TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
|
Net income
|
|
$
|
265.6
|
|
|
$
|
182.0
|
|
Add: loss from discontinued operations, net of tax
|
|
4.6
|
|
|
1.4
|
|
Income from continuing operations
|
|
270.2
|
|
|
183.5
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
271.4
|
|
|
218.8
|
|
Loss on debt financing transactions
|
|
1.5
|
|
|
12.0
|
|
Amortization and (gain) loss on fair value of hedge instrument
|
|
—
|
|
|
(0.7
|
)
|
Net (gain) impairment of investments in nonconsolidated affiliates and assets-held-for-sale
|
|
(20.6
|
)
|
|
1.5
|
|
Equity in net income of affiliates, net of dividends
|
|
(1.2
|
)
|
|
(3.1
|
)
|
Deferred taxes
|
|
(9.7
|
)
|
|
(17.9
|
)
|
Amortization of discount and deferred financing fees
|
|
4.7
|
|
|
3.2
|
|
Stock-based compensation
|
|
29.7
|
|
|
36.9
|
|
Payment of contingent obligation
|
|
(0.4
|
)
|
|
(0.2
|
)
|
Provision for losses on trade accounts receivable
|
|
7.9
|
|
|
6.3
|
|
Other
|
|
2.8
|
|
|
3.0
|
|
Changes in assets and liabilities:
|
|
|
|
|
Trade accounts receivable
|
|
(13.2
|
)
|
|
(79.4
|
)
|
Other current and long-term assets
|
|
(35.4
|
)
|
|
(5.5
|
)
|
Trade accounts payable
|
|
10.8
|
|
|
8.3
|
|
Other current and long-term liabilities
|
|
69.2
|
|
|
43.6
|
|
Cash provided by operating activities of continuing operations
|
|
587.7
|
|
|
410.3
|
|
Cash used in operating activities of discontinued operations
|
|
(7.3
|
)
|
|
(0.9
|
)
|
Cash provided by operating activities
|
|
580.4
|
|
|
409.4
|
|
Cash flows from investing activities:
|
|
|
|
|
Capital expenditures
|
|
(132.1
|
)
|
|
(118.3
|
)
|
Proceeds from sale of trading securities
|
|
3.5
|
|
|
1.8
|
|
Purchases of trading securities
|
|
(1.9
|
)
|
|
(2.0
|
)
|
Proceeds from sale of other investments
|
|
18.2
|
|
|
15.9
|
|
Purchases of other investments
|
|
(31.4
|
)
|
|
(22.7
|
)
|
Acquisitions and purchases of noncontrolling interests, net of cash acquired
|
|
(46.2
|
)
|
|
(1,800.4
|
)
|
Proceeds from disposals of discontinued operations, net of cash on hand
|
|
40.3
|
|
|
(0.5
|
)
|
Other
|
|
(5.5
|
)
|
|
(0.9
|
)
|
Cash used in investing activities of continuing operations
|
|
(155.1
|
)
|
|
(1,927.1
|
)
|
Cash used in investing activities of discontinued operations
|
|
—
|
|
|
(0.1
|
)
|
Cash used in investing activities
|
|
(155.1
|
)
|
|
(1,927.2
|
)
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from Senior Secured Term Loan B-4
|
|
—
|
|
|
1,000.0
|
|
Proceeds from Senior Secured Term Loan A-2
|
|
—
|
|
|
800.0
|
|
Proceeds from senior secured revolving line of credit
|
|
—
|
|
|
125.0
|
|
Payments of senior secured revolving line of credit
|
|
—
|
|
|
(210.0
|
)
|
Repayments of debt
|
|
(313.9
|
)
|
|
(39.3
|
)
|
Debt financing fees
|
|
—
|
|
|
(33.8
|
)
|
Proceeds from issuance of common stock and exercise of stock options
|
|
22.4
|
|
|
23.3
|
|
Dividends to shareholders
|
|
(42.6
|
)
|
|
(27.7
|
)
|
Distributions to noncontrolling interests
|
|
(1.2
|
)
|
|
(2.8
|
)
|
Employee taxes paid on restricted stock units recorded as treasury stock
|
|
(37.7
|
)
|
|
(0.8
|
)
|
Cash (used in) provided by financing activities
|
|
(373.0
|
)
|
|
1,633.9
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(3.8
|
)
|
|
(5.3
|
)
|
Net change in cash and cash equivalents
|
|
48.5
|
|
|
110.8
|
|
Cash and cash equivalents, beginning of period
|
|
187.4
|
|
|
115.8
|
|
Cash and cash equivalents, end of period
|
|
$
|
235.9
|
|
|
$
|
226.6
|
|
As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Paid-In
Capital
|
|
Treasury
Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Noncontrolling
Interests
|
|
Total
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
183.2
|
|
|
$
|
1.9
|
|
|
$
|
1,863.5
|
|
|
$
|
(138.8
|
)
|
|
$
|
137.4
|
|
|
$
|
(135.3
|
)
|
|
$
|
95.9
|
|
|
$
|
1,824.6
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
73.1
|
|
|
—
|
|
|
2.3
|
|
|
75.4
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21.7
|
|
|
0.1
|
|
|
21.8
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
8.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.9
|
|
Employee share purchase plan
|
|
0.1
|
|
|
—
|
|
|
4.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.8
|
|
Exercise of stock options
|
|
0.7
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.3
|
|
Treasury stock purchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
Cumulative effect of adopting Topic 606, net of tax
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.0
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(6.1
|
)
|
Cumulative effect of adopting ASC 2016-16
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.2
|
)
|
|
—
|
|
|
—
|
|
|
(2.2
|
)
|
Balance, March 31, 2018
|
|
184.0
|
|
|
1.9
|
|
|
1,882.5
|
|
|
(139.2
|
)
|
|
202.3
|
|
|
(113.6
|
)
|
|
98.2
|
|
|
1,932.1
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55.0
|
|
|
—
|
|
|
2.3
|
|
|
57.3
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73.9
|
)
|
|
(3.2
|
)
|
|
(77.1
|
)
|
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Noncontrolling interests of acquired businesses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
11.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11.5
|
|
Exercise of stock options
|
|
0.7
|
|
|
—
|
|
|
4.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
Treasury stock purchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.1
|
)
|
|
—
|
|
|
—
|
|
|
(14.1
|
)
|
Balance, June 30, 2018
|
|
184.7
|
|
|
1.9
|
|
|
1,898.7
|
|
|
(139.3
|
)
|
|
243.2
|
|
|
(187.5
|
)
|
|
97.3
|
|
|
1,914.3
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46.3
|
|
|
—
|
|
|
3.1
|
|
|
49.4
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.4
|
)
|
|
(0.6
|
)
|
|
(7.0
|
)
|
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4
|
)
|
|
(3.4
|
)
|
Noncontrolling interests of acquired businesses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
0.2
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
15.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15.0
|
|
Employee share purchase plan
|
|
0.1
|
|
|
—
|
|
|
6.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.5
|
|
Exercise of stock options
|
|
0.5
|
|
|
—
|
|
|
3.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.7
|
|
Treasury stock purchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Balance, September 30, 2018
|
|
185.3
|
|
|
$
|
1.9
|
|
|
$
|
1,923.9
|
|
|
$
|
(139.5
|
)
|
|
$
|
275.2
|
|
|
$
|
(193.9
|
)
|
|
$
|
96.5
|
|
|
$
|
1,964.1
|
|
As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Paid-In
Capital
|
|
Treasury
Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Noncontrolling
Interests
|
|
Total
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
185.7
|
|
|
$
|
1.9
|
|
|
$
|
1,947.3
|
|
|
$
|
(139.9
|
)
|
|
$
|
363.1
|
|
|
$
|
(282.7
|
)
|
|
$
|
92.5
|
|
|
$
|
1,982.2
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.9
|
|
|
—
|
|
|
2.4
|
|
|
73.4
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53.2
|
|
|
0.1
|
|
|
53.3
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
9.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.2
|
|
Employee share purchase plan
|
|
0.1
|
|
|
—
|
|
|
6.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.9
|
|
Exercise of stock options
|
|
0.5
|
|
|
—
|
|
|
4.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.2
|
|
Vesting of restricted stock units
|
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Treasury stock purchased
|
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
(37.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37.1
|
)
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
Cumulative effect of adopting ASU 2017-12
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
Balance, March 31, 2019
|
|
187.3
|
|
|
1.9
|
|
|
1,967.6
|
|
|
(177.0
|
)
|
|
418.8
|
|
|
(229.4
|
)
|
|
95.0
|
|
|
2,076.9
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
101.5
|
|
|
—
|
|
|
2.5
|
|
|
104.0
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66.8
|
)
|
|
0.7
|
|
|
(66.1
|
)
|
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
(0.8
|
)
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
6.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.1
|
|
Exercise of stock options
|
|
0.5
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
Treasury stock purchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
Balance, June 30, 2019
|
|
187.8
|
|
|
1.9
|
|
|
1,976.4
|
|
|
(177.1
|
)
|
|
506.1
|
|
|
(296.2
|
)
|
|
97.4
|
|
|
2,108.5
|
|
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
91.7
|
|
|
—
|
|
|
(3.4
|
)
|
|
88.3
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(73.5
|
)
|
|
(1.4
|
)
|
|
(74.9
|
)
|
Distributions to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
12.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12.4
|
|
Employee share purchase plan
|
|
0.1
|
|
|
—
|
|
|
8.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8.3
|
|
Exercise of stock options
|
|
0.4
|
|
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
Treasury stock purchased
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
Dividends to shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.3
|
)
|
|
—
|
|
|
—
|
|
|
(14.3
|
)
|
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Balance, September 30, 2019
|
|
188.3
|
|
|
$
|
1.9
|
|
|
$
|
1,999.7
|
|
|
$
|
(177.9
|
)
|
|
$
|
583.4
|
|
|
$
|
(369.7
|
)
|
|
$
|
92.1
|
|
|
$
|
2,129.5
|
|
As a result of displaying amounts in millions, rounding differences may exist in the table above.
See accompanying notes to unaudited consolidated financial statements.
TRANSUNION AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. Significant Accounting and Reporting Policies
Basis of Presentation
Unless the context indicates otherwise, any reference in this report to the “Company,” “we,” “our,” “us,” and “its” refers to TransUnion and its consolidated subsidiaries, collectively.
The accompanying unaudited consolidated financial statements of TransUnion and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. All significant intercompany transactions and balances have been eliminated. The operating results of TransUnion for the periods presented are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (“SEC”) on February 14, 2019.
Subsequent Events
Events and transactions occurring through the date of issuance of the financial statements have been evaluated by management and, when appropriate, recognized or disclosed in the financial statements or notes to the consolidated financial statements.
Principles of Consolidation
The consolidated financial statements of TransUnion include the accounts of TransUnion and all of its controlled subsidiaries. Investments in nonmarketable unconsolidated entities in which the Company is able to exercise significant influence are accounted for using the equity method. Investments in nonmarketable unconsolidated entities in which the Company is not able to exercise significant influence, our “Cost Method Investments,” are accounted for at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Recently Adopted Accounting Pronouncements
On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842). During 2018 and 2019, the FASB issued additional guidance related to the new standard. This series of comprehensive guidance, among other things, requires us to record the discounted present value of all future lease payments as a liability on our balance sheet, as well as a corresponding “right-of-use” (“ROU”) asset, which is an asset that represents the right to use or control the use of a specified asset for the lease term, for all long-term leases. Under the new standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We have adopted this guidance effective January 1, 2019, on a modified retrospective basis, as of the beginning of the period adopted, including the package of practical expedients available per paragraph 842-10-65-1(f). On each reporting date after adoption, we will recognize an operating lease liability and offsetting ROU asset on our Consolidated Balance Sheet, with no other impact to our Consolidated Financial Statements. See Note 5, “Other Assets,” Note 7 “Other Current Liabilities,” Note 8, “Other Liabilities” and Note 10, “Leases” for additional information and the new required disclosures.
On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new standard is intended to improve and simplify accounting rules around hedge accounting. The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods therein. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness. For our cash flow hedges, this means that the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is now recorded in other comprehensive income, and reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. We have adopted this ASU and related amendments effective January 1, 2019, and have applied the modified retrospective transition method that allows for a cumulative-effect adjustment to reclassify cumulative ineffectiveness previously recorded in other comprehensive income to retained earnings in the period of adoption. The adjustment was not material to our consolidated financial statements.
On February 14, 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. These amendments provide an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (the “Act”) is recorded. We adopted this guidance on January 1, 2019 and have elected to not reclassify the stranded tax effects within accumulated other comprehensive income to retained earnings and therefore there is no impact on our consolidated financial statements.
On August 27, 2018, the FASB issued ASU 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. These amendments modify the disclosure requirements in Topic 820 by removing, adding or modifying certain fair value measurement disclosures. We adopted this guidance on January 1, 2019. This guidance only impacts certain disclosures, with no impact to our financial statements.
Recent Accounting Pronouncements Not Yet Adopted
On June 16, 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In addition, these amendments require the measurement of all expected credit losses for financial assets, including trade accounts receivable, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods therein. We are currently assessing the impact this guidance will have on our consolidated financial statements.
2. Business Acquisitions
Callcredit Acquisition
On June 19, 2018, we acquired 100% of the equity of Callcredit Information Group, Ltd. (“Callcredit”) for $1,408.2 million in cash, funded primarily by additional borrowings against our Senior Secured Credit Facility. See Note 9, “Debt,” for additional information about our Senior Secured Credit Facility. There was no contingent consideration resulting from this transaction. Callcredit, founded in 2000, is a United Kingdom-based information solutions company that, like TransUnion, provides data, analytics and technology solutions to help businesses and consumers make informed decisions. International expansion is a key growth strategy for TransUnion, and we expect to leverage strong synergies across TransUnion’s and Callcredit’s business models and solutions.
Callcredit’s revenue and operating income have been included as part of the International segment in the accompanying Consolidated Statements of Income since the date of acquisition, including revenue of $35.9 million and an operating loss of $18.9 million for the nine months ended September 30, 2018.
For the nine months ended September 30, 2018, on a pro-forma basis assuming the transaction occurred on January 1, 2017, combined pro-forma revenue of TransUnion and Callcredit was $1,791.8 million, and combined pro-forma net income from continuing operations was $165.8 million. For the nine months ended September 30, 2018, combined pro-forma net income from continuing operations was adjusted to exclude $19.1 million of acquisition-related costs and $9.4 million of financing costs expensed in 2018.
We identified and categorized certain operations of Callcredit that we do not consider core to our business as discontinued operations of our International segment as of the date of acquisition. These discontinued operations consist of businesses that do not align with our stated strategic objectives. As of June 30, 2019, we had disposed of all of these businesses and do not expect to have a significant continuing involvement with any of these operations. At December 31, 2018, we categorized the assets and liabilities of these discontinued operations on separate lines on the face of our balance sheet and reflect them as of the date of acquisition as discontinued operations in the table below.
Purchase Price Allocation
The final allocation of the purchase price, including our estimate of the fair values of the identifiable assets and goodwill, to the assets acquired and liabilities assumed on the date of acquisition, consisted of the following:
|
|
|
|
|
|
(in millions)
|
|
Fair Value
|
Trade accounts receivable
|
|
$
|
20.8
|
|
Property and equipment
|
|
3.2
|
|
Goodwill(1)
|
|
757.1
|
|
Identifiable intangible assets
|
|
720.1
|
|
All other assets
|
|
55.0
|
|
Assets of discontinued operations(2)
|
|
57.1
|
|
Total assets acquired
|
|
1,613.3
|
|
|
|
|
All other liabilities
|
|
(185.5
|
)
|
Liabilities of discontinued operations(2)
|
|
(19.6
|
)
|
Net assets of the acquired company
|
|
$
|
1,408.2
|
|
|
|
(1)
|
For tax purposes, none of the goodwill is tax deductible.
|
|
|
(2)
|
We have categorized certain businesses of Callcredit as discontinued operations in our consolidated financial statements. As of June 30, 2019, we had disposed of all of these businesses.
|
We recorded the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed as goodwill in a new reportable unit in our International segment. The purchase price of Callcredit exceeded the preliminary fair value of the net assets acquired primarily due to growth opportunities, the assembled workforce, synergies associated with internal use software and other technological and operational efficiencies.
Identifiable Amortizable Intangible Assets
The fair values of the amortizable intangible assets acquired consisted of the following:
|
|
|
|
|
|
|
|
(in millions)
|
|
Estimated Useful Life
|
|
Fair Value
|
Database and credit files
|
|
15 years
|
|
$
|
502.0
|
|
Customer relationships
|
|
15 years
|
|
155.0
|
|
Technology and software
|
|
5 years
|
|
62.4
|
|
Trademarks
|
|
2 years
|
|
0.7
|
|
Total identifiable assets
|
|
|
|
$
|
720.1
|
|
The weighted-average useful life of the amortizable intangible assets acquired is approximately 14.1 years, resulting in approximately $51.0 million of annual amortization.
Acquisition Costs
As of September 30, 2019, we have incurred approximately $20.7 million of acquisition-related costs, including $19.9 million incurred in prior years. These costs include investment banker fees, legal fees, due diligence and other external costs that we have recorded in other income and expense. We may incur additional acquisition-related costs, including legal fees, valuation fees and other professional fees in the next several quarters that we will record in other income and expense.
Other Acquisitions
During the second quarter of 2018, we acquired 100% of the equity of iovation, Inc. (“iovation”) and Healthcare Payment Specialists, LLC (“HPS”). During the fourth quarter of 2018, we acquired 100% of the equity of Rubixis, Inc (“Rubixis”). During the second quarter of 2019, we acquired 100% of the equity of TruSignal, Inc. (“TruSignal”).
iovation is a provider of advanced device identity and consumer authentication services that helps businesses and consumers safely transact in a digital world. HPS provides expertise and technology solutions to help medical care providers maximize Medicare reimbursements. Rubixis is an innovative healthcare revenue cycle solutions company that helps providers maximize reimbursement from insurance payers. TruSignal is an innovative leader in people-based marketing technology for Fortune 500 brands, agencies, platforms, publishers and data owners.
The results of operations of iovation, HPS, Rubixis, and TruSignal, which are not material to our consolidated financial statements, have been included as part of our U.S. Markets segment (formerly U.S. Information Services) in our consolidated statements of income since the date of each of the acquisitions.
We finalized the purchase accounting for iovation and HPS during the second quarter of 2019. We finalized the purchase accounting for Rubixis during the third quarter of 2019. The final allocation of the purchase price for these three entities resulted in $249.3 million of goodwill and $219.5 million of amortizable intangible assets recorded in addition to what we recorded for Callcredit. The weighted-average useful life of the amortizable intangible assets acquired is approximately 10.7 years, resulting in approximately $20.6 million of annual amortization.
3. Fair Value
The following table summarizes financial instruments measured at fair value, on a recurring basis, as of September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
$
|
12.1
|
|
|
$
|
9.8
|
|
|
$
|
2.3
|
|
|
$
|
—
|
|
Available-for-sale debt securities
|
|
3.0
|
|
|
—
|
|
|
3.0
|
|
|
—
|
|
Interest rate caps
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Total
|
|
$
|
15.2
|
|
|
$
|
9.8
|
|
|
$
|
5.4
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
(54.5
|
)
|
|
$
|
—
|
|
|
$
|
(54.5
|
)
|
|
$
|
—
|
|
Contingent consideration
|
|
(9.1
|
)
|
|
—
|
|
|
—
|
|
|
(9.1
|
)
|
Total
|
|
$
|
(63.6
|
)
|
|
$
|
—
|
|
|
$
|
(54.5
|
)
|
|
$
|
(9.1
|
)
|
Level 1 instruments consist of exchange-traded mutual funds. Exchange-traded mutual funds are trading securities valued at their current market prices. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants.
Level 2 instruments consist of pooled separate accounts, foreign exchange-traded corporate bonds and interest rate caps and swaps. Pooled separate accounts are designated as trading securities valued at net asset values. These securities relate to the nonqualified deferred compensation plan held in trust for the benefit of plan participants. Foreign exchange-traded corporate bonds are available-for-sale debt securities valued at their current quoted prices. These securities mature between 2027 and 2033. The interest rate caps and swaps fair values are determined using the market standard methodology of discounting the future expected net cash flows that would occur if variable interest rates rise above the strike rate of the caps and swaps, taking into consideration the cash payments related to financing the premium of the interest rate caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. See Note 9, “Debt,” for additional information regarding interest rate caps and swaps.
All unrealized gains and losses on trading securities are included in net income, while unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income. There were no other-than-temporary gains or losses on available-for-sale debt securities and there were no significant realized or unrealized gains or losses on any of our securities for any of the periods presented.
Level 3 instruments consist of contingent obligations related to companies we have acquired with remaining maximum payouts totaling $11.0 million. These obligations are contingent upon meeting certain quantitative or qualitative performance metrics
through 2019, and are included in other current liabilities on our balance sheet. The fair values of the obligations are determined based on an income approach, using our expectations of the future expected earnings of the acquired entities. We assess the fair value of these obligations each reporting period with any changes reflected as gains or losses in selling, general and administrative expenses in the consolidated statements of income. During the three months and nine months ended September 30, 2019, we recorded additional expense of $0.6 million as a result of changes to the fair value of these obligations.
4. Other Current Assets
Other current assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
|
December 31, 2018
|
Prepaid expenses
|
|
$
|
82.5
|
|
|
$
|
77.1
|
|
Other investments
|
|
48.6
|
|
|
23.6
|
|
Income taxes receivable
|
|
26.2
|
|
|
5.5
|
|
Other receivable
|
|
15.0
|
|
|
14.3
|
|
Marketable securities
|
|
3.0
|
|
|
2.9
|
|
Contract assets
|
|
2.9
|
|
|
1.0
|
|
Deferred financing fees
|
|
0.6
|
|
|
0.6
|
|
Other
|
|
19.2
|
|
|
11.5
|
|
Total other current assets
|
|
$
|
198.0
|
|
|
$
|
136.5
|
|
Other investments include non-negotiable certificates of deposit that are recorded at their carrying value. Other receivables include amounts recoverable under insurance policies for certain litigation costs. See Note 12, “Revenue,” for a further discussion about our contract assets.
5. Other Assets
Other assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
|
December 31, 2018
|
Investments in nonconsolidated affiliates
|
|
$
|
130.8
|
|
|
$
|
81.9
|
|
Right-of-use lease assets
|
|
74.4
|
|
|
—
|
|
Marketable securities
|
|
12.1
|
|
|
12.4
|
|
Deposits
|
|
4.1
|
|
|
3.8
|
|
Notes receivable from affiliated companies
|
|
4.0
|
|
|
1.0
|
|
Deferred financing fees
|
|
1.2
|
|
|
1.6
|
|
Other investments
|
|
0.2
|
|
|
12.4
|
|
Interest rate caps
|
|
0.1
|
|
|
16.5
|
|
Other
|
|
7.6
|
|
|
6.7
|
|
Total other assets
|
|
$
|
234.5
|
|
|
$
|
136.3
|
|
See Note 6, “Investments in Nonconsolidated Affiliates,” for additional information about our investments in nonconsolidated affiliates. On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). As a result, we have recorded an ROU lease asset, which represent the fair value of the right to use our long-term leased assets over their lease terms. See Note 10, “Leases,” for additional information about our right-of-use lease assets. See Note 9, “Debt,” for additional information about our interest rate caps. Other investments include non-negotiable certificates of deposit that are recorded at their carrying value.
6. Investments in Nonconsolidated Affiliates
Investments in nonconsolidated affiliates represent our investment in nonconsolidated domestic and foreign entities. These entities are in businesses similar to ours, such as credit reporting, credit-scoring, decisioning services and credit-monitoring services.
We use the equity method to account for nonmarketable investments in affiliates where we are able to exercise significant influence. For these investments, we adjust the carrying value for our proportionate share of the affiliates’ earnings, losses and distributions, any impairments, as well as for purchases and sales of our ownership interest.
We account for nonmarketable investments in equity securities in which we are not able to exercise significant influence, our “Cost Method Investments”, at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. For these investments, we adjust the carrying value for any purchases or sales of our ownership interests. We record any dividends received from these investments as other income in non-operating income and expense.
During 2019, we recorded a $31.2 million gain on a Cost Method investment resulting from an observable price change for a similar investment of the same issuer, partially offset by $8.6 million of impairments of other Cost Method investments. The net gain was included in other income and expense in the consolidated statements of income. There were no material gain or loss adjustments to our investments in nonconsolidated affiliates during the three and nine months ended September 30, 2018.
