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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
 
   
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
- OR -
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number:
001-37470
 
 
TransUnion
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
61-1678417
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
555 West Adams,
Chicago,
IL
 
60661
(Address of principal executive offices)
 
(Zip code)
312-985-2000
(Registrants’ telephone number, including area code)
 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock,
$0.01 par value
 
TRU
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
 
Large Accelerated Filer
Accelerated Filer
 
Non-Accelerated Filer
Smaller Reporting Company
 
 
 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes
No
 
As of June 30, 2019, there were 187.8 million shares of TransUnion common stock outstanding.





Table of Contents

TRANSUNION
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNE 30, 2019
TABLE OF CONTENTS
 
 
Page
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

2

Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSUNION AND SUBSIDIARIES
Consolidated Balance Sheets
(in millions, except per share data)
 
 
June 30,
2019
 
December 31,
2018
 
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
194.7

 
$
187.4

Trade accounts receivable, net of allowance of $16.3 and $13.5
 
489.2

 
456.8

Other current assets
 
185.7

 
136.5

Current assets of discontinued operations
 

 
60.8

Total current assets
 
869.6

 
841.5

Property, plant and equipment, net of accumulated depreciation and amortization of $410.6 and $366.2
 
215.1

 
220.3

Goodwill
 
3,352.5

 
3,293.6

Other intangibles, net of accumulated amortization of $1,347.0 and $1,206.7
 
2,449.4

 
2,548.1

Other assets
 
240.7

 
136.3

Total assets
 
$
7,127.3

 
$
7,039.8

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Trade accounts payable
 
$
178.7

 
$
169.9

Short-term debt and current portion of long-term debt
 
86.4

 
71.7

Other current liabilities
 
310.6

 
284.1

Current liabilities of discontinued operations
 

 
22.8

Total current liabilities
 
575.7

 
548.5

Long-term debt
 
3,831.5

 
3,976.4

Deferred taxes
 
461.3

 
478.0

Other liabilities
 
150.3

 
54.7

Total liabilities
 
5,018.8

 
5,057.6

Stockholders’ equity:
 
 
 

Common stock, $0.01 par value; 1.0 billion shares authorized at June 30, 2019 and December 31, 2018, 192.6 million and 190.0 million shares issued at June 30, 2019 and December 31, 2018, respectively, and 187.8 million shares and 185.7 million shares outstanding as of June 30, 2019 and December 31, 2018, respectively
 
1.9

 
1.9

Additional paid-in capital
 
1,976.4

 
1,947.3

Treasury stock at cost; 4.8 million and 4.2 million shares at June 30, 2019 and December 31, 2018, respectively
 
(177.1
)
 
(139.9
)
Retained earnings
 
506.1

 
363.1

Accumulated other comprehensive loss
 
(296.2
)
 
(282.7
)
Total TransUnion stockholders’ equity
 
2,011.1

 
1,889.7

Noncontrolling interests
 
97.4

 
92.5

Total stockholders’ equity
 
2,108.5

 
1,982.2

Total liabilities and stockholders’ equity
 
$
7,127.3

 
$
7,039.8


See accompanying notes to unaudited consolidated financial statements.

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TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
(in millions, except per share data)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2019
 
2018
 
2019

2018
Revenue
 
$
661.9

 
$
563.1

 
$
1,281.2

 
$
1,100.5

Operating expenses
 
 
 
 
 
 
 
 
Cost of services (exclusive of depreciation and amortization below)
 
216.2

 
189.1

 
424.3

 
371.4

Selling, general and administrative
 
196.7

 
171.6

 
392.4

 
334.9

Depreciation and amortization
 
89.2

 
68.0

 
182.7

 
134.6

Total operating expenses
 
502.2

 
428.7

 
999.4

 
840.9

Operating income
 
159.7

 
134.4

 
281.8

 
259.6

Non-operating income and (expense)
 
 
 
 
 
 
 
 
Interest expense
 
(45.2
)
 
(25.9
)
 
