10-K 1 clgx-12312017x10k.htm 10-K Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K
x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
o    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 001-13585
__________________
CoreLogic, Inc.
(Exact name of registrant as specified in its charter)
Delaware
95-1068610
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
40 Pacifica, Irvine, California, 92618-7471
(Address of principal executive offices) (Zip Code)
(949) 214-1000
Registrant’s telephone number, including area code
__________________
Securities registered pursuant to Section 12(b) of the Act:
Common
New York Stock Exchange
(Title of each class)
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
__________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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 x
Accelerated filer o
 
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
 
 
Emerging growth company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
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. o
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2017, the last business day of the registrant's most recently-completed second fiscal quarter was $3,632,429,159.
On February 22, 2018, there were 81,486,222 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement with respect to the 2018 annual meeting of the stockholders are incorporated by reference in Part III of this report. The definitive proxy statement or an amendment to this Form 10-K will be filed no later than 120 days after the close of the registrant’s fiscal year.
 





CoreLogic, Inc.
Table of Contents


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PART I

Item 1. Business

The Company

We are a leading global property information, analytics and data-enabled services provider operating in North America, Western Europe and Asia Pacific. Our vision is to deliver unique property-level insights that power the global real estate economy. Our mission is to empower our clients to make smarter decisions through data-driven insights.

Our combined data from public, contributory and proprietary sources provides detailed coverage of property, mortgages and other encumbrances, property risk and replacement cost, consumer credit, tenancy, location, hazard risk and related performance information. We have more than one million users who rely on our data and predictive decision analytics to reduce risk, enhance transparency and improve the performance of their businesses.

We offer our clients a comprehensive national database covering real property and mortgage information, judgments and liens, building and replacement costs, parcel and geospatial data, criminal background records, eviction information, non-prime lending records, credit information, and tax information, among other data types. Our databases include over 900 million historical property transactions, over 100 million mortgage applications and property-specific data covering approximately 99% of U.S. residential properties, as well as commercial locations, totaling over 150 million records. We are also the industry's first parcel-based geocoder and have developed a proprietary parcel database covering more than 145 million parcels across the U.S. We believe the quality of the data we offer is distinguished by our broad range of data sources and our experience in aggregating, organizing, normalizing, processing and delivering data to our clients.

With our data as a foundation, we have built strong analytics capabilities and a variety of value-added business services to meet our clients’ needs for property tax processing, property valuation, mortgage and automotive credit reporting, tenancy screening, hazard risk, property risk and replacement cost, flood plain location determination and other geospatial data, analytics and related services.

We became a stand-alone public company on June 1, 2010 when we completed a transaction in which we separated from the financial services businesses of our predecessor company, The First American Corporation (referred to as the "Separation"). The First American Corporation was incorporated in California in 1894, and as part of the Separation, we reincorporated in Delaware on June 1, 2010, changed our name to CoreLogic, Inc. and began trading on the New York Stock Exchange under the symbol “CLGX.” As used herein, the terms "CoreLogic," the "Company," "we," "our" and "us" refer to CoreLogic, Inc. and our consolidated subsidiaries, except where it is clear that the terms mean only CoreLogic, Inc. and not our subsidiaries. Our executive offices are located at 40 Pacifica, Irvine, California, 92618-7471, our telephone number is (949) 214-1000, and our website is www.corelogic.com.

Corporate Events

Acquisitions

In August 2017, we completed the acquisitions of Mercury Network, LLC ("Mercury"), Myriad Development, Inc. ("Myriad") and Clareity Ventures, Inc. ("Clareity") for total cash of approximately $189.4 million. The acquisition of Myriad included contingent consideration of up to $3.0 million, to be paid in cash in 2019 upon the achievement of certain revenue targets in fiscal years 2017 and 2018. See Note 16 - Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.    
    
Financing Activities

In August 2017, we amended and restated our credit agreement (the “Credit Agreement”) with Bank of America, N.A. as the administrative agent, and other financial institutions. The Credit Agreement provides for a $1.8 billion five-year term A loan facility (the “Term Facility”), and a $700.0 million five-year revolving credit facility ("Revolving Facility). The Term Facility matures and the Revolving Facility expires in August 2022. The Revolving Facility includes a $100.0 million multicurrency revolving sub-facility and a $50.0 million letter of credit sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility by up to $100.0 million in the aggregate; however, the lenders are not obligated to do so. See Note 8 - Long Term Debt of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.


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Our Data

Our data is the foundation of many of our products, analytics and services, and can generally be categorized as property information, mortgage information and consumer information. We obtain our data from a variety of sources, including, but not limited to, data gathered from public sources, data contributed by our clients and data obtained from data aggregators.

We gather a variety of data from public sources, including data and documents from federal, state and local governments. We enhance our public record information with the data we collect from other public and non-public sources to create comprehensive textual and geospatial views of each property within our coverage areas, including physical property characteristics, boundaries and tax values, current and historical ownership, voluntary and involuntary liens, tax assessments and delinquencies, replacement cost, property risk including environmental, flood and hazard information, criminal data, building permits, local trends and summary statistics.

Our client agreements typically govern the use of our client-contributed data. These contractual arrangements often permit our clients to use our solutions which incorporate their data. We generally structure our client agreements to specify the particular uses of the data our clients contribute and to provide the required levels of data privacy and protection. Our contributed data includes loan performance information (from loan servicers, trustees, securitizers, issuers and others), appraisal information, information regarding property rental and under-banked loan applications from various loan originators, and information regarding landlords and property owners.

In addition, we gather property listing and tenant/landlord rental information from Boards of Realtors®, real estate agents, brokers, landlords, and owners of multi-tenant properties. We collect appraisals and property valuations from appraisers and we license consumer credit history information from credit reporting agencies, lenders and auto dealers.

Business Segments

We have organized our business into the following two segments: Property Intelligence & Risk Management Solutions ("PIRM") and Underwriting & Workflow Solutions ("UWS"). In December 2017, we refined our operating segments to reflect our ongoing strategic transformation into a scaled provider of unique property insight, risk management and underwriting solutions. Information included herein reflects this updated segmentation for all periods presented.

We believe that we hold the leading market position for many of our solutions, including:

property tax processing, based on the number of loans under service;
flood zone determinations, based on the number of flood zone certification reports issued;
credit and income verification services to the U.S. mortgage lending industry, based on the number of credit reports issued;
property valuation and technology platform solutions, based on the number of in-house staff appraisers and inquiries received; and
multiple listing services ("MLS"), based on the number of active desktops using our technology.

In addition to our two reporting segments, we also have a corporate group, which includes costs and expenses not allocated to our segments.

The following table sets forth our operating revenue for the last three years from our segments:

(in thousands)
2017
 
% of Total Operating Revenue
 
2016
 
% of Total Operating Revenue
 
2015
 
% of Total Operating Revenue
PIRM
$
703,032

 
37.9
 %
 
$
706,496

 
36.2
 %
 
$
712,335

 
46.6
 %
UWS
1,157,432

 
62.5

 
1,256,841

 
64.4

 
825,339

 
54.0

Corporate and Eliminations
(9,347
)
 
(0.4
)
 
(10,780
)
 
(0.6
)
 
(9,564
)
 
(0.6
)
Operating revenue
$
1,851,117

 
100.0
 %
 
$
1,952,557

 
100.0
 %
 
$
1,528,110

 
100.0
 %


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More detailed financial information regarding each of our business segments as well as information about our operating revenue attributed to domestic and foreign operations is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 18 - Segment Financial Information of the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of Part II of this report.

Solutions

Property Intelligence & Risk Management Solutions

Our PIRM segment combines property information, mortgage information and consumer information to deliver unique housing market and property-level insights, predictive analytics and risk management capabilities. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with decision-making and compliance tools in the real estate industry, insurance industry and the single and multifamily industry. We deliver this information directly to our clients in a standard format over the web, through hosted software platforms or in bulk data form. Our solutions include property insights and insurance & spatial solutions in North America, Western Europe and Asia Pacific.

Our property insights combine our patented predictive analytics and proprietary and contributed data to enable our clients to improve customer acquisition and retention, detect and prevent fraud, improve mortgage transaction cycle time and cost efficiency, identify real estate trends and neighborhood characteristics, track market performance and increase market share. Our data is comprised of real estate information with crime, site inspection, neighborhood, document images and other information from proprietary sources. We also provide verification of applicant income, identity and certain employment verification services using Internal Revenue Service ("IRS") and Social Security Administration databases as well as third-party employment data providers. Further, we maintain the leading market share of real estate listing software systems, with provisioning to more than 50% of all U.S. and Canadian real estate agents. We also provide a full range of professional services to listing organizations and assist our clients in identifying revenue opportunities and improving member services.

Our insurance & spatial solutions provide originators and property and casualty insurers the solutions required to more effectively locate, assess and manage property-level assets and risks through location-based data and analytics. In addition to the industry's first parcel-based geocoder and a proprietary parcel database covering more than 145 million parcels across the U.S., we maintain critical and up-to-date information across multiple hazard databases including information on damaging winds and sinkholes, flood data and the location of fire stations. Our analytics and hazard data are delivered to customers through multiple methods, including proprietary platforms targeted to insurance industry participants.

Underwriting & Workflow Solutions

Our UWS segment combines property information, mortgage information and consumer information to provide comprehensive mortgage origination and monitoring solutions, including underwriting-related solutions and data-enabled valuations and appraisals. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with vetting and on-boarding prospects, meeting compliance regulations and understanding, diagnosing and monitoring property values. Our solutions include property tax solutions, valuation solutions, credit solutions and flood services in North America.

Our property tax solutions are built from aggregated property tax information from over 20,000 taxing authorities. We use this information to advise mortgage originators and servicers of the property tax payment status of loans in their portfolio and to monitor that status over the life of the loans. If a mortgage lender requires tax payments to be impounded on behalf of its borrowers, we can also monitor and oversee the transfer of these funds to the taxing authorities and provide the lender with payment confirmation.

Our valuations solutions represent property valuation-related data-driven services and analytics combined with collateral valuation workflow technologies, which assist our clients in assessing risk of loss using both traditional and alternative forms of property valuation, driving process efficiencies, and ensuring compliance with lender and governmental regulations. We have been building collateral risk management models for more than 20 years and provide collateral information technology and solutions that automate property appraisal ordering, tracking, documentation and review for lender compliance with government regulations.

Our credit solutions have access to one of the largest consumer and business databases, which enables us to provide credit and income verification services to the mortgage and automotive industries. We provide comprehensive information

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about credit history, income verification and home address history. We normalize our data to provide a broad range of advanced business information solutions designed to reduce risk and improve business performance.

Our flood data solutions provide flood zone determinations in accordance with the U.S. Federal legislation passed in 1994, which requires that most mortgage lenders obtain a determination of the current flood zone status at the time each loan is originated and obtain applicable updates during the life of the loan. We provide flood zone determinations primarily to mortgage lenders.

Clients

Our clients are predominantly financial services institutions in the mortgage and insurance industries. We provide our solutions to national and regional mortgage lenders, servicers, brokers, credit unions, commercial banks, investment banks, fixed-income investors, real estate agents, MLS companies, property management companies, real estate investment trusts, property and casualty insurance companies, government agencies and government-sponsored enterprises.

Our more significant client relationships tend to be long-term in nature and we typically provide a number of different solutions to each client. Because of the depth of these relationships, we derive a significant portion of our aggregate revenue from our largest clients, with 38.7% of our 2017 operating revenues being generated by our ten largest clients. One of our clients, Bank of America, accounted for 11.1% of our operating revenues for the year ended December 31, 2017.

Competition

We offer a diverse array of specialized products and services that compete directly and indirectly with similar products and services offered by national and local providers. We believe there is no single competitor who offers the same combination of products and services that we do. Therefore, we believe that we compete with a broad range of entities.

Our PIRM segment competes with entities that provide access to data or data-based analytics products and services as part of their product offerings, including Black Knight Financial Services, which provides real estate information, analytics, valuation-related services and other solutions, ATTOM Data, which provides public records data, First American, which provides real estate, home ownership and property data, Verisk Analytics, Inc., which provides data and risk assessment in the insurance and financial services industries, and RealPage, Inc. and Yardi Systems, Inc., which provide services in the multifamily residential industry. We also compete with departments within financial institutions that utilize internal resources to provide similar analytics and services on a captive basis. We compete based on the breadth and quality of our data sets, the exclusive nature of some of our key data sets, the quality and effectiveness of our products and the integration of our platforms into client systems. We believe the data we offer is distinguished by quality, the broad range of our data sources (including non-public sources), the volume of records we maintain and our ability to provide data spanning a historical period of time that exceeds comparable data sets of most of our competitors.

Our UWS segment competes with third-party providers such as Black Knight, Inc. and Lereta LLC, which provide tax and flood services, as well as credit and screening solutions providers such as Equifax, Inc., Credit Plus, and Kroll Factual Data, and Clear Capital, Solidifi and ServiceLink, which provide valuation-related services. For these services, we compete largely based on the quality of the products and services we provide, our ability to provide scalable services at competitive prices and our ability to provide integrated platforms. We also compete with departments within financial institutions that utilize internal resources to provide similar services on a captive basis. We generally compete with captive providers based on the quality of our products and services, the scalability of our services, cost efficiencies and our ability to provide some level of risk mitigation.

Sales and Marketing

Our sales strategy is client-focused and resources are primarily assigned based on client size and complexity. Several of our sales team members and subject matter experts specialize in specific solutions, products and services. Each of our sales executives develops and maintains key relationships within each client’s business units and plays an important role in relationship management as well as developing new business. Our sales executives understand the current marketplace environment and demonstrate extensive knowledge of our clients’ internal operating structure and business needs. The depth and breadth of our relationships with our clients allows us to develop and implement solutions that are tailored to the specific needs of each client in a prompt and efficient manner.


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Smaller clients, measured by revenue or geographic coverage, are primarily managed through our inside sales operations function which is responsible for working with mortgage and real estate brokers, smaller property and casualty insurance companies, fixed-income investors, appraisers, real estate agents, correspondents and other lenders.

Several of our product and service lines have sales teams and subject matter experts who specialize in specific solutions, products and services. These sales teams and subject matter experts work collaboratively with our sales executives and our inside sales operations to assist with client sales by combining our data, products and data-enabled services to meet the specific needs of each client, and may be assigned to assist with sales in targeted markets, for certain categories of clients or for particular service groups.

Our marketing strategy is to accelerate growth by building trusted relationships with our clients and delivering superior value through unique property-related data, analytics and data-enabled solutions. We use the most efficient methods available to successfully identify, target, educate and engage potential and existing clients through their preferred channel of communication. Employing client-centric marketing initiatives and campaigns, we clearly articulate our value proposition to build awareness, familiarity and interest in our business solutions, build demand for our products and services, and increase volume, quality and velocity of sales opportunities. Our marketing activities include direct marketing, advertising, public relations, event marketing, digital marketing, social media and other targeted activities.

 Acquisitions and Divestitures

Historically, we have accelerated our growth into new markets, products and services through selective acquisitions that we believe strengthen our overall solution offerings and value proposition to clients. We continually evaluate our business mix and opportunistically seek to optimize our business portfolio through acquisitions and divestitures.

Intellectual Property

We own significant intellectual property rights, including patents, copyrights, trademarks and trade secrets. We consider our intellectual property to be proprietary and we rely on a combination of statutory (e.g., copyright, trademark, trade secret and patent) and contractual safeguards in an intellectual property enforcement program to protect our intellectual property rights.

We have more than 50 issued patents in the U.S. covering business methods, software and systems patents, principally relating to automated valuation, fraud detection, data gathering, flood detection, MLS technology and property monitoring. We also have approximately 30 patent applications pending in these and other areas in the U.S. In addition, we have a number of issued patents and pending patent applications internationally, including in Canada and Australia. The protection of our proprietary technology is important to our success and we intend to continue to protect those intellectual property assets for which we have expended substantial research and development capital and which are material to our business.

In addition, we own more than 300 trademarks in the U.S. and foreign countries, including the names of our products and services and our logos and tag lines, many of which are registered. Many of our trademarks, trade names, service marks and logos are material to our business, as they assist our clients in identifying our products and services and the quality that stands behind them.

We own more than 1,000 registered copyrights in the U.S. and foreign countries, covering computer programs, reports and manuals. We also have other literary works, including marketing materials, handbooks, presentations and website content that are protected under common law copyright. We believe our written materials are essential to our business as they provide our clients with insight into various areas of the financial and real estate markets in which we operate.

Our research and development activities focus primarily on the design and development of our analytical tools, software applications, and data sets. We expect to continue our practice of investing in the development of new software applications and systems in response to the market and client needs we identify through client input collected in meetings, phone calls and web surveys. We also assess opportunities to integrate existing data sets to enhance our products' effectiveness.

In order to maintain control of our intellectual property, we enter into license agreements with our clients, granting rights to use our products and services, including our software and databases. We also audit our clients from time to time to ensure compliance with our agreements. This helps to maintain the integrity of our proprietary intellectual property and to protect the embedded information and technology contained in our solutions. As a general practice, employees, contractors and other parties with access to our proprietary information enter into agreements that prohibit the unauthorized use or disclosure of our proprietary rights, information and technology.

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Information Technology

Information technology is a significant focus area and we maintain a long-term strategic technology plan which is reassessed annually. Our information technology initiatives are driven by internal technology staff with support from a number of external technology firms. Our existing technology infrastructure is a private, dedicated cloud-based computing environment hosted in a primary and secondary technology center located in Quincy, Washington and Plano, Texas, respectively. These technology centers were formerly run by Dell and are now owned and managed by the NTT Data Corporation ("NTT").

We maintain a global innovation center ("GIC"), headquartered in Dallas, Texas, which is developing our next generation product platforms and software applications. In addition, the GIC plays a leading role in research and development in the areas of employing hardware advancements, data and analytics, mobility and the application of machine learning and mobility solutions. We supplement the GIC with a number of strategic alliances, including most notably Pivotal Software, Inc.

Technology Operations

Our private, dedicated cloud computing environment hosted by NTT is designed to enable us to deliver secure and compliant data, analytics and services to support client needs. This network of systems, combined with enterprise-level service operations, positions us as a leading property insights provider to the financial services market. Additionally, our platform stores, processes and delivers our data and our proprietary technologies that are the foundation of our business and critical to the development of our solutions. In conjunction with NTT, we operate a computing technology environment intended to allow us to provide flexible systems at all times, enabling us to deliver increased capacity as needed or when client needs demand increased speed of delivery. Additionally, our unified network architecture allows us to operate multiple systems as a single resource capable of delivering our applications, data and analytics as a combined solution to our clients.

Security

We have deployed a wide range of physical and technology security measures, along with a formal governance program, designed to secure our information technology infrastructure, personnel and data. Our governance program is based on corporate information security policies, an information security awareness training program along with an enterprise compliance program. Both our technology managers and NTT’s technology infrastructure managers are Information Technology Infrastructure Library certified. NTT is contractually obligated to comply with our information security policies and procedures. Our digital security framework provides layered protection designed to secure both active and inactive virtual machines in the data centers we use. This approach enables dedicated virtual machines to regularly scan all of our systems. These measures help to detect and prevent intrusions, monitor firewall integrity, inspect logs, catch and quarantine malware and prevent data breaches. Our physical and virtual security solutions run in tandem, enabling us to better identify suspicious activities and implement preventive measures.

Regulation

Various aspects of our businesses are subject to federal and state regulation. Our failure to comply with any applicable laws and regulations could result in restrictions on our ability to provide certain services, as well as the possible imposition of fines and penalties. Among the more significant areas of regulation for our business are the following:

Privacy and Protection of Consumer Data

For our businesses that involve the collection, processing and distribution of personal public and non-public data, certain of their solutions and services are subject to regulation under federal, state and local laws in the U.S. and, to a lesser extent, foreign countries. These laws impose requirements regarding the collection, protection, use and distribution of some of the data we have, and provide for sanctions and penalties in the event of violations of these requirements. In addition, the Consumer Financial Protection Bureau ("CFPB") serves as the principal federal regulator of providers of consumer financial products and services. As such, the CFPB has significant rulemaking authority under existing federal statutes that regulate many of our products and services, as well as the authority to conduct examinations of certain providers of financial products and services. Under the CFPB's authority to supervise larger market participants of the credit reporting market, the CFPB has the authority to conduct examinations of our covered businesses. The CFPB also has the authority to initiate an investigation of our other businesses if it believes that a federal consumer financial law is being violated.


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In terms of specific regulations applicable to us, the Gramm-Leach-Bliley Act ("GLBA") regulates the sharing of non-public personal financial information held by financial institutions and applies indirectly to companies that provide services to financial institutions. In addition to regulating information sharing, the GLBA requires that non-public personal financial information be safeguarded using physical, administrative and technological means. Certain of the non-public personal information we hold is subject to protection under the GLBA.

The Drivers Privacy Protection Act prohibits the public disclosure, use or resale by any state's department of motor vehicles of personal information about an individual that was obtained by the department in connection with a motor vehicle record, except for a “permissible purpose.”

Other federal and state laws also impose requirements relating to the privacy of information held by us. In addition, certain state laws may impose breach notice responsibilities in the event of the loss of data due to third-party security breaches, employee error, or other event resulting in persons gaining unauthorized access to our data (including, in some cases, for losses that are incurred through our clients' errors or systems).

The privacy and protection of consumer information remains a developing area and we continue to monitor legislative and regulatory developments at the federal, state and local levels. We expect that there will be enhanced regulation in the area of financial and consumer data privacy. Any such additional regulation could significantly impact some of our business practices. It is too early to assess the financial and operational impact to our business of any heightened regulation.

Regulation of Credit Reporting Businesses
The Fair Credit Reporting Act ("FCRA") governs the practices of consumer reporting agencies that are engaged in the business of collecting and analyzing certain types of information about consumers, including credit eligibility information. The FCRA also governs the submission of information to consumer reporting agencies, the access to and use of information provided by consumer reporting agencies and the ability of consumers to access and dispute information held about them. Some our databases and services are subject to regulation under the FCRA.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank Act") gave the CFPB supervisory authority over “larger participants” in the market for consumer financial services, as the CFPB defines by rule. In July 2012, the CFPB finalized its regulation regarding larger participants in the consumer reporting market. Under the regulation, certain of our credit services businesses are considered larger participants. As a result, the CFPB has the authority to conduct examinations of the covered credit services businesses, and we expect that we will continue to be examined by the CFPB as part of this authority.

Regulation of Settlement Services

The Real Estate Settlement Procedures Act ("RESPA") is enforced by the CFPB. RESPA generally prohibits the payment or receipt of fees or any other item of value for the referral of real estate-related settlement services. RESPA also prohibits fee shares or splits or unearned fees in connection with the provision of residential real estate settlement services, such as mortgage brokerage services and real estate brokerage services. Notwithstanding these prohibitions, RESPA permits payments for goods furnished or for services actually performed, so long as those payments bear a reasonable relationship to the market value of the goods or services provided. Our mortgage origination-related businesses that supply credit reports, flood and tax services, valuation products, and all other settlement services to residential mortgage lenders are structured and operated in a manner intended to comply with RESPA and related regulations.

Regulation of Property Valuation Activities

Real estate appraisals and automated valuation models ("AVMs") are subject to federal and state regulation. The Dodd-Frank Act implemented rules and guidance thereunder, and inter-agency guidance jointly issued by the federal financial institution regulators have expanded regulation of these activities. Regulations address appraisals, AVMs and other forms of property value estimates, which are subject to explicit and detailed regulations including licensing, pricing and quality control requirements. In addition, creditors are required to disclose information to applicants about the purpose, and provide consumers with a free copy, of any appraisal, AVM or other estimate of a home's value developed in connection with a residential real estate mortgage loan application.

In addition, the increased regulation of the residential mortgage lending industry has created opportunities for expanded use of property valuation tools.

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Other Regulations

In addition to the foregoing areas of regulation, several of our other businesses are subject to regulation, including the following:

Our tenant screening business is subject to certain landlord-tenant laws and insurance agency laws;
Our loan document business must monitor state laws applicable to our clients relating to loan documents and fee limitations as well as Fannie Mae and Freddie Mac requirements to develop and maintain compliant loan documents and other instruments; and
Our activities in foreign jurisdictions are subject to the requirements of the Foreign Corrupt Practices Act ("FCPA") and comparable foreign laws.

We do not believe that compliance with current and future laws and regulations related to our businesses, including consumer protection laws and regulations, will have a material adverse effect on us, but such activities will likely increase our compliance costs.

Employees

As of December 31, 2017, we had approximately 5,900 employees, of which approximately 5,200 were employed in the U.S. and 700 outside the U.S.

Available Information

We are required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission ("SEC"). The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), are also available free of charge through the "Investors" page on our Internet site at http://www.corelogic.com as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC.

Item 1A. Risk Factors.

Risks Related to Our Business

If we are unable to protect our information systems against data corruption, cyber-based attacks or network security breaches, or if we are unable to provide adequate security in the electronic transmission of sensitive data, it could have a material adverse effect on our business, financial condition and results of operations.

We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for business-to-business and business-to-consumer electronic commerce. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure of confidential information, including non-public personal information and consumer data. Unauthorized access, including through use of fraudulent schemes such as "phishing" schemes, could jeopardize the security of information stored in our systems. In addition, malware or viruses could jeopardize the security of information stored or used in a user's computer. If we are unable to prevent such security or privacy breaches, our operations could be disrupted, or we may suffer loss of reputation, financial loss, lawsuits and other regulatory imposed restrictions and penalties because of lost or misappropriated information, including sensitive consumer data.

Likewise, our clients are increasingly imposing more stringent contractual obligations on us relating to our information security protections. If we are unable to maintain protections and processes at a level commensurate with that

10


required by our clients, it could negatively affect our relationships with those clients or increase our operating costs, which could harm our business or reputation.

We depend on our ability to access data from external sources to maintain and grow our businesses. If we are unable to access needed data from these sources or if the prices charged for these services increase, the quality, pricing and availability of our products and services may be adversely affected, which could have a material adverse impact on our business, financial condition and results of operations.

We rely extensively upon data from a variety of external sources to maintain our proprietary and non-proprietary databases, including data from third-party suppliers, various government and public record sources and data contributed by our clients. Our data sources could cease providing or reduce the availability of their data to us, increase the price we pay for their data, or limit our use of their data for a variety of reasons, including legislatively or judicially imposed restrictions on use. If a number of suppliers are no longer able or are unwilling to provide us with certain data, or if our public record sources of data become unavailable or too expensive, we may need to find alternative sources. If we are unable to identify and contract with suitable alternative data suppliers and efficiently and effectively integrate these data sources into our service offerings, we could experience service disruptions, increased costs and reduced quality of our services. Moreover, some of our suppliers compete with us in certain product offerings, which may make us vulnerable to unpredictable price increases from them. Significant price increases could have a material adverse effect on our operating margins and our financial position, in particular if we are unable to arrange for substitute sources of data on favorable economic terms. Loss of such access or the availability of data in the future on commercially reasonable terms or at all may reduce the quality and availability of our services and products, which could have a material adverse effect on our business, financial condition and results of operations.

Systems interruptions may impair the delivery of our products and services, causing potential client and revenue loss.

System interruptions may impair the delivery of our products and services, resulting in a loss of clients and a corresponding loss in revenue. Our technology infrastructure runs primarily in a private dedicated cloud-based environment hosted in NTT's technology center in Quincy, WA. We cannot be sure that certain systems interruptions or events beyond our control, including issues with NTT's technology center or our third-party network and infrastructure providers or in connection with our upgrading or replatforming key systems, will not interrupt or terminate the delivery of our products and services to our clients. These interruptions also may interfere with our suppliers' ability to provide necessary data to us and our employees' ability to attend to work and perform their responsibilities. Any of these possible outcomes could result in a loss of clients or a loss in revenue, which could have an adverse effect on our business or operations.

Our clients and we are subject to various governmental regulations, and a failure to comply with government regulations or changes in these regulations could result in penalties, restrict or limit our or our clients' operations or make it more burdensome to conduct such operations, any of which could have a material adverse effect on our revenues, earnings and cash flows.

