incentive Plan or the 1996 Incentive Plan. Awards under the 2013 Incentive Plan may include one or more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share based awards, and (vii) cash. Employees, directors and consultants are eligible for awards under the 2013 Incentive Plan. The Company issued common stock under these plans from the Company’s treasury shares. As of June 30, 2018, there were 5,616,912 shares of common stock reserved and available for future issuance under the 2013 Incentive Plan. Cash received from stock option exercises for the six months ended June 30, 2018 and 2017 was $47.0 million and $22.4 million, respectively.
The Company granted equity awards to key employees of the Company. The nonqualified stock options have an exercise price equal to the closing price of the Company’s common stock on the grant date, with a ten-year contractual term. The fair value of the restricted stock is determined using the closing price of the Company’s common stock on the grant date. The restricted stock is not assignable or transferable until it becomes vested. Performance share units (“PSU”) vest at the end of a three-year performance period, subject to the recipient’s continued service. Each PSU represents the right to receive one share of Verisk common stock and the ultimate realization is based on the Company’s achievement of certain market performance criteria and may range from 0% to 200% of the recipient’s target levels established on the grant date.  The fair value of performance share units is determined on the grant date using the Monte Carlo Simulation model. The Company recognizes the expense of the equity awards ratably over the vesting period. A summary of the equity awards granted for the six months ended

19


June 30, 2018 is presented below.
Grant Date
 
Service Vesting Period
 
Stock Options
 
Restricted Stock
 
Performance Share Units
January 1 to June 30, 2018
 
Four-year graded vesting
 
944

 
194

 

April 1, 2018
 
Four-year graded vesting
 
873,383

 
187,462

 

April 1, 2018

Three-year cliff vesting
 

 

 
46,705

April 16, 2018
 
Four-year graded vesting
 
11,491

 
2,338

 

 
 
 
 
885,818

 
189,994

 
46,705

On July 1, 2018, the Company granted 1,858 shares of common stock and 19,798 shares of nonqualified stock options that were immediately vested, 17,402 non-qualified stock options with a one-year service period that vests ratably over twelve months, and 12,716 deferred stock units to the Directors of the Company.
The fair value of the stock options granted for the six months ended June 30, 2018 and 2017 was estimated using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table:

2018
 
2017
Option pricing model
 
Black-Scholes


 
Black-Scholes

Expected volatility
 
18.52
%

 
18.71
%
Risk-free interest rate
 
2.51
%

 
1.82
%
Expected term in years
 
4.4


 
4.5

Dividend yield
 
%

 
%
Weighted average grant date fair value per stock option
$
21.23


$
15.64

The expected term for the stock options granted was estimated based on studies of historical experience and projected exercise behavior. However, for certain awards granted, for which no historical exercise pattern exists, the expected term was estimated using the simplified method. The risk-free interest rate is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the expected term of the equity award. The volatility factor is calculated using historical daily closing prices over the most recent period that is commensurate with the expected term of the stock option award. The expected dividend yield was based on the Company’s expected annual dividend rate on the date of grant.
A summary of the stock options outstanding and exercisable as of December 31, 2017 and June 30, 2018 and changes during the interim period are presented below: