S-1/A 1 d203004ds1a.htm AMENDMENT NUMBER 3 TO FORM S-1 Amendment Number 3 to Form S-1
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As filed with the Securities and Exchange Commission on October 7, 2011

Registration No. 333-175353

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

AMENDMENT NO. 3

to

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

TransUnion Corp.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

7320

(Primary Standard Industrial

Classification Code Number)

 

74-3135689

(I.R.S. Employer

Identification Number)

 

 

555 West Adams Street

Chicago, Illinois 60661

Telephone: (312) 985-2000

(Address, including zip code, and telephone number, including area code, of registrants’ principal executive offices)

 

 

John W. Blenke

Executive Vice President, Corporate General Counsel and Corporate Secretary

TransUnion Corp.

555 West Adams Street

Chicago, Illinois 60661

Telephone: (312) 985-2000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Michael A. Pucker

Cathy A. Birkeland

Roderick O. Branch

Latham & Watkins LLP

233 South Wacker Drive, Suite 5800

Chicago, Illinois 60606

(312) 876-7700

  

Samuel A. Hamood

Executive Vice President and
Chief Financial Officer

TransUnion Corp.

555 West Adams Street

Chicago, Illinois 60661

(312) 985-2000

  

Andrew J. Pitts

Craig F. Arcella

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, New York 10019

(212) 474-1000

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer  ¨       Accelerated Filer  ¨   Non-Accelerated Filer  x   Smaller reporting company  ¨
    (Do not check if a smaller reporting company)  

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)(2)
 

Amount of

Registration Fee

Common Stock, par value $0.01 per share

  $ 325,000,000   $ 37,732.50(3)

 

 

 

(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(0) under the Securities Act of 1933, as amended (the “Securities Act”).
(2) Includes additional shares that the Underwriters have the option to purchase to cover over-allotments, if any. See “Underwriting.”
(3) The registration fee has been previously paid.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we and the selling stockholders are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion

Preliminary Prospectus dated October 7, 2011

PROSPECTUS

            Shares

 

LOGO

TransUnion Corp.

Common Stock

 

 

This is TransUnion’s initial public offering. We are selling             shares of our common stock.

We expect the public offering price to be between $             and $             per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will trade on the New York Stock Exchange under the symbol “TRUN.”

Investing in the common stock involves risks that are described in the “Risk Factors” section beginning on page 15 of this prospectus.

 

 

 

      

Per Share

 

  

 

Total

Public offering price

     $     $

Underwriting discount

     $     $

Proceeds, before expenses, to us

     $     $

The underwriters may also exercise their option to purchase up to an additional             shares from the selling stockholders at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus to cover overallotments, if any. We will not receive any of the proceeds from the sale of shares sold by the selling stockholders pursuant to the underwriters’ overallotment option.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about                     , 2011.

 

 

Joint Book-Running Managers

 

BofA Merrill Lynch   J.P. Morgan   Deutsche Bank Securities

 

Credit Suisse     Morgan Stanley

 

 

 

Barclays Capital   Baird     Stifel Nicolaus Weisel        Loop Capital Markets   

 

 

The date of this prospectus is                     , 2011.


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LOGO


Table of Contents

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY

     1   

RISK FACTORS

     15   

FORWARD-LOOKING STATEMENTS

     30   

USE OF PROCEEDS

     32   

DIVIDEND POLICY

     32   

CAPITALIZATION

     33   

DILUTION

     35   

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

     37   

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

     38   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     40   

BUSINESS

     65   

MANAGEMENT

     83   

COMPENSATION DISCUSSION AND ANALYSIS

     92   

2010 MANAGEMENT EQUITY PLAN

     113   

PRINCIPAL AND SELLING STOCKHOLDERS

     119   

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     122   

DESCRIPTION OF CERTAIN INDEBTEDNESS

     127   

DESCRIPTION OF CAPITAL STOCK

     131   

SHARES ELIGIBLE FOR FUTURE SALE

     136   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK

     138   

UNDERWRITING

     142   

LEGAL MATTERS

     149   

EXPERTS

     149   

WHERE YOU CAN FIND MORE INFORMATION

     149   

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1   

 

 

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by or on behalf of us that we have referred to you. Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with additional or different information from that contained in this prospectus or in any free writing prospectus. If anyone provides you with additional, different or inconsistent information, you should not rely on it. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus may only be accurate on the date of this prospectus.

 

 

Industry and Market Data

This prospectus includes industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other information available to us. Some data is also based on our good faith estimates, which are derived from management’s knowledge of the industry and independent sources.

 

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PROSPECTUS SUMMARY

This summary contains selected information contained elsewhere in this prospectus. This summary does not contain all the information you should consider in making your investment decision. You should carefully read this entire prospectus, including the information set forth under the headings “Risk Factors,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes thereto appearing elsewhere in this prospectus before deciding to invest in our common stock.

Unless we indicate otherwise or the context otherwise requires, all references to “TransUnion,” the “Company,” “we,” “us” and “our” refer collectively to TransUnion Corp. and its consolidated subsidiaries. References in this prospectus to years are to our fiscal years, which end on December 31.

Overview

We are a leading global provider of information and risk management solutions. We provide these solutions to businesses across multiple industries and to individual consumers. Our technology and services enable businesses to make more timely and informed credit granting, risk management, underwriting, fraud protection and customer acquisition decisions by delivering high quality data, and by integrating advanced analytics and enhanced decision-making capabilities. Our interactive website provides consumers with real-time access to their personal credit information and analytical tools that help them understand and proactively manage their personal finances. Over a million unique consumers visit our website each month. We have operations in the United States, Africa, Canada, Latin America, East Asia and India and provide services in 23 countries. Since our founding in 1968, we have built a stable and highly diversified customer base of approximately 45,000 businesses in multiple industries, including financial services, insurance, healthcare, automotive, retail and communications.

High quality data is the cornerstone of our business. Businesses depend on our data for their daily risk-management processes. Consumers seek our data to help them understand their credit profile and protect themselves against identity theft. Together with our unconsolidated subsidiaries, we maintain credit files on approximately 500 million consumers and businesses worldwide. We refine and enhance the financial, credit, identity, insurance claims, bankruptcy and other data we obtain from thousands of sources and use our sophisticated matching algorithms to create proprietary databases. We combine our data with our analytics and decisioning technology to deliver additional value to our customers. Our analytics, such as predictive modeling and scoring, customer segmentation, benchmarking and forecasting, enable businesses and consumers to efficiently monitor and manage risk. Our decisioning technology, which is delivered on a software-as-a-service platform, enables businesses to interpret data and scores and apply their specific qualifying criteria to make real-time decisions at the point of interaction with their customers.

We have a diverse and stable global customer base, which includes many of the largest companies in each of the primary industries we serve. For example, in the United States, we contract with nine of the ten largest banks, all of the major credit card issuers and eight of the ten largest property and casualty insurance carriers and we provide services to thousands of healthcare providers. In addition, we provide subscription-based interactive services to a growing base of over a million consumers. Our deep industry knowledge and experience allow us to craft solutions tailored to our customers’ specific needs. We maintain long-standing relationships with the majority of our largest customers, including relationships of over ten years with each of our top ten global financial services customers. We attribute the length of our customer relationships to the critical nature of the services we provide, our consistency and reliability, and our innovative and collaborative approach to meeting our customers’ continually changing needs.

 

 

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We manage our business through three operating segments. U.S. Information Services, (“USIS”), which represented approximately 65% of our revenue for the six months ended June 30, 2011, provides consumer reports, credit scores, verification services, analytical services and decisioning technology to businesses in the United States. USIS offers these services to customers in the financial services, insurance, healthcare and other industries, and delivers them through both direct and indirect channels. International, which represented approximately 21% of our revenue for the six months ended June 30, 2011, provides services similar to our USIS and Interactive segments in several countries outside the United States. Interactive, which represented approximately 14% of our revenue for the six months ended June 30, 2011, provides services to consumers that help them understand and proactively manage their personal finances and protect them from identity theft.

We had revenues of $956.5 million for the year ended December 31, 2010, and $503.4 million for the six months ended June 30, 2011. We had net income attributable to TransUnion Corp. of $36.6 million for the year ended December 31, 2010 and a net loss attributable to TransUnion Corp. of $2.6 million for the six months ended June 30, 2011. The year-to-date 2011 net loss attributable to TransUnion Corp. was directly attributable to the loss on the early extinguishment of debt incurred in connection with the refinancing of our senior secured credit facility in the first quarter of 2011, including a write-off of unamortized deferred financing fees of $49.8 million and a prepayment premium of $9.5 million. See “Description of Certain Indebtedness—Senior Secured Credit Facility” and Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus for additional information. We had Adjusted EBITDA of $326.6 million for the year ended December 31, 2010, and $170.5 million for the six months ended June 30, 2011. See “—Summary Historical Consolidated Financial Data” for a reconciliation of Adjusted EBITDA to its most comparable GAAP measure, net income (loss) attributable to TransUnion Corp.

Market Opportunity

We believe several important trends in the global macroeconomic environment, as well as within the key industries we serve, are driving market growth for information and risk management solutions.

 

   

Large and Growing Market for Data and Analytics. We believe that the business information services market is large and growing. According to the 2011 publication, “Communications Industry Forecast 2011-2015” from Veronis Suhler Stevenson, spending on business information in the United States reached $54.7 billion in 2010 and is projected to grow at a compounded annual growth rate (“CAGR”) of 6.5% from 2010 through 2015. For 2010, $11.3 billion of this amount was attributed to credit and risk information. Spending in this category of information is projected to grow at a CAGR of 3.5% from 2010 through 2015. We believe that the demand for targeted data and sophisticated analytical tools will continue to grow meaningfully as businesses seek real time access to more granular data in order to better understand their customers.

 

   

Substantial Focus on Risk Management. As a result of the recent economic downturn, new regulatory requirements and a heightened focus on reducing fraud and losses, we believe there is a growing demand for risk-based pricing and underwriting strategies as well as ongoing reviews of existing customers’ risk profiles. For example, since 2008 insurance carriers have seen double-digit percentage increases in the number of quotes requested, leading to increased underwriting and administrative costs. In addition, financial institutions are utilizing more robust account and portfolio management strategies in order to manage losses within their existing customer base. Changing regulations in the credit card industry are motivating issuers to use more advanced customer segmentation and scoring tools to match customers to appropriate products.

 

   

Growth Driven by Non-traditional Users of Consumer Data. Non-traditional users of consumer data are recognizing the value of credit information and analytical tools. Healthcare companies use these tools to manage their revenue cycle, capital markets participants use them to develop better

 

 

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valuations of securitized loan portfolios, and for-profit education companies use them to reduce loan defaults. In the healthcare industry, for example, increases in high-deductible health plans and the number of uninsured and under-insured consumers have increased collection risks for healthcare providers. According to a 2011 article published by the Centers for Disease Control and Prevention, entitled “Ambulatory Medical Care Utilization Estimates for 2007,” in 2007 there were 1 billion patient visits annually to physician offices, hospital outpatient and emergency departments. To manage costs associated with these visits, healthcare providers are increasingly seeking information about their patients at the time of registration through modernized healthcare technology and electronic records. We believe companies that can offer real-time, reliable data and technology will be best positioned to benefit from the increasing demand for and use of consumer data by non-traditional users.

 

   

Growth in Emerging International Markets. Economic growth in emerging markets continues to outpace the global average. According to an April 2011 World Economic Outlook Report by the International Monetary Fund, entitled “Tensions from a Two-Speed Recovery—Unemployment, Commodities and Capital Flows,” for 2012, the average GDP of emerging markets is projected to grow over 2.5 times faster than that of developed markets. As economies in emerging markets continue to develop and mature, we believe there will continue to be a rise in favorable socio-economic trends, such as an increase in the size of middle and affluent classes, and a significant increase in the use of financial services. In addition, credit penetration is relatively low in emerging markets compared to developed markets. For example, using our database of information compiled from financial institutions as a benchmark of credit activity, we estimate that less than 20% of the adult population in India is currently credit active. We expect the populations in emerging markets to become more credit active, resulting in increased demand for our services.

 

   

Increased Consumer Focus on Managing Personal Finances and Protecting Against Identity Theft. Consumers are increasingly focused on proactively managing their finances and protecting their identities. According to research published in a September 2010 article, entitled “2010 Annual Identity Protection Services Scorecard,” by Javelin Strategy and Research, a third-party industry source, the annual market for online credit monitoring and identity theft protection services is $2.4 billion. According to a press release by the Federal Trade Commission in March 2011, identity theft was the top consumer complaint received by the agency in 2010. Tighter availability of credit and stricter lending practices are prompting individual consumers to seek a better understanding of their credit profile. As a result of these factors, an increasing number of consumers are accessing their credit reports and purchasing credit monitoring services.

Our Competitive Strengths

 

   

Global Leader in Information Management Solutions. We are one of only three leading global participants in the consumer credit and information management industry. Over the past 40 years, we have established comprehensive proprietary databases and information management solutions and developed the ability to rapidly and reliably deliver high quality consumer information, creating what we believe is a sustainable competitive advantage. We have a diverse and stable global customer base, which includes many of the largest companies in each of our primary industries. We believe that our scale, global footprint, reputation and strong market positions will allow us to capitalize on business opportunities in countries and regions around the world and contribute to our long-term growth.

 

   

Innovative and Differentiated Information Solutions. We have developed innovative and differentiated service offerings to meet the evolving needs of our customers. Our industry-leading triggers platform notifies our business customers of changes to consumer profiles on a daily basis.

 

 

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Our decisioning technology helps businesses interpret both data and predictive model results, and applies customer-specific criteria to facilitate real-time, automated decisions at the point of consumer interaction. We develop industry studies and provide a source of market intelligence that we believe provide a more holistic perspective on macroeconomic and market trends than comparable offerings of our competitors. We believe our specialized data, analytics and decisioning services differentiate us from our competitors.

 

   

Deep and Specialized Industry Expertise. We have developed substantial expertise in a number of industries, including financial services, insurance and healthcare, and have placed industry experts in key leadership positions throughout our organization. Our thought leadership and published studies have enhanced our reputation within these industries. In addition, we have been able to apply our industry knowledge and high-quality data assets to form strategic partnerships with other leading companies in key industries to develop new solutions and revenue opportunities. We believe that our industry knowledge base, coupled with our collaborative customer approach, has made it possible for us to anticipate and address our customers’ needs and enables us to offer additional proprietary value-added services.

 

   

Strong Presence in Attractive International Markets. We currently provide services in 22 countries outside the United States in both developed and emerging markets with significant growth potential. We have a strong presence in our developed markets, where we hold a leading market position. We are also well-positioned as a first mover in several fast-growing emerging markets, such as India, a market we entered in 2003. Since 1993, we have hosted the most extensive credit database in South Africa, which positions us well for expansion into the rest of the African continent. In addition, we have become a significant credit information and analytics provider in Latin America through partnerships and acquisitions, such as our recent acquisition in Chile. We believe that our flexible approach to forming local partnerships has allowed us to establish a foothold in certain markets ahead of our major competitors.

 

   

Attractive Business Model. Data, analytics and technology are the three key components of our business model, which is characterized by diversified, predictable revenue streams, low working capital requirements and operating leverage. We own 100% of our U.S. consumer credit data base and we typically obtain information at little or no cost, which provides us with an efficient cost structure and allows us to benefit from economies of scale. Our significant investments to upgrade and improve our technology provide us with the ability to address our customers’ needs with minimal and predictable capital investment. Additionally, our ongoing Operational Excellence program, which is aimed at creating a long-term competitive and efficient cost structure, has institutionalized our cost-management practices.

 

   

Proven and Experienced Management Team. We have a seasoned senior management team with an average of 15 years of experience in a variety of industries, including the credit and information management, financial services and information technology industries. Our senior management team has a track record of strong performance and depth of expertise in the markets we serve. This team has overseen our expansion into new industries and geographies while managing ongoing cost-saving initiatives. As a result of the sustained focus of our management team, we have maintained stable operating performance despite the recent economic downturn.

Our Growth Strategy

 

   

Develop Innovative Solutions to Meet Market Challenges. We have a culture of innovation. Our industry expertise and collaborative approach allow us to prioritize investments in new data sources and development of additional services to provide integrated solutions to meet our customers’

 

 

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needs. In addition, we plan to take advantage of strategic partnerships to develop innovative services that differentiate us from our competitors. As the needs of our customers evolve, we plan to continue to provide creative solutions to meet their challenges and further expand our relationships with them.

 

   

Expand Internationally. We believe international markets present a significant opportunity for growth, as these economies continue to develop and their populations become more credit active. Given our incumbent position in many fast-growing emerging markets, we are well positioned to benefit from the ongoing expansion of consumer credit in these regions. We will continue to focus on expanding into new industries in developed international markets with the introduction of new solutions and lines of business. We will continue to expand globally by forming alliances with local partners, pursuing strategic acquisitions and developing operations in new markets.

 

   

Focus on Underpenetrated and Growth Industries. We continue to focus on underpenetrated and growth industries in the United States, such as insurance and healthcare, where we believe that the use of information-based analytics and decisioning technology is low. Insurers have seen an increase in claims dollars paid, reinforcing their need to price risk appropriately. We offer a range of solutions, including new fraud detection tools and predictive scores, that help insurers price risk appropriately in the quoting and underwriting process. Similarly, we expect providers and payers in the growing healthcare market to utilize more of our data and analytics as they manage collection risks and respond to new regulations that require them to measure the quality of their care in order to be eligible for full reimbursement by the government. We expect that these industries will continue to be a source of growing revenue and profitability for us.

 

   

Expand Interactive Business. Consumers are becoming increasingly aware of the need to proactively manage their personal finances and protect their identities. We will continue to invest in consumer-driven product enhancements and utilize our data-driven customer acquisition strategy through advertising and mobile and social media. In addition to our direct-to-consumer offerings, we will continue our low capital intensive strategy of test marketing new product enhancements and configurations through strategic partners who combine our services with their own offerings. We also plan to leverage the success of our U.S. based Interactive business to offer similar services in our international markets.

 

   

Pursue Strategic Acquisitions. We will evaluate and pursue strategic acquisitions in order to accelerate growth within our existing businesses and diversify into new businesses. We are focused on opportunities to expand our geographic footprint and the breadth and depth of our services, including acquiring proprietary datasets and industry expertise, in our key industries. We may also increase our investments in foreign entities where we hold a minority interest, as we recently did in India with the purchase of an additional interest in Credit Information Bureau (India) Limited. We plan to maintain our disciplined fiscal approach to any acquisition.

Risk Factors

Investing in our common stock involves risks. Important factors that could materially affect our business, financial condition and results of operations are disclosed under “Risk Factors” and elsewhere in this prospectus. Some of the factors that we believe could materially affect our results include:

 

   

Our revenues are concentrated in the U.S. consumer credit and financial services industries. When these industries or the broader financial markets experience a downturn, demand for our services, our revenues and the collectability of receivables may be adversely affected.

 

 

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Data security and integrity are critically important to our business, and breaches of security, unauthorized disclosure of confidential information or the perception that confidential information is not secure, could result in a material loss of business, substantial legal liability, or significant harm to our reputation.

 

   

If we experience system failures or capacity constraints, the delivery of our services to our customers could be delayed or interrupted, which could harm our business and reputation and result in the loss of revenues of customers.

 

   

We could lose our access to data sources, which could prevent us from providing our services.

 

   

Our business is subject to various governmental regulations and laws, compliance with which may cause us to incur significant expenses, and if we fail to maintain satisfactory compliance with certain regulations, we could be subject to civil or criminal penalties.