Many of our and our clients' businesses are subject to various federal, state, local and foreign laws and regulations. Our failure to comply with applicable laws and regulations could restrict our ability to provide certain services or result in the imposition of fines and penalties, substantial regulatory and compliance costs, litigation expense, adverse publicity and loss of revenue.

In addition, our businesses are subject to an increasing degree of compliance oversight by regulators and by our clients. Specifically, the CFPB has authority to enact rules affecting the business of consumer reporting agencies and also to supervise, conduct examinations of, and enforce compliance with federal consumer financial protection laws and regulations with respect to certain “non-depository covered persons” determined by the CFPB to be “larger participants” that offer consumer financial products and services. Two of our credit businesses - CoreLogic Credco and Teletrack - are subject to the CFPB non-bank supervision program and the CFPB or other regulatory bodies could attempt to assert authority over other products or services. The CFPB and the prudential financial institution regulators such as the OCC also have the authority to examine us in our role as a service provider to large financial institutions. In addition, several of our largest bank clients are subject to consent orders with the OCC and/or are parties to the National Mortgage Settlement, both of which require them to exercise greater oversight and perform more rigorous audits of their key vendors such as us.

These laws and regulations (as well as laws and regulations in the various states or in other countries) could limit our ability to pursue business opportunities we might otherwise consider engaging in, impose additional costs or restrictions on us, result in significant loss of revenue, impact the value of assets we hold, or otherwise significantly adversely affect our business. In addition, this increased level of scrutiny may increase our compliance costs.

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Our operations could be negatively affected by changes to laws and regulations and enhanced regulatory oversight of our clients and us. These changes may compel us to increase our prices in certain situations or decrease our prices in other situations, may restrict our ability to implement price increases, and may limit the manner in which we conduct our business or otherwise may have a negative impact on our ability to generate revenues, earnings and cash flows. If we are unable to adapt our products and services to conform to the new laws and regulations, or if these laws and regulations have a negative impact on our clients, we may experience client losses or increased operating costs, and our business and results of operations could be negatively affected.

We rely on our top ten clients for a significant portion of our revenue and profit and we cannot guarantee that we will be able to retain or renew existing agreements or maintain these relationships. If these clients are negatively impacted by current economic or regulatory conditions or otherwise experience financial hardship or stress, or if the terms of our relationships with these clients change, our business, financial condition and results of operations could be adversely affected.

Our ten largest clients generated approximately 38.7% of our operating revenues for the year ended December 31, 2017, and one of our largest clients accounted for 11.1% of our revenue for the year ended December 31, 2017. We expect that a limited number of our clients will continue to represent a significant portion of our revenues for the foreseeable future, and that our concentration of revenue with one or more clients may continue to be significant or increase. These clients face continued pressure in the current economic and regulatory climate. Many of our relationships with these clients are long-standing and are important to our future operating results, but there is no guarantee that we will be able to retain or renew existing agreements or maintain our relationships on acceptable terms or at all. In addition, in response to increased regulatory oversight, clients in the mortgage lending industry may have internal policies that require them to use multiple vendors or service providers, thereby causing a diversification of revenue among many vendors. Deterioration in or termination of any of these relationships, including through vendor diversification policies or merger or consolidation among our clients, could significantly reduce our revenue and could adversely affect our business, financial condition and results of operations. In addition, certain of our businesses have higher client concentration than our company as a whole. As a result, these businesses may be disproportionately affected by declining revenue from, or loss of, a significant client.

We rely upon proprietary technology and information rights, and if we are unable to protect our rights, our business, financial condition and results of operations could be harmed.

Our success depends, in part, upon our intellectual property rights. We rely primarily on a combination of patents, copyrights, trade secrets, and trademark laws and nondisclosure and other contractual restrictions on copying, distribution and creation of derivative products to protect our proprietary technology and information. This protection is limited, and our intellectual property could be used by others without our consent. In addition, patents may not be issued with respect to our pending or future patent applications, and our patents may not be upheld as valid or may not prevent the development of competitive products. Any infringement, disclosure, loss, invalidity of, or failure to protect our intellectual property could negatively impact our competitive position, and ultimately, our business. Moreover, litigation may be necessary to enforce or protect our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could be time-consuming, result in substantial costs and diversion of resources and could harm our business, financial condition, results of operations and cash flows.

Because our revenue from clients in the mortgage, consumer lending and real estate industries is affected by the strength of the economy and the housing market generally, including the volume of real estate transactions, a negative change in any of these conditions could materially adversely affect our business and results of operations.

A significant portion of our revenue is generated from solutions we provide to the mortgage, consumer lending and real estate industries and, as a result, a weak economy or housing market or adverse changes in the interest rate environment may adversely affect our business. The volume of mortgage origination and residential real estate transactions is highly variable. Reductions in these transaction volumes could have a direct impact on certain portions of our revenues and may materially adversely affect our business, financial condition and results of operations. Moreover, negative economic conditions and/or increasing interest rate environments could affect the performance and financial condition of some of our clients in many of our businesses, which may negatively impact our revenue, earnings and liquidity in particular if these clients go bankrupt or otherwise exit certain businesses.

Our acquisition and integration of businesses may involve increased expenses, and may not produce the desired financial or operating results contemplated at the time of the transaction.


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We have acquired and expect to continue to acquire, on an opportunistic basis, companies, businesses, products and services. These activities may increase our expenses, and the expected results, synergies and growth from these initiatives may not materialize as planned. While management believes that acquisitions will improve our competitiveness and profitability, no assurance can be given that acquisitions will be successful or accretive to earnings.

In addition, we may have difficulty integrating our completed or any future acquisitions into our operations, including implementing controls, procedures and policies in line with our controls, procedures and policies. If we fail to properly integrate acquired businesses, products, technologies and personnel, it could impair relationships with employees, clients and strategic partners, distract management attention from our core businesses, result in control failures and otherwise disrupt our ongoing business and harm our results of operations. We also may not be able to retain key management and other critical employees after an acquisition. Although part of our business strategy may include growth through strategic acquisitions, we may not be able to identify suitable acquisition candidates, obtain the capital necessary to pursue acquisitions or complete acquisitions on satisfactory terms.

We operate in a competitive business environment, and if we are unable to compete effectively our results of operations and financial condition may be adversely affected.

The markets for our products and services are intensely competitive. Our competitors vary in size and in the scope and breadth of the services they offer. We compete for existing and new clients against both third parties and the in-house capabilities of our clients. Many of our competitors have substantial resources. Some have widely-used technology platforms that they seek to use as a competitive advantage to drive sales of other products and services. In addition, we expect that the markets in which we compete will continue to attract new competitors and new technologies. These competitors and new technologies may be disruptive to our existing technology or service offerings, resulting in operating inefficiencies and increased competitive pressure. We cannot assure you that we will be able to compete successfully against current or future competitors. Any competitive pressures we face in the markets in which we operate could materially adversely affect our business, financial condition and results of operations.

Regulatory developments with respect to use of consumer data and public records could have a material adverse effect on our business, financial condition and results of operations.

Because our databases include certain public and non-public personal information concerning consumers, we are subject to government regulation and potential adverse publicity concerning our use of consumer data. We acquire, store, use and provide many types of consumer data and related services that are subject to regulation under the FCRA, the GLBA, and the Driver's Privacy Protection Act and, to a lesser extent, various other federal, state, and local laws and regulations. These laws and regulations are designed to protect the privacy of consumers and to prevent the unauthorized access and misuse of personal information in the marketplace. Our failure to comply with these laws, or any future laws or regulations of a similar nature, could result in substantial regulatory penalties, litigation expense and loss of revenue.

In addition, some of our data suppliers face similar regulatory requirements and, consequently, they may cease to be able to provide data to us or may substantially increase the fees they charge us for this data, which may make it financially burdensome or impossible for us to acquire data that is necessary to offer our products and services. Further, many consumer advocates, privacy advocates and government regulators believe that existing laws and regulations do not adequately protect privacy or ensure the accuracy of consumer-related data. As a result, they are seeking further restrictions on the dissemination or commercial use of personal information to the public and private sectors as well as contemplating requirements relative to data accuracy and the ability of consumers to opt to have their personal data removed from databases such as ours. Any future laws, regulations or other restrictions limiting the dissemination or use of personal information may reduce the quality and availability of our products and services, which could have a material adverse effect on our business, financial condition and results of operations.

Our reliance on outsourcing arrangements subjects us to risk and may disrupt or adversely affect our operations. In addition, we may not realize the full benefit of our outsourcing arrangements, which may result in increased costs, or may adversely affect our service levels for our clients.

Over the last few years, we have outsourced various business process and information technology services to third parties, including the outsourcing arrangements we entered into with a subsidiary of Cognizant Technology Solutions and the technology infrastructure management services agreement we entered into with NTT. Although we have service-level arrangements with our providers, we do not ultimately control their performance, which may make our operations vulnerable to their performance failures. In addition, the failure to adequately monitor and regulate the performance of our third-party

13


vendors could subject us to additional risk. Reliance on third parties also makes us vulnerable to changes in the vendors' business, financial condition and other matters outside of our control, including their violations of laws or regulations which could increase our exposure to liability or otherwise increase the costs associated with the operation of our business. The failure of our outsourcing partners to perform as expected or as contractually required could result in significant disruptions and costs to our operations and to the services we provide to our clients, which could materially and adversely affect our business, client relationships, financial condition, operating results and cash flow.

Our international service providers and our own international operations subject us to additional risks, which could have an adverse effect on our results of operations and may impair our ability to operate effectively.

Over the last few years, we have reduced our costs by utilizing lower-cost labor outside the U.S. in countries such as India, Mexico and the Philippines through outsourcing arrangements. It is likely that the countries where our outsourcing vendors are located may be subject to higher degrees of political and social instability than the U.S. and may lack the infrastructure to withstand political unrest or natural disasters. Such disruptions could impact our ability to deliver our products and services on a timely basis, if at all, and to a lesser extent could decrease efficiency and increase our costs. Fluctuations of the U.S. dollar in relation to the currencies used and higher inflation rates experienced in these countries may also reduce the savings we planned to achieve. Furthermore, the practice of utilizing labor based in foreign countries has come under increased scrutiny in the U.S. and, as a result, many of our clients may require us to use labor based in the U.S. We may not be able to pass on the increased costs of higher-priced U.S.-based labor to our clients, which ultimately could have an adverse effect on our results of operations.

In addition, the U.S. or the foreign countries in which we have service provider arrangements or operate could adopt new legislation or regulations that would adversely affect our business by making it difficult, more costly or impossible for us to continue our foreign activities as currently being conducted. Furthermore, in many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the FCPA. Any violations of the FCPA or local anti-corruption laws by us, our subsidiaries or our local agents could have an adverse effect on our business and reputation and result in substantial financial penalties or other sanctions.

If our products or services are found to infringe on the proprietary rights of others, we may be required to change our business practices and may also become subject to significant costs and monetary penalties.

As we continue to develop and expand our products and services, we may become increasingly subject to infringement claims from third parties such as non-practicing entities, software providers and suppliers of data. Likewise, if we are unable to maintain adequate controls over how third-party software and data are used we may be subject to claims of infringement. Any claims, whether with or without merit, could:

be expensive and time-consuming to defend;
cause us to cease making, licensing or using applications that incorporate the challenged intellectual property;
require us to redesign our applications, if feasible;
divert management's attention and resources; and
require us to enter into royalty or licensing agreements in order to obtain the right to use necessary technologies.

Our level of indebtedness could adversely affect our financial condition and prevent us from complying with our covenants and obligations under our outstanding debt instruments. Further, the instruments governing our indebtedness subject us to various restrictions that could limit our operating flexibility.

As of December 31, 2017, our total debt was approximately $1.8 billion and we had unused commitments of approximately $700.0 million under our Revolving Facility.

Subject to the limitations contained in the Credit Agreement governing our credit facilities and our other debt instruments, we may incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other general corporate purposes. If we do so, the risks related to our level of debt could increase. Specifically, our level of debt could have important consequences to us, including increasing our vulnerability to adverse economic and industry conditions and compromising our flexibility to capitalize our business opportunities and to plan for, or react to, competitive pressures and changes in our business or market conditions.

The Credit Agreement governing our credit facilities imposes operating and financial restrictions on our activities. These restrictions include the financial covenants in our credit facilities, which require ongoing compliance with certain

14


financial tests and ratios, including a minimum interest coverage ratio and maximum leverage ratio, and could limit or prohibit our ability to, among other things:

create, incur or assume additional debt;
create, incur or assume certain liens;
redeem and/or prepay certain subordinated debt we might issue in the future;
pay dividends on our stock or repurchase stock;
make certain investments and acquisitions, including joint ventures;
enter into or permit to exist contractual limits on the ability of our subsidiaries to pay dividends to us;
enter into new lines of business;
engage in consolidations, mergers and acquisitions;
engage in specified sales of assets; and
enter into transactions with affiliates.

These restrictions on our ability to operate our business could negatively impact our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities that might otherwise be beneficial to us. Our failure to comply with these restrictions could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all our debt.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our outstanding debt instruments, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations. If we cannot make scheduled payments on our debt, we will be in default and the lenders under our credit facilities could declare all outstanding principal and interest to be due and payable and could terminate their revolving commitments to loan money and foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.

We may not be able to attract and retain qualified management personnel or develop current management personnel to assist in or lead company growth, which could have an adverse effect on our ability to maintain or expand our product and service offerings.

We rely on skilled management personnel and our success depends on our ability to attract, train and retain a sufficient number of such individuals. If our attrition rate increases, our operating efficiency and productivity may decrease. We compete for talented individuals not only with other companies in our industry, but also with companies in other industries, such as software services, engineering services and financial services companies, and there is a limited pool of individuals who have the skills and training needed to grow our company, especially in the increasingly-regulated environment in which we operate. Increased attrition or competition for qualified management could have an adverse effect on our ability to expand our business and product offerings, as well as cause us to incur greater personnel expenses and training costs.

We have substantial investments in recorded goodwill as a result of prior acquisitions and an impairment of these investments would require a write-down that would reduce our net income.

Goodwill is assessed for impairment annually or sooner if circumstances indicate a possible impairment. Factors that could lead to impairment of goodwill include significant under-performance relative to historical or projected future operating results, a significant decline in our stock price and market capitalization and negative industry or economic trends. In the event that the book value of goodwill is impaired, any such impairment would be charged to earnings in the period of impairment. In the event of significant volatility in the capital markets or a worsening of current economic conditions, we may be required to record an impairment charge, which would negatively impact our results of operations. Possible future impairment of goodwill may have a material adverse effect on our business, financial condition and results of operations.


15


We may not be able to effectively achieve our strategies, which could adversely affect our financial condition or results of operations.

Our ability to execute on our strategies depends in part on maintaining our competitive advantage with current solutions in new and existing markets, as well as our ability to develop new technologies and solutions to serve such markets. There can be no assurance that we will be able to realize all of the projected benefits of our cost-containment plans or that we will be able to compete successfully in new markets or continue to compete effectively in our existing markets. In addition, development of new technologies and solutions may require significant investment by us. If we fail to introduce new technologies or solutions on a cost-effective or timely basis, or if we are not successful in introducing or obtaining regulatory or market acceptance for new solutions, we may lose market share and our results of operations or cash flows could be adversely affected.

We share responsibility with First American for certain income tax liabilities for tax periods prior to and including the date of the Separation.

Under the Tax Sharing Agreement, by and between FAC and FAFC, dated as of June 1, 2010 (the "Tax Sharing Agreement") we entered into in connection with the Separation transaction, we are generally responsible for taxes attributable to our business, assets and liabilities and FAFC is generally responsible for all taxes attributable to members of the FAFC group of companies and the assets, liabilities or businesses of the FAFC group of companies. Generally, any liabilities arising from tax adjustments to consolidated tax returns for tax periods prior to and including the date of the Separation will be shared in proportion to each company's percentage of the tax liability for the relevant year (or partial year with respect to 2010), unless the adjustment is attributable to either party, in which case the adjustment will generally be for the account of such party. In addition to this potential liability associated with adjustments for prior periods, if FAFC were to fail to pay any tax liability it is required to pay under the Tax Sharing Agreement, we could be legally liable under applicable tax law for such tax liabilities and required to make additional tax payments. Accordingly, under certain circumstances, we may be obligated to pay amounts in excess of our agreed-upon share of tax liabilities.

If certain transactions, including internal transactions, undertaken in anticipation of the Separation are determined to be taxable for U.S. federal income tax purposes, we, our stockholders that are subject to U.S. federal income tax and FAFC will incur significant U.S. federal income tax liabilities.

In connection with the Separation we received a private letter ruling from the Internal Revenue Service to the effect that, among other things, certain internal transactions undertaken in anticipation of the Separation will qualify for favorable treatment under the U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’), and the contribution by us of certain assets of the financial services businesses to FAFC and the pro-rata distribution to our shareholders of the common stock of FAFC will, except for cash received in lieu of fractional shares, qualify as a tax-free transaction for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. In addition, we received opinions of tax counsel to similar effect. The ruling and opinions relied on certain facts, assumptions, representations and undertakings from us and FAFC regarding the past and future conduct of the companies' respective businesses and other matters. If any of these facts, assumptions, representations or undertakings is incorrect or not otherwise satisfied, we and our stockholders may not be able to rely on the ruling or the opinions of tax counsel and could be subject to significant tax liabilities. Notwithstanding the private letter ruling and opinions of tax counsel, the IRS could determine on audit that the Separation is taxable if it determines that any of these facts, assumptions, representations or undertakings were not correct or have been violated or if it disagrees with the conclusions in the opinions that were not covered by the private letter ruling, or for other reasons, including as a result of certain significant changes in the stock ownership of us or FAFC after the Separation. If the Separation is determined to be taxable for U.S. federal and state income tax purposes, we and our stockholders that are subject to income tax could incur significant income tax liabilities.

In addition, under the terms of the Tax Sharing Agreement, in the event a transaction were determined to be taxable and such determination were the result of actions taken after the Separation by us or FAFC, the party responsible for such failure would be responsible for all taxes imposed on us or FAFC as a result thereof.

Moreover, the Tax Sharing Agreement generally provides that each party thereto is responsible for any taxes imposed on the other party as a result of the failure of the distribution to qualify as a tax-free transaction under the Code if such failure is attributable to post-Separation actions taken by or in respect of the responsible party or its stockholders, regardless of when the actions occur after the Separation, and the other party consents to such actions or such party obtains a favorable letter ruling or opinion of tax counsel as described above.


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In connection with the Separation, we entered into a number of agreements with FAFC setting forth rights and obligations of the parties post-Separation. In addition, certain provisions of these agreements provide protection to FAFC in the event of a change of control of us, which could reduce the likelihood of a potential change of control that our stockholders may consider favorable.

In connection with the Separation, we and FAFC entered into a number of agreements that set forth certain rights and obligations of the parties post-Separation, including the Separation and Distribution Agreement, the Tax Sharing Agreement and the Restrictive Covenants Agreement. We possess certain rights under those agreements, including without limitation indemnity rights from certain liabilities allocated to FAFC. The failure of FAFC to perform its obligations under the agreements could have an adverse effect on our financial condition, results of operations and cash flows.

In addition, the Separation and Distribution Agreement gives FAFC the right to purchase the equity or assets of our entity or entities directly or indirectly owning the real property databases that we currently own upon the occurrence of certain triggering events. The triggering events include the direct or indirect purchase of the databases by a title insurance underwriter (or its affiliate) or an entity licensed as a title insurance underwriter, including a transaction where a title insurance underwriter (or its affiliate) acquires 25% or more of us. The purchase right expires June 1, 2020. Until the expiration of the purchase right, this provision could have the effect of limiting or discouraging an acquisition of us or preventing a change of control that our stockholders might consider favorable. Likewise, if a triggering event occurs, the loss of ownership of our real property database could have a material adverse effect on our financial condition, business and results of operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, 2017, our real estate portfolio of 1.2 million square feet is comprised of leased property throughout 22 states in the U.S. totaling approximately 1.1 million square feet with another 92,000 square feet in the aggregate in Australia, Canada, India, France, Bulgaria, Brazil, New Zealand and the United Kingdom. Our properties range in size from a single property under 1,000 square feet to our large, multiple-building complex in Irving, TX totaling approximately 329,000 square feet. The lease governing our Irving, TX property expires in March 2032. Our corporate headquarters are located in Irvine, CA, where we occupy approximately 123,000 square feet pursuant to a lease that expires in July 2021.

All properties are primarily used as offices and have multiple expiration dates. The office facilities we occupy are, in all material respects, in good condition and adequate for their intended use.

Item 3. Legal Proceedings

For a description of our legal proceedings, see Note 15 - Litigation and Regulatory Contingencies and Note 17 - Discontinued Operations of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K, which is incorporated by reference in response to this item.

Item 4. Mine Safety Disclosures

Not applicable.


17


PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Prices and Dividends

Our common stock is listed on the New York Stock Exchange and trades under the symbol "CLGX". The approximate number of record holders of our common stock on February 22, 2018 was 2,523. High and low stock prices for the last two years were as follows:

 
2017
 
2016
 
High
Low
 
High
Low
Quarter ended March 31,
$
40.94

$
34.59

 
$
36.79

$
30.73

Quarter ended June 30,
$
43.95

$
38.49

 
$
39.09

$
33.41

Quarter ended September 30,
$
48.02

$
42.32

 
$
43.43

$
38.00

Quarter ended December 31,
$
49.30

$
42.00

 
$
42.77

$
35.60


We did not declare dividends for the years ended December 31, 2017 and 2016 and have not declared dividends since we became a stand-alone public company and changed our name to CoreLogic on June 1, 2010 and began trading on the New York Stock Exchange under the symbol “CLGX.” At this time, we do not expect to pay regular quarterly cash dividends, and any future dividends will be dependent on future earnings, financial condition, compliance with our Credit Agreement and capital requirements.

Unregistered Sales of Equity Securities

During the quarter ended December 31, 2017, we did not issue any unregistered shares of our common stock.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

On October 27, 2016, the Board of Directors canceled all prior repurchase authorizations and established a new share repurchase authorization of up to $500.0 million. As of December 31, 2017, we have $210.5 million in value of shares (inclusive of commissions and fees) available to be repurchased under the plan. The stock repurchase plan has no expiration date and repurchases may be made in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan.

Under our Credit Agreement, our stock repurchase capacity is restricted to $150.0 million per fiscal year, with the ability to undertake an additional amount of repurchases in such fiscal year provided that, on a pro forma basis after giving effect to the stock repurchase, our total covenant leverage ratio does not exceed 3.50 to 1.00. While we continue to preserve the capacity to execute share repurchases under our existing share repurchase authorization, going forward we will strive to pursue a balanced approach to capital allocation and will consider the repurchase of shares of our common stock, retirement of outstanding debt and the pursuit of strategic acquisitions on an opportunistic basis.


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The following table summarizes our repurchase activity under our Board-approved stock repurchase plan for the three months ending December 31, 2017:

Issuer Purchases of Equity Securities
 
 
 
 
 
 
 
Period
Total Number of Shares Purchased
 
Average Price Paid per Share (1)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
October 1 to October 31, 2017
210,285

 
$
47.01

 
210,285

 
$
275,613,018

November 1 to November 30, 2017
919,715

 
$
45.91

 
919,715

 
$
233,392,416

December 1 to December 31, 2017
507,800

 
$
45.00

 
507,800

 
$
210,541,041

Total
1,637,800

 
$
45.77

 
1,637,800

 
 
 
 
 
 
 
 
 
 
(1)
Calculated inclusive of commissions.


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Stock Performance Graph

The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that it is specifically incorporated by reference into such filing.

The following graph compares the yearly percentage change in the cumulative total stockholder return on our common stock with corresponding changes in the cumulative total returns of the Russell 2000 Index and two peer group indices. The comparison assumes an investment of $100 at the close of business on December 31, 2012 and reinvestment of dividends. This historical performance is not indicative of future performance.


peergroups.jpg
The 2016 Peer Group, which was used by the Board's Compensation Committee for 2016 compensation decisions, consisted of: Acxiom Corporation, Broadridge Financial Solutions, Inc., Black Knight Financial Services, Inc., CIBER Inc., CSG Systems International Inc., DST Systems, Inc., The Dun & Bradstreet Corporation, Equifax, Inc., Fair Isaac Corporation, Fidelity National Financial, Inc., First American Financial, Gartner, Inc., Jack Henry & Associates, Inc., Neustar, Inc. and Verisk Analytics, Inc. In 2017, the Compensation Committee adopted the 2017 Peer Group for use in 2017 compensation decisions, modifying the 2016 Peer Group to add TeraData Corporation. In addition, Black Knight Financial Services, Inc., and Neustar, Inc., were removed from the 2017 Peer Group as they were both delisted and ceased trading. The 2017 Peer Group more accurately and appropriately reflects our business and the industries in which we compete and also reflects the recent merger and acquisition activity and corporate reorganizations impacting companies in the 2016 Peer Group. We have included the 2016 Peer Group in the performance graph above for transition purposes only.


20


Item 6. Selected Financial Data

The selected consolidated financial data for the five-year period ended December 31, 2017 has been derived from the consolidated financial statements. The selected consolidated financial data should be read in conjunction with the consolidated financial statements and notes thereto, “Item 1—Business—Corporate Events—Acquisitions” and “Item 7—Management’s Discussion and Analysis of Financial Condition and Consolidated Results of Operations.” The consolidated statements of operations data for the years ended December 31, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015, 2014, and 2013 have been derived from financial statements not included herein.

In September 2014, we completed the sale of our collateral solutions and field services businesses. Therefore, these results of operations are all reflected as discontinued operations. See Note 17 – Discontinued Operations of the Notes to Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of Part II of this report for additional disclosures.

(in thousands, except per share amounts)
For the Year Ended December 31,
Income Statement Data:
2017
 
2016
 
2015
 
2014
 
2013
Operating revenue
$
1,851,117

 
$
1,952,557

 
$
1,528,110

 
$
1,405,040

 
$
1,404,401

Operating income
$
238,618

 
$
277,940

 
$
203,449

 
$
170,517

 
$
143,557

Equity in (losses)/earnings of affiliates, net of tax
$
(1,186
)
 
$
496

 
$
13,720

 
$
14,120

 
$
27,361

Amounts attributable to CoreLogic:
 
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
149,534

 
$
109,946

 
$
128,400

 
$
89,741

 
$
100,313

Income/(loss) from discontinued operations, net of tax
2,315

 
(1,466
)
 
(556
)
 
(16,653
)
 
14,423

Gain/(loss) from sale of discontinued operations, net of tax
313

 
(1,930
)
 

 
112

 
(7,008
)
Net income
$
152,162

 
$
106,550

 
$
127,844

 
$
73,200

 
$
107,728

Balance Sheet Data:
 

 
 

 
 

 
 

 
 

Assets of discontinued operations
$
383

 
$
662

 
$
681

 
$
4,267

 
$
38,926

Total assets
$
4,077,413

 
$
3,907,534

 
$
3,673,716

 
$
3,487,295

 
$
2,981,316

Long-term debt
$
1,753,570

 
$
1,602,047

 
$
1,336,674

 
$
1,301,495

 
$
818,114

Total equity
$
1,007,876

 
$
1,002,984

 
$
1,049,490

 
$
1,014,167

 
$
1,044,373

Amounts attributable to CoreLogic:
 

 
 

 
 

 
 

 
 

Basic income/(loss) per share:
 

 
 

 
 

 
 

 
 

Income from continuing operations, net of tax
$
1.79

 
$
1.26

 
$
1.44

 
$
0.99

 
$
1.05

Income/(loss) from discontinued operations, net of tax
0.03

 
(0.02
)
 
(0.01
)
 
(0.18
)
 
0.15

Gain/(loss) from sale of discontinued operations, net of tax

 
(0.02
)
 

 

 
(0.07
)
Net income
$
1.82

 
$
1.22

 
$
1.43

 
$
0.81

 
$
1.13

Diluted income/(loss) per share:
 

 
 

 
 

 
 

 
 

Income from continuing operations, net of tax
$
1.75

 
$
1.23

 
$
1.42

 
$
0.97

 
$
1.03

Income/(loss) from discontinued operations, net of tax
0.03

 
(0.02
)
 
(0.01
)
 
(0.18
)
 
0.15

Gain/(loss) from sale of discontinued operations, net of tax

 
(0.02
)
 

 

 
(0.07
)
Net income
$
1.78

 
$
1.19

 
$
1.41

 
$
0.79

 
$
1.11

Weighted average shares outstanding
 

 
 

 
 

 
 

 
 

Basic
83,499

 
87,502

 
89,070

 
90,825

 
95,088

Diluted
85,234

 
89,122

 
90,564

 
92,429

 
97,109



21


Item 7. Management’s Discussion and Analysis of Financial Condition and Consolidated Results of Operations

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Annual Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “should,” “would,” “could,” “may,” and similar expressions also identify forward-looking statements. The forward-looking statements include, without limitation, statements regarding our future operations, financial condition and prospects, operating results, revenues and earnings liquidity, our estimated income tax rate, unrecognized tax positions, amortization expenses, impact of recent accounting pronouncements, our cost management program, our acquisition strategy and our growth plans, expectations regarding our recent acquisitions, share repurchases, the level of aggregate U.S. mortgage originations and the reasonableness of the carrying value related to specific financial assets and liabilities.