(90.2
)
 
(48.5
)
Interest income
 
1.8

 
1.4

 
3.3

 
2.1

Earnings from equity method investments
 
3.3

 
2.9

 
7.1

 
5.2

Other income and (expense), net
 
26.7

 
(39.7
)
 
19.9

 
(42.3
)
Total non-operating income and (expense)
 
(13.4
)
 
(61.3
)
 
(59.9
)
 
(83.5
)
Income from continuing operations before income taxes
 
146.3

 
73.1

 
221.8

 
176.1

Provision for income taxes
 
(39.4
)
 
(15.8
)
 
(39.9
)
 
(43.5
)
Income from continuing operations
 
107.0

 
57.3

 
181.9

 
132.6

Discontinued operations, net of tax
 
(3.0
)
 

 
(4.6
)
 

Net income
 
104.0

 
57.3

 
177.3

 
132.6

Less: net income attributable to the noncontrolling interests
 
(2.5
)
 
(2.3
)
 
(4.9
)
 
(4.5
)
Net income attributable to TransUnion
 
$
101.5

 
$
55.0

 
$
172.4

 
$
128.1

 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
107.0

 
$
57.3

 
$
181.9

 
$
132.6

Less: income from continuing operations attributable to noncontrolling
interests
 
(2.5
)
 
(2.3
)
 
(4.9
)
 
(4.5
)
Income from continuing operations attributable to TransUnion
 
104.5

 
55.0

 
177.0

 
128.2

Discontinued operations, net of tax
 
(3.0
)
 

 
(4.6
)
 

Net income attributable to TransUnion
 
$
101.5

 
$
55.0

 
$
172.4

 
$
128.1

 
 
 
 
 
 
 
 
 
Basic earnings per common share from:
 
 
 


 



 
Income from continuing operations attributable to TransUnion
 
$
0.56

 
$
0.30

 
$
0.95

 
$
0.70

Discontinued operations, net of tax
 
(0.02
)
 

 
(0.02
)
 

Net Income attributable to TransUnion
 
$
0.54

 
$
0.30

 
$
0.92

 
$
0.70

Diluted earnings per common share from:
 
 
 
 
 
 
 
 
Income from continuing operations attributable to TransUnion
 
$
0.55

 
$
0.29

 
$
0.93

 
$
0.67

Discontinued operations, net of tax
 
(0.02
)
 

 
(0.02
)
 

Net Income attributable to TransUnion
 
$
0.53

 
$
0.29

 
$
0.90

 
$
0.67

Weighted-average shares outstanding:
 
 
 


 



 
Basic
 
187.5

 
184.3

 
187.1

 
184.0

Diluted
 
191.3

 
190.8

 
191.2

 
190.5


As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.

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TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Unaudited)
(in millions)
 
 
 
Three Months Ended 
 June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
104.0

 
$
57.3

 
$
177.3

 
$
132.6

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
         Foreign currency translation:
 
 
 
 
 
 
 
 
               Foreign currency translation adjustment
 
(42.5
)
 
(80.9
)
 
23.9

 
(65.9
)
               (Expense) benefit for income taxes
 
(0.1
)
 
0.7

 
(0.3
)
 
0.1

         Foreign currency translation, net
 
(42.6
)
 
(80.2
)
 
23.6

 
(65.8
)
         Hedge instruments:
 
 
 
 
 
 
 
 
               Net change on interest rate cap
 
(7.1
)
 
4.2

 
(11.7
)
 
14.1

               Net change on interest rate swap
 
(24.3
)
 

 
(38.1
)
 

               Cumulative effect of adopting ASU 2017-12
 

 

 
1.0

 

               Benefit (expense) for income taxes
 
7.9

 
(1.0
)
 
12.4

 
(3.5
)
         Hedge instruments, net
 
(23.5
)
 
3.2

 
(36.4
)
 
10.6

         Available-for-sale debt securities:
 
 
 
 
 
 
 
 
              Net unrealized loss
 

 
(0.1
)
 