 

   

We depend, in part, on strategic alliances, joint ventures and acquisitions to grow our business. If we are unable to make strategic acquisitions and develop and maintain these strategic alliances and joint ventures, our growth may be adversely affected.

 

   

We have a substantial amount of indebtedness, which could adversely affect our financial position.

Our History

Our business was founded in 1968 as a Delaware corporation and, in 1969, we acquired the Credit Bureau of Cook County, located in Chicago, Illinois, to provide regional credit reporting services. In the early 1970s, we began expanding on a national scale by acquiring and partnering with other regional credit bureaus, and by 1988, we had collected consumer credit information covering the United States. We were acquired by Marmon Holdings, Inc. (“Marmon”) in 1981 and continued to operate within Marmon’s corporate structure until 2005, when we were spun-off to the Pritzker family business interests (the stockholders of Marmon at that time). Since the spin-off, we have operated as a stand-alone corporate group. For purposes of this prospectus, the term “Pritzker family business interests” refers to the following: (1) various lineal descendants of Nicholas J. Pritzker (deceased) and spouses and adopted children of such descendants; (2) various U.S. situs trusts for the benefit of the individuals described in clause (1) and trustees thereof; (3) various non-U.S. situs trusts for the benefit of the individuals described in clause (1) and trustees thereof; and (4) various entities owned and/or controlled, directly and/or indirectly, by the individuals and trusts described in (1), (2) and (3).

On June 15, 2010, an affiliate of Madison Dearborn Partners, LLC (“Madison Dearborn” or the “Sponsor”), on behalf of certain of its investment funds, acquired 51.0% of our outstanding common stock from Pritzker family business interests and certain employee and director stockholders of TransUnion. We refer to this transaction as the “Change in Control Transaction” and describe the transaction in more detail below. Madison Dearborn, based in Chicago, is an experienced and successful private equity investment firm that has raised over $18 billion of capital. Since its formation in 1992, the Sponsor’s investment funds have invested in approximately 120 companies. The Sponsor’s investment funds invest in businesses across a broad spectrum of industries, including basic industries, communications, consumer, financial services and healthcare. Madison Dearborn’s objective is to invest in companies with strong competitive characteristics that it believes have the potential for significant long-term equity appreciation. To achieve this objective, the Sponsor seeks to partner with outstanding management teams that have a solid understanding of their businesses as well as track records of building shareholder value.

The Change in Control Transaction

On June 15, 2010, an affiliate of Madison Dearborn, on behalf of certain of its investment funds, acquired 51.0% of our outstanding common stock from Pritzker family business interests and certain employee and director stockholders of TransUnion.

 

 

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The Change in Control Transaction consisted of the following principal components:

 

   

Debt Financing—The following debt financing, the proceeds of which we used to repay certain of our outstanding debt and to fund the Interim Merger described below among other things:

 

   

borrowings of $965.0 million under a new $1,150.0 million senior secured credit facility entered into on June 15, 2010 (the terms of which were subsequently amended and restated on February 10, 2011), which consisted of $950.0 million of borrowings under a senior secured term loan and $15.0 million of borrowings under a $200.0 million senior secured revolving line of credit;

 

   

the issuance of $645.0 million aggregate principal amount of 11 3/8% Senior Notes due 2018 (the “senior notes”); and

 

   

borrowings of approximately $16.7 million on an unsecured, interest-free basis with a maturity date of December 15, 2018 (the “RFC loan”) from Pritzker family business interests.

 

   

Sale of Shares of Common Stock by Employee and Director Stockholders to Madison Dearborn—Following the debt financing described above, on June 15, 2010, an affiliate of Madison Dearborn purchased shares of TransUnion Corp. common stock from certain employee and director stockholders of TransUnion Corp. representing 2.8% of the then outstanding common stock of TransUnion Corp. for an aggregate of $52.2 million, or $24.37 per share.

 

   

Interim Merger—Following the transactions described above, on June 15, 2010, certain outstanding shares of TransUnion Corp. common stock were converted into the right to receive cash from us and otherwise cancelled pursuant to a merger (the “Interim Merger”) of a newly-formed Delaware corporation (“MergerCo”) with and into TransUnion Corp., with TransUnion Corp. continuing as the surviving corporation. The Interim Merger was structured as follows:

 

   

immediately prior to the Interim Merger, certain stockholders of TransUnion Corp., including Pritzker family business interests, members of senior management and the affiliate of Madison Dearborn, contributed shares representing 38.2% of the outstanding common stock of TransUnion Corp. to MergerCo in exchange for shares of voting and, in the case of employee stockholders, non-voting common stock of MergerCo (the “MergerCo Contribution”). After giving effect to the MergerCo Contribution, the outstanding shares of TransUnion Corp. common stock were held by Pritzker family business interests, certain other stockholders and MergerCo;

 

   

at the effective time of the Interim Merger on June 15, 2010,

 

   

the outstanding shares of TransUnion Corp. common stock (other than shares of TransUnion common stock owned by MergerCo) were converted into the right to receive an aggregate of approximately $1.18 billion in cash from TransUnion and were otherwise cancelled pursuant to Delaware law. The shares converted into the right to receive cash in the Interim Merger represented 61.8% of the then outstanding shares of common stock of TransUnion Corp. Pritzker family business interests received approximately $1.17 billion for their shares of TransUnion common stock in the Interim Merger;

 

   

the outstanding shares of TransUnion Corp. common stock owned by MergerCo were cancelled without payment of any consideration;

 

   

the outstanding shares of MergerCo voting common stock automatically converted into voting common stock of TransUnion Corp. (the surviving corporation); and

 

   

the outstanding shares of MergerCo non-voting common stock held by employee stockholders automatically converted into non-voting common stock of TransUnion Corp. (the surviving corporation).

 

 

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Madison Dearborn Purchase—Following the transactions described above, on June 15, 2010, an affiliate of Madison Dearborn purchased certain shares of voting common stock of TransUnion Corp. from Pritzker family business interests and certain other TransUnion Corp. stockholders, for an aggregate of $317.8 million, or $24.37 per share (the “Madison Dearborn Purchase”). Immediately following the Madison Dearborn Purchase, the affiliate of Madison Dearborn owned 51.43% of our outstanding voting common stock and 51.00% of our total outstanding common stock; Pritzker family business interests owned 48.57% of our outstanding voting common stock and 48.15% of our total outstanding common stock; and employee stockholders owned 100% of our outstanding non-voting common stock and 0.85% of our total outstanding common stock.

For more information about the effect of the Change in Control Transaction on our financial condition and results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2, “Change in Control,” of our audited and unaudited consolidated financial statements appearing elsewhere in this prospectus. For more information about our debt, see “Description of Certain Indebtedness” and Note 9, “Debt,” of our unaudited consolidated financial statements and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

Stock Repurchases from Pritzker Family Business Interests

 

   

On November 25, 2008, we purchased $398.1 million of our common stock from Pritzker family business interests at a purchase price of $25.85 per share.

 

   

On December 17, 2009, we purchased $897.3 million of our common stock from Pritzker family business interests at a purchase price of $26.24 per share.

 

   

On June 15, 2010, at the effective time of the Interim Merger and as described above, shares of our outstanding common stock held by Pritzker family business interests converted into the right to receive an aggregate of approximately $1.17 billion in cash from TransUnion and were otherwise cancelled pursuant to Delaware law.

For additional information regarding these share repurchases, see “Certain Relationships and Related Party Transactions—Stock Repurchases” and “—The Change in Control Transaction.”

Corporate Information

Our principal executive offices are located at 555 West Adams Street, Chicago, Illinois 60661. Our telephone number is (312) 985-2000. Our website address is www.transunion.com. The information on, or that may be accessed through, our website is not a part of this prospectus.

This prospectus includes our trademarks such as “TransUnion,” which are protected under applicable intellectual property laws and are the property of TransUnion Corp. or its subsidiaries. This prospectus also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.

 

 

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THE OFFERING

 

Common Stock offered by us

        shares

 

Common Stock to be outstanding immediately after this offering

        shares

 

Overallotment option

The selling stockholders have granted the underwriters an option to purchase up to             additional shares of our common stock at the initial public offering price for a period of 30 days after the date of this prospectus.

 

Common stock to be held by the Sponsor and Pritzker family business interests after this offering

Upon completion of this offering, the Sponsor will beneficially own approximately             % of our outstanding common stock (or approximately             % of our outstanding common stock if the underwriters fully exercise their overallotment option) and Pritzker family business interests will beneficially own approximately             % of our outstanding common stock (or approximately             % of our outstanding common stock if the underwriters fully exercise their overallotment option). The Sponsor will, for the foreseeable future, have significant influence over our reporting and corporate management and affairs, and virtually all matters requiring stockholder approval.

 

Use of Proceeds

We currently intend to use approximately $251.4 million of the net proceeds to us from this offering to redeem 35% of the aggregate principal amount of the senior notes at a redemption price equal to 111.375% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest, pursuant to the terms of the indenture governing the senior notes. As of June 30, 2011, $645.0 million of the senior notes were outstanding. The senior notes have a stated maturity of June 15, 2018 and accrue interest at a rate equal to 11 3/8% per annum. See “Description of Certain Indebtedness—Senior Notes.” We intend to use any remaining proceeds for working capital and other general corporate purposes. We will not receive any proceeds from the sale of shares by the selling stockholders pursuant to the underwriters’ overallotment option. See “Use of Proceeds.”

 

Risk Factors

See “Risk Factors” beginning on page 15 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

 

Proposed symbol for trading on the New York Stock Exchange (the “NYSE”)

“TRUN”

 

 

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The total number of shares of common stock to be outstanding immediately after this offering is based on 29,827,867 shares of our common stock outstanding as of June 30, 2011, and excludes:

 

   

3,272,658 shares of common stock issuable upon exercise of options outstanding as of June 30, 2011, at an exercise price of $24.37 per share, of which 296,866 options to purchase shares were exercisable as of that date;

 

   

9,000 shares of common stock issuable upon exercise of options outstanding as of June 30, 2011, at an exercise price of $44.47 per share, of which no options to purchase shares were exercisable as of that date; and

 

   

1,233,287 additional shares of common stock reserved for issuance under our TransUnion Corp. 2010 Management Equity Plan (as will be amended and restated prior to the consummation of this offering, our “2010 Management Equity Plan”) as of June 30, 2011 (see “Compensation Discussion and Analysis”).

Except as otherwise indicated, information in this prospectus:

 

   

reflects the automatic reclassification and conversion of all outstanding shares of our non-voting common stock into 307,151 shares of voting common stock immediately prior to the consummation of this offering;

 

   

assumes (1) no exercise by the underwriters of their option to purchase up to            additional shares from the selling stockholders and (2) an initial public offering price of $             per share, the midpoint of the initial public offering price range indicated on the cover of this prospectus; and

 

   

assumes filing of our amended and restated certificate of incorporation and adoption of our amended and restated bylaws, which will occur at or prior to the consummation of the offering.

 

 

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth our summary historical consolidated financial data for the periods ended and as of the dates indicated below.

We have derived the summary historical consolidated financial data as of December 31, 2010 and 2009, and for each of the years in the three-year period ended December 31, 2010, from our audited consolidated financial statements appearing elsewhere in this prospectus. We have derived the summary historical consolidated financial data for the six months ended June 30, 2011, and June 30, 2010, and the summary historical consolidated balance sheet data as of June 30, 2011, from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements, and, in our opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly in all material respects our financial position and results of operations for the six months ended June 30, 2011. Our results of operations for the six months ended June 30, 2011, are not necessarily indicative of the results that may be expected for the full year. Additionally, our historical results are not necessarily indicative of the results expected for any future period.

The summary historical financial data set forth below is only a summary and should be read in conjunction with “Unaudited Pro Forma Consolidated Financial Data,” “Selected Historical Consolidated Financial Data,” “Risk Factors,” “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

    Six Months Ended June 30,     Twelve Months Ended December 31,  

(in millions, except per share data)

  2011     2010     2010     2009     2008  
    (Unaudited)                    

Income Statement Data:

         

Revenue

  $ 503.4      $ 464.3      $ 956.5      $ 924.8      $ 1,015.9   

Operating expenses:

         

Cost of services

    212.1        199.2        395.8        404.2        432.2   

Selling, general and administrative

    132.5        138.1        263.0        234.6        305.5   

Depreciation and amortization

    43.2        40.3        81.6        81.6        85.7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses(1)

    387.8        377.6        740.4        720.4        823.4   

Operating income

    115.6        86.7        216.1        204.4        192.5   

Non-operating income and expense(2)

    (120.2     (61.2     (133.1     1.3        17.4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income tax

    (4.6     25.5        83.0        205.7        209.9   

Benefit (provision) for income tax

    6.6        (23.6     (46.3     (73.4     (75.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

    2.0        1.9        36.7        132.3        134.4   

Discontinued operations, net of tax

    (0.5     8.7        8.2        1.2        (15.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    1.5        10.6        44.9        133.5        118.5   

Less: net income attributable to noncontrolling interests

    (4.1     (3.9     (8.3     (8.1     (9.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to TransUnion Corp.

  $ (2.6   $ 6.7      $ 36.6      $ 125.4      $ 109.3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations attributable to TransUnion Corp. common stockholders per share, basic

  $ (0.07   $ (0.03   $ 0.55      $ 1.13      $ 1.01   

Income (loss) from continuing operations attributable to TransUnion Corp. common stockholders per share, diluted

  $ (0.07   $ (0.03   $ 0.55      $ 1.13      $ 1.00   

Weighted average shares, basic

    29.8        72.8        51.1        109.5        124.5   

Weighted average shares, diluted

    29.8        72.8        51.3        109.8        125.0   

 

 

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    Six Months Ended June 30,     Twelve Months Ended December 31,  

(in millions)

  2011     2010     2010     2009     2008  
    (Unaudited)                    

Other Financial Data:

         

Adjusted EBITDA(3)

  $ 170.5      $ 157.7      $ 326.6      $ 299.8      $ 343.7   

Cash provided by operating activities of continuing operations

    57.6        84.6        204.6        251.8        230.4   

Capital expenditures of continuing operations(4)

    38.9        19.0        46.8        56.3        93.5   

 

     As of June 30, 2011      As of December 31,  

(in millions)

   Actual     As  Adjusted(5)(6)      2010     2009  
     (Unaudited)               

Balance Sheet Data:

         

Cash and cash equivalents

   $ 122.8      $                    $ 131.2      $ 137.5   

Total assets

     934.3           954.2        1,010.0   

Total debt

     1,605.6           1,606.0        591.3   

Total stockholders’ equity(7)

     (862.5        (862.0     249.4   

 

(1) 

For the six months ended June 30, 2011, total operating expenses included a $3.6 million outsourcing vendor contract early termination fee and a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. For the twelve months ended December 31, 2010, total operating expenses included $21.4 million of accelerated stock-based compensation and related expenses resulting from the Change in Control Transaction and a gain of $3.9 million on the trade in of mainframe computers. See Note 2, “Change in Control,” and Note 16, “Stock-Based Compensation,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction.

(2) 

For the six months ended June 30, 2011, non-operating income and expense included $64.3 million of interest expense and, as a result of refinancing our senior secured credit facility in February 2011, a $9.5 million prepayment premium and $49.8 million write-off of unamortized loan costs incurred in connection with financing the Change in Control Transaction in June 2010. For the twelve months ended December 31, 2010, non-operating income and expense included $90.1 million of interest expense, $28.7 million of acquisition fees and $20.5 million of loan fees, primarily related to the Change in Control Transaction. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction. See Note 9, “Debt,” of our unaudited consolidated financial statements and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about interest expense and the refinancing.

(3) 

Adjusted EBITDA is a non-GAAP measure. We present Adjusted EBITDA as a supplemental measure of our operating performance because it eliminates the impact of certain items that we do not consider indicative of our ongoing operating performance. In addition, Adjusted EBITDA does not reflect our capital expenditures, interest, income tax, depreciation, amortization or stock-based compensation. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

In addition to its use as a measure of our operating performance, our board of directors and executive management team focus on Adjusted EBITDA as a compensation measure. The annual variable compensation for certain members of our management is based in part on Adjusted EBITDA.

 

 

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Adjusted EBITDA is not a measure of financial condition or profitability under GAAP and should not be considered an alternative to cash flow from operating activities, as a measure of liquidity or as an alternative to operating income or net income as an indicator of operating performance. We believe that the most directly comparable GAAP measure to Adjusted EBITDA is net income (loss) attributable to TransUnion Corp. The reconciliation of net income (loss) attributable to TransUnion Corp. to Adjusted EBITDA, is as follows:

 

     Six Months Ended June 30,     Twelve Months Ended December 31,  

(in millions)

   2011     2010     2010     2009     2008  
     (Unaudited)                    

Net income (loss) attributable to TransUnion Corp

   $ (2.6   $ 6.7      $ 36.6      $ 125.4      $ 109.3   

Discontinued operations

     0.5        (8.7     (8.2     (1.2     15.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) from continuing operations attributable to TransUnion Corp.

   $ (2.1   $ (2.0   $ 28.4      $ 124.2      $ 125.2   

Net interest expense (income)

     64.0        15.5        89.1               (20.6

Income taxes

     (6.6     23.6        46.3        73.4        75.5   

Depreciation and amortization

     43.2        40.3        81.6        81.6        85.7   

Stock-based compensation

     2.4        8.5        10.8        16.1        20.1   

Other (income) and expense(A)

     63.3        50.4        52.9        4.5        10.5   

Adjustments(B)

     6.3        21.4        17.5               47.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 170.5      $ 157.7      $ 326.6      $ 299.8      $ 343.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (A)

For the six months ended June 30, 2011, as a result of refinancing our senior secured credit facility in February 2011, other income and expense included a $59.3 million loss on the early extinguishment of debt as a result of refinancing our senior secured credit facility and $4.0 million of other income and expense. See Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus for further information about the refinancing. For the twelve months ended December 31, 2010, other income and expense included $28.7 million of acquisition fees and $20.5 million of loan fees, primarily related to the Change in Control Transaction, and $3.7 million of other income and expense. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction. For the twelve months ended December 31, 2008, other income and expense included a $7.7 million impairment loss on marketable securities and $2.8 million of other income and expense. Other income and expense included in the reconciliation of net income (loss) attributable to TransUnion Corp. to Adjusted EBITDA includes all amounts included in other income and expense, net, on our income statement except for earnings from equity method investments and dividends received from cost method investments.

  (B)

For the six months ended June 30, 2011, adjustments included a $3.6 million outsourcing vendor contract early termination fee and a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. For the twelve months ended December 31, 2010, adjustments included $21.4 million of accelerated stock-based compensation and related expenses resulting from the Change in Control Transaction and a gain of $3.9 million on the trade in of mainframe computers. See Note 2, “Change in Control,” and Note 16, “Stock-Based Compensation,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction. For the twelve months ended December 31, 2008, adjustments comprised $47.3 million related to the settlement of the Privacy Litigation. See “Business—Legal Proceedings—Privacy Litigation.”

 

 

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(4) 

Capital expenditures for the six months ended June 30, 2011, included $18.8 million paid in the first quarter of 2011 for assets purchased and accrued for in the fourth quarter of 2010.

(5) 

Reflects the issuance and sale of            shares of our common stock in this offering at an assumed initial public offering price of $            per share, the midpoint of the range set forth on the front cover of this prospectus, our receipt of the net proceeds from this offering, after deducting the underwriting discount and estimated offering expenses payable by us and our use of the net proceeds from this offering to reduce our outstanding indebtedness as described in this prospectus.