Investments in nonconsolidated affiliates consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
|
December 31, 2018
|
Equity method investments
|
|
$
|
45.6
|
|
|
$
|
44.0
|
|
Cost Method Investments
|
|
85.2
|
|
|
37.9
|
|
Total investments in nonconsolidated affiliates
|
|
$
|
130.8
|
|
|
$
|
81.9
|
|
These balances are included in other assets in the consolidated balance sheets. The increase in cost method investments is due to the net gains on certain previous Consumer Interactive and U.S. Markets Cost Method investments discussed above that we recorded in other income and expense, a new investment made by our U.S. Markets segment, and incremental investments in one of our Consumer Interactive and one of our International segment investments.
Earnings from equity method investments, which are included in non-operating income and expense, and dividends received from equity method investments consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Earnings from equity method investments
|
|
3.1
|
|
|
3.2
|
|
|
10.2
|
|
|
8.4
|
|
Dividends received from equity method investments
|
|
0.5
|
|
|
0.3
|
|
|
9.0
|
|
|
5.3
|
|
Dividends received from Cost Method Investments for the three and nine months ended September 30, 2019, was $0.3 million and $1.0 million in each respective period, and for the three and nine months ended September 30, 2018, was $0.1 million and $0.8 million, in each respective period.
7. Other Current Liabilities
Other current liabilities consisted of the following
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
|
December 31, 2018
|
Accrued payroll
|
|
$
|
111.4
|
|
|
$
|
102.5
|
|
Deferred revenue
|
|
92.0
|
|
|
73.1
|
|
Accrued legal and regulatory
|
|
35.1
|
|
|
33.2
|
|
Income taxes payable
|
|
29.9
|
|
|
17.0
|
|
Accrued employee benefits
|
|
27.4
|
|
|
35.1
|
|
Operating lease liabilities
|
|
20.3
|
|
|
—
|
|
Contingent consideration
|
|
9.1
|
|
|
1.2
|
|
Accrued interest
|
|
3.5
|
|
|
2.5
|
|
Other
|
|
31.0
|
|
|
19.5
|
|
Total other current liabilities
|
|
$
|
359.7
|
|
|
$
|
284.1
|
|
On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). As a result, we have recorded the discounted present value of all future lease payments over the terms of the corresponding leases as a liability for our long-term leases. See Note 8, “Other Liabilities” for the long-term portion of this liability and Note 10, “Leases,” for additional information about our leases. See Note 3, “Fair Value,” for additional information related to our contingent consideration obligations.
8. Other Liabilities
Other liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
|
December 31, 2018
|
Operating lease liabilities
|
|
$
|
60.1
|
|
|
$
|
—
|
|
Interest rate swap
|
|
54.5
|
|
|
10.7
|
|
Unrecognized tax benefits
|
|
33.3
|
|
|
19.6
|
|
Deferred revenue
|
|
17.1
|
|
|
0.9
|
|
Retirement benefits
|
|
10.6
|
|
|
10.2
|
|
Income tax payable
|
|
—
|
|
|
5.0
|
|
Contingent consideration
|
|
—
|
|
|
0.1
|
|
Other
|
|
0.8
|
|
|
8.2
|
|
Total other liabilities
|
|
$
|
176.4
|
|
|
$
|
54.7
|
|
On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842). As a result, we have recorded the discounted present value of all future lease payments over the terms of the corresponding leases as a liability for our long-term leases. See Note 7, “Other Current Liabilities” for the current portion of this liability and Note 10, “Leases” for additional information about our leases. See Note 9, “Debt,” for additional information about our interest rate swap.
9. Debt
Debt outstanding consisted of the following:
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
|
December 31, 2018
|
Senior Secured Term Loan B-3, payable in quarterly installments through April 9, 2023, with periodic variable interest at LIBOR or alternate base rate, plus applicable margin (4.04% at September 30, 2019, and 4.52% at December 31, 2018), net of original issue discount and deferred financing fees of $3.4 million and $3.2 million, respectively, at September 30, 2019, and original issue discount and deferred financing fees of $5.0 million and $4.6 million, respectively, at December 31, 2018
|
|
$
|
1,615.1
|
|
|
$
|
1,892.0
|
|
Senior Secured Term Loan A-2, payable in quarterly installments through August 9, 2022, with periodic variable interest at LIBOR or alternate base rate, plus applicable margin (3.54% at September 30, 2019, and 4.27% at December 31, 2018), net of original issue discount and deferred financing fees of $2.2 million and $2.9 million, respectively, at September 30, 2019, and original issue discount and deferred financing fees of $2.8 million and $3.6 million, respectively, at December 31, 2018
|
|
1,144.9
|
|
|
1,166.0
|
|
Senior Secured Term Loan B-4, payable in quarterly installments through June 19, 2025, with periodic variable interest at LIBOR or alternate base rate, plus applicable margin (4.04% at September 30, 2019, and 4.52% at December 31, 2018), net of original issue discount and deferred financing fees of $2.1 million and $9.6 million, respectively, at September 30, 2019, and original issue discount and deferred financing fees of $2.3 million and $10.7 million, respectively, at December 31, 2018
|
|
975.8
|
|
|
982.0
|
|
Senior Secured Revolving Line of Credit
|
|
—
|
|
|
—
|
|
Other notes payable
|
|
3.6
|
|
|
7.3
|
|
Finance leases
|
|
0.5
|
|
|
0.8
|
|
Total debt
|
|
3,739.9
|
|
|
4,048.1
|
|
Less short-term debt and current portion of long-term debt
|
|
(93.9
|
)
|
|
(71.7
|
)
|
Total long-term debt
|
|
$
|
3,646.0
|
|
|
$
|
3,976.4
|
|
Excluding any potential additional principal payments which may become due on the senior secured credit facility based on excess cash flows of the prior year, scheduled future maturities of total debt at September 30, 2019, were as follows:
|
|
|
|
|
|
(in millions)
|
|
September 30,
2019
|
2019
|
|
$
|
22.7
|
|
2020
|
|
93.7
|
|
2021
|
|
89.9
|
|
2022
|
|
1,044.9
|
|
2023
|
|
1,567.1
|
|
Thereafter
|
|
945.0
|
|
Unamortized original issue discounts and deferred financing fees
|
|
(23.4
|
)
|
Total debt
|
|
$
|
3,739.9
|
|
Senior Secured Credit Facility
For the three and nine months ended September 30, 2019, we prepaid $165.0 million and $265.0 million of our outstanding Senior Secured Term Loan B-3 in each respective period. As a result of these prepayments, we expensed $0.7 million and $1.5 million of our unamortized original issue discount and deferred financing fees in each respective period.
As of September 30, 2019, we had no outstanding balance under the Senior Secured Revolving Line of Credit and $0.1 million of outstanding letters of credit, and could have borrowed up to the remaining $299.9 million available.
As of September 30, 2019, we were in compliance with all debt covenants.
On December 17, 2018, we entered into interest rate swap agreements with various counterparties that effectively fixed our LIBOR exposure on a portion of our existing senior secured term loans or similar replacement debt between a range of 2.647% to 2.706%. We have designated these swap agreements as cash flow hedges. The current aggregate notional amount under these agreements is $1,435.0 million, decreasing each quarter until the second agreement terminates on December 30, 2022.
On December 18, 2015, we entered into interest rate cap agreements with various counterparties that effectively cap our LIBOR exposure on a portion of our existing senior secured term loans or similar replacement debt at 0.75% beginning June 30, 2016. We have designated these cap agreements as cash flow hedges. The current aggregate notional amount under these agreements is $1,428.1 million and will decrease each quarter until the agreement terminates on June 30, 2020. In July 2016, we began to pay the various counterparties a fixed rate on the outstanding notional amounts of between 0.98% and 0.994% and receive payments to the extent LIBOR exceeds 0.75%.
Based on how the fair value of interest rate caps are determined, the earlier interest periods have lower fair values at inception than the later interest periods, resulting in less interest expense being recognized in the earlier periods compared with the later periods. Any payments we receive to the extent LIBOR exceeds 0.75% is also reclassified from other comprehensive income to interest expense in the period received.
In accordance with ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, the new guidance eliminates the requirement to separately measure and report hedge ineffectiveness. For our cash flow hedges, this means that the entire change in the fair value of the hedging instrument included in our assessment of hedge effectiveness is now recorded in other comprehensive income, and reclassified to interest expense when the corresponding hedged debt affects earnings.
The change in the fair value of the swaps resulted in an unrealized loss of $5.6 million ($4.5 million, net of tax) and $43.7 million ($33.0 million, net of tax) for the three and nine months ended September 30, 2019, respectively, recorded in other comprehensive income. Interest expense on the swaps in the three and nine months ended September 30, 2019 was expense of $1.5 million ($1.3 million, net of tax) and $2.6 million ($2.0 million, net of tax), respectively. We expect to recognize a loss of approximately $15.0 million as interest expense due to our expectation that LIBOR will exceed the fixed rates of interest over the next twelve months.