 
(0.1
)
              Benefit for income taxes
 

 

 

 

         Available-for-sale debt securities, net
 

 
(0.1
)
 

 
(0.1
)
Total other comprehensive income (loss), net of tax
 
(66.1
)
 
(77.1
)
 
(12.8
)
 
(55.3
)
Comprehensive income
 
37.9

 
(19.8
)
 
164.5

 
77.3

Less: comprehensive income (loss) attributable to noncontrolling interests
 
(3.2
)
 
0.9

 
(5.7
)
 
(1.4
)
Comprehensive income (loss) attributable to TransUnion
 
$
34.7

 
$
(18.9
)
 
$
158.8

 
$
75.9

See accompanying notes to unaudited consolidated financial statements.


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TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
 
 
Six Months Ended June 30,
 
 
2019

2018
Cash flows from operating activities:
 



Net income
 
$
177.3


$
132.6

Add: loss from discontinued operations, net of tax
 
4.6



Income from continuing operations
 
181.9


132.6

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


 
Depreciation and amortization
 
182.7


134.6

Loss on debt financing transactions
 
0.8

 
11.9

Amortization and (gain) loss on fair value of hedge instrument
 


(0.7
)
Net (gain) impairment from adjustments to the carrying value of investments in nonconsolidated affiliates
 
(22.6
)
 
1.4

Equity in net income of affiliates, net of dividends
 
1.4


(0.2
)
Deferred taxes
 
0.1


(8.9
)
Amortization of discount and deferred financing fees
 
3.2


1.6

Stock-based compensation
 
16.6


21.3

Payment of contingent obligation
 
(0.4
)
 

Provision for losses on trade accounts receivable
 
5.6


3.4

Other
 
1.2


1.8

Changes in assets and liabilities:
 
 

 
Trade accounts receivable
 
(32.6
)

(46.6
)
Other current and long-term assets
 
(34.8
)

(17.4
)
Trade accounts payable
 
6.1


25.9

Other current and long-term liabilities
 
(0.9
)

(30.2
)
Cash provided by operating activities of continuing operations
 
308.3


230.5

Cash used in operating activities of discontinued operations
 
(7.3
)


Cash provided by operating activities
 
301.0


230.5

Cash flows from investing activities:
 


 
Capital expenditures
 
(88.0
)

(70.4
)
Proceeds from sale of trading securities
 
3.3


1.8

Purchases of trading securities
 
(1.7
)

(1.8
)
Proceeds from sale of other investments
 
10.5


4.5

Purchases of other investments
 
(19.8
)

(14.1
)
Acquisitions and purchases of noncontrolling interests, net of cash acquired
 
(45.9
)
 
(1,801.2
)
Proceeds from disposals of discontinued operations, net of cash on hand
 
40.3

 
(0.5
)
Other
 
(6.5
)


Cash used in investing activities
 
(107.8
)
 
(1,881.7
)
Cash flows from financing activities:
 



Proceeds from Senior Secured Term Loan B-4
 

 
1,000.0

Proceeds from Senior Secured Term Loan A-2
 

 
800.0

Proceeds from senior secured revolving line of credit
 

 
125.0

Payments of senior secured revolving line of credit
 


(135.0
)
Repayments of debt
 
(133.9
)

(24.2
)
Debt financing fees
 

 
(33.6
)
Proceeds from issuance of common stock and exercise of stock options
 
12.8


14.1

Dividends to shareholders
 
(28.5
)

(13.8
)
Distributions to noncontrolling interests
 
(0.8
)
 
(0.1
)
Employee taxes paid on restricted stock units recorded as treasury stock
 
(36.9
)

(0.5
)
Cash (used in) provided by financing activities
 
(187.3
)
 
1,731.9

Effect of exchange rate changes on cash and cash equivalents
 
1.4

 
(4.2
)
Net change in cash and cash equivalents
 
7.3

 
76.5

Cash and cash equivalents, beginning of period
 
187.4

 
115.8

Cash and cash equivalents, end of period
 
$
194.7

 
$
192.3

As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.