(6) 

A $1.00 increase or decrease in the assumed initial public offering price of $            per share, the midpoint of the range set forth on the front cover of this prospectus, would result in an approximately $            million increase or decrease in each of cash and cash equivalents, total assets and total stockholders’ equity, assuming that the number of shares offered by us set forth on the front cover of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. Each increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease in each of cash and cash equivalents, total assets and total stockholders’ equity by approximately $            million, assuming that the assumed initial public offering price of $            per share, the midpoint of the range set forth on the front cover of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and the other terms of this offering.

(7) 

The balance of total stockholders’ equity decreased from December 31, 2009, to December 31, 2010, primarily due to the Change in Control Transaction. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

 

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RISK FACTORS

You should consider carefully the risks and uncertainties described below and the other information in this prospectus before deciding to invest in our common stock. The following risks and uncertainties could materially affect our business, financial condition or results of operations. As a result, the market price of our common stock could decline, and you could lose part, or all, of your investment.

Risks Related to Our Business

Our revenues are concentrated in the U.S. consumer credit and financial services industries. When these industries or the broader financial markets experience a downturn, demand for our services, our revenues and the collectability of receivables may be adversely affected.

Our largest customers depend on favorable macroeconomic conditions and are impacted by the availability of credit, the level and volatility of interest rates, inflation, employment levels, consumer confidence and housing demand. When financial markets experience volatility, illiquidity and disruption, as they did beginning in 2008, our customer base suffers. These recent market developments and the potential for increased and continuing disruptions going forward present considerable risks to our businesses and operations. Changes in the economy have resulted, and may continue to result, in fluctuations in demand, and the volumes, pricing and operating margins for our services. For example, the banking and financial market downturn that began to affect our business in 2008 caused a greater focus on expense reduction by our customers and led to a decline in their account acquisition mailings, which resulted in reduced revenues from our credit marketing programs. In addition, financial institutions tightened lending standards and granted fewer mortgage loans, student loans, automobile loans and other consumer loans. As a result, we experienced a reduction in our credit report volumes. If businesses in these industries experience economic hardship, we cannot assure you that we will be able to generate future revenue growth or collect our receivables. In addition, if consumer demand for financial services and products and the number of credit applications decrease, the demand for our services could also be materially reduced. These types of disruptions could lead to a decline in the volumes of services we provide our customers and could negatively impact our revenue and results of operations.

Data security and integrity are critically important to our business, and breaches of security, unauthorized disclosure of confidential information or the perception that confidential information is not secure, could result in a material loss of business, substantial legal liability or significant harm to our reputation.

We own a large amount of highly sensitive and confidential consumer financial and personal information. This data is often accessed through secure transmissions over public networks, including the internet. Despite our technical and contractual precautions to prevent the unauthorized access to and disclosure of our data, we cannot assure you that the networks that access our services and databases will not be compromised, whether as a result of criminal conduct, advances in computer hacking or otherwise. Several recent, highly publicized data security breaches have heightened consumer awareness of this issue. Unauthorized disclosure, loss or corruption of our data could disrupt our operations, subject us to substantial legal liability, result in a material loss of business, and significantly harm our reputation.

Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted consumer notification requirements in the event that consumer information is accessed by unauthorized persons. In the United States, federal and state laws provide for over 40 disparate notification regimes, all of which we are subject to. Complying with such numerous and complex regulations in the event of unauthorized access will be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability.

If we experience system failures or capacity constraints, the delivery of our services to our customers could be delayed or interrupted, which could harm our business and reputation and result in the loss of revenues or customers.

Our ability to provide reliable service largely depends on the efficient and uninterrupted operation of our computer network, systems and data centers, some of which have been outsourced to third-party providers. In

 

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addition, we generate a significant amount of our revenues through channels that are dependent on links to telecommunications providers. Our systems and operations could be exposed to damage or interruption from fire, natural disasters, power loss, war, terrorist acts, telecommunication failures, computer viruses, denial of service attacks or human error. For example, in 2007, a service interruption occurring during a routine maintenance visit by one of our hardware vendors resulted in a disruption in our ability to deliver data and services for almost 24 hours. We may not have sufficient redundant operations to cover a loss or failure of our systems in a timely manner. Any significant interruption could severely harm our business and reputation and result in a loss of revenue and customers.

We could lose our access to data sources which could prevent us from providing our services.

Our services and products depend extensively upon continued access to and receipt of data from external sources, including data received from customers, strategic partners and various government and public records depositories. Our data providers could stop providing data or increase the costs for their data, for a variety of reasons, including a perception that our systems are insecure as a result of a data security breach or a desire to generate additional revenue. We could also become subject to legislative, regulatory or judicial restrictions on the collection or use of such data, in particular if such data is not collected by our providers in a way that allows us to legally use the data. In some cases, we compete with our data providers. If we lost access to this external data or if our access was restricted or became less economical, our ability to provide services could be negatively impacted, which would adversely affect our reputation, business, financial condition and results of operations. We cannot provide assurance that we will be successful in maintaining our relationships with these external data source providers or that we will be able to continue to obtain data from them on acceptable terms or at all. Furthermore, we cannot provide assurance that we will be able to obtain data from alternative sources if our current sources become unavailable.

Our business is subject to various governmental regulations and laws, compliance with which may cause us to incur significant expenses, and if we fail to maintain satisfactory compliance with certain regulations, we could be subject to civil or criminal penalties.

Our business is subject to significant international, federal, state and local laws and regulations, including but not limited to privacy and consumer data protection, financial, tax and labor regulations. See “Business—Regulatory Matters” for a description of select regulatory regimes to which we are subject. These laws and regulations are complex, change frequently and have tended to become more stringent over time. We currently incur significant expenses in our attempt to ensure compliance with these laws. In addition, in the future we may be subject to significant additional expense to remedy violations of these laws and regulations. Any failure by us to comply with applicable laws or regulations could also result in significant liability to us, including liability to private plaintiffs as a result of individual or class-action litigation, or may result in the cessation of our operations or portions of our operations or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our services are sold into regulated industries, we must comply with additional regulations in marketing our services into these industries, including, but not limited to, state insurance laws and regulations and the Health Insurance Portability and Accountability Act of 1996.

Certain of the laws and regulations governing our business are opaque and subject to interpretation by judges, juries and administrative bodies, creating substantial uncertainty for our business. In the past, we have incurred liability as a result of selling target marketing lists, a practice that was found by the Federal Trade Commission (the “FTC”) to be unlawful under the Fair Credit Reporting Act, despite a lack of statutory or regulatory guidance. We paid $75 million into a class-action settlement fund in connection with the Privacy Litigation as a result of this finding. See “Business—Legal Proceedings—Privacy Litigation.” We cannot predict what effect the interpretation of existing or new laws or regulations may have on our business.

 

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The Dodd-Frank Act authorizes the newly created Bureau of Consumer Financial Protection (the “CFPB”) to adopt rules that could potentially have a substantial impact on our and our customers’ businesses and it also empowers the CFPB and state officials to bring enforcement actions against companies that violate federal consumer financial laws.

In 2010, the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Title X of the Dodd-Frank Act establishes the Bureau of Consumer Financial Protection and significant portions of the Dodd-Frank Act related to the CFPB became effective on July 21, 2011. The CFPB has broad powers to promulgate, administer and enforce consumer financial regulations, including those applicable to us and our customers. Final regulations could place significant restrictions on our business and the businesses of our customers, particularly customers in the lending industry, and could increase the costs of or make the continuance of all or a portion of our current business impractical or unprofitable. Compliance with the Dodd-Frank Act, CFPB regulations, or other new laws, regulations or interpretations could result in substantial compliance costs or otherwise adversely impact our business, financial condition and our results of operations.

In addition to the Dodd-Frank Act’s grant of regulatory and supervisory powers to the CFPB, the Dodd-Frank Act gives the CFPB authority to conduct examinations and pursue administrative proceedings or litigation for violations of federal consumer financial laws, including the CFPB’s own rules. In these proceedings, the CFPB can obtain cease and desist orders, which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief, and monetary penalties ranging from $5,000 per day for ordinary violations of federal consumer financial laws to $25,000 per day for reckless violations and $1 million per day for knowing violations. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions for the kind of cease and desist orders available to the CFPB (but not for civil penalties). Potentially, if the CFPB or one or more state officials believe we have violated the foregoing laws, they could exercise their enforcement powers in ways that would have a material adverse effect on us.

Changes in legislation or regulations governing consumer privacy may affect our ability to collect, manage and use personal information.

There has been an increasing public concern about the use of personal information, particularly Social Security numbers, dates of birth, financial information, medical information and department of motor vehicle data. As a result, there may be legislative or regulatory efforts to further restrict the use of this personal information. In addition, we provide credit reports and scores to consumers for a fee, and this income stream may be reduced or interrupted by legislation. For example, in 2003, the United States Congress passed a law requiring us to provide consumers with one credit report per year free of charge. Recently, legislation was introduced requiring us to provide credit scores to consumers without charge. Changes in applicable legislation or regulations that restrict our ability to collect and disseminate information, or that require us to provide services to customers or a segment of customers without charge, could result in decreased demand for our services, increase our compliance costs, restrict or eliminate our access to consumer data and adversely affect our business, financial position and results of operations.

The outcome of litigation or regulatory proceedings in which we are involved, or in which we may become involved, could subject us to significant monetary damages or restrictions on our ability to do business.

Legal proceedings arise frequently as part of the normal course of our business. These include individual consumer cases, class action lawsuits and actions brought by federal or state regulators. The outcome of these proceedings is difficult to assess or quantify. Plaintiffs in these lawsuits may seek recovery of large amounts and the cost to defend this litigation may be significant. There may also be adverse publicity associated with litigation that could decrease customer acceptance of our services. In addition, a court-ordered injunction or an administrative cease-and-desist order may require us to modify our business practices or may prohibit conduct that would otherwise be legal and in which our competitors may engage. Many of the technical and complex statutes to which we are subject, including state and federal credit reporting, medical privacy, and financial

 

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privacy requirements, may provide for civil and criminal penalties and may permit consumers to maintain individual or class actions against us and obtain statutorily prescribed damages. While we do not believe that the outcome of any pending or threatened litigation or regulatory enforcement action will have a material adverse effect on our financial position, litigation is inherently uncertain and adverse outcomes could result in significant monetary damages, penalties or injunctive relief against us. For example, in 2008, pursuant to the terms of a settlement agreement with respect to certain class action proceedings, which we refer to as the Privacy Litigation (as defined in “Business—Legal Proceedings”), we paid $75.0 million into a fund for the benefit of class members and provided approximately 600,000 individuals with up to 9 months of free credit monitoring services. Moreover, in 2009, pursuant to a settlement agreement we agreed with the other two defendants in a class action proceeding, which we refer to as the Bankruptcy Tradeline Litigation (as defined in “Business—Legal Proceedings”), to deposit $17.0 million, our share of the $51.0 million total settlement, into a settlement fund for the benefit of class members. Final approval of this monetary settlement by the Court occurred on July 15, 2011. Certain objectors to this monetary settlement have appealed the decision of the Court. Our insurance coverage may be insufficient to cover adverse judgments against us. See “Business—Legal Proceedings” for further information regarding the Privacy Litigation, the Bankruptcy Tradeline Litigation and other material pending litigation.

We depend, in part, on strategic alliances, joint ventures and acquisitions to grow our business. If we are unable to make strategic acquisitions and develop and maintain these strategic alliances and joint ventures, our growth may be adversely affected.

An important focus of our business is to identify business partners who can enhance our services and enable us to develop solutions that differentiate us from our competitors. We have entered into several alliance agreements or license agreements with respect to certain of our data sets and services and may enter into similar agreements in the future. These arrangements may require us to restrict our use of certain of our technologies among certain customer industries, or to grant licenses on terms that ultimately may prove to be unfavorable to us, either of which could reduce the value of our common stock. Relationships with our alliance agreement partners may include risks due to incomplete information regarding the marketplace and commercial strategies of our partners, and our alliance agreements or other licensing agreements may be the subject of contractual disputes. If we or our alliance agreements’ partners are not successful in commercializing the alliance agreements’ services, such commercial failure could adversely affect our business.

In addition, a significant strategy for our international expansion is to establish operations through strategic alliances or joint ventures with local financial institutions and other partners. We cannot provide assurance that these arrangements will be successful or that our relationships with our partners will continue to be mutually beneficial. If these relationships cannot be established or maintained it could negatively impact our business, financial condition and results of operations. Moreover, our ownership in and control of our foreign investments may be limited by local law.

We also selectively evaluate and consider acquisitions as a means of expanding our business and entering into new markets. We may not be able to acquire businesses we target due to a variety of factors such as competition from companies that are better positioned to make the acquisition. Our inability to make such strategic acquisitions could restrict our ability to expand our business and enter into new markets which would limit our ability to generate future revenue growth.

When we engage in acquisitions, investments in new businesses or divestitures of existing businesses, we will face risks that may adversely affect our business.

We may acquire or make investments in businesses that offer complementary services and technologies. Future acquisitions may not be completed on favorable terms and acquired assets, data or businesses may not be successfully integrated into our operations. Any acquisitions or investments will include risks commonly encountered in acquisitions of businesses, including:

 

   

failing to achieve the financial and strategic goals for the acquired business;

 

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paying more than fair market value for an acquired company or assets;

 

   

failing to integrate the operations and personnel of the acquired businesses in an efficient and timely manner;

 

   

disrupting our ongoing businesses;

 

   

distracting management focus from our ongoing businesses;

 

   

acquiring unanticipated liabilities;

 

   

failing to retain key personnel;

 

   

incurring the expense of an impairment of assets due to the failure to realize expected benefits;

 

   

damaging relationships with employees, customers or strategic partners; and

 

   

diluting the share value of existing stockholders.

Any divestitures will be accompanied by the risks commonly encountered in the sale of businesses, which may include:

 

   

disrupting our ongoing businesses;

 

   

reducing our revenues;

 

   

losing key personnel;

 

   

distracting management focus from our ongoing businesses;

 

   

indemnification claims for breaches of representations and warranties in sale agreements;

 

   

damaging relationships with employees and customers as a result of transferring a business to new owners; and

 

   

failure to close a transaction due to conditions such as financing or regulatory approvals not being satisfied.

These risks could harm our business, financial condition or results of operations, particularly if they occur in the context of a significant acquisition or a divestiture. Acquisitions of businesses having a significant presence outside the United States will increase our exposure to the risks of conducting operations in international markets.

If we are unable to develop successful new services in a timely manner, or if the market does not adopt our new services, our ability to maintain or increase our revenue could be adversely affected.

In order to keep pace with customer demands for increasingly sophisticated service offerings, to sustain expansion into growth industries and to maintain our profitability, we must continue to innovate and introduce new services to the market. The process of developing new services is complex and uncertain. Our industry solutions require intense experience and knowledge from within the relevant industry. We must commit significant resources to this effort before knowing whether the market will accept new service offerings. We may not successfully execute on our new services because of challenges in planning or timing, technical hurdles, difficulty in predicting market demand, changes in regulation, or a lack of appropriate resources. Failure to successfully introduce new services to the market could adversely affect our reputation, business, financial condition and results of operations.

 

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If we fail to keep up with rapidly changing technologies, demand for our services could be adversely affected.

In our markets, there are continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems, database technology and the use of the internet. Changes in customer preferences or regulatory requirements may require changes in the technology used to deliver our services. Our future success will depend, in part, upon our ability to:

 

   

internally develop new and competitive technologies;

 

   

use leading third-party technologies effectively; and

 

   

respond to changing customer needs and regulatory requirements.

We cannot provide assurance that we will successfully implement new technologies or adapt our technology to customer, regulatory and competitive requirements. If we fail to respond to changes in technology, regulatory requirements or customer preferences, the demand for our services, or the delivery of our services, could be adversely affected.

Our ability to expand our operations in, and the portion of our revenue derived from, markets outside the United States is subject to economic, political and other inherent risks, which could adversely impact our growth rate and financial performance.

Over the last several years, we have derived a growing portion of our revenues from customers outside the United States, and it is our intent to continue to expand our international operations. We have sales and technical support personnel in numerous countries worldwide. We expect to continue to add international personnel to expand our abilities to deliver differentiated services to our international customers. Expansion into international markets will require significant resources and management attention and will subject us to new regulatory, economic and political risks. Moreover, the services we offer in developed and emerging markets must match our customers’ demand for those services. Due to price, limited purchasing power and differences in the development of consumer credit markets, there can be no assurance that our services will be accepted in any particular developed or emerging market, and we cannot be sure that our international expansion efforts will be successful. The results of our operations and our growth rate could be adversely affected by a variety of factors arising out of international commerce, some of which are beyond our control. These factors include:

 

   

currency exchange rate fluctuations;

 

   

foreign exchange controls that might prevent us from repatriating cash to the United States;

 

   

difficulties in managing and staffing international offices;

 

   

increased travel, infrastructure, legal and compliance costs of multiple international locations;

 

   

foreign laws and regulatory requirements;

 

   

terrorist activity, natural disasters and other catastrophic events;

 

   

restrictions on the import and export of technologies;

 

   

difficulties in enforcing contracts and collecting accounts receivable;

 

   

longer payment cycles;

 

   

failure to meet quality standards for outsourced work;

 

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unfavorable tax rules;

 

   

political and economic conditions in foreign countries, particularly in emerging markets;

 

   

varying business practices in foreign countries; and

 

   

reduced protection for intellectual property rights.

As we continue to expand our business, our success will partially depend on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks could adversely affect our business, financial condition and results of operations.

We may not be able to effectively maintain our cost management strategy, which may adversely affect our ability to sustain our operating margins.

Our cost management strategy includes strategic sourcing, labor management, streamlining back-office functions and improving overall processes. Although we have implemented such plans and continue to explore means by which we can control or reduce expenses, we cannot assure you that we will be able to realize all the projected benefits of our cost management strategies. In addition, if we cannot maintain control of our cost structure, it will have a negative impact on our operating margins. Moreover, our operations and performance may be disrupted by our cost-management and facilities-integration efforts.

We are subject to significant competition in many of the markets in which we operate.

We may not be able to compete successfully against our competitors, which could impair our ability to sell our services. We compete on the basis of system availability, differentiated solutions, personalized customer service, breadth of services and price. Our regional and global competitors vary in size, financial and technical capability, and in the scope of the products and services they offer. Some of our competitors may be better positioned to develop, promote and sell their products. Larger competitors may benefit from greater cost efficiencies and may be able to win business simply based on pricing. Our competitors may also be able to respond to opportunities before we do, taking advantage of new technologies, changes in customer requirements, or market trends.

Our Interactive segment experiences competition from emerging companies. For example, prior to January 2008, Equifax and Experian were our top competitors for direct-to-consumer credit services, such as credit reports and identity theft protection services. In the past few years there has been an influx of non-bureau companies offering similar services, some leveraging the free services that we must provide by law. These developments have resulted in increased competition.

Many of our competitors have extensive customer relationships, including relationships with our current and potential customers. New competitors, or alliances among competitors, may emerge and gain significant market share. Existing or new competitors may develop products and services that are superior to ours or that achieve greater market acceptance. If we are unable to respond to changes in customer requirements as quickly and effectively as our competition, our ability to expand our business and sell our services may be adversely affected.

Our competitors may be able to sell services at lower prices than us, individually or as part of integrated suites of several related services. This ability may cause our customers to purchase from our competitors rather than us. Price reductions by our competitors could also negatively impact our operating margins or harm our ability to obtain new long-term contracts or renewals of existing contracts on favorable terms.

We cannot assure you that we will be able to compete effectively against current and future competitors. If we fail to successfully compete, our business, financial condition and results of operations may be adversely affected.

 

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We have a substantial amount of indebtedness, which could adversely affect our financial position.

We have a substantial amount of indebtedness. As of June 30, 2011, we had total debt of $1,605.6 million, consisting of $645.0 million of senior notes, $947.6 million of borrowings under our senior secured credit facility, and $13.0 million of other debt, of which $10.3 million was debt of TransUnion Corp. Our substantial indebtedness may:

 

   

make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our indebtedness;

 

   

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

 

   

limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

 

   

require us to use a substantial portion of our cash flow from operations to make debt service payments;

 

   

limit our flexibility to plan for, or react to, changes in our business and industry;

 

   

place us at a competitive disadvantage compared to our less leveraged competitors; and

 

   

increase our vulnerability to the impact of adverse economic and industry conditions.

Based on our current level of debt, we expect our annual interest expense to be in excess of $120 million for the next several years. In addition, our borrowings under our senior secured credit facility are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable-rate indebtedness could also increase, even if the amount borrowed remains the same, which could decrease our net income. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk.”

Despite our current level of indebtedness, we may still be able to incur substantial additional indebtedness. This could exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing our senior notes and the agreement governing our senior secured credit facility limit, but do not prohibit, us or our subsidiaries from incurring additional indebtedness. If we incur any additional indebtedness the holders of that indebtedness will be entitled to share ratably with the holders of the senior notes and the guarantees in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of our business prior to any recovery by our equity holders. This may have the effect of reducing the amount of proceeds paid to you in such an event. If new indebtedness, including under our senior secured credit facility, is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify, especially with respect to the demands on our liquidity as a result of increased debt service obligations.

Covenants in our debt agreements restrict our business in many ways.

The indenture governing our senior notes and the agreement governing our senior secured credit facility contain various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

 

   

incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

 

   

issue redeemable stock and preferred stock;

 

   

pay dividends or distributions or redeem or repurchase capital stock;

 

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prepay, redeem or repurchase debt;

 

   

make loans and investments;

 

   

enter into agreements that restrict distributions from our subsidiaries;

 

   

sell assets and capital stock of our subsidiaries;

 

   

enter into certain transactions with affiliates; and

 

   

consolidate or merge with or into, or sell substantially all of our assets to, another person.

As a condition to borrowing and as of the end of any fiscal quarter for which we have borrowings outstanding under our senior secured revolving line of credit, we must have a senior secured net leverage ratio equal to or less than 4.50 to 1, reducing for certain periods after January 1, 2012, calculated on a pro forma basis. A breach of any of these covenants would limit our ability to borrow funds under our senior secured revolving line of credit and could result in a default under the senior secured credit facility and/or the senior notes. Upon the occurrence of an event of default under our senior secured credit facility or our senior notes, the lenders or the holders of our senior notes, as the case may be, could elect to declare all amounts outstanding under the applicable indebtedness to be immediately due and payable, and the lenders could terminate all commitments to extend further credit under our secured credit facility. If we were unable to repay those amounts, the lenders under our senior secured credit facility could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the senior secured credit facility. If the lenders under the senior secured credit facility accelerate the repayment of borrowings or the holders of our senior notes accelerate repayment of our senior notes, we may not have sufficient assets to repay the senior secured credit facility and our other indebtedness, including the senior notes. See “Description of Certain Indebtedness.”

Changes in credit ratings issued by statistical rating organizations could adversely affect our costs of financing.

Credit rating agencies rate our indebtedness based on factors that include our operating results, actions that we take, their view of the general outlook for our industry and their view of the general outlook for the economy. Actions taken by the rating agencies can include maintaining, upgrading or downgrading the current rating or placing us on a watch list for possible future downgrading. Downgrading the credit rating of our indebtedness or placing us on a watch list for possible future downgrading could limit our ability to access the capital markets to meet liquidity needs and refinance maturing liabilities or, increase the interest rates and our cost of financing.

We are subject to losses from risks for which we do not insure.

For certain risks, we do not maintain insurance coverage because of cost and/or availability. Because we retain some portion of insurable risks, and in some cases retain our risk of loss completely, unforeseen or catastrophic losses in excess of insured limits could materially adversely affect our business, financial condition and results of operations.

We may be unable to protect our intellectual property adequately or cost-effectively, which may cause us to lose market share or force us to reduce our prices.

Our success depends, in part, on our ability to protect and preserve the proprietary aspects of our technology and services. If we are unable to protect our intellectual property, our competitors could use our intellectual property to market similar services, decreasing the demand for our services. We may be unable to prevent third parties from using our proprietary assets without our authorization. We rely on patents, copyrights, trademarks, and contractual and trade secret restrictions to protect and control access to our proprietary intellectual property. These measures afford limited protection, however, and may be inadequate. Enforcing

 

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our rights could be costly, time-consuming, distracting and harmful to significant business relationships. Additionally, others may develop non-infringing technologies that are similar or superior to ours. Any significant failure or inability to adequately protect and control our proprietary assets may harm our business and reduce our ability to compete.

We may face claims for intellectual property infringement, which could subject us to monetary damages or limit us in using some of our technologies or providing certain services.

There has been substantial litigation in the United States regarding intellectual property rights in the information technology industry. There is a risk that we may infringe on the intellectual property rights of third parties, including the intellectual property rights of third parties in other countries, which could result in a liability to us. In the event that claims are asserted against us, we may be required to obtain licenses from third parties. Intellectual property infringement claims against us could subject us to liability for damages and restrict us from providing services or require changes to certain services. Although our policy is to obtain licenses or other rights where necessary, we cannot provide assurance that we have obtained all required licenses or rights. If a successful claim of infringement is brought against us and we fail to develop non-infringing services, or to obtain licenses on a timely and cost-effective basis, our reputation, business, financial condition and results of operations could be adversely affected.

If our outside service providers and key vendors are not able to or do not fulfill their service obligations, our operations could be disrupted and our operating results could be harmed.

We depend on a number of service providers and key vendors such as telecommunication companies, software engineers, data processors, software and hardware vendors and providers of credit score algorithms, who are critical to our operations. These service providers and vendors are involved with our service offerings, communications and networking equipment, computer hardware and software and related support and maintenance. Although we have implemented service-level agreements and have established monitoring controls, our operations could be disrupted if we do not successfully manage relationships with our service providers, if they do not perform or are unable to perform to agreed upon service levels, or if they are unwilling to make their services available to us at reasonable prices. If our service providers and vendors do not perform their service obligations, it could adversely affect our reputation, business, financial condition and results of operations.

Our access to the capital and credit markets could be adversely affected by economic conditions.

Historically, we have relied on cash from operations to fund our working capital and business growth. We may require additional capital from equity or debt financing in the future, the availability of which is dependent on, among other things, market and general economic conditions. Our access to funds under short-term credit facilities is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity, or due to changing or increased regulations.

Our relationships with key long-term customers may be materially diminished or terminated.

We have long-standing relationships with a number of our large customers, many of whom could unilaterally terminate their relationship with us or materially reduce the amount of business they conduct with us at any time. Market competition, customer requirements and customer consolidation through mergers or acquisitions also could adversely affect our ability to continue or expand these relationships. There is no guarantee that we will be able to retain or renew existing agreements or maintain relationships with any of our customers on acceptable terms or at all. Our customer agreements relating to our core credit reporting service offered through our USIS segment are terminable upon advance written notice (ranging from 30 days to six months) by either us or the customer, which provides our customers with the opportunity to renegotiate their contracts with us or to award more business to our competitors. The loss of one or more of our major customers could adversely affect our business, financial condition and results of operations.

 

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There may be further consolidation in our end customer markets, which may adversely affect our revenues.

There has been, and we expect there will continue to be, merger, acquisition and consolidation activity in our customer markets. If our customers merge with, or are acquired by, other entities that are not our customers, or that use fewer of our services, our revenue may be adversely impacted. In addition, industry consolidation could affect the base of recurring transaction-based revenue if consolidated customers combine their operations under one contract, since most of our contracts provide for volume discounts.

To the extent the availability of free or relatively inexpensive consumer information increases, the demand for some of our services may decrease.

Public sources of free or relatively inexpensive consumer information have become increasingly available, particularly through the internet, and this trend is expected to continue. Governmental agencies in particular have increased the amount of information to which they provide free public access. Public sources of free or relatively inexpensive consumer information may reduce demand for our services. To the extent that our customers choose not to obtain services from us and instead rely on information obtained at little or no cost from these public sources, our business, financial condition and results of operations may be adversely affected.

Recently enacted health care reform and supporting stimulus funding may be overturned in the future, adversely affecting our anticipated growth in demand for our services by healthcare providers.

While the Health Care and Education Affordability Reconciliation Act of 2010 is estimated to result in approximately 32 million additional insured, this law and related health care reform may subsequently be overturned by future legislation or judicial ruling. Additionally, the American Recovery and Reinvestment Act, which is expected to generate $22.6 billion in stimulus dollars to support health care reform and the digitization of consumer medical files and other data, may also be overturned or curtailed by the United States Congress. To the extent that future growth in our business is dependant on providing additional services to customers in the healthcare industry, the modification, repeal or nullification of these laws could put constraints on our ability to grow and extend our business.

If we experience changes in tax laws or adverse outcomes resulting from examination of our income tax returns, it could adversely affect our results of operations.

We are subject to federal, state and local income taxes in the United States and in foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. Our future effective tax rates and the value of our deferred tax assets could be adversely affected by changes in tax laws. In addition, we are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from such examinations to determine the adequacy of our provision for income taxes. Although we believe we have made appropriate provisions for taxes in the jurisdictions in which we operate, changes in the tax laws or challenges from tax authorities under existing tax laws could adversely affect our business, financial condition and results of operations.

We may not be able to attract and retain the skilled employees that we need to support our business.

Our success depends on our ability to attract and retain experienced management, sales, research and development, analytics, marketing and technical support personnel. If any of our key personnel were unable or unwilling to continue in their present positions, it may be difficult to replace them and our business could be seriously harmed. The complexity of our services requires trained customer service and technical support personnel. We may not be able to hire and retain such personnel at compensation levels consistent with our compensation structure. Some of our competitors may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to

 

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competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expense replacing employees and our ability to provide quality services could diminish, resulting in a material adverse effect on our business.

Risks Related to Share Ownership of Our Common Stock and this Offering

An active public market for our common stock may not develop following this offering, which could limit your ability to sell your shares of our common stock at an attractive price, or at all.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our common stock or how liquid that market might become. An active public market for our common stock may not develop or be sustained after the offering. We have applied to have our common stock listed on the NYSE, but we cannot assure you that our application will be accepted. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is attractive to you, or at all.

After this offering, the Sponsor will continue to have substantial control over us, and its interests in our business may be different from yours.

Upon completion of this offering, the Sponsor will beneficially own approximately     % of our outstanding common stock, or approximately     % of our outstanding common stock if the underwriters fully exercise their overallotment option, and Pritzker family business interests will beneficially own approximately     % of our outstanding common stock, or approximately     % of our outstanding common stock if the underwriters fully exercise their overallotment option. The Sponsor will, for the foreseeable future, have significant influence over our reporting and corporate management and affairs, and virtually all matters requiring stockholder approval. In particular, the Sponsor will be able to exert a significant degree of influence over the election of directors and control actions to be taken by us and our board of directors, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors so elected will have the authority, subject to the terms of our indebtedness and the rules and regulations of the NYSE, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. It is possible that the interests of the Sponsor may in some circumstances conflict with our interests and the interests of our other stockholders, including you. For example, the Sponsor may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investments, even though such transactions might involve risks to you as a holder of our common stock or that could depress our stock price. See “Certain Relationships and Related Party Transactions” and “Principal and Selling Stockholders.”

Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.

After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

 

   

quarterly variations in our operating results compared to market expectations;

 

   

changes in preferences of our customers;

 

   

announcements of new products or significant price reductions by us or our competitors;

 

   

size of the public float;

 

   

stock price performance of our competitors;

 

   

fluctuations in stock market prices and volumes;

 

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default on our indebtedness;

 

   

actions by competitors;

 

   

changes in senior management or key personnel;

 

   

changes in financial estimates by securities analysts;

 

   

negative earnings or other announcements by us or other credit bureaus;

 

   

downgrades in our credit ratings or the credit ratings of our competitors;

 

   

issuances of capital stock; and

 

   

global economic, legal and regulatory factors unrelated to our performance.

The initial public offering price of our common stock will be determined by negotiations between us, the selling stockholders and the underwriters based upon a number of factors and may not be indicative of prices that will prevail following the consummation of this offering. Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, we will have             shares of common stock outstanding. We, each of our officers and directors, the selling stockholders and our other existing stockholders have agreed with the underwriters, other than shares being sold in this offering and subject to certain exceptions, not to dispose of or hedge any of the shares of common stock or securities convertible into or exchangeable for, or that represent the right to receive, shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, subject to certain exceptions and extensions. See “Underwriting.” The shares of common stock offered in this offering will be freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by us, our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Of the remaining             outstanding shares,             will be deemed restricted securities. All of these              shares will be subject to the lock-up period. Restricted securities may be sold in the public market only if they are registered under the Securities Act or they qualify for an exemption from registration under Rule 144 or 701 under the Securities Act, which rules are summarized in “Shares Eligible for Future Sale.”

In the future, we may also issue our securities if we need to raise capital in connection with a capital expenditure or acquisition. The amount of shares of our common stock issued in connection with a capital expenditure or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any perceived excess in the supply of our shares in the market could negatively impact our share price.

 

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Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

Our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among others, authorizing the board of directors to issue preferred stock without further action by you, establishing a classified board in which each class of director serves a staggered three-year term, allowing the removal of directors only for cause, providing that vacancies in our board of directors and any newly created director positions created by the expansion of the board of directors can only be filled by a majority vote of the remaining directors then in office, eliminating the right of stockholders to act by written consent, requiring advance notice for raising business matters or nominating directors at stockholders’ meetings and affirmatively electing to be subject to the business combination provisions of Section 203 of the Delaware General Corporate Law.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Disputes among Pritzker family members or among Pritzker family members and the trustees of the Pritzker family trusts could have a negative effect on the trading price of our common stock or generate negative publicity about TransUnion.

In the past, disputes have arisen among certain Pritzker family members, and among beneficiaries of the Pritzker family trusts and the trustees of such trusts, with respect to, among other things, the ownership, operation, governance, and management of certain Pritzker family business interests. Such disputes may arise in the future. Although the Pritzker family business interests currently own, and will upon completion of this offering continue to own, a minority of our common stock, if such disputes were to occur in the future, they could have a negative effect on the trading price of our common stock or generate negative publicity about TransUnion.

We do not expect to pay any cash dividends for the foreseeable future.

The continued operation and expansion of our business along with the service of our debt will require substantial funding. Accordingly, we do not anticipate that we will pay any cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, our operating subsidiaries are currently restricted from paying cash dividends by the agreements governing our indebtedness, and we expect these restrictions to continue in the future. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

 

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Maintaining our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members, and any failure to maintain financial controls could result in our financial statements becoming unreliable.

In becoming a public company, we have incurred significant legal, accounting, insurance and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also have incurred and will continue to incur costs associated with the Sarbanes-Oxley Act of 2002 and related rules implemented by the Securities and Exchange Commission (“SEC”) and in the future will incur costs in connection with listing on the NYSE. The expenses incurred by public companies for reporting and corporate governance purposes have been generally increasing.

Our efforts to comply with these rules and regulations have significantly increased our legal and financial reporting costs, including costs associated with the hiring of additional personnel. In addition, these laws and regulations could also make it more difficult and costly for us to obtain or renew certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to the delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related rules and regulations, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. Both we and our independent registered public accounting firm will continue to test our internal controls in connection with the Section 404 requirements and could, as part of that documentation and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Any failure to maintain the adequacy of internal control over financial reporting, or any consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could cause the market value of our common stock to decline.

 

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FORWARD-LOOKING STATEMENTS

Any statements made in this prospectus that are not statements of historical fact, including statements about our beliefs and expectations, are “forward-looking statements.” Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “forecast,” “should,” “could,” “would,” “may,” “will” and other similar expressions. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at the time such statements were made. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. Factors that may materially affect such forward-looking statements include:

 

   

macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets;

 

   

our ability to maintain the security and integrity of our data;

 

   

our ability to deliver services timely without interruption;

 

   

our ability to maintain our access to data sources;

 

   

government regulation and changes in the regulatory environment;

 

   

litigation or regulatory proceedings;

 

   

our ability to effectively develop and maintain strategic alliances and joint ventures;

 

   

our ability to make acquisitions and integrate the operations of other businesses;

 

   

our ability to timely develop new services;

 

   

our ability to manage and expand our operations and keep up with rapidly changing technologies;

 

   

our ability to manage expansion of our business into international markets;

 

   

economic and political stability in international markets where we operate;

 

   

our ability to effectively manage our costs;

 

   

our ability to provide competitive services and prices;

 

   

our ability to make timely payments of principal and interest on our indebtedness;

 

   

our ability to satisfy covenants in the agreements governing our indebtedness;

 

   

our ability to maintain our liquidity;

 

   

our ability to protect our intellectual property;

 

   

our ability to retain or renew existing agreements with long-term customers;

 

   

our ability to access the capital markets;

 

   

further consolidation in our end customer markets;

 

   

reliance on key management personnel; and

 

   

other factors described under “Risk Factors.”

 

 

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Many of these factors are beyond our control. The forward-looking statements contained in this prospectus speak only as of the date of this prospectus. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements, to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. For further information or other factors which could affect our financial results and such forward-looking statements, see “Risk Factors.”

 

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USE OF PROCEEDS

Based upon an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover of this prospectus, we estimate we will receive net proceeds from the offering of approximately $             million after deducting underwriting discounts and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders pursuant to the underwriters’ overallotment option.

We currently intend to use approximately $251.4 million of the net proceeds to us from this offering to redeem 35% of the aggregate principal amount of the senior notes at a redemption price equal to 111.375% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest, pursuant to the terms of the indenture governing the senior notes. As of June 30, 2011, $645.0 million of the senior notes were outstanding. The senior notes have a stated maturity of June 15, 2018 and accrue interest at a rate equal to 11 3/8% per annum. See “Description of Certain Indebtedness—Senior Notes.” We intend to use any remaining proceeds for working capital and other general corporate purposes, and our management will have broad discretion over the use of the remaining net proceeds. Pending application of the remaining net proceeds as described above, we intend to invest the net proceeds in short-term, investment-grade, interest-bearing securities.

A $1.00 increase or decrease in the assumed initial public offering price of $             per share would increase or decrease the net proceeds we receive from this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase or decrease by 1.0 million shares in the number of shares offered by us would increase or decrease the net proceeds to us by $             million assuming the assumed initial public offering price of $             per share, the midpoint of the range set forth on the front cover of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

DIVIDEND POLICY

Since our spin-off from Marmon in 2005, we have not declared or paid cash dividends on our common stock. Additionally, because we are a holding company, our ability to pay dividends on our common stock is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us, including restrictions under the terms of the agreements governing our indebtedness. See “Description of Certain Indebtedness.” We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and to service our debt and, therefore, do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, capital requirements, restrictions contained in current or future financing instruments and such other factors as our board of directors deems relevant. Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.

 

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CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of June 30, 2011, on:

 

   

an actual basis; and

 

   

an as adjusted basis to give effect to (1) the filing of our amended and restated certificate of incorporation at or prior to the consummation of the offering, (2) our receipt of the estimated net proceeds from the sale of shares of common stock offered by us in this offering, at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the front cover of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us and (3) our use of the net proceeds from this offering to reduce our outstanding indebtedness as described in this prospectus.

This information should be read in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

     As of June 30, 2011  

(in millions)

   Actual     As  Adjusted(1)  

Cash and cash equivalents

   $ 122.8      $     

Debt:

    

Note payable for 2007 acquisition

     0.9     

Note payable for 2011 acquisition

     1.8     

Senior secured term loan

     947.6     

Senior secured revolving line of credit

         

Senior notes

     645.0     

Foreign cash loan (RFC loan)

     10.3     
  

 

 

   

 

 

 

Total debt

   $ 1,605.6      $     

Stockholders’ equity:

    

Preferred stock; $0.01 par value; 20.0 shares authorized and no shares issued and outstanding, actual; 30.0 shares authorized and no shares issued and outstanding, as adjusted

         

Common stock; $0.01 par value; 180.0 shares authorized and 29.8 shares issued and outstanding, actual; 270.0 shares authorized and            shares issued and outstanding, as adjusted

     0.3     

Additional paid-in capital

     891.6     

Retained earnings

     (1,781.3  

Accumulated other comprehensive income

     8.9     

Noncontrolling interests

     18.0     
  

 

 

   

 

 

 

Total stockholders’ equity(2)

     (862.5  
  

 

 

   

 

 

 

Total capitalization

   $ 743.1      $                
  

 

 

   

 

 

 

 

(1) 

A $1.00 increase or decrease in the assumed initial public offering price of $            per share, the midpoint of the range set forth on the front cover of this prospectus, would result in an approximately $            million increase or decrease in each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity, and total capitalization, assuming that the number of shares offered by us set forth on the front cover of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. Each 1.0 million increase or decrease in the number of shares offered by us would increase or decrease each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $            million, assuming the initial public offering price of

 

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  $             per share, the midpoint of the range set forth on the front cover of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering.
(2) 

Total stockholders’ equity is negative at June 30, 2011, because the Change in Control Transaction was accounted for as a recapitalization of the Company in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations, with the necessary adjustments reflected in the equity section of our balance sheet. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus for additional information regarding the Change in Control Transaction.

The number of shares of common stock in the table above excludes as of June 30, 2011:

 

   

3,272,658 shares of common stock issuable upon exercise of options outstanding as of June 30, 2011, at an exercise price of $24.37 per share, of which 296,866 options to purchase shares were exercisable as of that date;

 

   

9,000 shares of common stock issuable upon exercise of options outstanding as of June 30, 2011, at an exercise price of $44.47 per share, of which no options to purchase shares were exercisable as of that date; and

 

   

1,233,287 additional shares of common stock reserved for issuance under our 2010 Management Equity Plan (see “Compensation Discussion and Analysis”).

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest would be diluted if the amount per share paid by purchasers of shares of common stock in this initial public offering is higher than the adjusted net tangible book value per share of common stock immediately after completion of this offering. Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

The net tangible book value of our common stock as of June 30, 2011, was approximately $(1.14) billion, or approximately $(38.31) per share, based on 29,827,867 shares of our common stock outstanding as of June 30, 2011.

After giving effect to the sale of             shares of common stock in this offering by us at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the front cover of this prospectus, our use of the net proceeds from this offering to reduce our outstanding indebtedness as described in this prospectus and the deduction of estimated offering expenses payable by us, the adjusted net tangible book value of our common stock as of June 30, 2011, would have been approximately $             billion, or approximately $             per share. This represents an immediate increase in net tangible book value per share of $             to our existing stockholders and an immediate dilution of $             per share to purchasers of common stock in this offering. If the initial public offering price is higher or lower than $             per share, the dilution to new stockholders will be higher or lower.

The following table illustrates this per share dilution:

 

Assumed initial public offering price per share

   $                
  

 

 

 

Net tangible book value per share as of as of June 30, 2011

   $ (38.31

Increase in net tangible book value per share to existing stockholders attributable to this offering

  
  

 

 

 

As adjusted net tangible book value per share after this offering

  
  

 

 

 

Dilution per share to new investors in this offering

   $                
  

 

 

 

Dilution per share to new investors is determined by subtracting as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by a new investor.

The following table sets forth as of June 30, 2011, on the adjusted basis described above, assuming an initial public offering price of $             per share, the midpoint of the range set forth on the front cover of this prospectus, before deducting the underwriting discount and estimated expenses payable by us:

 

   

the number of             shares of common stock sold in this offering;

 

   

the total consideration paid and the average price per share paid to us by our existing stockholders during the past five years; and

 

   

the total consideration paid and the average price per share paid to us by the investors purchasing shares in this offering.

 

     Shares Purchased    Total Consideration    Average Price
Per Share
     Number    Percent    Amount    Percent   

Existing stockholders

              

New investors

              

Totals

              

 

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The discussion and tables above are based on 29,827,867 shares of our common stock outstanding as of June 30, 2011, and exclude:

 

   

3,272,658 shares of common stock issuable upon exercise of options outstanding as of June 30, 2011, at an exercise price of $24.37 per share, of which 296,866 options to purchase shares were exercisable as of that date;

 

   

9,000 shares of common stock issuable upon exercise of options outstanding as of June 30, 2011, at an exercise price of $44.47 per share, of which no options to purchase shares were exercisable as of that date; and

 

   

1,233,287 additional shares of common stock reserved for issuance under our 2010 Management Equity Plan (see “Compensation Discussion and Analysis”).

 

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

On June 15, 2010, an affiliate of the Sponsor acquired 51.0% of our outstanding common stock. In connection with this Change in Control Transaction, we incurred $1,626.7 million of debt as discussed in Note 2, “Change in Control,” and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus. Net income for the year ended December 31, 2010, includes interest expense on this debt from June 15, 2010, the date of the Change in Control Transaction.

Had the Change in Control Transaction, including the incurrence of the related debt financing, occurred on January 1, 2010, and assuming we had paid the required $2.4 million quarterly principal payments throughout 2010 with respect to the term loan portion of our senior secured credit facility and not borrowed additional funds under our senior secured revolving line of credit, 2010 total interest expense on all debt would have been approximately $58 million higher than the actual 2010 total interest expense of $90.1 million, and net income attributable to TransUnion Corp. would have been approximately $37 million less than the actual 2010 net income attributable to TransUnion Corp. of $36.6 million. The additional $58 million of interest expense would have included approximately $55 million of additional cash interest expense and $3 million of additional amortization of deferred financing fees. Based on our current level of debt, we expect our annual interest expense to be in excess of $120 million for the next several years.

You should read this “Unaudited Pro Forma Consolidated Financial Data” section together with “Selected Historical Consolidated Financial Data,” “Risk Factors,” “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notes appearing elsewhere in this prospectus.

On February 10, 2011, we amended and restated the agreement governing our senior secured credit facilities at terms that are more favorable to us. This amendment and restatement resulted in a reduction in the interest rate, payment of additional financing fees that will be amortized over the life of the senior secured term loan facility and the write-off of previously unamortized financing fees associated with the original senior secured term loan facility. See “Description of Certain Indebtedness” and Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus. As a result of this amendment and restatement, and the application of the net proceeds of this offering as described elsewhere in this prospectus and assuming we do not borrow additional funds and interest rates do not increase, our annual interest expense will be less than our pro forma interest expense.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables set forth our selected historical consolidated financial data for the periods ended and as of the dates indicated below.

We have derived the selected historical consolidated financial data as of December 31, 2010 and 2009, and for each of the years in the three-year period ended December 31, 2010, from our audited consolidated financial statements appearing elsewhere in this prospectus. We have derived the selected historical consolidated balance sheet data as of December 31, 2008, 2007 and 2006, from our audited consolidated financial statements as of such dates, which are not included in this prospectus. We have derived the selected historical consolidated income statement data for each of the years ended December 31, 2007 and 2006, from our audited consolidated financial statements for such periods, which are not included in this prospectus. We have derived the selected historical consolidated financial data for the six months ended June 30, 2011, and June 30, 2010, and the selected historical consolidated balance sheet data as of June 30, 2011, from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements, and, in our opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly in all material respects our financial position and results of operations for the six months ended June 30, 2011. Our results of operations for the six months ended June 30, 2011, are not necessarily indicative of the results that may be expected for the full year. Additionally, our historical results are not necessarily indicative of the results expected for any future period.

You should read the following financial data together with “Unaudited Pro Forma Consolidated Financial Data,” “Risk Factors,” “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

     Six Months
Ended June 30,
    Twelve Months Ended December 31,  

(in millions, except per share data)

   2011     2010     2010     2009     2008     2007     2006  
     (Unaudited)                                

Income Statement Data:

              

Revenue

   $ 503.4      $ 464.3      $ 956.5      $ 924.8      $ 1,015.9      $ 1,060.0      $ 1,003.4   

Operating expense:

              

Cost of services

     212.1        199.2        395.8        404.2        432.2        453.8        431.4   

Selling, general and administrative

     132.5        138.1        263.0        234.6        305.5        270.7        232.5   

Depreciation and amortization

     43.2        40.3        81.6        81.6        85.7        84.4        76.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense(1)

     387.8        377.6        740.4        720.4        823.4        808.9        740.8   

Operating income

     115.6        87.6        216.1        204.4        192.5        251.1        262.6   

Non-operating income and expense(2)

     (120.2     (61.2     (133.1     1.3        17.4        38.0        30.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income tax

     (4.6     25.5        83.0        205.7        209.9        289.1        293.2   

Benefit (provision) for income tax

     6.6        (23.6     (46.3     (73.4     (75.5     (98.9     (98.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     2.0        1.9        36.7        132.3        134.4        190.2        195.0   

Discontinued operations, net of tax

     (0.5     8.7        8.2        1.2        (15.9     (34.7     (2.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1.5        10.6        44.9        133.5        118.5        155.5        193.0   

Less: net income attributable to noncontrolling interests

     (4.1     (3.9     (8.3     (8.1     (9.2     (7.5     (6.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to TransUnion Corp.

   $ (2.6   $ 6.7      $ 36.6      $ 125.4      $ 109.3      $ 148.0      $ 186.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations attributable to TransUnion Corp. common stockholders per share, basic

   $ (0.07   $ (0.03   $ 0.55      $ 1.13      $ 1.01      $ 1.44      $ 1.51   

Income (loss) from continuing operations attributable to TransUnion Corp. common stockholders per share, diluted

     (0.07     (0.03     0.55        1.13        1.00        1.44        1.51   

Weighted average shares, basic

     29.8        72.8        51.1        109.5        124.5        125.9        125.1   

Weighted average shares, diluted

     29.8        72.8        51.3        109.8        125.0        126.2        125.6   

 

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     As of June 30, 2011    As of December 31,  

(in millions)

   Actual     As
Adjusted(3)(4)
   2010     2009      2008      2007      2006  
     (Unaudited)                                  

Balance sheet data:

                  

Total assets(5)

   $ 934.3         $ 954.2      $ 1,010.0       $ 1,169.3       $ 1,535.6       $ 1,370.7   

Total debt

   $ 1,605.6         $ 1,606.0      $ 591.3       $ 6.2       $ 5.6       $ 2.4   

Total stockholders’ equity(5)

   $ (862.5      $ (862.0   $ 249.4       $ 996.1       $ 1,306.6       $ 1,139.2   

 

(1) 

For the six months ended June 30, 2011, total operating expenses included a $3.6 million outsourcing vendor contract early termination fee and a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. For the twelve months ended December 31, 2010, total operating expenses included $21.4 million of accelerated stock-based compensation and related expenses resulting from the Change in Control Transaction and a gain of $3.9 million on the trade in of mainframe computers. See Note 2, “Change in Control,” and Note 16, “Stock-Based Compensation,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction.

(2)

For the six months ended June 30, 2011, non-operating income and expense included $64.3 million of interest expense and, as a result of refinancing our senior secured credit facility in February 2011, a $9.5 million prepayment premium and $49.8 million write-off of unamortized loan costs incurred in connection with financing the Change in Control Transaction in June 2010. For the twelve months ended December 31, 2010, non-operating income and expense included $90.1 million of interest expense, $28.7 million of acquisition fees and $20.5 million of loan fees, primarily related to the Change in Control Transaction. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction. See Note 9, “Debt,” of our unaudited consolidated financial statements and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about interest expense and the refinancing.

(3) 

Reflects the issuance and sale of             shares of our common stock in this offering at an assumed initial public offering price of $             per shares, the midpoint of the range set forth on the front cover of this prospectus, and our receipt of the net proceeds from this offering, after deducting the underwriting discount and estimated offering expenses payable by us.

(4) 

A $1.00 increase or decrease in the assumed initial public offering price of $             per share, the midpoint of the range set forth on the front cover of this prospectus, would result in an approximately $             million increase or decrease in each of cash and cash equivalents, total assets and total stockholders’ equity, assuming that the number of shares offered by us set forth on the front cover of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. Each 1.0 million increase or decrease in the number of shares offered by us would increase or decrease each of cash and cash equivalents, total assets and total stockholders’ equity by approximately $             million, assuming that the initial public offering price of $             per share, the midpoint of the range set forth on the front cover of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering.

(5) 

The decrease in total assets and stockholders equity at December 31, 2010, reflects the impact of the Change in Control Transaction. The decrease in total assets and stockholders equity at December 31, 2009, reflects the stock repurchase of approximately $900 million in December 2009. For total assets, this decrease was partially offset by loan proceeds of approximately $600 million received throughout 2009. The decrease in total assets and stockholders equity at December 31, 2008, reflects the stock repurchase of approximately $400 million in November 2008. See Note 2, “Change in Control,” Note 13, “Debt,” and Note 14, “Earnings Per Share,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, “Unaudited Pro Forma Consolidated Financial Data,” “Selected Historical Consolidated Financial Data,” “Risk Factors,” “Use of Proceeds,” “Capitalization” and our historical consolidated financial statements and the related notes appearing elsewhere in this prospectus. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those discussed in “Forward-Looking Statements” and “Risk Factors.”

Overview

We are a leading global provider of information and risk management solutions. We provide these solutions to businesses across multiple industries and to individual consumers. Our technology and services enable businesses to make more timely and informed credit granting, risk management, underwriting, fraud protection and customer acquisition decisions by delivering high quality data, and by integrating advanced analytics and enhanced decision-making capabilities. Our interactive website provides consumers with real-time access to their personal credit information and analytical tools that help them understand and proactively manage their personal finances. Over a million unique consumers visit our website each month. We have operations in the United States, Africa, Canada, Latin America, East Asia and India and provide services in 23 countries. Since our founding in 1968, we have built a stable and highly diversified customer base of approximately 45,000 businesses in multiple industries, including financial services, insurance, healthcare, automotive, retail and communications.

We generate revenues primarily from the sale of credit reports, credit marketing services, portfolio reviews and other credit-related services to financial institutions, insurance companies and credit card issuers both in the U.S. and internationally through both direct and indirect channels. We maintain long-standing relationships with many of our largest customers, including relationships of over ten years with each of our top ten global financial services customers. We attribute the length of our customer relationships to the critical nature of the services we provide, our consistency and reliability and our innovative and collaborative approach to developing integrated solutions that meet our customers continually changing needs. We also generate revenues by providing subscription-based interactive services to consumers that help them understand and manage their personal finances and that protect them from identity theft.

Segments

We manage our business and report our financial results in three operating segments: U.S. Information Services (“USIS”), International and Interactive. Segment revenue for the six months ended June 30, 2011, and June 30, 2010, and the twelve months ended December 31, 2010 and 2009, was as follows:

 

(dollars in millions)    Six Months Ended June 30,     Twelve Months Ended December 31,  

Segments

   2011      %     2010      %     2010      %     2009      %  

U.S. Information Services:

                    

Online Data Services

   $ 222.1         44.1   $ 217.7         46.9   $ 439.7         46.0   $ 458.6         49.6

Credit Marketing Services

     63.6         12.6     54.5         11.7     120.4         12.6     115.4         12.5

Decision Services

     39.5         7.9     39.2         8.4     75.9         7.9     53.5         5.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total U.S. Information Services

   $ 325.2         64.6   $ 311.4         67.0   $ 636.0         66.5   $ 627.5         67.9

International:

                    

Developed markets

   $ 43.5         8.6   $ 42.3         9.1   $ 86.6         9.1   $ 79.4         8.6

Emerging markets

     61.4         12.2     49.9         10.8     109.2         11.4     90.7         9.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total International

   $ 104.9         20.8   $ 92.2         19.9   $ 195.8         20.5   $ 170.1         18.4

Interactive

   $ 73.3         14.6   $ 60.7         13.1   $ 124.7         13.0   $ 127.2         13.7
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total revenue

   $ 503.4         100.0   $ 464.3         100.0   $ 956.5         100.0   $ 924.8         100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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USIS provides consumer reports, credit scores, verification services, analytical services and decisioning technology to businesses in the United States through both direct and indirect channels. In this segment, we intend to focus on continued expansion into underpenetrated and growth industries, such as insurance and healthcare, and introduction of innovative and differentiated solutions in the financial services and other industries.

 

   

International provides services similar to our USIS and Interactive segments in several countries outside the United States. We believe our International segment represents a significant opportunity for growth as many of the economies in which we operate, such as India and Mexico, continue to develop their credit markets. We also seek to enter into and develop our business in new geographies.

 

   

Interactive provides primarily subscription-based services to consumers, including credit reports, scores and credit and identity monitoring. As the U.S. economy continues to stabilize and improve, and consumer borrowing activity and concerns over identity theft continue to increase, we expect our Interactive segment to grow and to represent an increasing portion of our overall revenue.

In addition, certain costs that are not directly attributable to one or more of our operating segments are reported as corporate expenses, which we refer to as Corporate. These expenses are typically for enterprise level functions and are primarily administrative in nature.

Factors Affecting Our Results of Operations

The following are certain key factors that affect, or have recently affected, our results of operations:

Macroeconomic and Industry Trends

Our revenues are significantly influenced by general macroeconomic conditions, including the availability of affordable credit and capital, interest rates, inflation, employment levels, consumer confidence and housing demand. The economic downturn that began impacting our business in 2008 resulted in reduced revenues across all of our segments due to lower credit activity and to lower demand for our services. During the later half of 2010 and the first half of 2011 in the United States and other markets we saw signs of improved economic conditions and increased market stabilization. In the United States, we also saw a continuing gradual improvement in the consumer lending market and an increase in demand for our credit marketing services. These factors helped drive improved financial results in all of our segments since mid-year 2010. The economic and market improvements were tempered by continuing consumer uncertainty. During the first half of 2011, concerns remained over continuing high unemployment and a housing market that remained stagnant. These concerns have pressured growth in all of our segments and will likely continue to do so until markets further improve and the uncertainty subsides.

Our revenues are also significantly influenced by industry trends, including the demand for the credit-related services we offer. Spending on credit and risk information in the United States is projected to have significant growth over the next three years. Companies increasingly rely on data and analytics to make more informed decisions, operate their businesses more efficiently and manage risk. Similarly, consumers seek information to help them understand and proactively manage their personal finances and to better protect themselves against identity theft. We expect that increased demand for targeted data and sophisticated analytical tools will drive revenue growth in all of our segments.

 

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Acquisitions and Partnerships

We selectively evaluate and consider acquisitions and partnerships as a means of expanding our business and international footprint and entering into new markets.

 

   

On April 15, 2011, we acquired the remaining 20% ownership interest in our South Africa subsidiary, TransUnion Analytic and Decision Services (Proprietary) Limited, from the minority shareholders for $6.0 million. As a result of this acquisition, we will no longer record net income attributable to non-controlling interests for this subsidiary.

 

   

On August 1, 2010, we acquired a 51% ownership interest in Databusiness S.A., our Chile subsidiary (“Chile”), for $6.7 million. The results of operations of Chile have been included as part of the International segment in our consolidated statements of income since the acquisition.

 

   

On, April 18, 2010, we acquired an additional 9.99% ownership interest in Credit Information Bureau (India) Limited (“CIBIL”), for $8.7 million, bringing our total ownership to 19.99%. As a result of this acquisition, we now account for this investment using the equity method.

 

   

On December 31, 2009, we acquired all of the outstanding units and voting interests of MedData Health LLC (“MedData”) for $96.5 million. MedData is a leading provider of healthcare information and data solutions for hospitals, physician practices and insurance companies. We have integrated MedData into our USIS segment.

We continue to look at a number of strategic acquisitions and partnerships in the healthcare, insurance, international and other markets consistent with our growth objective.

Change in Control Transaction

On June 15, 2010, an affiliate of the Sponsor acquired 51.0% of our outstanding common stock upon the consummation of the Change in Control Transaction. See “Prospectus Summary—The Change in Control Transaction.” In connection with the Change in Control Transaction we incurred the following debt financing, the proceeds of which we used, among other things, to repay certain of our outstanding debt and to fund the Interim Merger that was part of the Change in Control Transaction:

 

   

borrowings of $965.0 million under our new $1,150.0 million senior secured credit facility entered into on June 15, 2010 (the terms of which were subsequently amended and restated on February 10, 2011), which consisted of $950.0 million of borrowings under a senior secured term loan and $15.0 million of borrowings under a $200.0 million senior secured revolving line of credit;

 

   

the issuance of $645.0 million aggregate principal amount of senior notes; and

 

   

borrowings of approximately $16.7 million under the RFC loan from Pritzker family business interests

Our interest expense has increased significantly and, with our current level of debt, is expected to be in excess of $120 million annually for the next several years. As of June 30, 2011, $947.6 million of our outstanding debt, or 59% of our total debt of $1,605.6 million, was variable-rate debt. All of our variable-rate debt was borrowed under our senior secured term loan. If market interest rates increase, our debt service obligations on our variable-rate debt could also increase even if the amount borrowed remains the same, which could decrease our net income. See “—Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk.” Our substantial indebtedness may make it difficult for us to satisfy our financial obligations or limit our ability to borrow additional funds or use our cash flow for future working capital, capital expenditures, acquisitions or other general business purposes. As a result, our substantial indebtedness could limit our

 

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flexibility to plan for, or react to, changes in our business and industry and place us at a competitive disadvantage compared to our less leveraged competitors, which could increase our vulnerability to the impact of adverse economic and industry conditions.

Our senior secured credit facility and the indenture governing our senior notes also contain various covenants and restrictions, including restrictions on dividends, investments, indebtedness, liens, dispositions, future borrowings and other limitations. A breach of any of these covenants would limit our ability to borrow funds under our senior secured revolving line of credit and could result in a default under the senior secured credit facility and/or the senior notes. Upon the occurrence of an event of default under our senior secured credit facility or our senior notes, the lenders or the holders of our senior notes, as the case may be, could elect to declare all amounts outstanding under the applicable indebtedness to be immediately due and payable, and the lenders could terminate all commitments to extend further credit under our secured credit facility. At June 30, 2011, we were in compliance with all of these covenants.

See Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus, “Risk Factors—Risks Related to Our Business—We have a substantial amount of indebtedness, which could adversely affect our financial position” and “Risk Factors—Risks Related to our Business—Covenants in our debt agreements restrict our business in many ways.”

In addition, we recognized expense for $21.4 million of accelerated stock-based compensation and related expenses, $27.8 million of acquisition fees and $18.9 million of loan fees in the six months ended June 30, 2010, in connection with the Change in Control Transaction.

Operational Excellence Program

In 2008, we launched our ongoing Operational Excellence program aimed at creating a long-term cost structure that is more competitive and efficient. Key initiatives include strategic sourcing, labor management, streamlining back-office functions and improving overall processes. Institutionalizing these cost-management practices is designed to drive a competitive business model, long-term innovation and bottom-line growth. These cost-control initiatives allowed us to maintain consistent Adjusted EBITDA as a percentage of revenue from 2008 through 2010, despite a decrease in revenue of 6% during the same period.

2011 Debt Refinancing

In the first quarter 2011, we refinanced our senior secured credit facility, which resulted in a $59.3 million loss on the early extinguishment of debt, including a write-off of unamortized deferred financing fees of $49.8 million and a prepayment premium of $9.5 million. Our year-to-date 2011 net loss was directly attributable to this refinancing.

Key Components of Our Results of Operations

Revenue

We derive our revenue from three operating platforms within our USIS segment: Online Data Services, Credit Marketing Services and Decision Services. Revenue in Online Data Services is driven primarily by the volume of credit reports that our customers purchase. Revenue in Credit Marketing Services is driven primarily by demand for customer acquisition and portfolio review services. Revenue in Decision Services is driven primarily by demand for services that provide our customers with online, real-time, automated decisions at the point of consumer interaction.

We report our International segment revenue in two categories: developed markets and emerging markets. Our developed markets are Canada, Hong Kong and Puerto Rico. Our emerging markets include Africa, Latin America, East Asia and India.

 

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We derive revenue in our Interactive segment from both direct and indirect channels. Currently, our Interactive revenue is primarily subscription based.

Cost of Services

Costs of services include data acquisition and royalty fees, costs related to our databases and software applications, consumer and call center support costs, hardware and software maintenance costs, telecommunication expenses and occupancy costs associated with the facilities where these functions are performed.

Selling, General and Administrative

Selling, general and administrative expenses include personnel-related costs for sales, administrative and management employees, costs for professional and consulting services, advertising and occupancy and facilities expense of these functions.

Non-Operating Income and Expense

Non-operating income and expense includes interest expense, interest income, earnings from equity-method investments, dividends from cost-method investments and other non-operating income and expenses.

Results of Operations – Six Months Ended June 30, 2011 and 2010

Revenue

Total revenue increased $39.1 million for the six months ended June 30, 2011, compared to the same period in 2010. The increase in revenue was due to improving economic conditions, revenue from our recent acquisition in Chile, and the impact of strengthening foreign currencies in our International segment. Revenue by segment for the six-month period was as follows:

 

     Six Months Ended June 30,  

(dollars in millions)

       2011              2010          $ Change      % Change  

U.S. Information Services:

           

Online Data Services

   $ 222.1       $ 217.7       $ 4.4         2.0

Credit Marketing Services

     63.6         54.5         9.1         16.7

Decision Services

     39.5         39.2         0.3         0.8
  

 

 

    

 

 

    

 

 

    

Total U.S. Information Services

     325.2         311.4         13.8         4.4

International:

           

Developed markets

     43.5         42.3         1.2         2.8

Emerging markets

     61.4         49.9         11.5         23.0
  

 

 

    

 

 

    

 

 

    

Total International

     104.9         92.2         12.7         13.8

Interactive

     73.3         60.7         12.6         20.8
  

 

 

    

 

 

    

 

 

    

Total revenue

   $ 503.4       $ 464.3       $ 39.1         8.4
  

 

 

    

 

 

    

 

 

    

U.S. Information Services Segment

USIS revenue increased $13.8 million for the six months ended June 30, 2011, compared to the same period in 2010. The increase was primarily due to an increase in our customers’ credit marketing programs and improvements in Online Data Services that began in the second half of 2010.

Online Data Services. Online Data Services revenue increased $4.4 million for the six-month period compared to the same period in 2010, due to a 3.4% increase in online credit report unit volume, primarily in the financial services market, and an increase in the volume of other online services.

 

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Credit Marketing Services. Credit Marketing Services revenue increased $9.1 million for the six-month period compared to the same period in 2010, due to an increase in our customers’ credit marketing orders, with an increase in demand for custom data sets and archive information for both customer acquisition and portfolio review services.

Decision Services. Decision Services revenue increased $0.3 million for the six-month period compared to the same period in 2010. An increase in healthcare revenue was generally offset by a decrease in financial services revenue.

International Segment

International revenue increased $12.7 million, or 13.8%, for the six months ended June 30, 2011, compared to the same period in 2010. Of this increase, 6.6% was due to the impact of strengthening foreign currencies, 4.4% was due to revenue from our Chile acquisition and the remainder was due to higher revenue from increased volumes in most countries.

Developed Markets. Developed markets revenue increased $1.2 million, or 2.8%, for the six-month period compared to the same period in 2010, primarily due to the impact of a strengthening Canadian dollar and higher revenue from increased volume in Hong Kong, partially offset by lower revenue from a decrease in volume in Canada.

Emerging Markets. Emerging markets revenue increased $11.5 million, or 23.0%, for the six-month period compared to the same period in 2010. Of this increase, 8.2% was due to the impact of strengthening foreign currencies, primarily the South African rand, 8.3% was due to revenue from our acquisition in Chile and the remainder was due to higher revenue from increased volumes in Africa, Latin America and India. Approximately 72% of the emerging markets revenue for the six-month period ending June 30, 2011, was from South Africa.

Interactive Segment

Interactive revenue increased $12.6 million for the six months ended June 30, 2011, compared to the same period in 2010. This increase was primarily due to an increase in the average number of subscribers in both our direct and indirect channels.

Operating Expenses

Total operating expenses increased $10.2 million for the six months ended June 30, 2011, compared to the same period in 2010. This increase was primarily due to an increase in variable costs related to the increase in revenue, certain charges in our USIS segment discussed below, the impact of strengthening foreign currencies, higher labor costs and the inclusion of costs for our Chile operations, partially offset by lower stock-based compensation expense. Operating expenses for the six-month period were as follows:

 

     Six Months Ended June 30,  

(dollars in millions)

       2011              2010          $ Change     % Change  

Cost of services

   $ 212.1       $ 199.2       $ 12.9        6.5

Selling, general and administrative

     132.5         138.1         (5.6     (4.1 )% 

Depreciation and amortization

     43.2         40.3         2.9        7.2
  

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

   $ 387.8       $ 377.6       $ 10.2        2.7
  

 

 

    

 

 

    

 

 

   

 

 

 

Cost of Services

Cost of services increased $12.9 million for the six months ended June 30, 2011, compared to the same period in 2010. Overall cost of services in our International segment increased as a result of the impact of

 

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strengthening foreign currencies and the inclusion of costs from our acquisition in Chile. In addition, royalty expense and data costs increased $8.0 million as a result of the increased revenue across all segments. Labor-related costs, excluding stock-based compensation, increased $4.8 million, primarily in our USIS and International segment, as we continue to invest for future growth. In our USIS segment, a $3.6 million outsourcing vendor contract early termination fee and a $2.7 million software impairment and related restructuring charge increased cost of services. These increases were partially offset by a decrease in stock-based compensation expense due to a change in our stock-based compensation program and $8.0 million of additional stock-based compensation and related expenses incurred in 2010 from the Change in Control Transaction. See Note 2, “Change in Control,” of our audited and unaudited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction.

Selling, General and Administrative

Selling, general and administrative expenses decreased $5.6 million for the six months ended June 30, 2011, compared to the same period in 2010. This decrease was primarily due to lower stock-based compensation expense as a result of a change in our stock-based compensation program and $13.4 million of additional stock-based compensation and related expenses in 2010 from the Change in Control Transaction. See Note 2, “Change in Control,” of our audited and unaudited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction. These decreases were partially offset by a $5.6 million increase in labor-related costs, including the impact of foreign currency and costs attributable to our acquisition in Chile, but excluding the stock-based compensation discussed above, primarily in our USIS and International segments and our Corporate unit as we continue to invest for future growth.

Operating Income and Operating Margins

 

     Six Months Ended June 30,  

(dollars in millions)

           2011                     2010             $ Change     % Change  

Operating Income(1)

        

U.S. Information Services(2)

   $ 86.4      $ 76.6      $ 9.8        12.8

International(2)

     30.9        28.8        2.1        7.3

Interactive

     23.7        14.0        9.7        69.3

Corporate(2)

     (25.4     (32.7     7.3        22.3
  

 

 

   

 

 

   

 

 

   

Total operating income(2)

   $ 115.6      $ 86.7      $ 28.9        33.3
  

 

 

   

 

 

   

 

 

   
     2011     2010     Change(3)        

Operating Margin

        

U.S. Information Services

     26.6     24.6     2.0  

International

     29.5     31.2     (1.8 )%   

Interactive

     32.3     23.1     9.3  

Total operating margin

     23.0     18.7     4.3  

 

(1) 

For the six months ended June 30, 2011, operating income included an expense for a $3.6 million outsourcing vendor contract early termination fee and an expense for a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. Both of these expenses were recorded in our USIS segment. For the six months ended June 30, 2010, operating income included $21.4 million of accelerated stock-based compensation and related expenses resulting from the Change in Control Transaction that were recorded in each segment and Corporate as follows: USIS $12.2 million; International $2.6 million; Interactive $1.2 million; and Corporate $5.4 million.

(2) 

For the six months ended June 30, 2010, a $2.2 million legal settlement with a global vendor impacted segment and corporate operating income as follows: USIS a $1.9 million increase; International a $2.2 million increase; and Corporate a $1.9 million decrease.

(3) 

When comparing changes for margins, variance changes are based on a “basis point” change.

 

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Total operating income increased $28.9 million and operating margin increased 430 basis points for the six months ended June 30, 2011, compared to the same period in 2010. This increase was due to the increases in revenue that were partially offset by the increases in operating expense as discussed above. Margins for the USIS segment increased due to the increase in revenue and decrease in stock-based compensation, partially offset by an increase in labor costs and the impact of the outsourcing vendor contract early termination fee and the impairment and related restructuring charge. Margins for the International segment decreased as the increases in labor and product costs more than outweighed the increase in revenue. Margins for the Interactive segment increased due to the increase in revenue.

Non-Operating Income and Expense

 

     Six Months Ended June 30,  

(dollars in millions)

   2011     2010     $ Change     % Change  

Interest income

   $ 0.3      $ 0.7      $ (0.4     (57.1 )% 

Interest expense

     (64.3     (16.1     (48.2     (299.4 )% 

Other income and expense, net:

        

Acquisition fees

     (2.3     (28.0     25.7        91.8

Loan fees

     (60.2     (20.1     (40.1     (199.5 )% 

Earnings from equity method investments

     6.6        4.4        2.2        50.0

Loss on sale of investments

     —          (2.2     2.2        100.0

Dividends from cost method investments

     0.4        0.3        0.1        33.3

Other

     (0.7     (0.2     (0.5     (250.0 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expense, net

     (56.2     (45.8     (10.4     (22.7 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-operating income and expense

   $ (120.2   $ (61.2   $ (59.0     (96.4 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and expense, net, was significantly impacted by the Change in Control Transaction in June 2010 and by the senior secured credit facility refinancing transaction in February 2011. See Note 2, “Change in Control,” of our audited and unaudited consolidated financial statements and Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus.

Interest expense increased $48.2 million for the six months ended June 30, 2011, compared to the same period in 2010, primarily due to the new debt incurred in connection with the Change in Control Transaction in June 2010.

Loan fees were $60.2 million for the six months ended June 30, 2011, including a $59.3 million loss on the early extinguishment of debt consisting of a write-off of $49.8 million of previously unamortized deferred financing fees and a prepayment premium of $9.5 million as a result of refinancing our senior secured credit facility in February 2011. Loan fees also include commitment fees and amortization of deferred financing fees related to the undrawn portion of the lines of credit that were outstanding during the period.

Acquisition fees were $28.0 million for the six months ended June 30, 2010, primarily due to transaction fees for the Change in Control Transaction. Loan fees were $20.1 million for the six months ended June 30, 2010, primarily due to the Change in Control Transaction. These loan fees included a $10.0 million fee for the lenders’ commitment to provide a bridge loan for the transaction that we did not utilize and $8.9 million of previously unamortized deferred financing fees related to the senior unsecured loan facility that was repaid as part of the transaction. These loan fees also included commitment fees and amortization of deferred financing fees related to the undrawn portion of the lines of credit that were outstanding during the periods. Loss on sale of investments was $2.2 million for the six months ended June 30, 2010, primarily due to a $2.1 million loss realized on the cash settlement of the swap instrument we held as an interest rate hedge on the prior unsecured term loan that was repaid in connection with the Change in Control Transaction.

 

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Provision for Income Taxes

 

     Six Months Ended June 30,  
     2011     2010  

(in millions)

   $     %     $      %  

Income (loss) from continuing operations before income taxes

   $ (4.6     $ 25.5      

Provision (benefit) for income taxes at statutory rate

     (1.6     35.0     8.9         35.0

Change in Control Transaction costs

     (4.7     102.2     10.3         40.4

Credits and other

     (0.3     6.3     4.4         17.1
  

 

 

   

 

 

   

 

 

    

 

 

 

Total provision (benefit) for income taxes

   $ (6.6     143.5   $ 23.6         92.5
  

 

 

   

 

 

   

 

 

    

 

 

 

In connection with the Change in Control Transaction, we incurred significant costs which were expensed for GAAP accounting purposes under ACS 805, “Business Combinations.” Certain of these costs must be capitalized and are considered non-deductible for tax purposes, creating a permanent book-to-tax difference. During the second quarter of 2011, we completed our analysis of the non-deductible Change in Control Transaction expenses and determined that a portion of the expenses previously considered non-deductible did qualify for a tax deduction.

For the six months ended June 30, 2011, we reported a loss from continuing operations before income taxes and recorded a tax benefit related to the loss. The effective tax benefit rate for this period of 143.5% was higher than the U.S. federal statutory rate of 35% primarily due to the tax benefit from additional expense we are deducting after concluding our analysis of the deductibility of fees incurred in the Change in Control Transaction.

The effective tax expense rate for the six months ended June 30, 2010, of 92.5% was higher than the statutory 35% rate primarily due to the non-deductibility of certain Change in Control Transaction expenses and the limitation on foreign tax credits.

Discontinued Operations, Net of Tax

 

     Six Months Ended June 30,  

(dollars in millions)

   2011     2010      $ Change     % Change  

Discontinued operations, net of tax

   $ (0.5   $ 8.7       $ (9.2     (105.7 )% 

During the first quarter of 2010, we completed the sale of the remaining business comprising our real estate services business. During the second quarter of 2010, we completed the sale of our third-party collection business in South Africa to the existing minority shareholders. We will have no significant ongoing relationship with either of these businesses. Income for the six months ended June 30, 2010, included gains net of tax of $11.0 million on the final disposal of these businesses.

Significant Changes in Assets and Liabilities

Our balance sheet at June 30, 2011, as compared to December 31, 2010, was impacted by the following:

 

   

Net deferred income tax assets included in other current assets increased $18.9 million from year end 2010 primarily due to recording a deferred tax asset resulting from a domestic net operating loss through the first six months of 2011.

 

   

Deferred financing fees included in other current assets decreased $6.8 million from year end 2010 due to the refinancing of our senior secured credit facility. See Note 5, “Other Current Assets,” and Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus.

 

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Deferred financing fees included in other assets decreased $34.2 million from year end 2010 due to the refinancing of our senior secured credit facility. See Note 6, “Other Assets,” and Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus.