Our expectations, beliefs, objectives, intentions and strategies regarding future results are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by our forward-looking statements. These risks and uncertainties include, but are not limited to:

compromises in the security or stability of our data and systems, including from cyber-based attacks, the unauthorized transmission of confidential information or systems interruptions;
limitations on access to or increase in prices for data from external sources, including government and public record sources;
changes in applicable government legislation, regulations and the level of regulatory scrutiny affecting our clients or us, including with respect to consumer financial services and the use of public records and consumer data;
our ability to protect proprietary technology rights;
difficult or uncertain conditions in the mortgage and consumer lending industries and the economy generally;
our ability to realize the anticipated benefits of certain acquisitions and the timing thereof;
intense competition in the market against third parties and the in-house capabilities of our clients;
risks related to the outsourcing of services and international operations;
the level of our indebtedness, our ability to service our indebtedness and the restrictions in our various debt agreements;
our ability to attract and retain qualified management;
impairments in our goodwill or other intangible assets;
our cost reduction program and growth strategies, and our ability to effectively and efficiently implement them; and
the remaining tax sharing arrangements and other obligations associated with the spin-off of FAFC.

We urge you to carefully consider these risks and uncertainties and review the additional disclosures we make concerning risks and uncertainties that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Item 1A, “Risk Factors” in this 10-K, as such risk factors may be amended, supplemented or superseded from time to time by other reports we file with the SEC. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Annual Report on Form 10-K.

Business Overview

We are a leading global property information, analytics and data-enabled services provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory and proprietary sources provides detailed coverage of property, mortgages and other encumbrances, property risk and replacement cost, consumer credit, tenancy, location, hazard risk and related performance information. We have more than one million users who rely on our data and predictive decision analytics to reduce risk, enhance transparency and improve the performance of their businesses.

We offer our clients a comprehensive national database covering real property and mortgage information, judgments and liens, building and replacement costs, parcel and geospatial data, criminal background records, eviction information, non-prime lending records, credit information, and tax information, among other data types. Our databases include over 900 million historical property transactions, over 100 million mortgage applications and property-specific data covering approximately 99% of U.S. residential properties, as well as commercial locations, totaling nearly 150 million records. We are also the

22


industry's first parcel-based geocoder and have developed a proprietary parcel database covering more than 145 million parcels across the U.S. We believe the quality of the data we offer is distinguished by our broad range of data sources and our experience in aggregating, organizing, normalizing, processing and delivering data to our clients.

With our data as a foundation, we have built strong analytics capabilities and a variety of value-added business services to meet our clients’ needs for property tax processing, property valuation, mortgage and automotive credit reporting, tenancy screening, hazard risk, property risk and replacement cost, flood plain location determination and other geospatial data analytics and related services.

Overview of Business Environment and Company Developments

Business Environment

The volume of U.S. mortgage loan originations serves as a key market driver for more than half of our business. We believe the volume of real estate and mortgage transactions is primarily affected by real estate prices, the availability of funds for mortgage loans, mortgage interest rates, employment levels and the overall state of the U.S. economy. We believe mortgage origination loan applications decreased by approximately 20% in 2017 relative to 2016, primarily due to significantly lower mortgage refinance volumes resulting from rising interest rates. For 2018, we expect the trend in rising interest rates to continue and therefore we expect 2018 mortgage unit volumes to be approximately 10% lower relative to 2017 levels, mostly due to lower expected refinance activity.

We generate the majority of our revenues from clients with operations in the U.S. residential real estate, mortgage origination and mortgage servicing markets. Approximately 38.7%, 43.0%, and 33.5% of our operating revenues for the year ended December 31, 2017, 2016 and 2015, respectively, were generated from our ten largest clients who consist of some of the largest U.S. mortgage originators and servicers. One of our clients, Bank of America, accounted for 11.1% of our operating revenues, respectively, for the year ended December 31, 2017, and two of our clients, Wells Fargo and Bank of America, accounted for 14.0% and 11.5%, respectively, of our operating revenues for the year ended December 31, 2016, with both of our business segments reporting revenue from these customers. No client accounted for 10.0% or more of our operating revenues for the year ended December 31, 2015.

Recent Company Developments

Acquisitions

In August 2017, we completed the acquisitions of Mercury, Myriad and Clareity for total cash of approximately $189.4 million. The acquisition of Myriad included contingent consideration of up to $3.0 million, to be paid in cash by 2019 upon the achievement of certain revenue targets in fiscal years 2017 and 2018. See Note 16 - Acquisitions for further discussion.    
    
Financing Activities

In August 2017, we amended and restated our Credit Agreement. The Credit Agreement provides for a $1.8 billion Term Facility, and a $700.0 million five-year Revolving Facility. The Term Facility matures and the Revolving Facility expires in August 2022. The Revolving Facility includes a $100.0 million multicurrency revolving sub-facility and a $50.0 million letter of credit sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility by up to $100.0 million in the aggregate; however, the lenders are not obligated to do so. See Note 8 - Long Term Debt for further discussion.

Productivity & Cost Management

In line with our on-going commitment to operational excellence and margin expansion, we achieved our cost reduction target of $30.0 million in 2017. Savings were realized through the reduction of operating costs, selling, general and administrative costs, outsourcing certain business process functions, consolidation of real estate facilities and other operational improvements.

Unless otherwise indicated, the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K relate solely to the discussion of our continuing operations.


23


Consolidated Results of Operations

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Operating Revenues

Our consolidated operating revenues were $1.9 billion for the year ended December 31, 2017, a decrease of $101.4 million when compared to 2016, and consisted of the following:

(in thousands, except percentages)
 
2017
 
2016
 
$ Change
 
% Change
PIRM
 
$
703,032

 
$
706,496

 
$
(3,464
)
 
(0.5
)%
UWS
 
1,157,432

 
1,256,841

 
(99,409
)
 
(7.9
)
Corporate and eliminations
 
(9,347
)
 
(10,780
)
 
1,433

 
(13.3
)
Operating revenues
 
$
1,851,117

 
$
1,952,557

 
$
(101,440
)
 
(5.2
)%

Our PIRM segment revenues decreased by $3.5 million, or 0.5%, when compared to 2016. Acquisition activity contributed $10.5 million in 2017. Excluding acquisition activity, the decrease of $14.0 million was primarily due to lower property insights revenues of $22.2 million from lower mortgage loan origination volumes and project-related revenues and lower other revenues of $6.8 million, partially offset by higher insurance & spatial solutions revenues of $15.0 million, improved pricing, market share gains and new product contributions.

Our UWS segment revenues decreased by $99.4 million, or 7.9%, when compared to 2016. Acquisition activity contributed $30.4 million in 2017. Excluding acquisition activity, the decrease of $129.8 million was primarily comprised of revenue reductions in valuation solutions of $106.8 million, flood data solutions of $9.1 million and other of $13.9 million. These reductions reflect lower mortgage loan origination volumes as well as the impact of the planned vendor diversification by a significant appraisal management client.

Our corporate and eliminations revenues were comprised of intercompany revenue eliminations between our operating segments.

Cost of Services (exclusive of depreciation and amortization)

Our consolidated cost of services was $1.0 billion for the year ended December 31, 2017, a decrease of $69.1 million, or 6.6%, when compared to 2016. Acquisition activity contributed $18.6 million of additional cost in 2017. Excluding acquisition activity, the decrease of $87.7 million was primarily due to lower revenues and our on-going operational efficiency programs.

Selling, General and Administrative Expense

Our consolidated selling, general and administrative expenses were $459.8 million for the year ended December 31, 2017, an increase of $1.7 million, or 0.4%, when compared to 2016. Acquisition activity contributed an increase of $7.2 million in 2017. Excluding acquisition activity, the decrease of $5.5 million was primarily due to lower personnel-related expenses of $59.8 million largely from lower variable compensation and the favorable impact of our ongoing operational efficiency programs. These programs also lowered facility costs by $2.3 million, travel and communication costs by $2.4 million and other costs by $9.4 million, partially offset by higher legal settlement costs of $14.0 million, higher external services costs of $32.4 million (including investments in technology, innovation and compliance-related capabilities) and higher professional fees of $22.0 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $177.8 million for the year ended December 31, 2017, an increase of $5.2 million, or 3.0%, when compared to 2016. Acquisition activity contributed $10.4 million in 2017. Excluding acquisition activity, the decrease of $5.2 million was primarily due to assets that were fully depreciated in the prior year, primarily in the UWS segment.


24


Operating Income

Our consolidated operating income was $238.6 million for the year ended December 31, 2017, a decrease of $39.3 million, or 14.1%, when compared to 2016, and consisted of the following:

(in thousands, except percentages)
 
2017
 
2016
 
$ Change
 
% Change
PIRM
 
$
89,129

 
$
101,700

 
$
(12,571
)
 
(12.4
)%
UWS
 
233,366

 
255,583

 
(22,217
)
 
(8.7
)
Corporate and eliminations
 
(83,877
)
 
(79,343
)
 
(4,534
)
 
5.7

Operating income
 
$
238,618

 
$
277,940

 
$
(39,322
)
 
(14.1
)%

Our PIRM segment operating income decreased by $12.6 million, or 12.4%, when compared to 2016. Acquisition-related activity contributed $3.2 million to operating income in 2017. Excluding acquisition activity, operating income decreased $15.8 million and operating margins decreased 199 basis points primarily due to lower property insights revenues and higher legal settlement costs of $14.0 million, partially offset by higher insurance & spatial solutions revenues and the impact of our on-going operational efficiency programs.

Our UWS segment operating income decreased by $22.2 million, or 8.7%, when compared to 2016. Acquisition-related activity contributed $1.4 million of operating losses in 2017 primarily due to the amortization of acquired intangibles. Excluding acquisition activity, operating income decreased $23.6 million and operating margins remained relatively consistent when compared to 2016. The decrease was primarily due to lower revenues, partially offset by the impact of our ongoing operational efficiency programs.

Corporate and eliminations operating loss increased $4.5 million, or 5.7%, due to higher stock-based compensation of $4.2 million from a one-time vesting acceleration in accordance with our equity plan, along with higher external services costs from investments in technology, innovation and compliance-related capabilities of $48.0 million, partially offset by the impact of ongoing operational efficiency programs.

Total Interest Expense, Net

Our consolidated total interest expense, net was $61.8 million for the year ended December 31, 2017, an increase of $1.5 million, or 2.5%, when compared to 2016. The increase was primarily due to a higher average outstanding principal balance in 2017 and higher interest rates.

Loss on early extinguishment of debt

Our consolidated loss on early extinguishment of debt was $1.8 million for the year ended December 31, 2017, a decrease of $24.8 million when compared to 2016. The decrease is primarily related to losses on our extinguishment of debt of $24.4 million in connection with the redemption of all outstanding balances under the 7.25% senior notes in July 2016 and $2.2 million in connection with the pay down on the 7.55% senior debentures in November 2016. For the year ended December 31, 2017, we wrote-off unamortized debt issuance costs of $1.8 million due to financing activities in August 2017.

Impairment Loss on Investment in Affiliates

Our consolidated impairment loss on investment in affiliates was $3.8 million for the year ended December 31, 2017, a decrease of $19.6 million, or 83.7%. Such write-downs are due to other-than-temporary losses in value in investments, reflecting our expected inability to recover the carrying amount of the investments.

Loss on Investments and Other, Net

Our consolidated loss on investments and other, net was $2.3 million for the year ended December 31, 2017, an unfavorable variance of $22.1 million when compared to 2016. The variance is primarily due to the prior year gain of $8.0 million on the fair value adjustment of the contingent consideration related to the acquisition of FNC, Inc. ("FNC") in April 2016, a prior year gain of $11.4 million from the sale of investments, prior year losses of $2.0 million related to supplemental benefit plans, current year losses of $5.1 million from the final settlement of a previously terminated pension plan, current year

25


net losses of $1.9 million in connection with the purchase of Mercury, partially offset by higher realized gains on investments of $2.3 million.

Provision for Income Taxes

Our consolidated provision for income taxes from continuing operations was $18.2 million and $54.5 million for the years ended December 31, 2017 and 2016, respectively. Our effective income tax rate was 10.8% and 33.3% for the years ended December 31, 2017 and 2016, respectively. The change in the effective income tax rate was primarily due to the enactment of the Tax Cuts and Jobs Act ("TCJA") enacted in December 2017, which required the remeasurement of our federal deferred tax assets and liabilities due to the reduction of U.S. corporate income tax rate from 35.0% to 21.0%. See Note 9 - Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.

