Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2020

☐ 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
(Street Address)	(City)	(State)	(Zip Code)

(949) 214-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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



Title of each class:	Trading symbol(s)	Name of exchange on which registered
Common Stock, $0.00001 par value	CLGX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On April 28, 2020 there were 79,411,399 shares of common stock outstanding.

CoreLogic, Inc.

Table of Contents



Part I:	Financial Information	1

Item 1.	Financial Statements (unaudited)

	A. Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	1

	B. Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	2

	C. Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019	3

	D. Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	4

	E. Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2020 and 2019	5

	F. Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

Part II:	Other Information	33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 6.	Exhibits	35

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements.

CoreLogic, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



(in thousands, except par value)	March 31,			December 31,
Assets	2020			2019
Current assets:
Cash and cash equivalents	$	152,822		$	105,185
Accounts receivable (less allowance for credit losses of $7,236 and $7,161 as of March 31, 2020 and December 31, 2019, respectively)	285,528			281,392
Prepaid expenses and other current assets	54,453			59,972
Total current assets	492,803			446,549
Property and equipment, net	443,998			451,021
Operating lease assets	61,754			65,825
Goodwill, net	2,381,309			2,396,096
Other intangible assets, net	364,425			378,818
Capitalized data and database costs, net	320,226			327,078
Investment in affiliates, net	11,339			16,666
Other assets	71,753			76,604
Total assets	$	4,147,607		$	4,158,657
Liabilities and Equity
Current liabilities:
Accounts payable and other accrued expenses	$	174,007		$	173,989
Accrued salaries and benefits	66,643			86,598
Contract liabilities, current	341,068			321,647
Current portion of long-term debt	77,724			56,022
Operating lease liabilities, current	17,532			18,058
Total current liabilities	676,974			656,314
Long-term debt, net of current	1,589,507			1,610,538
Contract liabilities, net of current	568,964			563,246
Deferred income tax liabilities	85,008			110,396
Operating lease liabilities, net of current	80,301			85,139
Other liabilities	219,855			181,814
Total liabilities	3,220,609			3,207,447

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; 79,411 and 78,972 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	1			1
Additional paid-in capital	111,481			111,000
Retained earnings	1,057,692			1,006,992
Accumulated other comprehensive loss	(242,176		)	(166,783		)
Total stockholders' equity	926,998			951,210
Total liabilities and equity	$	4,147,607		$	4,158,657

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

CoreLogic, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



	For the Three Months Ended March 31,
	For the Three Months Ended March 31,
(in thousands, except per share amounts)	2020			2019
Operating revenues	$	443,885		$	417,708
Cost of services (excluding depreciation and amortization shown below)	215,565			219,061
Selling, general and administrative expenses	114,406			128,224
Depreciation and amortization	46,843			49,219
Total operating expenses	376,814			396,504
Operating income	67,071			21,204
Interest expense:
Interest income	414			978
Interest expense	18,193			19,703
Total interest expense, net	(17,779		)	(18,725		)
(Loss)/gain on investments and other, net	(3,047		)	734
Income from continuing operations before equity in earnings/(losses) of affiliates and income taxes	46,245			3,213
Provision for income taxes	12,951			1,058
Income from continuing operations before equity in earnings/(losses) of affiliates	33,294			2,155
Equity in earnings/(losses) of affiliates, net of tax	512			(422		)
Net income from continuing operations	33,806			1,733
Income/(loss) from discontinued operations, net of tax	13			(46		)
Net income	$	33,819		$	1,687

Basic income per share:
Net income from continuing operations	$	0.43		$	0.02
Income/(loss) from discontinued operations, net of tax	—			—
Net income	$	0.43		$	0.02
Diluted income per share:
Net income from continuing operations	$	0.42		$	0.02
Income/(loss) from discontinued operations, net of tax	—			—
Net income	$	0.42		$	0.02
Weighted-average common shares outstanding:
Basic	79,028			80,179
Diluted	80,525			81,277