 

   

Other current liabilities decreased $19.7 million from year end 2010 due to the payment of 2010 accrued bonuses and employee benefits in the first quarter of 2011. See Note 7, “Other Current Liabilities,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus.

Results of Operations—Twelve Months Ended December 31, 2010, 2009 and 2008

Revenue

For 2010, total revenue increased $31.7 million compared to 2009, due to an increase in our customers’ credit marketing programs, revenue from our recent acquisitions, organic growth and strengthening foreign currencies in our International segment. For 2009, total revenue decreased $91.1 million compared to 2008, due to the decline in economic conditions and the global financial crisis. Revenue by segment and a more detailed explanation of revenue within each segment follows:

 

                          Change  
     Twelve months ended December 31,      2010 vs. 2009     2009 vs. 2008  

(dollars in millions)

         2010                2009              2008          $     %     $     %  

U.S. Information Services:

                 

Online Data Services

   $ 439.7       $ 458.6       $ 513.5       $ (18.9     (4.1 )%    $ (54.9     (10.7 )% 

Credit Marketing Services

     120.4         115.4         139.3         5.0        4.3     (23.9     (17.2 )% 

Decision Services

     75.9         53.5         55.5         22.4        41.9     (2.0     (3.6 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total U.S. Information Services

   $ 636.0       $ 627.5       $ 708.3       $ 8.5        1.4   $ (80.8     (11.4 )% 

International:

                 

Developed Markets

   $ 86.6       $ 79.4       $ 85.6       $ 7.2        9.1   $ (6.2     (7.2 )% 

Emerging Markets

     109.2         90.7         90.4         18.5        20.4     0.3        0.3
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total International

   $ 195.8       $ 170.1       $ 176.0       $ 25.7        15.1   $ (5.9     (3.4 )% 

Interactive

   $ 124.7       $ 127.2       $ 131.6       $ (2.5     (2.0 )%    $ (4.4     (3.3 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total revenue

   $ 956.5       $ 924.8       $ 1,015.9       $ 31.7        3.4   $ (91.1     (9.0 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

USIS Segment

For 2010, USIS revenue increased $8.5 million compared to 2009, due to an increase in our customers’ credit marketing programs and the inclusion of revenue from the MedData acquisition, partially offset by unfavorable conditions in the consumer credit markets. For 2009, USIS revenue decreased $80.8 million compared to 2008, due to the downturn in economic conditions and credit markets that affected all service lines.

Online Data Services. Online credit report unit volume decreased 1.7% in 2010 and 13.2% in 2009. For 2010 and 2009, decreases in volume in the financial services market, driven by unfavorable conditions in the consumer credit markets, were partially offset by increases in volume in the insurance market, resulting in a revenue decrease of $18.9 million in 2010 and $54.9 million in 2009.

Credit Marketing Services. For 2010, overall requests for Credit Marketing Services increased due to an increase in our customers’ credit marketing programs, with an increase in demand for custom data sets and archive information for both customer acquisition and portfolio review services, resulting in an increase in revenue of $5.0 million. For 2009, overall requests for Credit Marketing Services decreased due to the declining credit markets, with a decrease in demand for acquisition services partially offset by an increase in demand for portfolio review services, resulting in a decrease in revenue of $23.9 million.

 

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Decision Services. For 2010, $19.8 million of revenue from MedData and an increase in demand for other Decision Services resulted in an increase in revenue of $22.4 million. For 2009, demand for Decision Services decreased due to the declining consumer credit markets, resulting in a decrease in revenue of $2.0 million.

International Segment

For 2010, International revenue increased $25.7 million, or 15.1%, compared to 2009, due to an increase in local currency revenue in both developed and emerging markets, the impact of strengthening foreign currencies and the inclusion of the Chile revenue beginning in August 2010. Of this increase, 8.3% was due to the impact of strengthening foreign currencies and 1.7% was due to Chile. For 2009, International revenue decreased $5.9 million, or 3.4%, compared to 2008, primarily due to the impact of the strengthening U.S. dollar.

Developed Markets. For 2010, developed markets revenue increased $7.2 million, or 9.1%, compared to 2009. Of this increase, 6.1% was due to the impact of strengthening foreign currencies, primarily the Canadian dollar, with the remainder due to higher revenue from increased volumes in all countries. For 2009, developed markets revenue decreased $6.2 million, or 7.2%, compared to 2008. Of this decrease, 4.7% was due to weakening foreign currencies, primarily the Canadian dollar, with the remainder due to decreases in volume in Canada and Puerto Rico, partially offset by an increase in volume in Hong Kong.

Emerging Markets. For 2010, emerging markets revenue increased $18.5 million, or 20.4%, compared to 2009. Of this increase, 10.3% was due to the impact of strengthening foreign currencies, primarily the South African rand, and 3.3% was due to Chile with the remainder due to higher revenue from increased volumes in most regions. South Africa revenue comprised approximately 76% of the emerging markets revenue in 2010. For 2009, emerging markets revenue increased $0.3 million, or 0.3%, compared to 2008, with increases in volume in African and East Asian countries and India partially offset by a decrease in volume in Latin America and a 2.1% decrease due to the impact of weakening foreign currencies, primarily the South African rand.

Interactive Segment

For 2010, Interactive revenue decreased $2.5 million compared to 2009, due to an FTC rule that limits the way our industry is permitted to market services to individuals, partially offset by an increase in the average number of subscribers. For 2009, Interactive revenue decreased $4.4 million compared to 2008, primarily due to the loss of a significant number of indirect subscribers.

Operating Expenses

For 2010, total operating expenses increased $20.0 million compared to 2009, due to $20.7 million of stock-based compensation expense resulting from the Change in Control Transaction, $18.9 million of costs related to the MedData acquisition in our USIS segment, and $9.8 million from the impact of strengthening foreign currencies in our International segment, partially offset by cost reductions from our Operational Excellence program. For 2009, total operating expenses decreased $103.0 million compared to 2008, due to the $47.3 million litigation expense related to the Privacy Litigation that we settled in 2008, a decrease in product costs in our Interactive segment and other cost management initiatives that reduced operating expenses during 2009. Operating expenses for each year were as follows:

 

                          Change  
     Twelve months ended December 31,      2010 vs. 2009     2009 vs. 2008  

(dollars in millions)

         2010                2009              2008          $     %     $     %  

Cost of services

   $ 395.8       $ 404.2       $ 432.2       $ (8.4     (2.1 )%    $ (28.0     (6.5 )% 

Selling, general and administrative

     263.0         234.6         305.5         28.4        12.1     (70.9     (23.2 )% 

Depreciation and amortization

     81.6         81.6         85.7                       (4.1     (4.8 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total operating expenses

   $ 740.4       $ 720.4       $ 823.4       $ 20.0        2.8   $ (103.0     (12.5 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

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Cost of Services

For 2010, cost of services decreased $8.4 million compared to 2009, due to a reduction in data center maintenance costs in our USIS segment resulting from the renegotiation of our data center maintenance agreement, a reduction in royalty costs in our USIS and International segments due to the resolution of a contract dispute and a nonrecurring gain on the trade in of computer hardware in our USIS segment, partially offset by the inclusion of $6.4 million of costs related to our MedData acquisition in our USIS segment, $8.0 million of additional stock-based compensation and related expenses resulting from the Change in Control Transaction and the impact of strengthening foreign currencies in our International segment. For 2009, cost of services decreased $28.0 million compared to 2008 due to an $18.1 million decrease in product costs in the Interactive segment as a result of certain changes to our direct-to-consumer services, along with labor and other savings from our Operational Excellence program, mostly in our USIS segment.

Selling, General and Administrative

For 2010, selling, general and administrative costs increased $28.4 million compared to 2009, due to $13.4 million of additional stock-based compensation and related expense resulting from the Change in Control Transaction, the inclusion of $8.1 million of costs related to our MedData acquisition in our USIS segment, an increase in labor costs in our USIS and International segments as we continued to invest for future growth, the impact of strengthening foreign currencies in our International segment and an increase in advertising expense in our Interactive segment, partially offset by reductions from other cost management initiatives. For 2009, selling, general and administrative costs decreased $70.9 million compared to 2008, primarily due to $47.3 million of litigation expense in 2008 related to the Privacy Litigation that was recorded in our Corporate unit, a decrease in compensation costs in our USIS segment and Corporate unit, a reduction of professional fees in our International segment, and a reduction in various cost savings initiatives as part of our Operational Excellence program.

Depreciation and Amortization

For 2010, depreciation and amortization were flat compared to 2009 as the increase in MedData-related depreciation and amortization in our USIS segment was offset by a decrease in other depreciation and amortization resulting from lower capital expenditures in 2010 and 2009 compared to 2008. For 2009, depreciation and amortization decreased $4.1 million compared to 2008, due to a lower level of capital expenditures for the year.

Operating Income and Operating Margins

 

                       Change  
     Twelve months ended December 31,     2010 vs. 2009     2009 vs. 2008  

(dollars in millions)

         2010               2009             2008         $     %     $     %  

Operating income:

              

U.S. Information Services:

   $ 177.1      $ 164.2      $ 213.0      $ 12.9        7.9   $ (48.8     (22.9 )% 

International

     62.7        55.8        61.7        6.9        12.4     (5.9     (9.6 )% 

Interactive

     37.7        46.4        33.1        (8.7     (18.8 )%      13.3        40.2

Corporate

     (61.4     (62.0     (115.3     0.6        1.0     53.3        46.2
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total operating income

   $ 216.1      $ 204.4      $ 192.5      $ 11.7        5.7   $ 11.9        6.2
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Operating margin:

              

U.S. Information Services

     27.8     26.2     30.1        

International

     32.0     32.8     35.1        

Interactive

     30.2     36.5     25.2        

Total operating margin

     22.6     22.1     18.9        

 

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For 2010, consolidated operating income increased $11.7 million and operating margin increased by 50 basis points compared to 2009, due to the increase in revenue, partially offset by the increased stock-based compensation expense resulting from the Change in Control Transaction. Operating margin for the USIS segment increased due to the increase in revenue and decrease in royalty and data center maintenance costs and the nonrecurring gain on the trade in of computer hardware partially offset by an increase in stock-based compensation and other labor-related costs. Operating margin for the International segment decreased due to an increase in labor costs, including stock-based compensation, as we continued to invest for future growth, partially offset by the increase in revenue. Operating margin for the Interactive segment decreased due to the decrease in revenue and increase in advertising expense.

For 2009, consolidated operating income increased $11.9 million and operating margin increased by 320 basis points compared to 2008, due to the $47.3 million of Privacy Litigation expense in 2008 included in Corporate and a decrease in product and labor costs, partially offset by the decrease in revenue. Operating margin for the USIS segment decreased because a substantial portion of the expenses were fixed while revenue for the segment decreased. Operating margin for the International segment also decreased due to the decrease in revenue. Operating margin for the Interactive segment increased due to product feature changes that significantly reduced our product costs, partially offset by the decrease in revenue and an increase in advertising expense.

Non-Operating Income and Expense

 

                       Change  
     Twelve months ended December 31,     2010 vs. 2009     2009 vs. 2008  

(dollars in millions)

         2010               2009             2008         $     %     $     %  

Interest expense

   $ (90.1   $ (4.0   $ (0.9   $ (86.1     nm      $ (3.1     nm   

Interest income

     1.0        4.0        21.5        (3.0     (75.0 )%      (17.5     (81.4 )% 

Other income and (expense), net

     (44.0     1.3        (3.2     (45.3     nm        4.5        nm   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total non-operating income and expense

   $ (133.1   $ 1.3      $ 17.4      $ (134.4     nm      $ (16.1     nm   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

nm: not meaningful

Interest expense increased $86.1 million for 2010 due to the new debt incurred in connection with the Change in Control Transaction. Interest expense increased $3.1 million for 2009 due to new debt incurred in connection with the December 2009 stock repurchase. See “—Liquidity and Capital Resources—Stock Repurchases.”

Interest income decreased $3.0 million for 2010 and $17.5 million for 2009, due to falling interest rates and a lower balance of investable funds. The decrease in investable funds was due to cash used for the stock repurchases made during the fourth quarter of 2008 and 2009 as discussed in Note 14, “Earnings Per Share,” of our audited consolidated financial statements appearing elsewhere in this prospectus, and cash used to fund the Change in Control Transaction.

For 2010, other income and expense resulted in a net increase in expense of $45.3 million compared to 2009. For 2010, other income and expense included $28.7 million of acquisition fees and $20.5 million of loan fees primarily due to the new debt used to fund a portion of the Change in Control Transaction. Loan fees included a $10.0 million fee for the lender’s commitment to provide a bridge loan for the Change in Control Transaction that we did not utilize, and $8.9 million of previously unamortized deferred financing fees related to the senior unsecured credit facility that was repaid as part of the Change in Control Transaction. The loan fees also included $2.7 million of commitment fees and amortization of deferred financing fees related to the undrawn portion of the senior secured revolving line of credit that was outstanding in 2010. Other income and expense also included a $2.1 million loss realized on the settlement of the swap instruments we held as an interest rate hedge on our old senior unsecured credit facility that was repaid in connection with the Change in Control

 

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Transaction. See Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus. For 2010, other income and expense also included a $3.1 million increase in income from unconsolidated affiliates.

For 2009, other income and expense resulted in a net increase in income of $4.5 million compared to 2008. For 2009, other income and expense included $3.4 million of acquisition expenses, primarily related to the MedData acquisition as discussed in Note 19, “Business Acquisitions,” of our audited consolidated financial statements appearing elsewhere in this prospectus. For 2009, other income and expense also included $5.3 million of income from unconsolidated affiliates. For 2008, other income and expense included a $7.7 million impairment charge taken on marketable securities and $2.9 million of realized foreign exchange losses, partially offset by $6.6 million of income from unconsolidated affiliates.

Provision for Income Taxes

 

     Twelve Months Ended December 31,  

(dollars in millions)

   2010     2009     2008  

Income taxes at 35% statutory rate

   $ 29.0        35.0   $ 71.8        35.0   $ 73.4        35.0 %

Increase (decrease) resulting from:

            

State taxes net of federal income tax benefit

     (1.6     (2.0 )%      1.8        0.9     1.4        0.7

Foreign rate differential

     (0.2     (0.2 )%      (2.1     (1.1 )%      (0.5     (0.3 )%

Nondeductible Change in Control Transaction expenses

     9.5        11.4                            

Credits and other

     9.6        11.6     1.9        0.9     1.2        0.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total provision and effective rate

   $ 46.3        55.8   $ 73.4        35.7   $ 75.5        36.0 %
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

For 2010, the decrease in the provision for income taxes was due to the costs incurred for the Change in Control Transaction and the increase in interest expense resulting from the new debt. The increase in the 2010 effective tax rate was primarily due to the nondeductible expenses related to the Change in Control Transaction and the limitation on our foreign tax credit. For 2010, credits and other included a limitation on our foreign tax credit of $6.1 million, or 7.3%, resulting from increased interest expense. There were no other significant items included in the 2010 credits and other. The change in state taxes, net of federal benefit, between 2010 and 2009 was primarily due to changes in state apportionment factors in our state tax combined filings. The change in the foreign rate differential between 2010 and 2009 was primarily due to recording a valuation allowance against foreign tax loss carryforwards. For 2009, the provision and effective tax rate were relatively flat compared to 2008.

Discontinued Operations, Net of Tax

 

                         Change  
     Twelve months ended December 31,     2010 vs. 2009      2009 vs. 2008  

(dollars in millions)

         2010                2009              2008         $      $  

Discontinued operations, net of tax

   $ 8.2       $ 1.2       $ (15.9   $ 7.0       $ 17.1   

Revenue for the discontinued real estate services operations was $3.7 million in 2010, $18.8 million in 2009 and $44.8 million in 2008. Net income from these discontinued operations for 2010 included an operating loss of $2.7 million and a gain on the final disposal of the business of $5.2 million. Net income from these discontinued operations included operating income of $1.5 million in 2009. For 2008, net income from these discontinued operations included an operating loss of $2.8 million and $13.1 million of tax expense resulting from the recognition of a valuation allowance against the deferred tax asset recognized for the impairment and sale of the segment.

 

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Revenue for the discontinued South Africa collection business was $1.3 million in 2010, $4.2 million in 2009 and $5.9 million in 2008. Net income from these discontinued operations included income of $5.7 million in 2010 and losses of $0.3 million in 2009 and less than $0.1 million in 2008. The 2010 gain included an operating loss of less than $0.1 million and a gain of $3.7 million, $5.7 million after tax benefit, on the final disposal of this business.

See Note 20, “Discontinued Operations,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

Significant Changes in Assets and Liabilities

Our balance sheet at December 31, 2010, as compared to December 31, 2009, was impacted by the following:

 

   

The balance of current and long-term debt increased $1,014.7 million from December 31, 2009, primarily to fund the Change in Control Transaction. See Note 2, “Change in Control,” and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

   

The balance of retained earnings and treasury stock decreased from December 31, 2009, primarily due to the Change in Control Transactions and the retirement of all treasury stock. The Change in Control Transaction was accounted for as a recapitalization of the Company in accordance with ASC 805, Business Combinations, resulting in an adjustment in retained earnings and no adjustment to the carrying value of our assets. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

   

The balance in other assets increased $58.4 million from December 31, 2009, primarily due to a net increase of $49.2 million in deferred financing fees related to the Change in Control Transaction and from the purchase of an additional equity interest in an unconsolidated subsidiary in India. See Note 8, “Other Assets,” and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

   

The balance of short-term and other marketable securities decreased $116.8 million from December 31, 2009, due to the sale and redemption of our auction rate securities. The proceeds from the sale of $25.0 million of auction rate securities that we sold at par to an entity owned by Pritzker family business interests were used to partially fund the Change in Control Transaction. See Note 2, “Change in Control,” Note 4, “Marketable Securities,” and Note 13, “Debt,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

   

The balances of total current assets and liabilities of discontinued operations as of December 31, 2010, decreased from December 31, 2009, due to the sale of our title insurance business and the third-party collection business in South Africa. See Note 20, “Discontinued Operations,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

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Quarterly Results of Operations

The following tables set forth unaudited consolidated results of operations and Adjusted EBITDA for each of the four quarters of 2009, the four quarters of 2010 and the first two quarters of 2011. The unaudited consolidated results of operations have been prepared on the same basis as our audited consolidated financial statements, and, in our opinion, reflect all adjustments, including normal recurring adjustments, necessary to present fairly in all material respects our results of operations for the periods presented. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. Additionally, our historical results are not necessarily indicative of the results expected for any future period.