The change in the fair value of the caps resulted in an unrealized loss of $0.4 million ($0.4 million, net of tax) and $12.2 million ($9.2 million, net of tax) for the three and nine months ended September 30, 2019, respectively, recorded in other comprehensive income. The change in the fair value of the caps resulted in an unrealized gain of $1.5 million ($1.1 million, net of tax) and $15.6 million ($11.7 million, net of tax) for the three and nine months ended September 30, 2018, respectively, recorded in other comprehensive income. Interest expense reclassified from other comprehensive income to interest expense related to the fair value of the portion of the caps expiring in the three and nine months ended September 30, 2019, was income of $0.3 million ($0.2 million, net of tax) and $3.2 million ($2.5 million, net of tax), respectively. Interest expense reclassified from other comprehensive income to interest expense related to the fair value of the portion of the caps expiring in the three and nine months ended September 30, 2018, was income of $0.8 million ($0.6 million, net of tax) and $1.1 million ($0.8 million, net of tax), respectively. We expect to reclassify a loss of approximately $6.6 million from other comprehensive income to interest expense related to the fair value of the portion of the caps expiring and payments received to the extent LIBOR exceeds 0.75% in the next twelve months.
Fair Value of Debt
As of September 30, 2019, the fair value of our variable-rate Senior Secured Term Loan A-2, excluding original issue discounts and deferred fees, approximates the carrying value. As of September 30, 2019, the fair value of our Senior Secured Term Loan B-3 and B-4, excluding original issue discounts and deferred fees, was $1,627.7 million and $991.2 million, respectively. The fair values of our variable-rate term loans are determined using Level 2 inputs, based on quoted market prices for the publicly traded instruments.
10. Leases
Upon adoption of Topic 842 on January 1, 2019, our lease obligations consisted of operating leases for office space and data centers and a small number of finance leases for equipment. Our operating leases have remaining lease terms of up to 13.0 years, with a weighted-average remaining lease term of 5.6 years. We have options to extend many of our operating leases for an additional period of time and options to terminate early several of our operating leases. The lease term consists of the non-cancelable period of the lease, periods covered by options to extend the lease if we are reasonably certain to exercise the option, periods covered by an option to terminate the lease if we are reasonably certain not to exercise the option, and periods covered by an option to extend or not to terminate the lease in which the exercise of the option is controlled by the lessor.
On the commencement date of an operating lease, we record an ROU asset, which represents our right to use or control the use of a specified asset for the lease term, and an offsetting lease liability, which represents our obligation to make lease payments
arising from the lease, based on the present value of the net fixed future lease payments due over the initial lease term. We use an estimate of our incremental borrowing rate as the discount rate to determine the present value of the net fixed future lease payments, except for leases where the interest rate implicit in the lease is readily determinable. Upon adoption and as of September 30, 2019, the weighted-average discount rate used to calculate the present value of the fixed future lease payments was 5.7%.
Both Topic 842 and the predecessor lease accounting guidance under ASU 840 require us to expense the net fixed payments of operating leases on a straight-line basis over the lease term. Topic 842 requires us to include any built up deferred or prepaid rent balance resulting from the difference between the straight-line expense and the cash payments as a component of our ROU asset. Also included in our ROU asset is any monthly prepayment of rent. Our rent expense is typically due on the first day of each month, and we typically pay rent several weeks before it is due, so at any given month end, we will have a prepaid rent balance that is included as a component of our ROU asset.
Most of our operating leases contain variable non-lease components consisting of maintenance, insurance, utilities, taxes and similar costs of the office and data center space we occupy. We have adopted the practical expedient to not separate these non-lease components from the lease components and instead account for them as a single lease component for all of our leases. We straight-line the net fixed payments of operating leases over the lease term and expense the variable lease payments in the period in which we incur the obligation to pay such variable amounts. These variable lease payments are not included in our calculation of our ROU assets or lease liabilities.
We have no significant short-term leases, finance leases, or subleases.
ROU assets are included in Other Assets, and operating lease liabilities are included in Other Current Liabilities and Other Liabilities in our Consolidated Balance Sheet. Finance lease assets are included in Property, Plant and Equipment, and finance lease liabilities are included in the Current Portion of Long-term Debt and Long-term Debt in our Consolidated Balance Sheet. See Note 7, “Other Current Liabilities,” Note 8,” Other Liabilities,” and Note 9, “Debt,” for additional information about these items.
Our operating lease costs, including fixed, variable and short-term lease costs, were $9.4 million and $8.8 million for the three months ended September 30, 2019 and 2018, respectively and $26.1 million and $21.1 million for the nine months ended September 30, 2019 and 2018. Cash paid for operating leases are included in operating cash flows, and were $9.4 million and $9.1 million for the three months ended September 30, 2019 and 2018, respectively and $26.9 million and $21.4 million for the nine months ended September 30, 2019 and 2018. Our finance lease amortization expense, interest expense, and cash paid were not significant for the reported periods.
We have adopted the package of transition practical expedients which allows us to not reassess our existing lease classifications, initial direct costs, and whether or not an existing contract contains a lease.
We have elected to use the portfolio approach to assess the discount rate we use to calculate the present value of our future lease payments. Using this approach does not result in a materially different outcome compared with applying separate discount rates to each lease in our portfolio.
We have adopted an accounting policy to recognize rent expense for short-term leases, those leases with initial lease terms of twelve months or less, on a straight-line basis in our income statement.
Future fixed payments for non-cancelable operating leases and finance leases in effect as of September 30, 2019, are payable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
2019
|
|
$
|
5.4
|
|
|
$
|
0.1
|
|
|
$
|
5.5
|
|
2020
|
|
24.1
|
|
|
0.3
|
|
|
24.4
|
|
2021
|
|
19.4
|
|
|
0.1
|
|
|
19.5
|
|
2022
|
|
11.7
|
|
|
—
|
|
|
11.7
|
|
2023
|
|
9.8
|
|
|
—
|
|
|
9.8
|
|
Thereafter
|
|
23.7
|
|
|
—
|
|
|
23.7
|
|
Less imputed interest
|
|
(13.7
|
)
|
|
—
|
|
|
(13.7
|
)
|
Totals
|
|
$
|
80.4
|
|
|
$
|
0.5
|
|
|
$
|
80.9
|
|
11. Stockholders’ Equity
Common Stock Dividends
On February 13, 2018, we announced that our board of directors has approved a dividend policy pursuant to which we intend to pay quarterly cash dividends on our common stock. On February 21, 2019, the board of directors declared a dividend of $0.075 per share to holders of record as of the close of business on March 7, 2019. The total dividend declared was $14.3 million, of which $14.0 million was paid on March 22, 2019, with the remainder due as dividend equivalents to employees who hold restricted stock units when and if those units vest. On May 9, 2019, the board of directors declared a dividend of $0.075 per share to holders of record as of the close of business on May 23, 2019. The total dividend declared was $14.3 million, of which $14.1 million was paid on June 7, 2019, with the remainder due as dividend equivalents to employees who hold restricted stock units when and if those units vest. On August 8, 2019, the board of directors declared a dividend of $0.075 per share to holders of record as of the close of business on August 22, 2019. The total dividend declared was $14.4 million, of which $14.1 million was paid on September 6, 2019, with the remainder due as dividend equivalents to employees who hold restricted stock units when and if those units vest.
Treasury Stock
During the first quarter of 2019, 1.6 million outstanding employee restricted stock units vested and became taxable to the employees. The employees used 0.6 million shares of the vested stock to satisfy their payroll tax withholding obligations in a net share settlement arrangement whereby the employees received 1.0 million of the shares and gave TransUnion the remaining 0.6 million shares that we have recorded as treasury stock. We remitted cash equivalent to the $36.8 million vest date value of the treasury stock to the respective governmental agencies in settlement of the employee withholding tax obligations. On occasion, as other stock units vest or stock options are exercised, employees use shares of stock to satisfy their payroll tax withholding obligations in a net settlement arrangement and we remit the equivalent value of those shares to the respective governmental agencies.
Preferred Stock
We have 100.0 million shares of preferred stock authorized. No preferred stock had been issued or was outstanding as of September 30, 2019.