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Table of Contents

TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Unaudited)
(in millions)
 
 
Common Stock
 
Paid-In
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
 
 
Shares
 
Amount
 
 
 
 
 
 
Balance, December 31, 2017
 
183.2

 
$
1.9

 
$
1,863.5

 
$
(138.8
)
 
$
137.4

 
$
(135.3
)
 
$
95.9

 
$
1,824.6

Net income
 

 

 

 

 
73.1

 

 
2.3

 
75.4

Other comprehensive income
 

 

 

 

 

 
21.7

 
0.1

 
21.8

Stock-based compensation
 

 

 
8.9

 

 

 

 

 
8.9

Employee share purchase plan
 
0.1

 

 
4.8

 

 

 

 

 
4.8

Exercise of stock options
 
0.7

 

 
5.3

 

 

 

 

 
5.3

Treasury stock purchased
 

 

 

 
(0.4
)
 

 

 

 
(0.4
)
Cumulative effect of adopting Topic 606, net of tax
 

 

 

 

 
(6.0
)
 

 
(0.1
)
 
(6.1
)
Cumulative effect of adopting ASC 2016-16
 

 

 

 

 
(2.2
)
 

 

 
(2.2
)
Balance, March 31, 2018
 
184.0

 
1.9

 
1,882.5

 
(139.2
)
 
202.3

 
(113.6
)
 
98.2

 
1,932.1

Net income
 

 

 

 

 
55.0

 

 
2.3

 
57.3

Other comprehensive income
 

 

 

 

 

 
(73.9
)
 
(3.2
)
 
(77.1
)
Distributions to noncontrolling interests
 

 

 

 

 

 

 
(0.1
)
 
(0.1
)
Noncontrolling interests of acquired businesses
 

 

 

 

 

 

 
0.1

 
0.1

Stock-based compensation
 

 

 
11.5

 

 

 

 

 
11.5

Exercise of stock options
 
0.7

 

 
4.7

 

 

 

 

 
4.7

Treasury stock purchased
 

 

 

 
(0.1
)
 

 

 

 
(0.1
)
Dividends to shareholders
 

 

 

 

 
(14.1
)
 

 

 
(14.1
)
Balance, June 30, 2018
 
184.7

 
$
1.9

 
$
1,898.7

 
$
(139.3
)
 
$
243.2

 
$
(187.5
)
 
$
97.3

 
$
1,914.3

 
 
Common Stock
 
Paid-In
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
 
 
Shares
 
Amount
 
 
 
 
 
 
Balance, December 31, 2018
 
185.7

 
$
1.9

 
$
1,947.3

 
$
(139.9
)
 
$
363.1

 
$
(282.7
)
 
$
92.5

 
$
1,982.2

Net income
 

 

 

 

 
70.9

 

 
2.4

 
73.4

Other comprehensive income
 

 

 

 

 

 
53.2

 
0.1

 
53.3

Stock-based compensation
 

 

 
9.2

 

 

 

 

 
9.2

Employee share purchase plan
 
0.1

 

 
6.9

 

 

 

 

 
6.9

Exercise of stock options
 
0.5

 

 
4.2

 

 

 

 

 
4.2

Vesting of restricted stock units
 
1.6

 

 

 

 

 

 

 

Treasury stock purchased
 
(0.6
)
 

 

 
(37.1
)
 

 

 

 
(37.1
)
Dividends to shareholders
 

 

 

 

 
(14.2
)
 

 

 
(14.2
)
Cumulative effect of adopting ASU 2017-12
 

 

 

 

 
(1.0
)
 

 

 
(1.0
)
Balance, March 31, 2019
 
187.3

 
1.9

 
1,967.6

 
(177.0
)
 
418.8

 
(229.4
)
 
95.0

 
2,076.9

Net income
 

 

 

 

 
101.5

 

 
2.5

 
104.0

Other comprehensive income
 

 

 

 

 

 
(66.8
)
 