 

    Three Months Ended  

(in millions, except per share data)

  Jun 30,
2011
    Mar 31,
2011
    Dec 31,
2010
    Sep 30,
2010
    Jun 30,
2010
    Mar 31,
2010
    Dec 31,
2009
    Sep 30,
2009
    Jun 30,
2009
    Mar 31,
2009
 

Revenue

  $ 257.5      $ 245.9      $ 245.4      $ 246.8      $ 237.4      $ 227.0      $ 224.2      $ 231.6      $ 235.9      $ 233.1   

Operating expenses

                   

Cost of services

    110.5        101.7        96.2        100.5        100.1        99.1        102.0        100.0        102.8        99.4   

Selling, general and administrative

    65.0        67.4        65.2        59.6        76.6        61.6        58.3        54.1        62.7        59.5   

Depreciation and amortization

    21.5        21.7        20.8        20.5        20.1        20.2        20.1        19.7        20.6        21.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    197.0        190.8        182.2        180.6        196.8        180.9        180.4        173.8        186.1        180.1   

Operating income

    60.5        55.1        63.2        66.2        40.6        46.1        43.8        57.8        49.8        53.0   

Non-operating income and expense

                   

Interest expense

    (30.7     (33.6 )     (37.1 )     (37.0 )     (10.8 )     (5.3 )     (3.1 )     (0.4 )     (0.2 )     (0.3 )

Interest income

    0.1        0.2        0.3        0.1        0.3        0.3        1.1        0.8        0.8        1.3   

Other income and expense, net(1)

    2.6        (58.9 )     1.9        (0.1 )     (46.6 )     0.8        (2.8 )     1.6        1.2        1.3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expense

    (28.0     (92.3 )     (34.9 )     (37.0 )     (57.1 )     (4.2 )     (4.8 )     2.0        1.8        2.3   

Income (loss) from continuing operations before income taxes

    32.5        (37.2 )     28.3        29.2        (16.5 )     41.9        39.0        59.8        51.6        55.3   

(Provision) benefit for income taxes

    (7.3     13.9        (10.9 )     (11.8 )     (8.5 )     (15.1 )     (12.0 )     (22.2 )     (17.9 )     (21.4 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

    25.2        (23.3 )     17.4        17.4        (25.0 )     26.8        27.0        37.6        33.7        33.9   

Discontinued operations, net of tax

    (0.3     (0.1 )     (0.4 )            12.8        (4.2 )     0.1        2.8        (0.6 )     (1.1 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    24.9        (23.4 )     17.0        17.4        (12.2 )     22.6        27.1        40.4        33.1        32.8   

Less: net income attributable to noncontrolling interests

    (2.0     (2.1 )     (2.1 )     (2.3 )     (2.0 )     (1.8 )     (1.8 )     (2.4 )     (1.6 )     (2.2 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to TransUnion Corp.

  $ 22.9      $ (25.5 )   $ 14.9      $ 15.1      $ (14.2 )   $ 20.8      $ 25.3      $ 38.0      $ 31.5      $ 30.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

For the three months ended March 31, 2011, as a result of refinancing our senior secured credit facility in February 2011, other income and expense included a $59.3 million loss on the early extinguishment of debt consisting of a write-off of $49.8 million of previously unamortized deferred financing fees and a prepayment premium of $9.5 million as a result of refinancing our senior secured credit facility in February 2011. See Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus. For the three months ended June 30, 2010, other income and expense included $27.4 million of acquisition fees and $19.5 million of loan fees primarily related to the Change in Control Transaction. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus.

 

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Adjusted EBITDA is a non-GAAP measure. For a further discussion of our definition of Adjusted EBITDA, how we use it, why we present it and material limitations on its usefulness, see “Prospectus Summary—Summary Historical Consolidated Financial Data.” The reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, net income (loss) attributable to TransUnion Corp., is included in the table below.

 

    Three Months Ended  
    Jun 30,
2011
    Mar 31,
2011
    Dec 31,
2010
    Sep 30,
2010
    Jun 30,
2010
    Mar 31,
2010
    Dec 31,
2009
    Sep 30,
2009
    Jun 30,
2009
    Mar 31,
2009
 

Net income attributable to TransUnion Corp.

  $ 22.9      $ (25.5 )   $ 14.9      $ 15.1      $ (14.2 )   $ 20.8      $ 25.3      $ 38.0      $ 31.5      $ 30.6   

Discontinued operations

    0.3        0.1        0.4               (12.8 )     4.2        (0.1 )     (2.8 )     0.6        1.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income (loss) from continuing operations attributable to TransUnion Corp.

    23.2        (25.4 )     15.3        15.1        (27.0 )     25.0        25.2        35.2        32.1        31.7   

Net interest expense (income)

    30.6        33.4        36.8        36.9        10.5        5.0        2.0        (0.4 )     (0.6 )     (1.0 )

Income taxes

    7.3        (13.9 )     10.9        11.8        8.5        15.1        12.0        22.2        17.9        21.4   

Depreciation and amortization

    21.5        21.7        20.8        20.5        20.1        20.2        20.1        19.7        20.6        21.2   

Stock-based compensation

    1.2        1.2        1.2        1.1        3.4        5.1        4.1        3.4        3.3        5.3   

Other (income) and expense (1)

    1.1        62.3        1.3        1.2        49.7        0.7        4.6        (0.2 )     (0.1 )     0.2   

Adjustments(2)

    6.3               (3.9 )            21.4                                      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 91.2      $ 79.3      $ 82.4      $ 86.6      $ 86.6      $ 71.1      $ 68.0      $ 79.9      $ 73.2      $ 78.8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Other income and expense above includes all amounts included on our consolidated statement of income in other income and expense, net, except for earnings from equity method investments and dividends received from cost method investments. For the three months ended March 31, 2011, as a result of refinancing our senior secured credit facility in February, 2011, other income and expense included a $59.3 million loss on the early extinguishment of debt consisting of a write-off of $49.8 million of previously unamortized deferred financing fees and a prepayment premium of $9.5 million as a result of refinancing our senior secured credit facility in February 2011 and $3.0 million of other income and expense. See Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus for further information about the refinancing. For the three months ended June 30, 2010, other income and expense included $27.4 million of acquisition fees and $19.5 million of loan fees primarily related to the Change in Control Transaction, and $2.8 million of other income and expense. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control Transaction.

(2) 

For the three months ended June 30, 2011, adjustments included a $3.6 million outsourcing vendor contract early termination fee and a $2.7 million software impairment and related restructuring charge due to a regulatory change requiring a software platform replacement. Both of these expenses were recorded in our USIS segment. For the three months ended December 31, 2010, adjustments included a $3.9 million nonrecurring gain on the trade in of mainframe computers recorded in our USIS segment. For the three months ended June 30, 2010, adjustments included $21.4 million of accelerated stock-based compensation and related expenses resulting from the Change in Control Transaction that were recorded in each segment and Corporate as follows: USIS $12.2 million; International $2.6 million; Interactive $1.2 million; and Corporate $5.4 million. See Note 2, “Change in Control,” and Note 16, “Stock-Based Compensation,” of our audited consolidated financial statements appearing elsewhere in this prospectus for further information about the impact of the Change in Control transaction.

 

 

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Liquidity and Capital Resources

Overview

Our principal sources of liquidity are cash flows provided by operating activities, cash and cash equivalents on hand, and our senior secured revolving line of credit. Our principal uses of liquidity are working capital, capital expenditures, debt service and other general corporate purposes. We believe our cash on hand, cash generated from operations, and funds available under our senior secured revolving line of credit will be sufficient to finance our liquidity requirements for the foreseeable future. We may, however, elect to raise funds through debt or equity financing in the future to fund significant investments or acquisitions that are consistent with our growth strategy.

Cash and cash equivalents totaled $122.8 million at June 30, 2011, of which $61.3 million was held outside the United States. Cash and cash equivalents totaled $131.2 million at December 31, 2010, of which $48.3 million was held outside the United States. The funds held outside the United States are intended to be permanently reinvested in operations outside of the United States and are not needed to fund our current or expected domestic operations. Repatriation of these foreign amounts would result in the accrual and payment of additional U.S. tax. Typically our first quarter cash flows each year are lower than other quarters due to the timing of compensation-related payments. As of June 30, 2011, we had no outstanding borrowings under our senior secured revolving line of credit and could borrow up to the full amount. Beginning in 2013, under the senior secured term loan we will be required to make additional principal payments based on the previous year’s excess cash flows. See Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus for additional information.

Sources and Uses of Cash

 

    Six Months Ended
June  30,
          Twelve Months Ended December 31,     2010 vs.
2009
    2009 vs.
2008
 

(dollars in millions)

  2011     2010     $ Change     2010     2009     2008     $ Change     $ Change  
    (Unaudited)                                      

Cash provided by operating activities of continuing operations

  $ 57.6      $ 84.6      $ (27.0   $ 204.6      $ 251.8      $ 230.4      $ (47.2 )   $ 21.4   

Cash used in operating activities of discontinued operations

    (1.3     (4.2 )     2.9        (4.2 )     (7.5 )     (10.0 )     3.3        2.5   

Cash (used in) provided by investing activities

    (41.3 )     103.3        (144.6 )     70.4        (134.7 )     169.4        205.1        (304.1 )

Cash used in financing activities

    (23.0 )     (256.8 )     233.8        (290.5 )     (337.3 )     (424.3 )     46.8        87.0   

Effect of exchange rate changes on cash and cash equivalents

    (0.4 )     (0.3     (0.1 )     1.8        4.0        (7.6 )     (2.2 )     11.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net change in cash and cash equivalents

  $ (8.4 )   $ 73.4      $ 65.00      $ (17.9 )   $ (223.7 )   $ (42.1 )   $ 205.8      $ (181.6 )
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Activities

Cash provided by operating activities decreased $27.0 million, from $84.6 million for the six months ended June 30, 2010, to $57.6 million for the six months ended June 30, 2011. The decrease in cash provided was primarily due to additional interest expense paid on our debt, partially offset by less cash used for working capital as a result of more aggressively managing our vendor payments. Cash provided by operating activities decreased $47.2 million in 2010, from $251.8 million in 2009 to $204.6 million in 2010. The decrease was primarily due to an increase in cash interest expense and accounts receivable, partially offset by a decrease in cash taxes paid.

 

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Investing Activities

Cash used in investing activities increased $144.6 million, from a source of cash of $103.3 million for the six months ended June 30, 2010, to a use of cash of $41.3 million for the six months ended June 30, 2011. The increase in cash used was primarily due to lower net proceeds from the sale of available-for-sale securities and higher capital expenditures. Cash provided by investing activities increased $205.1 million in 2010, from a use of cash of $134.7 million in 2009 to a source of cash of $70.4 million in 2010. The increase was due to an increase in the proceeds from the sale of available-for-sale securities, a decrease in acquisitions and purchases of noncontrolling interests, proceeds from the sale of the assets of discontinued operations and a decrease in capital expenditures.

Financing Activities

Cash used in financing activities decreased $233.8 million, from $256.8 million for the six months ended June 30, 2010, to $23.0 million for the six months ended June 30, 2011. The decrease in cash used was primarily due to the net cash used to finance the Change in Control Transaction in 2010. Cash used in financing activities decreased $46.8 million in 2010, from $337.3 million in 2009 to $290.5 million in 2010. The decrease was primarily because we used more cash on hand to fund the 2009 stock repurchase than we did to finance our recapitalization in connection with the Change in Control Transaction.

Capital Expenditures

 

     Six Months Ended June 30,      Twelve Months Ended December 31,  

(dollars in millions)

           2011                      2010                  2010              2009              2008      
     Unaudited                       

Cash capital expenditures

   $ 38.9       $ 19.0       $ 46.8       $ 56.3       $ 93.5   

We make capital expenditures to grow our business by developing new and enhanced capabilities, to increase our effectiveness and efficiency and to reduce risks. Our capital expenditures include product development, disaster recovery, security enhancements, regulatory compliance, and the replacement and upgrade of existing equipment at the end of its useful life.

For the six-month period, cash paid for capital expenditures increased $19.9 million, from $19.0 million for the six months ended June 30, 2010, to $38.9 million for the six months ended June 30, 2011. The increase included $18.8 million paid in the first quarter of 2011 for assets purchased and accrued for in the fourth quarter of 2010. Adjusting for these assets, we expect total capital expenditures for 2011 to be comparable to 2010.

Cash paid for capital expenditures decreased $9.5 million from $56.3 million in 2009, to $46.8 million in 2010. On an accrual basis, our capital expenditures were $65.2 million in 2010 compared to $59.2 million in 2009. In 2009, we incurred higher capital expenditures to continue to upgrade infrastructure and ensure high system availability by enhancing system redundancy. In 2010, these initiatives continued, but at a slower pace.

Cash paid for capital expenditures decreased $37.2 million from $93.5 million in 2008, to $56.3 million in 2009. In 2008, our capital expenditures included significant expenditures to upgrade our infrastructure, ensure high availability and develop internal software to position us for future growth. These expenditures continued in 2009, but at a slower pace.

Debt

Senior Secured Credit Facility

In connection with the Change in Control Transaction, on June 15, 2010, we entered into a senior secured credit facility with various lenders. On February 10, 2011, we amended and restated our senior secured credit facility (as amended and restated, our “new credit facility”). We repaid and extinguished the original senior

 

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secured term loan and borrowed new funds under the new senior secured term loan. We also replaced the senior secured revolving line of credit.

The new credit facility consists of a seven-year $950.0 million senior secured term loan and a five-year $200.0 million senior secured revolving line of credit. Interest rates on the borrowings are based, at our election, on LIBOR or an alternate base rate, subject to a floor, plus an applicable margin based on our senior secured net leverage ratio. There is a commitment fee payable quarterly, based on the undrawn portion of the revolving line of credit. With certain exceptions, the obligations are secured by a first-priority security interest in substantially all of the assets of Trans Union LLC, which is our principal operating subsidiary, including the capital stock of Trans Union LLC and certain subsidiaries. The new credit facility contains various restrictive covenants. The restrictive covenants include restrictions on dividends, investments, indebtedness, liens, dispositions, future borrowings and other restricted payments. See “Description of Certain Indebtedness—Senior Secured Credit Facility.” As of June 30, 2011, we were in compliance with all of the loan covenants.

Our senior secured revolving line of credit includes a senior secured net leverage ratio covenant as a condition to borrowing and as of the end of any fiscal quarter for which we have line of credit borrowings outstanding. This covenant requires us to maintain a senior secured net leverage ratio on a pro forma basis equal to, or less than, 4.50 to 1, reducing for certain periods after January 1, 2012. Although we were not subject to the covenant at June 30, 2011, because we did not have borrowings outstanding on our senior secured revolving line of credit, our senior secured net leverage ratio as of June 30, 2011, was 2.32 to 1. The senior secured net leverage ratio is the ratio of consolidated total net debt to consolidated EBITDA for the trailing twelve months as defined in the credit agreement governing our senior secured credit facility (“Covenant EBITDA”). Covenant EBITDA for the trailing twelve-month period ended June 30, 2011, totaled $355.0 million. The difference between Covenant EBITDA and Adjusted EBITDA totaled $15.6 million for the trailing twelve-month period ended June 30, 2011, and consisted of adjustments for noncontrolling interests, equity investments and other adjustments as defined in the credit agreement governing our senior secured credit facility.

Under the term loan, we are required to make principal payments of 0.25% of the original principal balance at the end of each quarter, with the remaining principal balance due February 10, 2018. We will also be required to make additional principal payments beginning in 2013, of between zero and fifty percent of the prior year’s excess cash flows with such percentage determined based on the net leverage ratio as of the end of such prior year. Under the revolving line of credit, the first $25 million commitment expires June 15, 2015, and the remaining $175 million commitment expires February 10, 2016. We did not borrow or repay any funds under our revolving line of credit during the six months ended June 30, 2011.

Senior Notes

In connection with the Change in Control Transaction, on June 15, 2010, Trans Union LLC and its wholly-owned subsidiary TransUnion Financing Corporation sold $645.0 million of senior notes. The senior notes mature on June 15, 2018, and accrue interest at a fixed rate of 11.375% per annum, payable semi-annually. The indenture governing our senior notes contains restrictive covenants, including restrictions on dividends, investments, indebtedness, liens, dispositions, future borrowings and other restricted payments. See “Description of Certain Indebtedness—Senior Notes.” As of June 30, 2011, we were in compliance with all covenants under the indenture.

RFC Loan

On June 15, 2010, we borrowed $16.7 million under the foreign cash loan (the “RFC Loan”) to finance a portion of the Change in Control Transaction. See Note 2, “Change in Control,” of our audited consolidated financial statements appearing elsewhere in this prospectus. The loan is an unsecured, non-interest bearing note, of which $2.5 million of the $16.7 million borrowed is treated as imputed interest. The loan comes due December 15, 2018, with prepayments of principal due annually based on foreign excess cash flows. Interest expense is calculated under the effective interest method using an imputed interest rate of 11.625%.

 

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Secured Line of Credit

In the first quarter of 2009, we entered into a line of credit agreement with UBS and borrowed $106.4 million, which was equal to the full par value of the auction rate securities held by us at UBS at that time. During 2009, payments totaling $17.3 million were made towards this loan. During 2010, the balance of this loan was repaid in full.

Senior Unsecured Credit Facility and Interest Rate Swap

On November 16, 2009, we entered into a senior unsecured credit facility with JPMorgan Chase Bank, N.A and various lenders and borrowed $500.0 million to fund the purchase of our common stock. On November 19, 2009, we entered into swap agreements with financial institutions that effectively fixed the interest payments on a portion of our old senior unsecured credit facility at 1.53%, plus the applicable margin on the loan. In connection with the Change in Control Transaction, on June 15, 2010, we repaid the remaining balance of our senior unsecured credit facility and cash settled the swap instruments, realizing a $2.1 million loss that was included in other expense.

Effect of Certain Debt Covenants

A breach of any of the covenants under the agreements governing our indebtedness could limit our ability to borrow funds under our senior secured revolving line of credit and could result in a default under the senior secured credit facility or the senior notes. Upon the occurrence of an event of default under our senior secured credit facility or our senior notes, the lenders or the holders of our senior notes, as the case may be, could elect to declare all amounts outstanding under the applicable indebtedness to be immediately due and payable, and the lenders could terminate all commitments to extend further credit under our secured credit facility. If we were unable to repay those amounts, the lenders could proceed against any collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under the senior secured credit facility. If the lenders under the senior secured credit facility accelerate the repayment of borrowings or the holders of our senior notes accelerate repayment of our senior notes, we may not have sufficient assets to repay the senior secured credit facility and our other indebtedness, including the senior notes.

TransUnion Corp. is a holding company and conducts substantially all of its operations through subsidiaries that own substantially all of its consolidated assets. Consequently, our ability to meet our liquidity needs or to pay dividends on our common stock depends in large part upon the ability of our subsidiaries to pay dividends or make distributions to us, which in turn depends on our subsidiaries’ earnings, the terms of their indebtedness, business and tax considerations and legal and other contractual restrictions. Trans Union LLC, the borrower under our senior secured credit facility and the co-issuer of our senior notes, is not permitted to declare any dividend or make any payment or other distribution, subject to certain exceptions, including:

 

   

compliance with a fixed charge coverage ratio and a basket that depends on our consolidated net income; and

 

   

certain distributions and dividends for the payment of taxes, fees, compensation obligations and general corporate operating and overhead costs, among other things.

The continued operation and expansion of our business along with the funding of our debt obligations will limit our ability to pay dividends. We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and to service our debt and, therefore, do not intend to pay cash dividends in the foreseeable future. See “Dividend Policy.”

For additional information about our indebtedness, see “Description of Certain Indebtedness,” Note 13, “Debt,” of our audited consolidated financial statements and Note 9, “Debt,” of our unaudited consolidated financial statements appearing elsewhere in this prospectus.

 

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Contractual Obligations

Future minimum payments for noncancelable operating leases, purchase obligations and debt repayments as of December 31, 2010, are payable as follows:

 

(in millions)

   Operating
leases
     Purchase
obligations
     Debt
repayments
     Loan fees
and interest
payments
     Total  

2011

   $ 10.3       $ 118.0       $ 15.1       $ 138.3       $ 281.7   

2012

     8.2         37.8         10.4         137.2         193.6   

2013

     6.2         10.6         9.5         135.3         161.6   

2014

     5.1         7.7         9.5         134.9         157.2   

2015

     3.6         7.3         9.5         133.9         154.3   

Thereafter

     12.2