12. Revenue
All of our revenue is derived from contracts with customers and is reported as revenue in the Consolidated Statement of Income. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under ASC Topic 606. We have contracts with two general groups of performance obligations: those that require us to stand ready to provide goods and services to a customer to use as and when requested (“Stand Ready Performance Obligations”) and those that do not require us to stand ready (“Other Performance Obligations”). Our Stand Ready Performance Obligations include obligations to stand ready to provide data, process transactions, provide access to our databases, software-as-a-service and direct-to-consumer products, provide rights to use our intellectual property and other services. Our Other Performance Obligations include the sale of certain batch data sets and various professional and other services.
Most of our Stand Ready Performance Obligations consist of a series of distinct goods and services that are substantially the same and have the same monthly pattern of transfer to our customers. We consider each month of service in this time series to be a distinct performance obligation and, accordingly, recognize revenue over time. For a majority of these Stand Ready Performance Obligations the total contractual price is variable because our obligation is to process an unknown quantity of transactions, as and when requested by our customers, over the contract period. We allocate the variable price to each month of service using the time-series concept and recognize revenue based on the most likely amount of consideration to which we will be entitled, which is generally the amount we have the right to invoice. This monthly amount can be based on the actual volume of units delivered or any guaranteed minimum, if higher. Occasionally we have contracts where the amount we will be entitled to for the transactions processed is uncertain, in which case we estimate the revenue based on what we consider to be the most likely amount of consideration we will be entitled to, and true-up any estimates as facts and circumstances evolve.
Certain Stand Ready Performance Obligation fees result from contingent fee based contracts that require us to provide services before we have an enforceable right to payment. For these performance obligations, we recognize revenue at the point in time the contingency is met and we have an enforceable contract and right to payment.
Certain of our Stand Ready Performance Obligation contracts include non-recurring, non-refundable up-front fees to cover our costs of setting up files or configuring systems to enable our customers to access our services. These fees are not fees for distinct performance obligations. When these fees are insignificant in relation to the total contract value we recognize such fees as revenue when invoiced. If such fees are significant we recognize them as revenue over the duration of the contract, the period of time for
which we have contractually enforceable rights and obligations. For contracts where such fees are for a distinct performance obligation, we recognize revenue as or when the performance obligation is satisfied.
For all contracts that include a Stand Ready Performance Obligation with variable pricing, we are unable to estimate the variable price attributable to future performance obligations because the number of units to be purchased is not known. As a result, we use the exception available to forgo disclosures about revenue attributable to the future performance obligations where we recognize revenue using the time-series concept as discussed above, including those qualifying for the right to invoice practical expedient. We also use the exception available to forgo disclosures about revenue attributable to contracts with expected durations of one year or less.
Certain of our Other Performance Obligations, including certain batch data sets and certain professional and other services, are delivered at a point in time. Accordingly, we recognize revenue upon delivery, once we have satisfied that obligation. For certain Other Performance Obligations, including certain professional and other services, we recognize revenue over time, based on an estimate of progress towards completion of that obligation.
In certain circumstances we apply the guidance in ASC Topic 606 to a portfolio of contracts with similar characteristics. We use estimates and assumptions when accounting for a portfolio that reflect the size and composition of the portfolio of contracts.
Our contracts generally include standard commercial payment terms generally acceptable in each region, and do not include financing with extended payment terms. We have no significant obligations for refunds, warranties, or similar obligations. Our revenue does not include taxes collected from our customers.
Accounts receivable are shown separately on our balance sheet. Contract assets and liabilities result due to the timing of revenue recognition, billings and cash collections. Contract assets include our right to payment for goods and services already transferred to a customer when the right to payment is conditional on something other than the passage of time, for example contracts where we recognize revenue over time but do not have a contractual right to payment until we complete the contract. Contract assets are included in our other current assets and are not material as of September 30, 2019. Contract liabilities include current and long-term deferred revenue which are included in other current liabilities and other liabilities. We expect to recognize the December 31, 2018 current deferred revenue as revenue during 2019. Our long-term deferred revenue is not significant, and is expected to be recognized in approximately 2 years.
For additional disclosures about the disaggregation of our revenue see Note 15, “Reportable Segments”.
13. Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the reported period. Diluted earnings per share reflects the effect of the increase in shares outstanding determined by using the treasury stock method for awards issued under our incentive stock plans.
As of September 30, 2019 and 2018, there were 1.1 million contingently-issuable stock-based awards outstanding that were excluded from the diluted earnings per share calculation because the contingencies had not been met.
Basic and diluted weighted average shares outstanding and earnings per share were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended September 30,
|
(in millions, except per share data)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Income from continuing operations
|
|
$
|
88.3
|
|
|
$
|
50.8
|
|
|
$
|
270.2
|
|
|
$
|
183.5
|
|
Less: loss (income) from continuing operations attributable to noncontrolling interests
|
|
3.4
|
|
|
(3.1
|
)
|
|
(1.5
|
)
|
|
(7.6
|
)
|
Income from continuing operations attributable to TransUnion
|
|
91.7
|
|
|
47.7
|
|
|
268.7
|
|
|
175.9
|
|
Discontinued operations, net of tax
|
|
—
|
|
|
(1.4
|
)
|
|
(4.6
|
)
|
|
(1.4
|
)
|
Net income attributable to TransUnion
|
|
$
|
91.7
|
|
|
$
|
46.3
|
|
|
$
|
264.1
|
|
|
$
|
174.4
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share from:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to TransUnion
|
|
$
|
0.49
|
|
|
$
|
0.26
|
|
|
$
|
1.43
|
|
|
$
|
0.95
|
|
Discontinued operations, net of tax
|
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
Net Income attributable to TransUnion
|
|
$
|
0.49
|
|
|
$
|
0.25
|
|
|
$
|
1.41
|
|
|
$
|
0.95
|
|
Diluted earnings per common share from:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to TransUnion
|
|
$
|
0.48
|
|
|
$
|
0.25
|
|
|
$
|
1.40
|
|
|
$
|
0.92
|
|
Discontinued operations, net of tax
|
|
—
|
|
|
(0.01
|
)
|
|
(0.02
|
)
|
|
(0.01
|
)
|
Net Income attributable to TransUnion
|
|
$
|
0.48
|
|
|
$
|
0.24
|
|
|
$
|
1.38
|
|
|
$
|
0.91
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
188.2
|
|
|
185.1
|
|
|
187.5
|
|
|
184.4
|
|
Diluted
|
|
192.0
|
|
|
191.2
|
|
|
191.6
|
|
|
190.8
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive stock-based awards outstanding
|
|
0.1
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
14. Income Taxes
For the three months ended September 30, 2019, we reported an effective tax rate of 21.6%, which was higher than the 21.0% U.S. federal statutory rate due primarily to $17.0 million of various foreign, federal and state tax impacts, partially offset by $11.7 million in state tax benefits and $4.6 million of excess tax benefits on stock-based compensation.
For the nine months ended September 30, 2019, we reported an effective tax rate of 19.2%, which was lower than the 21.0% U.S. federal statutory rate due primarily to $31.9 million of excess tax benefits on stock-based compensation and $11.2 million in state tax benefits, partially offset by $37.1 million of additional foreign, federal and state tax expenses.
For the three months ended September 30, 2018, we reported an effective tax rate of 36.0%, which was higher than the 21.0% U.S. federal statutory rate due primarily to $19.5 million of tax expense related to the impact of the Tax Cuts and Jobs Act of 2017 (the “Act”), foreign rate differential, unrecognized tax benefits, and non-deductible acquisition and other costs, partially offset by $7.6 million of excess tax benefits on stock-based compensation.
For the nine months ended September 30, 2018, we reported an effective tax rate of 28.2%, which was higher than the 21.0% U.S. federal statutory rate due primarily to $44.1 million of tax expense related to the impact of the Act, foreign rate differential, unrecognized tax benefits and non-deductible acquisition and other costs, partially offset by $25.7 million of excess tax benefits on stock-based compensation.
The total amount of unrecognized tax benefits was $33.3 million as of September 30, 2019, and $19.6 million as of December 31, 2018. The amounts that would affect the effective tax rate if recognized are $12.8 million and $12.3 million, respectively. There were no significant liabilities for accrued interest or penalties on income taxes as of September 30, 2019 or December 31, 2018. We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. Generally, tax years 2010 and forward remain open for examination in some foreign jurisdictions, 2011 and forward in some state jurisdictions, and tax years 2012 and forward remain open for examination for U.S. federal income tax purposes.