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

CoreLogic, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



	For the Three Months Ended March 31,
	For the Three Months Ended March 31,
(in thousands)	2020			2019
Net income	$	33,819		$	1,687
Other comprehensive loss
Market value adjustments on interest rate swaps, net of tax	(36,890		)	(12,206		)
Foreign currency translation adjustments	(38,690		)	5,342
Supplemental benefit plans adjustments, net of tax	187			(149		)
Total other comprehensive loss	(75,393		)	(7,013		)
Comprehensive loss	$	(41,574	)	$	(5,326	)

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

CoreLogic, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	For the Three Months Ended March 31,
	For the Three Months Ended March 31,
(in thousands)	2020			2019
Cash flows from operating activities:
Net income	$	33,819		$	1,687
Less: Income/(loss) from discontinued operations, net of tax	13			(46		)
Net income from continuing operations	33,806			1,733
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	46,843			49,219
Amortization of debt issuance costs	1,235			1,302
Amortization of operating lease assets	3,656			4,036
Provision for bad debt and claim losses	3,362			3,788
Share-based compensation	8,085			9,892
Equity in (earnings)/losses of affiliates, net of taxes	(512		)	422
Deferred income tax	2,092			4,346
Loss/(gain) on investments and other, net	3,047			(734		)
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable	(4,011		)	(5,489		)
Prepaid expenses and other current assets	3,677			(2,778		)
Accounts payable and other accrued expenses	(8,112		)	(7,665		)
Contract liabilities	24,372			173
Income taxes	4,930			10,966
Dividends received from investments in affiliates	185			—
Other assets and other liabilities	(9,808		)	(4,630		)
Net cash provided by operating activities - continuing operations	112,847			64,581
Net cash provided by operating activities - discontinued operations	18			—
Total cash provided by operating activities	$	112,865		$	64,581
Cash flows from investing activities:
Purchases of property and equipment	$	(14,312	)	$	(24,020	)
Purchases of capitalized data and other intangible assets	(9,464		)	(8,947		)
Cash paid for acquisitions, net of cash acquired	(11,760		)	—
Purchases of investments	(631		)	—
Cash received from sale of business-lines	—			1,082
Proceeds from investments and other	651			1,157
Net cash used in investing activities - continuing operations	(35,516		)	(30,728		)
Net cash provided by investing activities - discontinued operations	—			—
Total cash used in investing activities	$	(35,516	)	$	(30,728	)
Cash flows from financing activities:
Repayment of long-term debt	$	(723	)	$	(25,563	)
Proceeds from issuance of shares in connection with share-based compensation	2,932			2,758
Payment of tax withholdings related to net share settlements	(8,051		)	(8,551		)
Shares repurchased and retired	(2,431		)	—
Dividends paid	(17,374		)	—
Contingent consideration payments subsequent to acquisitions	—			(600		)
Net cash used in financing activities - continuing operations	(25,647		)	(31,956		)
Net cash provided by financing activities - discontinued operations	—			—
Total cash used in financing activities	$	(25,647	)	$	(31,956	)
Effect of exchange rate on cash, cash equivalents, and restricted cash	(4,690		)	(200		)
Net change in cash, cash equivalents, and restricted cash	47,012			1,697
Cash, cash equivalents, and restricted cash at beginning of period	115,702			98,250
Less: Change in cash, cash equivalents, and restricted cash - discontinued operations	18			—
Plus: Cash swept from discontinued operations	18			—
Cash, cash equivalents, and restricted cash at end of period	$	162,714		$	99,947

Supplemental disclosures of cash flow information:
Cash paid for interest	$	16,391		$	17,351
Cash paid for income taxes	$	2,512		$	1,958
Cash refunds from income taxes	$	371		$	15,950
Non-cash investing activities:
Capital expenditures included in accounts payable and other accrued expenses	$	11,980		$	14,469

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

CoreLogic, Inc.