0.7

 
(66.1
)
Distributions to noncontrolling interests
 

 

 

 

 

 

 
(0.8
)
 
(0.8
)
Stock-based compensation
 

 

 
6.1

 

 

 

 

 
6.1

Exercise of stock options
 
0.5

 

 
2.7

 

 

 

 

 
2.7

Treasury stock purchased
 

 

 

 
(0.1
)
 

 

 

 
(0.1
)
Dividends to shareholders
 

 

 

 

 
(14.2
)
 

 

 
(14.2
)
Balance, June 30, 2019
 
187.8

 
$
1.9

 
$
1,976.4

 
$
(177.1
)
 
$
506.1

 
$
(296.2
)
 
$
97.4

 
$
2,108.5

As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.

7

Table of Contents

TRANSUNION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. Significant Accounting and Reporting Policies
Basis of Presentation
Unless the context indicates otherwise, any reference in this report to the “Company,” “we,” “our,” “us,” and “its” refers to TransUnion and its consolidated subsidiaries, collectively.
The accompanying unaudited consolidated financial statements of TransUnion and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany transactions and balances have been eliminated. The operating results of TransUnion for the periods presented are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 14, 2019.
Subsequent Events
Events and transactions occurring through the date of issuance of the financial statements have been evaluated by management and, when appropriate, recognized or disclosed in the financial statements or notes to the consolidated financial statements. See Note 16, "Subsequent Event," for additional information.
Principles of Consolidation
The consolidated financial statements of TransUnion include the accounts of TransUnion and all of its controlled subsidiaries. Investments in nonmarketable unconsolidated entities in which the Company is able to exercise significant influence are accounted for using the equity method. Investments in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence, our “Cost Method Investments,” are accounted for at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Recently Adopted Accounting Pronouncements
On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842). During 2018 and 2019, the FASB issued additional guidance related to the new standard. This series of comprehensive guidance, among other things, requires us to record the discounted present value of all future lease payments as a liability on our balance sheet, as well as a corresponding “right-of-use” (“ROU”) asset, which is an asset that represents the right to use or control the use of a specified asset for the lease term, for all long-term leases. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We have adopted this guidance effective January 1, 2019, on a modified retrospective basis, as of the beginning of the period adopted, including the package of practical expedients available per paragraph 842-10-65-1(f). On March 31, 2019, and on each reporting date thereafter, we recognize an operating lease liability and offsetting ROU asset on our Consolidated Balance Sheet, with no other impact to our Consolidated Financial Statements. See Note 5, “Other Assets,” Note 7 “Other Current Liabilities,” Note 8, “Other Liabilities” and Note 10, “Leases” for additional information and the new required disclosures.
On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new standard is intended to improve and simplify accounting rules around hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods therein. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness. For our cash flow hedges, this means that the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is now recorded in other comprehensive income, and reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. We have adopted this ASU and related amendments effective January 1, 2019, and have applied the modified retrospective transition method that allows for a cumulative-effect adjustment to reclassify cumulative ineffectiveness previously recorded in other comprehensive income to retained earnings in the period of adoption. The adjustment was not material to our consolidated financial statements.
On February 14, 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. These amendments provide an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (the “Act”) is recorded. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein. We have elected to not reclassify the