Income from Discontinued Operations, Net of Tax

Our consolidated income from discontinued operations, net of tax was $2.3 million for the year ended December 31, 2017, a favorable variance of $3.8 million, when compared to 2016, due primarily to a legal settlement gain in the current year, partially offset by legal costs.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Operating Revenues

Our consolidated operating revenues were $2.0 billion for the year ended December 31, 2016, an increase of $424.4 million when compared to 2015, and consisted of the following:

(in thousands, except percentages)
 
2016
 
2015
 
$ Change
 
% Change
PIRM
 
$
706,496

 
$
712,335

 
$
(5,839
)
 
(0.8
)%
UWS
 
1,256,841

 
825,339

 
431,502

 
52.3

Corporate and eliminations
 
(10,780
)
 
(9,564
)
 
(1,216
)
 
12.7

Operating revenues
 
$
1,952,557

 
$
1,528,110

 
$
424,447

 
27.8
 %

Our PIRM segment revenues decreased by $5.8 million, or 0.8%, when compared to 2015. Acquisition activity contributed $14.5 million in 2016. Excluding acquisition activity, the decrease of $20.3 million was primarily due to lower property insights of $20.8 million from lower project-related revenues and lower other revenues of $5.3 million, partially offset by higher insurance & spatial solutions of $5.8 million from improved pricing and new product offerings.

Our UWS segment revenues increased by $431.5 million, or 52.3%, when compared to 2015. Acquisition activity contributed $384.8 million in 2016. Excluding acquisition activity, the increase of $46.7 million was primarily due to higher mortgage loan origination volumes and market-share gains, which increased our revenues from property tax solutions by $37.5 million, credit solutions by $36.2 million and flood data solutions by $7.5 million, partially offset by lower valuation solutions of $3.5 million and lower other revenues of $31.0 million due to certain business line exits and market volume decreases.

Our corporate and eliminations revenues were comprised of intercompany revenue eliminations between our operating segments.

Cost of Services (exclusive of depreciation and amortization)

Our consolidated cost of services was $1.0 billion for the year ended December 31, 2016, an increase of $267.4 million, or 34.4%, when compared to 2015. Acquisition activity contributed an increase of $272.5 million in 2017. Excluding acquisition activity, the decrease of $5.1 million was primarily due to lower costs of $26.0 million resulting from our on-going operational efficiency programs and favorable product mix, partially offset by higher costs of $20.9 million associated with higher mortgage origination volumes.


26


Selling, General and Administrative Expense

Our consolidated selling, general and administrative expenses was $458.1 million for the year ended December 31, 2016, an increase of $60.3 million, or 15.2%, when compared to 2015. Acquisition activity contributed an increase of $74.7 million in 2017. Excluding acquisition activity, the decrease of $14.4 million was primarily due to our on-going operational efficiency programs which resulted in lower compensation-related expenses of $20.4 million and lower professional fees of $18.4 million, partially offset by higher external services costs of $17.1 million (including cyber-security and compliance costs), higher provision for doubtful accounts of $5.1 million and other of $2.2 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $172.6 million for the year ended December 31, 2016, an increase of $22.2 million, or 14.8%, when compared to 2015. Acquisition activity contributed $32.3 million in 2017. Excluding acquisition activity, the decrease of $10.1 million was primarily due to assets that were fully depreciated in the prior year primarily in the UWS segment.

Operating Income

Our consolidated operating income was $277.9 million for the year ended December 31, 2016, an increase of $74.5 million, or 36.6%, when compared to 2015, and consisted of the following:

(in thousands, except percentages)
 
2016
 
2015
 
$ Change
 
% Change
PIRM
 
$
101,700

 
$
96,707

 
$
4,993

 
5.2
 %
UWS
 
255,583

 
192,367

 
63,216

 
32.9

Corporate and eliminations
 
(79,343
)
 
(85,625
)
 
6,282

 
(7.3
)
Operating income
 
$
277,940

 
$
203,449

 
$
74,491

 
36.6
 %

Our PIRM segment operating income increased by $5.0 million, or 5.2%, when compared to 2015 and operating margins increased 50 basis points primarily due to the impact of improved pricing and new product offerings in our insurance & spatial solutions and the impact of our on-going operational efficiency programs; partially offset by lower project-related revenues.

Our UWS segment operating income increased by $63.2 million, or 32.9%, when compared to 2015. Acquisition-related activity contributed $15.4 million to operating income in 2016. Excluding acquisition activity, operating income increased $47.8 million and operating margins increased 434 basis points primarily due to an increase in mortgage loan origination volumes, market-share gains, product mix, and the impact of ongoing operational efficiency programs.

Corporate and eliminations operating loss decreased $6.3 million, or 7.3%, due to higher non-recurring selling, general and administrative expenses primarily related to investments related to our operational efficiency programs in 2015.

Total Interest Expense, Net

Our consolidated total interest expense, net was $60.3 million for the year ended December 31, 2016, a decrease of $2.1 million, or 3.4%, when compared to 2015. The decrease was primarily due to lower interest rates, partially offset by a higher average outstanding principal balance in the current year and an out-of-period adjustment recorded during the first quarter of 2015, which reduced interest expense by $5.2 million. The lower interest rates were the result of our financing activities in July 2016 in which we amended our Credit Agreement and redeemed our 7.25% senior notes.

Loss on early extinguishment of debt

Our consolidated loss on early extinguishment of debt was $26.6 million for the year ended December 31, 2016, an increase of $25.0 million when compared to 2015. The increase is primarily related to our extinguishment of debt of $24.4 million in connection with the redemption of all outstanding balances under the 7.25% senior notes in July 2016 and $2.2 million in connection with the pay down on the 7.55% senior debentures in November 2016. For the year ended December 31, 2016, we wrote-off unamortized debt issuance costs of $1.6 million due to financing activities in April 2015.


27


Tax indemnification release

Our federal FAFC indemnification receivable of $23.4 million was recognized as tax indemnification release in our income from continuing operations for the year ended December 31, 2016. The release of the federal FAFC indemnification was due to the closure of the IRS audit for the exam years ended December 31, 2005 through 2009. Our associated federal tax reserves for uncertain tax benefits of $21.8 million and federal tax liability of $1.5 million was released and recognized as income tax benefit through provision for income taxes. Net income from continuing operations was not impacted due to the offsetting favorable tax benefit recognized from the release of the federal tax reserves for uncertain tax benefits, which resulted in a favorable variance to the effective tax rate.

Impairment Loss on Investment in Affiliates

Our consolidated impairment loss on investment in affiliates was $23.4 million for the year ended December 31, 2016. Such write-downs are due to other-than-temporary losses in value in investments, reflecting our inability to recover the carrying amount of the investments.

Gain on Investments and Other, Net

Our consolidated gain on investments and other was $19.8 million for the year ended December 31, 2016, a decrease of $14.1 million when compared to 2015. The decrease is primarily due to the prior year acquisition of the remaining 49.9% interest in RELS LLC ("RELS") which resulted in a $34.3 million gain due to the step-up in fair value on the previously held interest in 2015, losses in the current year compared to the prior year on employee benefits of $1.5 million, partially offset by a current year gain of $8.0 million on the fair value adjustment of the contingent consideration related to the FNC acquisition, $11.4 million gain from the sale of investments, gains in the current year compared to prior year losses on the investments related to supplemental benefit plans of $2.0 million and other of $0.3 million.

Provision for Income Taxes

Our consolidated provision for income taxes from continuing operations was $54.5 million and $57.4 million for the years ended December 31, 2016 and 2015, respectively. Our effective income tax rate was 33.3% and 33.4% for the years ended December 31, 2016 and 2015, respectively. While the effective income tax rate remained relatively flat, we recorded changes due to the closure of the IRS audit for the exam years ended December 31, 2005 through 2009, which we were indemnified by FAFC, and an out-of-period adjustment recorded during the fourth quarter of 2016; these were mostly offset by an increase in current year valuation allowance on certain deferred tax assets that may not be recognized in the future.

Equity in Earnings of Affiliates, Net of Tax

Our consolidated equity in earnings of affiliates, net of tax was $0.5 million for the year ended December 31, 2016, a decrease of $13.2 million, or 96.4%, when compared to 2015. We have equity interests in various affiliates which primarily provide settlement services in connection with residential mortgage loans. The decrease was primarily due to the acquisition of the remaining interest in RELS in December 2015, which contributed $12.0 million of earnings, net of tax in 2015. As of January 1, 2016, RELS operated as a consolidated subsidiary and is no longer accounted for under the equity method of accounting.

Loss from Discontinued Operations, Net of Tax

Our consolidated loss from discontinued operations, net of tax was $1.5 million for the year ended December 31, 2016, an unfavorable variance of $0.9 million when compared to 2015, primarily related to higher professional fees.

Loss from Sale of Discontinued Operations, Net of Tax

Our consolidated loss from sale of discontinued operations, net of tax was $1.9 million for the year ended December 31, 2016, primarily due to transaction payments under an amendment to the sale agreement of collateral solutions and field services businesses.

Net Income Attributable to Noncontrolling Interests

In January 2016, we acquired the remaining 40% interest in New Zealand-based Property IQ Ltd. (“PIQ"). Our consolidated net income attributable to noncontrolling interests for the year ended December 31, 2015 was $1.2 million.

28



Liquidity and Capital Resources

Cash and cash equivalents totaled $118.8 million and $72.0 million as of December 31, 2017 and 2016, respectively, representing an increase of $46.8 million. Cash and cash equivalents decreased $27.1 million in 2016 compared to 2015.

We hold our cash balances inside and outside of the U.S. Our cash balances held outside of the U.S. are primarily related to our international operations. As of December 31, 2017, we held $46.3 million in foreign jurisdictions. Most of the amounts held outside of the U.S. could be repatriated to the U.S. without the assessment of additional income tax other than the one-time transition tax pursuant to the TCJA. The Company is finalizing and will report this aspect of the TCJA during 2018. We plan to maintain significant cash balances outside the U.S. for the foreseeable future.

Restricted cash of $7.6 million and $17.9 million at December 31, 2017 and 2016, respectively, represents cash pledged for various letters of credit provided in the ordinary course of business to certain vendors in connection with obtaining insurance and real property leases and escrow accounts due to acquisitions and divestitures. The variance is due to settlements of escrow accounts.

Cash Flow

Operating Activities. Cash provided by operating activities reflects net income adjusted for certain non-cash items and changes in operating assets and liabilities. Total cash provided by operating activities was $383.6 million, $413.6 million and $328.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. The decrease in cash provided by operating activities in 2017 relative to 2016 was primarily due to lower net earnings as adjusted to exclude non-cash items, partially offset by favorable changes in working capital. We also benefited from lower cash used by operating activities from our discontinued operations of $4.1 million in 2017.

The increase in cash provided by operating activities in 2016 relative to 2015 was primarily due to cash generated from higher net earnings, as adjusted to exclude non-cash items, offset by unfavorable changes in working capital. We also benefited from lower cash used by operating activities from our discontinued operations of $7.2 million.

Investing Activities. Total cash used in investing activities consisted primarily of capital expenditures, acquisitions and dispositions. Cash used in investing activities was approximately $262.0 million, $481.8 million, and $277.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Cash used in investing activities from continuing operations during 2017 was primarily related to net cash paid for acquisitions, including Mercury for $153.0 million, Myriad for $22.0 million and Clareity for $15.0 million. Further, we had investments in property and equipment and capitalized data of $40.5 million and $35.0 million, respectively, and purchases of investments of $5.9 million, partially offset by changes in restricted cash of $7.9 million.

Cash used in investing activities from continuing operations during 2016 was primarily related to net cash paid for acquisitions, including $394.9 million for FNC in April 2016, $18.0 million for the remaining interest in PIQ in January 2016 and $2.0 million for other acquisitions that were not significant. Further, we had investments in property and equipment and capitalized data of $45.2 million and $35.5 million, respectively, changes in restricted cash of $7.0 million and purchases of investments of $3.4 million; partially offset by proceeds from the sale of marketable securities of $21.8 million and proceeds from the sale of investments of $2.5 million.

Cash used in investing activities from continuing operations during 2015 was primarily related to net cash paid for acquisitions, including $27.1 million for RELS in December 2015, $48.1 million for Cordell Information Pty Ltd in October 2015 and $119.3 million for LandSafe Appraisal Services, Inc. in September 2015. Further, we had investments in property and equipment and capitalized data of $44.1 million and $36.4 million, respectively, in 2015.

For the year ending December 31, 2018, we anticipate investing between $90 million and $100 million in capital expenditures for property and equipment and capitalized data. Capital expenditures are expected to be funded by a combination of existing cash balances, cash generated from operations or additional borrowings.

Financing Activities. Total cash used in financing activities was $73.4 million and $58.5 million for the years ended December 31, 2017 and 2015, respectively. Total cash provided by financing activities was $41.1 million for the year ended December 31, 2016.


29


Net cash used in financing activities during 2017 was primarily comprised of repayment of long-term debt of $1.8 billion, share repurchases of $207.4 million, debt issuance costs of $14.3 million and net settlement from stock-based compensation related transactions of $4.4 million, partially offset by proceeds from debt issuance of $2.0 billion.

Net cash provided by financing activities during 2016 was primarily comprised of proceeds from debt issuance of $962.0 million and net settlement from stock-based compensation related transactions of $6.7 million, partially offset by repayment of long-term debt of $710.0 million, share repurchases of $195.0 million, debt extinguishment premiums of $16.3 million and debt issuance costs of $6.3 million.

Net cash used in financing activities during 2015 was primarily comprised of share repurchases of $97.4 million, repayment of long-term debt of $82.9 million and debt issuance costs of $6.5 million, partially offset by proceeds from debt issuance of $114.4 million and net settlement from stock-based compensation related transactions of $13.9 million.

Financing and Financing Capacity

We had total debt outstanding of $1.8 billion and $1.6 billion as of December 31, 2017 and 2016, respectively. Our significant debt instruments are described below.

Credit Agreement

In August 2017, we amended and restated our Credit Agreement. The Credit Agreement provides for a $1.8 billion Term Facility and a $700.0 million Revolving Facility. The Term Facility matures and the Revolving Facility expires in August 2022. The Credit Agreement also provides for the ability to increase the Term Facility and/or Revolving Facility by up to $100.0 million in the aggregate; however, the lenders are not obligated to do so. For a detailed description of our Credit Agreement, see Note 8 - Long-Term Debt of our consolidated financial statements. As of December 31, 2017, we had borrowing capacity under the Revolving Facility of $700.0 million and were in compliance with the financial and restrictive covenants of the Credit Agreement. See Note 8 -Long Term Debt for further discussion.