Condensed Consolidated Statement of Stockholders' Equity (Year-to-Date)

(Unaudited)



	Common Stock Shares		Common Stock Amount		Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Loss			Total
(in thousands)
For the Three Months Ended March 31, 2020
Balance as of December 31, 2019	78,972		$	1	$	111,000		$	1,006,992	$	(166,783	)	$	951,210
Adoption of new accounting standards	—		—		—			16,827		—			16,827
Net income	—		—		—			33,819		—			33,819
Shares issued in connection with share-based compensation	489		—		2,932			—		—			2,932
Payment of tax withholdings related to net share settlements	—		—		(8,051		)	—		—			(8,051		)
Share-based compensation	—		—		8,085			—		—			8,085
Shares repurchased and retired	(50	)	—		(2,431		)	—		—			(2,431		)
Dividend declared	—		—		(54		)	54		—			—
Other comprehensive loss	—		—		—			—		(75,393		)	(75,393		)
Balance as of March 31, 2020	79,411		$	1	$	111,481		$	1,057,692	$	(242,176	)	$	926,998

For the Three Months Ended March 31, 2019
Balance as of December 31, 2018	80,092		$	1	$	160,870		$	975,375	$	(135,748	)	$	1,000,498
Net income	—		—		—			1,687		—			1,687
Shares issued in connection with share-based compensation	541		—		2,758			—		—			2,758
Payment of tax withholdings related to net share settlements	—		—		(8,551		)	—		—			(8,551		)
Share-based compensation	—		—		9,892			—		—			9,892
Other comprehensive loss	—		—		—			—		(7,013		)	(7,013		)
Balance as of March 31, 2019	80,633		$	1	$	164,969		$	977,062	$	(142,761	)	$	999,271

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

Note 1 – Basis of Condensed Consolidated Financial Statements

CoreLogic, Inc., together with its subsidiaries (collectively “the Company”, “we”, “us” or “our”), is a leading global property information, insight, analytics and data-enabled solutions 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. The markets we serve include real estate and mortgage finance, insurance, capital markets, and the public sector. We deliver value to clients through unique data, analytics, workflow technology, advisory and managed solutions. Clients rely on us to help identify and manage growth opportunities, improve performance, and mitigate risk.

Our condensed consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States ("US") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Actual amounts may differ from these estimated amounts. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The 2019 year-end condensed consolidated balance sheet was derived from the Company’s audited financial statements for the year ended December 31, 2019. Interim financial information does not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019.

The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of only normal recurring items which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future periods.

Client Concentration

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 31% and 29% of our operating revenues for the three months ended March 31, 2020 and 2019, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues during these periods.

Cash, Cash Equivalents, and Restricted Cash

We deem the carrying value of cash, cash equivalents, and restricted cash to be a reasonable estimate of fair value due to the nature of these instruments. Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash flows:



(in thousands)	March 31, 2020		March 31, 2019
Cash and cash equivalents	$	152,822	$	86,828
Restricted cash included in other assets	9,714		11,134
Restricted cash included in prepaid expenses and other current assets	178		1,985
Total cash, cash equivalents, and restricted cash	$	162,714	$	99,947

Operating Revenue Recognition

We derive our operating revenues primarily from US mortgage lenders, servicers, and insurance companies with good creditworthiness. Operating revenue arrangements are written and specify the products or services to be delivered, pricing, and payment terms. Operating revenue is recognized when the distinct good or service (also referred as "performance obligation"), is delivered and control has been transferred to the client. Generally, clients contract with us to provide products and services that are highly interrelated and not separately identifiable. Therefore, the entire contract is accounted for as one performance obligation. At times, some of our contracts have multiple performance obligations where we allocate the total price to each performance obligation based on the estimated relative standalone selling price using observable sales or the cost-plus-margin approach.

For products or services where delivery occurs at a point in time, we recognize operating revenue when the client obtains control of the products upon delivery. When delivery occurs over time, we generally recognize operating revenue ratably over the service period, once initial delivery has occurred. For certain of our products or services, clients may also pay upfront fees, which we defer and recognize as operating revenue over the longer of the contractual term or the expected client relationship period.

Licensing arrangements that provide our clients with the right to access or use our intellectual property are considered functional licenses for which we generally recognize operating revenue based on usage. For arrangements that provide a stand-ready obligation or substantive updates to the intellectual property which the client is contractually or practically required to use, we recognize operating revenue ratably over the contractual term.

Client payment terms are standard with no significant financing components or extended payment terms granted. In limited cases, we allow for client cancellations for which we estimate a reserve at the point-of-sale.

See further discussion in Note 7 - Operating Revenues.