15. Reportable Segments
Over the past few years, we have completed a significant number of acquisitions that have transformed our business. We have also developed a significant number of new product offerings that have further diversified our portfolio of businesses. As a result of the evolution of our business, we have changed the disaggregated revenue and our measure of segment profit (Adjusted EBITDA) information that we provide to our chief operating decision makers (our “CODM”) to better align with how we manage the business. Accordingly, our disclosures around the disaggregation of our revenue and the measure of segment profit have been recast for all periods presented in this Quarterly Report on Form 10-Q to conform to the information used by our CODM. We have not changed our reportable segments and these changes do not impact our consolidated results.
We have three reportable segments, U.S. Markets (formerly U.S. Information Services), International, and Consumer Interactive, and the Corporate unit, which provides support services to each of the segments. Our CODM uses the profit measure of Adjusted EBITDA, on both a consolidated and segment basis, to allocate resources and assess performance of our businesses. We use Adjusted EBITDA as our profit measure because it eliminates the impact of certain items that we do not consider indicative of operating performance, which is useful to compare operating results between periods. Our board of directors and executive management team also use Adjusted EBITDA as a compensation measure for both segment and corporate management under our incentive compensation plans. Adjusted EBITDA is also a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours.
We define Adjusted EBITDA as net income (loss) attributable to each segment plus (less) loss (income) from discontinued operations, plus net interest expense, plus (less) provision (benefit) for income taxes, plus depreciation and amortization, plus (less) certain deferred revenue acquisition revenue-related adjustments, plus stock-based compensation, plus mergers, acquisitions, divestitures and business optimization-related expenses including Callcredit integration-related expenses, plus (less) certain other expenses (income).
The segment financial information below aligns with how we report information to our CODM to assess operating performance and how we manage the business. The accounting policies of the segments are the same as described in Note 1, “Significant Accounting and Reporting Policies” and Note 12, “Revenue.”
In early July 2019, we determined that TransUnion Limited, a Hong Kong entity that is included in our International segment and in which we hold a 56.25% interest, was the victim of criminal fraud (the “Fraud Incident”). The Fraud Incident involved employee impersonation and fraudulent requests targeting TransUnion Limited, which resulted in a series of fraudulently-induced
unauthorized wire transfers totaling $17.8 million in early July 2019 that is included in other income and (expense), net, on our Consolidated Statements of Income. In addition, through September 30, 2019, we have incurred $1.8 million of administrative expenses investigating the Fraud Incident and enhancing our controls that is included in selling, general and administrative expenses, for a total of $19.7 million that is included in income before income taxes. The tax benefit of these expenses was $3.3 million, for a net after tax loss of $16.4 million, of which $7.1 million is attributable to the non-controlling interest and $9.3 million is attributable to Transunion. There was no impact on Adjusted EBITDA as the net impact of the Fraud Incident was added back to Adjusted EBITDA as presented in the tables below.
The following is a more detailed description of our three reportable segments and the Corporate unit, which provides support services to each segment:
U.S. Markets
U.S. Markets provides consumer reports, risk scores, analytical services and decisioning capabilities to businesses. These businesses use our services to acquire new customers, assess consumers’ ability to pay for services, identify cross-selling opportunities, measure and manage debt portfolio risk, collect debt, verify consumer identities and investigate potential fraud. The core capabilities and delivery methods in our U.S. Markets segment allow us to serve a broad set of customers across industries. We report disaggregated revenue of our U.S. Markets segment for the following verticals:
|
|
•
|
Financial Services: The financial services vertical consists of our consumer lending, mortgage, auto, and cards and payments lines of business. Our financial services clients consist of most banks, credit unions, finance companies, auto lenders, mortgage lenders, online-only lenders (FinTech), and other consumer lenders in the United States. We also distribute our solutions through most major resellers, secondary market players and sales agents. Beyond traditional lenders, we work with a variety of credit arrangers, such as auto dealers and peer-to-peer lenders. We provide solutions across every aspect of the lending lifecycle; customer acquisition and engagement, fraud and ID management, retention and recovery. Our products are focused on mitigating risk and include credit reporting, credit marketing, analytics and consulting, identity verification and authentication and debt recovery solutions.
|
|
|
•
|
Emerging Verticals: Emerging verticals include healthcare, insurance, collections, property management, public sector and other diversified markets. Our solutions in these verticals are similar to the solutions in our financial services vertical and also address the entire customer lifecycle. We offer onboarding and retention solutions, transaction processing products, scoring products, marketing solutions, analytics and consulting, identity management and fraud solutions, and revenue optimization and collections solutions.
|
International
The International segment provides services similar to our U.S. Markets segment to businesses in select regions outside the United States. Depending on the maturity of the credit economy in each country, services may include credit reports, analytics services, decisioning capabilities, and other value-added risk management services. In addition, we have insurance, business and automotive databases in select geographies. These services are offered to customers in a number of industries including financial services, insurance, automotive, collections, and communications, and are delivered through both direct and indirect channels. The International segment also provides consumer services similar to those offered by our Consumer Interactive segment that help consumers proactively manage their personal finances.
We report disaggregated revenue of our International segment for the following regions: Canada, Latin America, the United Kingdom, Africa, India and Asia Pacific.
Consumer Interactive
Consumer Interactive offers solutions that help consumers manage their personal finances and take precautions against identity theft. Services in this segment include credit reports and scores, credit monitoring, fraud protection and resolution, and financial management. Our products are provided through user-friendly online and mobile interfaces and are supported by educational content and customer support. Our Consumer Interactive segment serves consumers through both direct and indirect channels.
Corporate
In addition, Corporate provides support services for each of the segments, holds investments, and conducts enterprise functions. Certain costs incurred in Corporate that are not directly attributable to one or more of the segments remain in Corporate. These costs are typically enterprise-level costs and are primarily administrative in nature.
Selected segment financial information and disaggregated revenue consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue:
|
|
|
|
|
|
|
|
|
U.S. Markets:
|
|
|
|
|
|
|
|
|
Financial Services
|
|
$
|
225.3
|
|
|
$
|
199.6
|
|
|
$
|
627.4
|
|
|
$
|
574.8
|
|
Emerging Verticals
|
|
194.9
|
|
|
175.1
|
|
|
567.5
|
|
|
500.4
|
|
Total U.S. Markets
|
|
420.2
|
|
|
374.8
|
|
|
1,194.9
|
|
|
1,075.3
|
|
|
|
|
|
|
|
|
|
|
International:
|
|
|
|
|
|
|
|
|
Canada
|
|
27.3
|
|
|
24.6
|
|
|
75.7
|
|
|
70.5
|
|
Latin America
|
|
26.4
|
|
|
24.6
|
|
|
77.9
|
|
|
75.6
|
|
United Kingdom
|
|
47.6
|
|
|
28.2
|
|
|
136.4
|
|
|
35.9
|
|
Africa
|
|
15.7
|
|
|
15.3
|
|
|
44.7
|
|
|
47.9
|
|
India
|
|
27.4
|
|
|
20.6
|
|
|
80.0
|
|
|
59.7
|
|
Asia Pacific
|
|
15.6
|
|
|
15.4
|
|
|
42.4
|
|
|
41.3
|
|
Total International
|
|
160.0
|
|
|
128.7
|
|
|
457.1
|
|
|
330.9
|
|
|
|
|
|
|
|
|
|
|
Total Consumer Interactive
|
|
127.8
|
|
|
119.1
|
|
|
374.7
|
|
|
354.6
|
|
|
|
|
|
|
|
|
|
|
Total revenue, gross
|
|
$
|
708.0
|
|
|
$
|
622.6
|
|
|
$
|
2,026.7
|
|
|
$
|
1,760.8
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenue eliminations:
|
|
|
|
|
|
|
|
|
U.S. Markets
|
|
$
|
(17.1
|
)
|
|
$
|
(17.5
|
)
|
|
$
|
(51.8
|
)
|
|
$
|
(52.4
|
)
|
International
|
|
(1.3
|
)
|
|
(1.3
|
)
|
|
(3.8
|
)
|
|
(3.9
|
)
|
Consumer Interactive
|
|
(0.2
|
)
|
|
(0.2
|
)
|
|
(0.6
|
)
|
|
(0.5
|
)
|
Total intersegment eliminations
|
|
(18.7
|
)
|
|
(19.0
|
)
|
|
(56.2
|
)
|
|
(56.8
|
)
|
Total revenue as reported
|
|
$
|
689.3
|
|
|
$
|
603.6
|
|
|
$
|
1,970.5
|
|
|
$
|
1,704.1
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
U.S. Markets
|
|
$
|
181.0
|
|
|
$
|
153.0
|
|
|
$
|
498.5
|
|
|
$
|
434.3
|
|
International
|
|
64.0
|
|
|
57.3
|
|
|
188.6
|
|
|
131.5
|
|
Consumer Interactive
|
|
66.5
|
|
|
60.3
|
|
|
185.8
|
|
|
175.2
|
|
Corporate
|
|
(30.7
|
)
|
|
(25.7
|
)
|
|
(89.4
|
)
|
|
(72.8
|
)
|
Consolidated Adjusted EBITDA
|
|
$
|
280.9
|
|
|
$
|
244.9
|
|
|
$
|
783.5
|
|
|
$
|
668.1
|
|
As a result of displaying amounts in millions, rounding differences may exist in the table above.