The Credit Agreement provides that loans under the Term Facility shall be repaid in equal quarterly installments, commencing on the last day of the next full fiscal quarter and continuing on each three-month anniversary thereafter. The loans under the Term Facility shall be repaid in an amount equal to $22.5 million for the first eight quarterly payments and in an amount equal to $45.0 million for each quarterly payment thereafter. The outstanding balance of the term loans will be due in August 2022.

The Credit Agreement contains the following financial maintenance covenants: (i) a maximum total leverage ratio not to exceed 4.50:1.00; (stepped down to 4.25:1.00 starting with the fiscal quarter ending on September 30, 2018, with a further step down to 4.00:1.00 starting with the fiscal quarter ending on September 30, 2019, with an additional step down to 3.75:1.00 starting with the fiscal quarter ending on September 30, 2020, and a final step down to 3.50:1.00 starting with the fiscal quarter ending on September 30, 2021) and (ii) a minimum interest coverage ratio of at least 3.50:1.00.

At December 31, 2017, we had borrowing capacity of $700.0 million under the Revolving Facility and we were in compliance with all of our covenants under the Credit Agreement. However, if we have a significant increase in our outstanding debt or if our covenant EBITDA decreases significantly, we may be unable to incur additional indebtedness, and the lenders under the Credit Agreement may be unwilling to permit us to amend the financial or restrictive covenants described above to provide additional flexibility.

As of December 31, 2017 and December 31, 2016, we recorded $1.0 million and $0.8 million, respectively, of accrued interest expense.    

Interest Rate Swaps

We have entered into amortizing interest rate swaps ("Swaps") in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. In June 2017, we entered into Swaps which become effective in March 2018 and terminate in March 2021. The Swaps entered in June 2017 are for an initial notional balance of $275.0 million, with a notional step up of $200.0 million in March 2019, and a fixed interest rate of 1.83%. In August 2016, we entered into Swaps which became effective in September 2016 and terminate in April 2020. The Swaps entered in August 2016 are for an initial notional balance of $500.0 million, with a fixed interest rate of 1.03%, and amortize quarterly by $25.0 million through December 2018, with a step up in the notional balance of $100.0 million in March 2019 and

30


continued quarterly amortization of $25.0 million through April 2020. In May 2014, we entered into Swaps which became effective in December 2014 and terminate in March 2019. The Swaps entered in May 2014 are for an initial notional balance of $500.0 million, with a fixed interest rate of 1.57%, and amortize quarterly by $12.5 million through December 31, 2017 and $25.0 million through December 31, 2018.

Liquidity and Capital Strategy

We expect that cash flows from operations and current cash balances, together with available borrowings under our Revolving Facility, will be sufficient to meet operating requirements through the next twelve months. Cash available from operations, however, could be affected by any general economic downturn or any decline or adverse changes in our business such as a loss of clients, competitive pressures or other significant change in business environment.

We strive to pursue a balanced approach to capital allocation and will consider the repurchase of common shares, the retirement of outstanding debt, investments and the pursuit of strategic acquisitions on an opportunistic basis.

During the years ended December 31, 2017, 2016 and 2015, we repurchased approximately $4.6 million, 5.0 million and 2.5 million shares of our common stock for $207.4 million, $195.0 million and $97.4 million, respectively, including commission costs.

Availability of Additional Capital

Our access to additional capital fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Based on current market conditions and our financial condition (including our ability to satisfy the conditions contained in our debt instruments that are required to be satisfied to permit us to incur additional indebtedness), we believe that we have the ability to effectively access these liquidity sources for new borrowings. However, a weakening of our financial condition, including a significant decrease in our profitability or cash flows or a material increase in our leverage, could adversely affect our ability to access these markets and/or increase our cost of borrowings.

Contractual Obligations

A summary, by due date, of our total contractual obligations at December 31, 2017, is as follows:

(in thousands)
Less than 1 Year
 
1-3 Years
 
3-5 Years
 
More than 5 Years
 
Total
Operating leases
$
27,860

 
$
49,408

 
$
27,105

 
$
62,175

 
$
166,548

Long-term debt
70,046

 
297,357

 
1,395,259

 
14,645

 
1,777,307

Interest payments related to debt (1)
61,775

 
114,854

 
78,546

 
6,081

 
261,256

Total (2)
$
159,681

 
$
461,619

 
$
1,500,910

 
$
82,901

 
$
2,205,111

 
 
 
 
 
 
 
 
 
 

(1)
Estimated interest payments, net of the effect of our Swaps, are calculated assuming current interest rates over minimum maturity periods specified in debt agreements.
(2)
Excludes a net liability of $12.0 million related to uncertain tax positions including associated interest and penalties, and deferred compensation of $35.3 million due to uncertainty of payment period.

Critical Accounting Policies and Estimates

Our significant accounting policies are discussed in Note 2 - Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data. We consider the accounting policies described below to be critical in preparing our consolidated financial statements. These policies require us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures of contingencies. Our assumptions, estimates and judgments are based on historical experience, current trends and other factors to be relevant at the time we prepare the consolidated financial statements. Although our estimates and assumptions are reasonable, we cannot determine future events. Consequently, actual results could differ materially from our assumptions and estimates.

31



Revenue recognition. We derive our revenues principally from U.S. mortgage originators and servicers with good creditworthiness. Our product and service deliverables are generally comprised of data or other related services. Our revenue arrangements with our clients generally include a work order or written agreement specifying the data products or services to be delivered and related terms of sale including payment amounts and terms. The primary revenue recognition-related judgments we exercise are to determine when all of the following criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) our price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured.

For products or services where delivery occurs at a point in time, we recognize revenue upon delivery. These products or services include sales of tenancy data and analytics, credit solutions for mortgage and automotive industries, under-banked credit services, flood data and services and claims management.

For products or services where delivery occurs over time, we recognize revenue ratably on a subscription basis over the contractual service period once initial delivery has occurred. Generally, these service periods range from one to three years. Products or services recognized on a license or subscription basis include information and analytic products, property risk and replacement cost, flood database licenses, realtor's solutions and lending solutions. For certain of our products or services, clients may also pay us upfront set-up fees, which we defer and recognize as revenue over the longer of the contractual term or expected client relationship period.

Property tax processing revenues are comprised of periodic loan fees and life-of-loan fees. For periodic loan fee arrangements, we generate monthly fees at a contracted rate for as long as we service the loan. Loans serviced with a one-time, life-of-loan fee are billed once the loan is boarded to our tax servicing system in accordance with a client tax servicing agreement. Life-of-loan fees are then deferred and recognized ratably over the expected service period. The rates applied to recognize revenues assume a 10-year expected life and are adjusted to reflect prepayments. We review the tax service contract portfolio monthly to determine if there have been material changes in the expected lives, deferred on-boarding costs, expected service period and/or changes in the number and/or timing of prepayments. Accordingly, we may adjust the rates to reflect current trends.

Purchase Accounting. The purchase method of accounting requires companies to assign values to assets and liabilities acquired based upon their fair values at the acquisition date. In most instances, there are not readily defined or listed market prices for individual assets and liabilities acquired in connection with a business, including intangible assets. The determination of fair value for assets and liabilities in many instances requires a high degree of estimation. The valuation of intangible assets, in particular, is very subjective. We generally obtain third-party valuations to assist us in estimating fair values. The use of different valuation techniques and assumptions could change the amounts and useful lives assigned to the assets and liabilities acquired and related amortization expense.

Goodwill and other intangible assets. We perform an annual impairment test for goodwill and other indefinite-lived intangible assets for each reporting unit every fourth quarter, or on an interim basis if an indicator of impairment is present. In assessing the overall carrying value of our goodwill and other intangibles, we could first assess qualitative factors to determine whether the fair value of a reporting unit is less than its carrying amount. Examples of such events or circumstances include the following: cost factors, financial performance, legal and regulatory factors, entity specific events, industry and market factors, macroeconomic conditions and other considerations. For goodwill, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then quantitative impairment testing is performed. We could also elect to perform a quantitative impairment test without first assessing qualitative factors. In analyzing goodwill for the quantitative impairment test, we use a combination of the income and market approach.

If the fair value of the reporting unit exceeds its carrying value, then goodwill is not considered impaired and no additional analysis is required. However, if the book value is greater than the fair value, an impairment loss is recorded for the excess. The valuation of goodwill requires assumptions and estimates of many critical factors including revenue growth, cash flows, market multiples and discount rates.

For other indefinite-lived intangible assets, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then quantitative impairment testing is performed. In assessing the fair value of indefinite-lived intangibles, we compare the fair value of the asset to its carrying value to determine if there is an impairment. If the fair value of the asset is less than its carrying value, an impairment loss is recorded. See further discussion in Note 6 – Goodwill, Net of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further discussion.


32


As of December 31, 2017, our reporting units related to continuing operations are PIRM and UWS. During the fourth quarter of 2017, we elected to perform a quantitative impairment test on our reporting units without first assessing qualitative factors. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others. Key assumptions used to determine the fair value of our reporting units in our testing were: (a) expected cash flows for the period from 2018 to 2023; and (b) discount rates ranging from 8.5% and 9.0%, which were based on management's best estimate of an after-tax weighted average cost of capital. We noted no indicators of impairment on our reporting units related to continuing operations through our Step 1 analysis. It is reasonably possible that changes in the facts, judgments, assumptions and estimates used in assessing the fair value of the goodwill could cause a reporting unit to become impaired.

Income taxes. We account for income taxes under the asset and liability method, whereby we recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as expected benefits of utilizing net operating loss and credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates we expect to apply in the years in which we expect to recover or settle those temporary differences. We recognize in income the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the enactment date.

We recognize the effect of income tax positions only if sustaining those positions is more likely than not. We reflect changes in recognition or measurement of uncertain tax positions in the period in which a change in judgment occurs. We recognize interest and penalties, if any, related to uncertain tax positions within income tax expense. Accrued interest and penalties are included within the related tax liability line in the accompanying consolidated balance sheet.

We evaluate the need to establish a valuation allowance based upon expected levels of taxable income, future reversals of existing temporary differences, tax planning strategies and recent financial operations. We establish a valuation allowance to reduce deferred tax assets to the extent it is more-likely-than-not that some or all of the deferred tax assets will not be realized.

Stock-based compensation. Our primary means of providing stock-based compensation is granting restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”). The fair value of any grant is based on the market value of our shares on the date of grant and is generally recognized as compensation expense over the vesting period. We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized over the period during which an employee is required to provide services in exchange for the award. We utilize the Monte-Carlo simulation method to estimate the fair value for any PBRSUs granted and the Black-Scholes model to estimate the fair value of stock options. We apply the straight-line single option method of attributing the value of stock-based compensation expense. As stock-based compensation expense recognized in results of operations is based on awards ultimately expected to vest, stock-based compensation expense has been reduced for forfeitures. Forfeitures are recognized at the time they occur. We apply the long-form method for determining the pool of windfall tax benefits.

In addition, we have an employee stock purchase plan that allows eligible employees to purchase common stock of the Company at 85.0% of the closing price on the first or last day of each quarter, whichever is lower. We recognize an expense in the amount equal to the estimated fair value of the discount.

Recent Accounting Pronouncements

For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see Note 2 - Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K, which is incorporated by reference in response to this item.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Our primary exposure to market risk relates to interest-rate risk associated with certain financial instruments. We monitor our risk associated with fluctuations in interest rates and currently use derivative financial instruments to hedge some of these risks. We have entered into Swaps in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. In June 2017, we entered into Swaps which become effective in March 2018 and terminate in March 2021. The Swaps entered in June 2017 are for an initial notional balance of $275.0 million, with a notional step up of $200.0 million in March 2019 and a fixed interest rate of 1.83%. In August 2016, we entered into Swaps which became effective in September 2016 and terminate in April 2020. The Swaps entered in August 2016 are for an initial notional balance of $500.0 million, with a fixed interest rate of 1.03%, and amortize quarterly by $25.0 million through

33


December 2018, with a step up in the notional balance of $100.0 million in March 2019 and continued quarterly amortization of $25.0 million through April 2020. In May 2014, we entered into Swaps which became effective in December 2014 and terminate in March 2019. The Swaps entered in May 2014 are for an initial notional balance of $500.0 million, with a fixed interest rate of 1.57% and amortize quarterly by $12.5 million through December 31, 2017 and $25.0 million through December 31, 2018. We have designated the Swaps as cash flow hedges.

As of December 31, 2017, we had approximately $1.8 billion in long-term debt outstanding, all of which was variable interest rate debt. As of December 31, 2017, the remaining notional balance of the Swaps was $725.0 million. A hypothetical 1% increase or decrease in interest rates could result in an approximately $2.6 million change to interest expense on a quarterly basis.

Although we are subject to foreign currency exchange rate risk as a result of our operations in certain foreign countries, the foreign exchange exposure related to these operations, in the aggregate, is not material to our financial condition or results of operations.


34


Item 8. Financial Statements and Supplementary Data
 
INDEX


Financial statement schedules not listed are either omitted because they are not applicable or the required information is shown in the consolidated financial statements or in the notes thereto.


35


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of CoreLogic, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of CoreLogic, Inc. and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded Mercury Network, LLC (“Mercury”), Myriad Development, Inc. (“Myriad”), and Clareity Security, LLC (“Clareity”) from its assessment of internal control over financial reporting as of December 31, 2017 because they were acquired by the Company in purchase business combinations during 2017. We have also excluded Mercury, Myriad, and Clareity from our audit of internal control over financial reporting. Mercury, Myriad, and Clareity are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 0.5% and 1.2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures

36


that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


/s/ PricewaterhouseCoopers LLP
Irvine, California
February 27, 2018

We have served as the Company’s or its predecessor’s auditor since 1954, which includes periods prior to the Company’s separation from its predecessor (The First American Corporation) in 2010.