Comprehensive Income

Comprehensive income includes all changes in equity except those resulting from investments by shareholders and distributions to shareholders. Specifically, foreign currency translation adjustments, amounts related to supplemental benefit plans, unrealized gains and losses on interest rate swap transactions and investments are recorded in other comprehensive income. The following table shows the components of accumulated other comprehensive loss, net of taxes, as of March 31, 2020 and December 31, 2019:



(in thousands)	2020			2019
Cumulative foreign currency translation	$	(161,193	)	$	(122,503	)
Cumulative supplemental benefit plans	(8,730		)	(8,917		)
Net unrecognized losses on interest rate swaps	(72,253		)	(35,296		)
Reclassification adjustment for gain on terminated interest rate swap included in net income	—			(67		)
Accumulated other comprehensive loss	$	(242,176	)	$	(166,783	)

Investment in Affiliates, net

Investments in affiliates are accounted for under the equity method of accounting when we are deemed to have significant influence over the affiliate but do not control or have a majority voting interest in the affiliate. Investments are carried at the cost of acquisition, including subsequent impairments, capital contributions and loans from us, plus our equity in undistributed earnings or losses since inception of the investment, less dividends received.

We recorded equity in earnings of affiliates, net of tax, of $0.5 million, and equity in losses of affiliates, net of tax, of $0.4 million for the three months ended March 31, 2020 and 2019, respectively. For both the three months ended March 31, 2020 and 2019, we had no operating revenues related to our investment in affiliates. We recorded operating expenses related to our investment in affiliates of $0.1 million for the three months ended March 31, 2020 and $0.2 million for the three months ended 2019, respectively. As of March 31, 2020, and December 31, 2019, we had insignificant accounts payable and accounts receivable with these affiliates.

In January 2020, we completed the acquisition of the remaining 66% of Location, Inc. ("Location") for $11.5 million, subject to certain working capital adjustments. In connection with this transaction, we remeasured our pre-existing 34% investment balance of $5.6 million to fair value based on the purchase price, resulting in a $0.6 million step-up gain which was recorded within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations for the three months ended March 31, 2020. The total investment balance was then reclassified in the application of purchase accounting for this acquisition. See Note 12 - Acquisitions for additional information. Prior to the acquisition of the remaining interest, we accounted for Location under the equity method and received dividends of $0.7 million in the first quarter of 2020.

Leases

We determine if an arrangement contains a lease at inception and determine the classification of the lease, as either operating or finance, at commencement.

Operating and finance lease assets and liabilities are recorded based on the present value of future lease payments over the lease term which factors in certain qualifying initial direct costs incurred as well as any lease incentives received. If an implicit rate is not readily determinable, we utilize our incremental borrowing rate and inputs from third-party lenders to determine the appropriate discount rate. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term, which, if applicable, may factor in renewal or termination options. Finance leases incur interest expense using the effective interest method in addition to amortization of the leased asset on a straight-line basis, both over the applicable lease term. Lease terms may factor in options to extend or terminate the lease.

We adhere to the short-term lease recognition exemption for all classes of assets (i.e. facilities and equipment). As a result, leases with an initial term of twelve months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. In addition, for certain equipment leases, we account for lease and non-lease components, such as services, as a single lease component as permitted.

Dividends

We record cash dividends as reductions to retained earnings upon declaration, with a corresponding increase to current liabilities, based on common shares outstanding on the record date. In addition, as part of our share-based compensation program, the terms of our restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”) stipulate that holders of these awards are credited with dividend equivalent units on each date that a cash dividend is paid to holders of common stock. These dividend equivalents are subject to the same vesting and performance requirements of the underlying units and therefore are forfeitable (i.e. non-participating). Upon declaration of a dividend, we record dividend equivalents as a reduction to retained earnings, derived from the number of eligible unvested shares, with a corresponding increase to additional paid-in-capital.

In December 2019, we announced that our Board of Directors initiated and declared a cash dividend of $0.22 per common share. As a result, as of December 31, 2019, we recorded a liability of $17.4 million within accounts payable and other accrued expenses, as well as $0.4 million in dividend equivalents reflected in additional paid-in-capital within our accompanying consolidated balance sheets. The dividend declared was paid in January 2020 to shareholders of record at the close of business on January 10, 2020. In April 2020, the Board of Directors announced a cash dividend to common shareholders of $0.22 per share of common stock to be paid in June 2020.