A reconciliation of net income attributable to TransUnion to Adjusted EBITDA for the periods presented is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended September 30,
|
(in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Reconciliation of net income attributable to TransUnion to Adjusted EBITDA:
|
|
|
|
|
|
|
|
|
Net income attributable to TransUnion
|
|
$
|
91.7
|
|
|
$
|
46.3
|
|
|
$
|
264.1
|
|
|
$
|
174.4
|
|
Discontinued operations
|
|
—
|
|
|
1.4
|
|
|
4.6
|
|
|
1.4
|
|
Net income from continuing operations attributable to TransUnion
|
|
91.7
|
|
|
47.7
|
|
|
268.7
|
|
|
175.9
|
|
Net interest expense
|
|
41.3
|
|
|
42.6
|
|
|
128.2
|
|
|
89.0
|
|
Provision for income taxes
|
|
24.2
|
|
|
28.6
|
|
|
64.2
|
|
|
72.1
|
|
Depreciation and amortization
|
|
88.7
|
|
|
84.2
|
|
|
271.4
|
|
|
218.8
|
|
EBITDA
|
|
246.0
|
|
|
203.2
|
|
|
732.5
|
|
|
555.8
|
|
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
|
Acquisition-related revenue adjustments(1)
|
|
—
|
|
|
17.7
|
|
|
5.9
|
|
|
17.7
|
|
Stock-based compensation(2)
|
|
14.7
|
|
|
16.3
|
|
|
35.6
|
|
|
43.2
|
|
Mergers and acquisitions, divestitures and business optimization(3)
|
|
4.8
|
|
|
6.2
|
|
|
(7.8
|
)
|
|
35.3
|
|
Other(4)
|
|
15.4
|
|
|
1.5
|
|
|
17.3
|
|
|
16.1
|
|
Total adjustments to EBITDA
|
|
34.9
|
|
|
41.7
|
|
|
51.0
|
|
|
112.4
|
|
Consolidated Adjusted EBITDA
|
|
$
|
280.9
|
|
|
$
|
244.9
|
|
|
$
|
783.5
|
|
|
$
|
668.1
|
|
As a result of displaying amounts in millions, rounding differences may exist in the table above.
|
|
(1)
|
This adjustment represents certain non-cash adjustments related to acquired entities, predominantly adjustments to increase revenue resulting from purchase accounting reductions to deferred revenue we record on the opening balance sheets of acquired entities. Deferred revenue results when a company receives payment in advance of fulfilling their performance obligations under contracts. Business combination accounting rules require us to record deferred revenue of acquired entities at fair value if we are obligated to perform any future services under these contracts. The fair value of this deferred revenue is determined based on the direct and indirect incremental costs of fulfilling our performance obligations under these contracts, plus a normal profit margin. Generally, this fair value calculation results in a reduction to the purchased deferred revenue balance. The above adjustment includes an estimate for the increase in revenue equal to the difference between what the acquired entities would have recorded as revenue and the lower revenue we record as a result of the reduced deferred revenue balance. This increase is partially offset by an estimated decrease to revenue for certain acquired non-core customer contracts that are not classified as discontinued operations that will expire within approximately one year from the date of acquisition. Beginning in the third quarter of 2019, we no longer have these adjustments to revenue.We present Adjusted Revenue as a supplemental measure of our revenue because we believe it provides meaningful information regarding our revenue and provides a basis to compare revenue between periods. In addition, our board of directors and executive management team use Adjusted Revenue as a compensation measure under our incentive compensation plans. The table above provides a reconciliation for revenue to Adjusted Revenue.
|
|
|
(2)
|
Consisted of stock-based compensation and cash-settled stock-based compensation.
|
|
|
(3)
|
For the three months ended September 30, 2019, consisted of the following adjustments: a $2.0 million loss on assets of a small business in our United Kingdom region that are classified as held-for-sale; $2.0 million of Callcredit integration costs; a $0.6 million adjustment to contingent consideration expense from previous acquisitions; $0.5 million of acquisition expenses; and a $(0.2) million reimbursement for transition services provided to the buyers of certain of our discontinued operations.
|
For the nine months ended September 30, 2019, consisted of the following adjustments: a $(31.2) million gain on a Cost Method investment resulting from an observable price change for a similar investment of the same issuer; $(0.4) million reimbursement for transition services provided to the buyers of our discontinued operations; $10.5 million of Callcredit integration costs; a $8.6 million loss on the impairment of certain Cost Method investments; $2.1 million of acquisition expenses; a $2.0 million loss on assets of a small business in our United Kingdom region that are classified as held-for-sale; and a $0.6 million adjustment to contingent consideration expense from previous acquisitions.
For the three months ended September 30, 2018, consisted of the following adjustments: $4.2 million of Callcredit integration costs; $1.7 million of acquisition expenses; a $0.2 million loss on the divestiture of a small business operation; a $0.2 million loss from a fair value remeasurement of an investment in a nonconsolidated affiliate, offset by $(0.1) million
for the portion that is attributable to the non-controlling interest; a $0.1 million adjustment to contingent consideration expense from previous acquisitions; and $(0.1) million of miscellaneous.
For the nine months ended September 30, 2018, consisted of the following adjustments: $28.7 million of acquisition expenses; $4.2 million of Callcredit integration costs; a $1.5 million net loss from the fair value remeasurements of investments in nonconsolidated affiliates; $1.2 million loss on the divestiture of a small business operation, offset by $(0.4) million for the portion that is attributable to the non-controlling interest; and a $0.1 million adjustment to contingent consideration expense from previous acquisitions.
|
|
(4)
|
For the three months ended September 30, 2019, consisted of the following adjustments: $19.7 million of expenses (including $1.8 million of administrative expenses) associated with the Fraud Incident offset by the $(7.1) million portion that is attributable to the non-controlling interest; $1.6 million from currency remeasurement; $0.7 million of deferred loan fees written off as a result of the prepayments on our debt; and $0.5 million of loan fees.
|
For the nine months ended September 30, 2019, consisted of the following adjustments: $19.7 million of expenses (including $1.8 million of administrative expenses) associated with the Fraud Incident offset by the $(7.1) million portion that is attributable to the non-controlling interest; $1.9 million from currency remeasurement; $1.5 million of loan fees; $1.5 million of deferred loan fees written off as a result of the prepayments on our debt; and $(0.1) million of miscellaneous.
For the three months ended September 30, 2018, consisted of the following adjustments: $1.0 million loss from currency remeasurement of our foreign operations; $0.5 million of loan fees; $0.1 million of fees related to new financing under our senior secured credit facility; and $(0.1) million of miscellaneous.
For the nine months ended September 30, 2018, consisted of the following adjustments: $12.0 million of fees related to new financing under our senior secured credit facility; a $3.3 million loss from currency remeasurement of our foreign operations; $1.1 million of loan fees; $0.5 million of fees incurred in connection with a secondary offering of shares of TransUnion common stock by certain of our stockholders; a $(0.7) million mark-to-market gain related to ineffectiveness of our interest rate hedge; and $(0.1) million of miscellaneous.
Earnings from equity method investments included in non-operating income and expense for the periods presented were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
(in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
U.S. Markets
|
|
$
|
0.8
|
|
|
$
|
0.7
|
|
|
$
|
2.0
|
|
|
$
|
2.1
|
|
International
|
|
2.4
|
|
|
2.5
|
|
|
8.2
|
|
|
6.3
|
|
Total
|
|
$
|
3.1
|
|
|
$
|
3.2
|
|
|
$
|
10.2
|
|
|
$
|
8.4
|
|