37


CoreLogic, Inc.
Consolidated Balance Sheets
As of December 31, 2017 and 2016
(in thousands, except par value)
 
 
 
Assets
2017
 
2016
Current assets:
 
 
 
Cash and cash equivalents
$
118,804

 
$
72,031

Accounts receivable (less allowances of $8,229 and $8,857 in 2017 and 2016, respectively)
256,595

 
269,229

Prepaid expenses and other current assets
46,837

 
43,060

Income tax receivable
7,649

 
6,905

Assets of discontinued operations
383

 
662

Total current assets
430,268

 
391,887

Property and equipment, net
447,659

 
449,199

Goodwill, net
2,250,599

 
2,107,255

Other intangible assets, net
475,613

 
478,913

Capitalized data and database costs, net
329,403

 
327,921

Investment in affiliates, net
38,989

 
40,809

Deferred income tax assets, long-term
366

 
1,516

Restricted cash
7,565

 
17,943

Other assets
96,951

 
92,091

Total assets
$
4,077,413

 
$
3,907,534

Liabilities and Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
143,849

 
$
168,284

Accrued salaries and benefits
93,717

 
107,234

Deferred revenue, current
303,948

 
284,622

Current portion of long-term debt
70,046

 
105,158

Liabilities of discontinued operations
1,806

 
3,123

Total current liabilities
613,366

 
668,421

Long-term debt, net of current
1,683,524

 
1,496,889

Deferred revenue, net of current
504,900

 
487,134

Deferred income tax liabilities, long-term
102,571

 
120,063

Other liabilities
165,176

 
132,043

Total liabilities
3,069,537

 
2,904,550


 
 
 
Equity:
 

 
 

CoreLogic, Inc.'s ("CoreLogic") stockholders' equity:
 

 
 

Preferred stock, $0.00001 par value; 500 shares authorized, no shares issued or outstanding

 

Common stock, $0.00001 par value; 180,000 shares authorized; 80,885 and 84,368 shares issued and outstanding as of December 31, 2017 and 2016, respectively
1

 
1

Additional paid-in capital
224,455

 
400,452

Retained earnings
877,111

 
724,949

Accumulated other comprehensive loss
(93,691
)
 
(122,418
)
Total CoreLogic stockholders' equity
1,007,876

 
1,002,984

Total liabilities and equity
$
4,077,413

 
$
3,907,534


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

38


CoreLogic, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2017, 2016 and 2015

(in thousands, except per share amounts)
2017
 
2016
 
2015
Operating revenue
$
1,851,117

 
$
1,952,557

 
$
1,528,110

Cost of services (exclusive of depreciation and amortization)
974,851

 
1,043,937

 
776,509

Selling, general and administrative expenses
459,842

 
458,102

 
397,775

Depreciation and amortization
177,806

 
172,578

 
150,377

Total operating expenses
1,612,499

 
1,674,617

 
1,324,661

Operating income
238,618

 
277,940

 
203,449

Interest expense:
 

 
 

 
 

Interest income
1,532

 
3,052

 
4,021

Interest expense
63,356

 
63,392

 
66,486

Total interest expense, net
(61,824
)
 
(60,340
)
 
(62,465
)
Loss on early extinguishment of debt
(1,775
)
 
(26,624
)
 
(1,589
)
Tax indemnification release

 
(23,350
)
 

Impairment loss on investment in affiliates
(3,811
)
 
(23,431
)
 

(Loss)/gain on investments and other, net
(2,316
)
 
19,779

 
33,831

Income from continuing operations before equity in (losses)/earnings of affiliates and income taxes
168,892

 
163,974

 
173,226

Provision for income taxes
18,172

 
54,524

 
57,394

Income from continuing operations before equity in (losses)/earnings of affiliates
150,720

 
109,450

 
115,832

Equity in (losses)/earnings of affiliates, net of tax
(1,186
)
 
496

 
13,720

Net income from continuing operations
149,534

 
109,946

 
129,552

Income/(loss) from discontinued operations, net of tax
2,315

 
(1,466
)
 
(556
)
Gain/(loss) from sale of discontinued operations, net of tax
313

 
(1,930
)
 

Net income
152,162


106,550


128,996

Less: Net income attributable to noncontrolling interests

 

 
1,152

Net income attributable to CoreLogic
$
152,162

 
$
106,550

 
$
127,844

Amounts attributable to CoreLogic:
 

 
 

 
 

Net income from continuing operations
$
149,534

 
$
109,946

 
$
128,400

Income/(loss) from discontinued operations, net of tax
2,315

 
(1,466
)
 
(556
)
Gain/(loss) from sale of discontinued operations, net of tax
313

 
(1,930
)
 

Net income attributable to CoreLogic
$
152,162

 
$
106,550

 
$
127,844

Basic income/(loss) per share:
 

 
 

 
 

Net income from continuing operations
$
1.79

 
$
1.26

 
$
1.44

Income/(loss) from discontinued operations, net of tax
0.03

 
(0.02
)
 
(0.01
)
Gain/(loss) from sale of discontinued operations, net of tax

 
(0.02
)
 

Net income attributable to CoreLogic
$
1.82

 
$
1.22

 
$
1.43

Diluted income/(loss) per share:
 

 
 

 
 

Net income from continuing operations
$
1.75

 
$
1.23

 
$
1.42

Income/(loss) from discontinued operations, net of tax
0.03

 
(0.02
)
 
(0.01
)
Gain/(loss) from sale of discontinued operations, net of tax

 
(0.02
)
 

Net income attributable to CoreLogic
$
1.78

 
$
1.19

 
$
1.41

Weighted-average common shares outstanding:
 

 
 

 
 

Basic
83,499

 
87,502

 
89,070

Diluted
85,234

 
89,122

 
90,564


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

39


CoreLogic, Inc.
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2017, 2016 and 2015

(in thousands)
2017
 
2016
 
2015
Net income
$
152,162

 
$
106,550

 
$
128,996

Other comprehensive income/(loss):
 

 
 

 
 

Market value adjustments to marketable securities, net of tax

 
(550
)
 
275

Market value adjustments on interest rate swaps, net of tax
5,481

 
4,618

 
(364
)
Foreign currency translation adjustments
22,440

 
(3,642
)
 
(36,968
)
Supplemental benefit plans adjustments, net of tax
806

 
(2,728
)
 
727

Total other comprehensive income/(loss)
28,727

 
(2,302
)
 
(36,330
)
Comprehensive income
180,889

 
104,248

 
92,666

Less: Comprehensive income attributable to the noncontrolling interests

 

 
1,152

Comprehensive income attributable to CoreLogic
$
180,889

 
$
104,248

 
$
91,514


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

40


CoreLogic, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2017, 2016 and 2015
(in thousands) 
Common Stock Shares
 
Common Stock Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total
Balance at January 1, 2015
89,343

 
$
1

 
$
605,511

 
$
492,441

 
$
(83,786
)
 
$
1,014,167

Net income

 

 

 
127,844

 

 
127,844

Shares repurchased and retired
(2,528
)
 

 
(97,430
)
 

 

 
(97,430
)
Shares issued in connection with share-based compensation
1,413

 

 
22,569

 

 

 
22,569

Tax withholdings related to net share settlements

 

 
(15,230
)
 

 

 
(15,230
)
Share-based compensation

 

 
35,786

 

 

 
35,786

Adjust redeemable noncontrolling interests to redemption value

 

 

 
(1,886
)
 

 
(1,886
)
Other comprehensive loss

 

 

 

 
(36,330
)
 
(36,330
)
Balance at December 31, 2015
88,228

 
$
1

 
$
551,206

 
$
618,399

 
$
(120,116
)
 
$
1,049,490

Net income

 

 

 
106,550

 

 
106,550

Shares repurchased and retired
(5,000
)
 

 
(195,003
)
 

 

 
(195,003
)
Shares issued in connection with share-based compensation
1,140

 

 
14,907

 

 

 
14,907

Tax withholdings related to net share settlements

 

 
(10,507
)
 

 

 
(10,507
)
Share-based compensation

 

 
39,849

 

 

 
39,849

Other comprehensive loss

 

 

 

 
(2,302
)
 
(2,302
)
Balance at December 31, 2016
84,368

 
$
1

 
$
400,452

 
$
724,949

 
$
(122,418
)
 
$
1,002,984

Net income

 

 

 
152,162

 

 
152,162

Shares repurchased and retired
(4,638
)
 

 
(207,416
)
 

 

 
(207,416
)
Shares issued in connection with share-based compensation
1,155

 

 
9,595

 

 

 
9,595

Tax withholdings related to net share settlements

 

 
(14,043
)
 

 

 
(14,043
)
Share-based compensation

 

 
35,867

 

 

 
35,867

Other comprehensive income

 

 

 

 
28,727

 
28,727

Balance at December 31, 2017
80,885

 
$
1

 
$
224,455

 
$
877,111

 
$
(93,691
)
 
$
1,007,876


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

41


CoreLogic, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2017, 2016 and 2015
(in thousands)
2017
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
 
Net income
$
152,162

 
$
106,550

 
$
128,996

Less: Income/(loss) from discontinued operations, net of tax
2,315

 
(1,466
)
 
(556
)
Less: Gain/(loss) from sale of discontinued operations, net of tax
313

 
(1,930
)
 

Net income from continuing operations
149,534

 
109,946

 
129,552

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
 

 
 

 
 

Depreciation and amortization
177,806

 
172,578

 
150,377

Amortization of debt issuance costs
5,650

 
5,785

 
6,259

Provision for bad debts and claim losses
16,725

 
18,869

 
8,260

Share-based compensation
35,867

 
39,849

 
35,786

Tax benefit related to stock options

 
(2,315
)
 
(6,513
)
Equity in losses/(earnings) of investee, net of taxes
1,186

 
(496
)
 
(13,720
)
(Gain)/loss on sale of property and equipment
(246
)
 
(31
)
 
24

Loss on early extinguishment of debt
1,775

 
26,624

 
1,589

Deferred income tax
(40,769
)
 
18,213

 
35,110

Impairment loss on investment in affiliates
3,811

 
23,431

 

Tax indemnification release

 
23,350

 

Loss/(gain) on investments and other, net
2,316

 
(19,779
)
 
(33,831
)
Change in operating assets and liabilities, net of acquisitions:
 

 
 

 
 

Accounts receivable
15,522

 
(24,391
)
 
(15,400
)
Prepaid expenses and other assets
4,942

 
2,823

 
7,104

Accounts payable and accrued expenses
(44,629
)
 
(29,267
)
 
(45,289
)
Deferred revenue
36,577

 
53,682

 
68,410

Income taxes
(43
)
 
28,740

 
(32,771
)
Dividends received from investments in affiliates
1,198

 
9,044

 
30,084

Other assets and other liabilities
12,708

 
(42,652
)
 
11,118

Net cash provided by operating activities - continuing operations
379,930

 
414,003

 
336,149

Net cash provided by/(used in) operating activities - discontinued operations
3,655

 
(444
)
 
(7,612
)
Total cash provided by operating activities
$
383,585

 
$
413,559

 
$
328,537

Cash flows from investing activities:
 

 
 

 
 

Purchases of subsidiary shares from and other decreases in noncontrolling interests
$

 
$
(18,023
)
 
$

Purchases of property and equipment
(40,508
)
 
(45,211
)
 
(44,149
)
Purchases of capitalized data and other intangible assets
(34,990
)
 
(35,507
)
 
(36,409
)
Cash paid for acquisitions, net of cash acquired
(189,923
)
 
(396,941
)
 
(194,491
)
Purchases of investments
(5,900
)
 
(3,366
)
 
(3,748
)
Proceeds from sale of marketable securities

 
21,819

 

Proceeds from sale of property and equipment
335

 
31

 
137

Proceeds from sale of investments
1,000

 
2,451

 

Change in restricted cash
7,947

 
(7,017
)
 
1,434

Net cash used in investing activities - continuing operations
(262,039
)
 
(481,764
)
 
(277,226
)
Net cash provided by investing activities - discontinued operations

 

 


42


Total cash used in investing activities
$
(262,039
)
 
$
(481,764
)
 
$
(277,226
)
Cash flows from financing activities:
 

 
 

 
 

Proceeds from long-term debt
$
1,995,000

 
$
962,000

 
$
114,375

Debt issuance costs
(14,294
)
 
(6,314
)
 
(6,452
)
Debt extinguishment premium

 
(16,271
)
 

Repayments of long-term debt
(1,842,290
)
 
(709,983
)
 
(82,891
)
Shares repurchased and retired
(207,416
)
 
(195,003
)
 
(97,430
)
Proceeds from issuance of shares in connection with share-based compensation
9,595

 
14,907

 
22,569

Minimum tax withholdings related to net share settlements
(14,043
)
 
(10,507
)
 
(15,230
)
Tax benefit related to stock options

 
2,315

 
6,513

Net cash (used in)/provided by financing activities - continuing operations
(73,448
)
 
41,144

 
(58,546
)
Net cash used in financing activities - discontinued operations

 

 

Total cash (used in)/provided by financing activities
$
(73,448
)
 
$
41,144

 
$
(58,546
)
Effect of exchange rate on cash
(1,325
)
 
2

 
2,182

Net change in cash and cash equivalents
$
46,773

 
$
(27,059
)
 
$
(5,053
)
Cash and cash equivalents at beginning of year
72,031

 
99,090

 
104,677

Less: Change in cash and cash equivalents of discontinued operations
3,655

 
(444
)
 
(7,612
)
Plus: Cash swept from/(to) discontinued operations
3,655

 
(444
)
 
(8,146
)
Cash and cash equivalents at end of year
$
118,804

 
$
72,031

 
$
99,090


 
 
 
 
 
Supplemental disclosures of cash flow information:
 

 
 

 
 

Cash paid for interest
$
53,455

 
$
58,566

 
$
64,679

Cash paid for income taxes
$
71,697

 
$
31,382

 
$
47,783

Cash refunds from income taxes
$
9,413

 
$
537

 
$
3,737

Non-cash investing and financing activities:
 
 
 

 
 
Capital expenditures included in accounts payable and accrued liabilities
$
5,524

 
$
23,108