Discontinued Operations

As of March 31, 2020, and December 31, 2019, we recorded assets of discontinued operations of $6.3 million within prepaid expenses and other current assets within our condensed consolidated balance sheets, mainly consisting of income tax-related assets. Additionally, as of March 31, 2020 and December 31, 2019, we recorded liabilities of $0.4 million within accounts payable and other accrued expenses, which mainly consisted of legal-related accruals.

Tax Escrow Disbursement Arrangements

We administer tax escrow disbursements as a service to our clients in connection with our tax services business. Funds to be disbursed are deposited and maintained in segregated accounts for the benefit of our clients and totaled $6.8 billion and $1.4 billion as of March 31, 2020 and December 31, 2019, respectively. Because these deposits are held on behalf of our clients, they are not our funds and, therefore, are not included in the accompanying condensed consolidated balance sheets.

These deposits generally remain in the accounts for a period of two to five business days. We record credits from these activities as a reduction to related administrative expenses, including the cost of bank fees and other administration costs.

Under our contracts with our clients, if we make a payment in error or fail to pay a taxing authority when a payment is due, we could be held liable to our clients for all or part of the financial loss they suffer as a result of our act or omission. We maintained total claim reserves relating to incorrect disposition of assets of $22.4 million and $22.7 million as of March 31, 2020 and December 31, 2019, respectively. Within both of these amounts, $9.8 million are short-term and are reflected within accounts payable and other accrued expenses within our accompanying condensed consolidated balance sheets. The remaining reserves are reflected within other liabilities.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform, in connection with the scheduled phase-out of LIBOR as a reference interest rate. The guidance provides practical expedients and exceptions in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. Entities electing the practical expedients will be allowed, among other topics, to account for reference rate modification of debt and receivables prospectively; to not reassess lease classifications and discount rates in reference rate lease modifications; and ease cash-flow hedge effectiveness testing guidelines for hedges affected by reference rate reform. The guidance is effective as of March 12, 2020 through December 31, 2022 with adoption permitted as of any date within the aforementioned time frame from the beginning of the selected interim period on a prospective basis. We have elected to adopt the guidance in the current quarter which has not had a material effect on our condensed consolidated financial statements.

In December 2019, as part of a simplification initiative, the FASB issued guidance to remove certain exceptions and added further guidance to simplify the accounting for income taxes. The exceptions that were removed relate to recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The guidance reduces the complexity of recognizing deferred taxes for tax goodwill and allocating taxes to entities of a consolidated group. The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. We elected to early adopt on January 1, 2020 via the modified retrospective method with a cumulative effect adjustment at the date of initial application, resulting in an increase to retained earnings of $16.8 million which represents the release of a deferred tax liability that had previously been established for the outside basis difference of an equity method investment that later became a subsidiary.

In November 2018, the FASB issued guidance to clarify the definition and interaction of collaborative arrangements with previously issued guidance on revenue recognition. This guidance is effective for fiscal years beginning after December 15, 2019 on a retrospective basis to the date of the initial adoption of the revenue standard. We have adopted this guidance in the current year as required, which has not had a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued guidance that amends fair value disclosure requirements. The guidance removes disclosure requirements on the transfers between Level 1 and Level 2 of the fair value hierarchy in addition to the disclosure requirements on the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The guidance clarifies the measurement uncertainty disclosure and adds disclosure requirements for Level 3 unrealized gains and losses and significant unobservable inputs used to develop Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019. Entities were permitted to early adopt any removed or modified disclosures upon issuance and delay adoption of the additional disclosures until the effective date. We early adopted the removal of disclosure

provisions of the new guidance in 2018 and adopted the measurement uncertainty disclosure and additional Level 3 disclosures in the current year as required. Adoption of this guidance has not had a material impact on our condensed consolidated financial statements.