8

Table of Contents

stranded tax effects within accumulated other comprehensive income to retained earnings and therefore there is no impact on our consolidated financial statements.
On August 27, 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. These amendments modify the disclosure requirements in Topic 820 by removing, adding or modifying certain fair value measurement disclosures. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein. This new guidance only impacts our future disclosures, with no impact to our current disclosures.
Recent Accounting Pronouncements Not Yet Adopted
On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In addition, these amendments require the measurement of all expected credit losses for financial assets, including trade accounts receivable, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods therein. We are currently assessing the impact this guidance will have on our consolidated financial statements.
2. Business Acquisitions
Callcredit Acquisition
On June 19, 2018, we acquired 100% of the equity of Callcredit Information Group, Ltd. (“Callcredit”) for $1,408.2 million in cash, funded primarily by additional borrowings against our Senior Secured Credit Facility. See Note 9, “Debt,” for additional information about our Senior Secured Credit Facility. There was no contingent consideration resulting from this transaction. Callcredit, founded in 2000, is a United Kingdom-based information solutions company that, like TransUnion, provides data, analytics and technology solutions to help businesses and consumers make informed decisions. International expansion is a key growth strategy for TransUnion, and we expect to leverage strong synergies across TransUnion’s and Callcredit’s business models and solutions.
Callcredit’s 2018 revenue and operating income since the date of acquisition for the three and six months ended June 30, 2018, are included as part of the International segment in the accompanying consolidated statements of income and are not material.
For the six months ended June 30, 2018, on a pro-forma basis assuming the transaction occurred on January 1, 2017, combined pro-forma revenue of TransUnion and Callcredit was $1,188.2 million and combined pro-forma net income from continuing operations was $118.8 million. For the six months ended June 30, 2018, combined pro-forma net income from continuing operations was adjusted to exclude $18.2 million of acquisition-related costs and $9.4 million of financing costs expensed in 2018.
We identified and categorized certain operations of Callcredit that we do not consider core to our business as discontinued operations of our International segment as of the date of acquisition. These discontinued operations consist of businesses that do not align with our stated strategic objectives. As of June 30, 2019, we have disposed of all of these businesses and do not expect to have a significant continuing involvement with any of these operations. At December 31, 2018, we categorized the assets and liabilities of these discontinued operations on separate lines on the face of our balance sheet and reflect them as of the date of acquisition as discontinued operations in the table below.

9

Table of Contents

Purchase Price Allocation
The final allocation of the purchase price, including our estimate of the fair values of the identifiable assets and goodwill, to the assets acquired and liabilities assumed on the date of acquisition, consisted of the following:
(in millions)
 
Fair Value
Trade accounts receivable
 
$
20.8

Property and equipment
 
3.2

Goodwill(1)
 
757.1

Identifiable intangible assets
 
720.1

All other assets
 
55.0

Assets of discontinued operations(2)
 
57.1

Total assets acquired
 
1,613.3

 
 
 
All other liabilities
 
(185.5
)
Liabilities of discontinued operations(2)
 
(19.6
)
Net assets of the acquired company
 
$
1,408.2

(1)
For tax purposes, none of the goodwill is tax deductible.
(2)
We have categorized certain businesses of Callcredit as discontinued operations in our consolidated financial statements. As of June 30, 2019, we have disposed of all of these businesses.
We recorded the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed as goodwill in a new reportable unit in our International segment. The purchase price of Callcredit exceeded the preliminary fair value of the net assets acquired primarily due to growth opportunities, the assembled workforce, synergies associated with internal use software and other technological and operational efficiencies.

10

Table of Contents

Identifiable Amortizable Intangible Assets
The fair values of the amortizable intangible assets acquired consisted of the following:
(in millions)
 
Estimated Useful Life
 
Fair Value
Database and credit files
 
15 years
 
$
502.0

Customer relationships
 
15 years
 
155.0

Technology and software
 
5 years
 
62.4

Trademarks
 
2 years
 
0.7

Total identifiable assets
 
 
 