In June 2016, the FASB issued guidance for accounting of credit losses affecting the impairment model for most financial assets and certain other instruments. Entities are required to use a forward-looking current expected credit loss model for trade and other receivables, held-to-maturity debt securities, loans, and other instruments, which will generally lead to an earlier recognition of loss allowances. Entities will recognize expected losses on available-for-sale debt securities as allowances rather than a reduction in amortized cost of the security while the measurement process of such loss does not change. Disclosure requirements are expanded regarding an entity’s assumptions, models, and methods of estimations of the allowance. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. In November 2018 and 2019, the FASB issued updates to this standard which, amongst other items, clarified that impairment of receivables arising from operating leases should be accounted for under applicable leasing guidance. We have adopted this guidance in the current year as required, which has not had a material impact on our condensed consolidated financial statements.

Note 2 - Property and Equipment, Net

Property and equipment, net as of March 31, 2020 and December 31, 2019 consists of the following:



(in thousands)	2020			2019
Land	$	7,476		$	7,476
Buildings	6,487			6,487
Furniture and equipment	71,993			74,978
Capitalized software	906,590			916,820
Leasehold improvements	49,858			48,811
Construction in progress	480			3,064
	1,042,884			1,057,636
Less accumulated depreciation	(598,886		)	(606,615		)
Property and equipment, net	$	443,998		$	451,021

Depreciation expense for property and equipment, net, was approximately $23.2 million and $23.4 million for the three months ended March 31, 2020 and 2019, respectively.

Note 3 – Goodwill, Net

A reconciliation of the changes in the carrying amount of goodwill and accumulated impairment losses, by reporting unit, for the three months ended March 31, 2020 is as follows:



(in thousands)	PIRM			UWS			Consolidated
Balance as of January 1, 2020
Goodwill	$	1,107,494		$	1,296,127		$	2,403,621
Accumulated impairment losses	(600		)	(6,925		)	(7,525		)
Goodwill, net	1,106,894			1,289,202			2,396,096
Acquisition	12,301			—			12,301
Measurement period adjustments	—			(98		)	(98		)
Translation adjustments	(26,990		)	—			(26,990		)
Balance as of March 31, 2020
Goodwill, net	$	1,092,205		$	1,289,104		$	2,381,309

See Note 12 - Acquisitions for discussion of current year acquisition and measurement period adjustments.

Note 4 – Other Intangible Assets, Net

Other intangible assets, net consists of the following:



	March 31, 2020							December 31, 2019
(in thousands)	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Client lists	$	650,380	$	(352,847	)	$	297,533	$	662,611	$	(354,011	)	$	308,600
Non-compete agreements	26,746		(17,565		)	9,181		26,409		(16,249		)	10,160
Tradenames and licenses	126,173		(68,462		)	57,711		127,176		(67,118		)	60,058
	$	803,299	$	(438,874	)	$	364,425	$	816,196	$	(437,378	)	$	378,818

Amortization expense for other intangible assets, net was $14.3 million and $16.6 million for the three months ended March 31, 2020 and 2019, respectively.

Estimated amortization expense for other intangible assets, net is as follows:



(in thousands)
Remainder of 2020	$	42,951
2021	54,061
2022	52,314
2023	44,156
2024	37,821
Thereafter	133,122
	$	364,425

Note 5 – Long-Term Debt

Our long-term debt consists of the following:



		March 31, 2020								December 31, 2019
(in thousands)		Gross		Debt Issuance Costs			Net			Gross		Debt Issuance Costs			Net
Bank debt:
	Term loan facility borrowings due May 2024, weighted-average interest rate of 3.42% as of March 31, 2020	$	1,672,188	$	(13,996	)	$	1,658,192		$	1,672,188	$	(14,868	)	$	1,657,320
	Revolving line of credit borrowings due May 2024, weighted-average interest rate of 3.42% as of March 31, 2020	—		(6,064		)	(6,064		)	—		(6,425		)	(6,425		)
Notes:
	7.55% senior debentures due April 2028	9,531		(25		)	9,506			9,524		(26		)	9,498
Other debt:
	Various debt instruments with maturities through March 2024	5,597		—			5,597			6,167		—			6,167
Total long-term debt		1,687,316		(20,085		)	1,667,231			1,687,879		(21,319		)	1,666,560
Less current portion of long-term debt		77,724		—			77,724			56,022		—			56,022
Long-term debt, net of current portion		$	1,609,592	$	(20,085	)	$	1,589,507		$	1,631,857	$	(21,319	)	$	1,610,538

As of March 31, 2020 and December 31, 2019, we recorded $0.6 million and $0.4 million, respectively, of accrued interest expense on our debt-related instruments within accounts payable and other accrued expenses.