$
720.1

We estimate the weighted-average useful life of the identifiable intangible assets to be approximately 14.1 years, resulting in approximately $51.0 million of annual amortization.
Acquisition Costs
As of June 30, 2019, we have incurred approximately $20.4 million of acquisition-related costs, including $19.9 million incurred in prior years. These costs include investment banker fees, legal fees, due diligence and other external costs that we have recorded in other income and expense. We may incur additional acquisition-related costs, including legal fees, valuation fees and other professional fees in the next several quarters that we will record in other income and expense.
Other Acquisitions
During the second quarter of 2018, we acquired 100% of the equity of iovation, Inc. (“iovation”) and Healthcare Payment Specialists, LLC (“HPS”). During the fourth quarter of 2018, we acquired 100% of the equity of Rubixis, Inc (“Rubixis”). During the second quarter of 2019, we acquired 100% of the equity of TruSignal, Inc. (“TruSignal”).
iovation is a provider of advanced device identity and consumer authentication services that helps businesses and consumers safely transact in a digital world. HPS provides expertise and technology solutions to help medical care providers maximize Medicare reimbursements. Rubixis is an innovative healthcare revenue cycle solutions company that helps providers maximize reimbursement from insurance payers. TruSignal is an innovative leader in people-based marketing technology for Fortune 500 brands, agencies, platforms, publishers and data owners.
The results of operations of iovation, HPS, Rubixis, and TruSignal, which are not material to our consolidated financial statements, have been included as part of our U.S. Markets segment (formerly U.S. Information Services) in our consolidated statements of income since the date of the acquisition.
We finalized the purchase accounting for iovation and HPS during the second quarter of 2019. The final allocation of the purchase price for these two entities resulted in $230.2 million of goodwill and $208.5 million of amortizable intangible assets recorded in addition to what we recorded for Callcredit as discussed above. The weighted-average useful lives of the amortizable intangible assets are approximately 10.6 years, resulting in approximately $19.7 million of annual amortization.

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3. Fair Value
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of June 30, 2019:
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
Assets
 











Trading securities
 
$
12.0

 
$
9.7

 
$
2.3

 
$

Available-for-sale debt securities
 
3.0

 

 
3.0

 

Interest rate caps
 
2.2

 

 
2.2

 

Total
 
$
17.2

 
$
9.7

 
$
7.5

 
$

 
 
 
 
 
 
 
 
 
Liabilities
 


 
 
 
 
 
 
Interest rate swaps
 
$
(48.9
)
 
$

 
$
(48.9
)
 
$

Contingent consideration
 
(7.6
)
 

 

 
(7.6
)
Total
 
$
(56.5
)
 
$

 
$
(48.9
)
 
$
(7.6
)

Level 1 instruments consist of exchange-traded mutual funds. Exchange-traded mutual funds are trading securities valued at their current market prices. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants.
Level 2 instruments consist of pooled separate accounts, foreign exchange-traded corporate bonds and interest rate caps and swaps. Pooled separate accounts are designated as trading securities valued at net asset values. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants. Foreign exchange-traded corporate bonds are available-for-sale debt securities valued at their current quoted prices. These securities mature between 2027 and 2033. The interest rate caps and swaps fair values are determined using the market standard methodology of discounting the future expected net cash flows that would occur if variable interest rates rise above the strike rate of the caps and swaps, taking into consideration the cash payments related to financing the premium of the interest rate caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. See Note 9, “Debt,” for additional information regarding interest rate caps and swaps.
All unrealized gains and losses on trading securities are included in net income, while unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income. There were no other-than-temporary gains or losses on available-for-sale debt securities and there were no significant realized or unrealized gains or losses on any of our securities for any of the periods presented.
Level 3 instruments consist of contingent obligations related to companies we have acquired with remaining maximum payouts totaling $11.3 million. These obligations are contingent upon meeting certain quantitative or qualitative performance metrics through 2019, and are included in other current liabilities on our balance sheet. The fair values of the obligations are determined based on an income approach, using our expectations of the future expected earnings of the acquired entities. We assess the fair value of these obligations each reporting period with any changes reflected as gains or losses in selling, general and administrative expenses in the consolidated statements of income. During the three months ended June 30, 2019, we recorded a gain of $0.9 million as a result of changes to the fair value of these obligations. During the six months ended June 30, 2019, there were no significant gains or losses as a result of changes to the fair value of these obligations.

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4. Other Current Assets
Other current assets consisted of the following:
(in millions)
 
June 30, 
 2019
 
December 31, 2018
Prepaid expenses
 
$
89.5

 
$
77.1

Other investments
 
43.9

 
23.6

Income taxes receivable
 
17.9