Credit Agreement

In May 2019, 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 5-year term loan facility (the “Term Facility”), and a $750.0 million 5-year revolving credit facility (the “Revolving Facility”). The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multi-currency 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 $300.0 million in the aggregate; however, the lenders are not obligated to do so. As of March 31, 2020, we had a remaining borrowing capacity of $750.0 million under the Revolving Facility and we were in compliance with all financial and restrictive covenants under the Credit Agreement.

Debt Issuance Costs

In connection with the amendment and restatement of the Credit Agreement, in May 2019, we incurred approximately $9.7 million of debt issuance costs of which $9.6 million were initially capitalized within long-term debt, net of current, in the accompanying condensed consolidated balance sheets. In addition, when we amended and restated the Credit Agreement, we wrote-off previously unamortized debt issuance costs of $1.5 million within (loss)/gain on investments and other, net, in the accompanying consolidated statement of operations, which resulted in a remaining $14.6 million of previously unamortized costs. We will amortize all of these costs over the term of the Credit Agreement. For the three months ended March 31, 2020 and 2019, $1.2 million and $1.3 million, respectively, were recognized in the accompanying condensed consolidated statements of operations related to the amortization of debt issuance costs.

7.55% Senior Debentures

In April 1998, we issued $100.0 million in aggregate principal amount of 7.55% senior debentures due 2028. The indentures governing these debentures, as amended, contain limited restrictions on us.

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. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month London interbank offering rate ("LIBOR"). The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of March 31, 2020, the Swaps have a combined remaining notional balance of $1.3 billion, a weighted average fixed interest rate of 2.08% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts of between $1.3 billion and $1.2 billion through September 2021, then $1.1 billion and $1.0 billion through August 2022, and $496.8 million and $465.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.51%, 2.64%, and 2.61%, respectively.

We have designated the Swaps as cash flow hedges. The estimated fair values of these cash flow hedges are recorded in prepaid expenses and other current assets or other assets as well as accounts payable and other accrued expenses or other liabilities in the accompanying condensed consolidated balance sheets. As of March 31, 2020, the estimated fair value of these cash flow hedges resulted in a liability of $96.3 million of which $6.2 million was recorded within accounts payable and other accrued expenses. As of December 31, 2019, the estimated fair value of these cash flow hedges resulted in an asset of $0.6 million which was recorded within prepaid expenses and other current assets, as well as a liability of $47.7 million recorded within other liabilities.

Unrealized losses of $36.9 million (net of $12.3 million in deferred taxes) and $12.2 million (net of $4.1 million in deferred taxes) for the three months ended March 31, 2020 and 2019, respectively, were recognized in other comprehensive loss related to the Swaps.

As a result of our Swap activity, for the three months ended March 31, 2020 and 2019, included within interest expense, on a pre-tax basis, we recognized interest expense of $15.8 million and interest income of $1.7 million, respectively. Estimated net losses included in accumulated other comprehensive loss related to the Swaps as of March 31, 2020, that will be reclassified into earnings as interest expense over the next 12 months, utilizing March 31, 2020 LIBOR, is estimated to be $21.1 million, on a pre-tax basis.

Note 6 – Fair Value

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable.

The market approach is applied for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value balances are classified based on the observability of those inputs.

A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize observable inputs in active markets for similar assets and liabilities, or, quoted prices in markets that are not active.

In estimating fair value, we used the following methods and assumptions:

Cash and Cash Equivalents

For cash and cash equivalents, the carrying value is a reasonable estimate of fair value due to the short-term nature of the instruments.

Restricted Cash

Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. We deem the carrying value to be a reasonable estimate of fair value due to the nature of these instruments.

Other Investments

Other investments are currently comprised of a minority equity investment in a foreign enterprise which we measure at cost and adjust to fair value on a quarterly basis when there are observable price changes in orderly transactions for the identical, or similar, investments. Changes in fair value are recorded within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations.

Contingent Consideration

The fair value of our contingent consideration was estimated using the Monte-Carlo simulation model, which relies on significant assumptions and estimates including discount rates and future market conditions, among others.

Long-Term Debt

The fair value of debt was estimated based on the current rates available to us for similar debt of the same remaining maturities and consideration of our default and credit risk.

Swaps

The fair values of the Swaps were estimated based on market-value quotes received from the counterparties to the agreements.

The fair values of our financial instruments as of March 31, 2020 are presented in the following table:



(in thousands)	Fair Value Measurements Using
As of March 31, 2020	Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and cash equivalents	$	152,822	$	—	$	—	$	152,822
Restricted cash	8,196		1,696		—		9,892
Other investments	—		2,232		—		2,232
Total	$	161,018	$	3,928	$	—	$	164,946

Financial Liabilities:
Contingent consideration	$	—	$	—	$	3,700	$	3,700
Total debt	—		1,688,230		—		1,688,230
Total	$	—	$	1,688,230	$	3,700	$	1,691,930

Derivatives:
Liability for Swaps	$	—	$	96,272	$	—	$	96,272

As of December 31, 2019
Financial Assets:
Cash and cash equivalents	$	105,185	$	—	$	—	$	105,185
Restricted cash	9,791		726		—		10,517
Other investments	—		1,898		—		1,898
Total	$	114,976	$	2,624	$	—	$	117,600

Financial Liabilities:
Contingent consideration	$	—	$	—	$	4,509	$	4,509
Total debt	—		1,690,731		—		1,690,731
Total	$	—	$	1,690,731	$	4,509	$	1,695,240

Derivatives:
Asset for Swaps	$	—	$	572	$	—	$	572
Liability for Swaps	$	—	$	47,691	$	—	$	47,691

In connection with certain acquisitions in 2017, we entered into contingent consideration agreements for up to $20.5 million in cash by 2022 upon the achievement of certain revenue targets ending in fiscal year 2021. These contingent payments were originally recorded at a fair value of $6.2 million using the Monte-Carlo simulation model. In connection with the 2019 acquisition of National Tax Search, LLC (“NTS”), we entered into a contingent consideration agreement for up to $7.5 million in cash based upon certain revenue targets in fiscal years 2020 and 2021. This contingent consideration has been assessed with no fair value as of March 31, 2020 using the Monte-Carlo simulation model. The contingent payments are remeasured at fair value quarterly, and changes are recorded within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations. During the three months ended March 31, 2020, we decreased the fair value of our contingent consideration by $0.8 million and recorded the gain in our condensed consolidated statement of operations. During the three months ended March 31, 2019, we increased the fair value of our contingent consideration by $0.4 million and recorded the loss in our condensed consolidated statement of operations.

Due to observable price changes in an inactive market, for the three months ended March 31, 2019 we recorded an unfavorable fair value adjustment of $2.3 million to a minority equity investment, within (loss)/gain on investments and other, net, in our condensed consolidated statement of operations. No adjustments were necessary for the three months ended March 31, 2020.

Note 7 – Operating Revenues

Operating revenues by solution type consist of the following:



(in thousands)	PIRM		UWS		Corporate and Eliminations			Consolidated
For the Three Months Ended March 31, 2020	PIRM		UWS		Corporate and Eliminations			Consolidated
Property insights	$	116,977	$	—	$	—		$	116,977
Insurance and spatial solutions	46,840		—		—			46,840
Flood data solutions	—		27,603		—			27,603
Valuation solutions	—		61,247		—			61,247
Credit solutions	—		81,127		—			81,127
Property tax solutions	—		101,991		—			101,991
Other	9,238		3,653		(4,791		)	8,100
Total operating revenue	$	173,055	$	275,621	$	(4,791	)	$	443,885

For the Three Months Ended March 31, 2019
Property insights	$	118,670	$	—	$	—		$	118,670
Insurance and spatial solutions	45,416		—