QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-15967
___________________________________
The Dun & Bradstreet Corporation
(Exact name of registrant as specified in its charter)
___________________________________
Delaware
22-3725387
(State of
incorporation)
(I.R.S. Employer
Identification No.)
103 JFK Parkway, Short Hills, NJ
07078
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (973) 921-5500
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 ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one:)
Large accelerated filer
ý
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company o
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 ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2018
2017
2018
2017
(Amounts in millions, except per share data)
Revenue
$
407.3
$
428.3
$
1,265.1
$
1,215.5
Operating Expenses
142.2
142.3
420.4
423.3
Selling and Administrative Expenses
158.2
164.1
465.6
497.5
Depreciation and Amortization
22.6
20.1
66.4
58.4
Restructuring Charge
2.1
5.8
23.6
22.3
Operating Costs
325.1
332.3
976.0
1,001.5
Operating Income
82.2
96.0
289.1
214.0
Interest Income
0.4
0.4
1.5
1.2
Interest Expense
(13.6
)
(15.2
)
(40.9
)
(44.9
)
Other Income (Expense) - Net
(1.9
)
(1.7
)
(1.2
)
(2.4
)
Non-Operating Income (Expense) - Net
(15.1
)
(16.5
)
(40.6
)
(46.1
)
Income (Loss) Before Provision for Income Taxes and Equity in Net Income of Affiliates
67.1
79.5
248.5
167.9
Less: Provision for Income Taxes
16.1
24.2
38.3
51.1
Equity in Net Income of Affiliates
0.7
0.5
1.8
3.2
Net Income (Loss) from Continuing Operations
51.7
55.8
212.0
120.0
Less: Net Income Attributable to the Noncontrolling Interest
(1.5
)
(1.7
)
(4.9
)
(4.5
)
Net Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet
$
50.2
$
54.1
$
207.1
$
115.5
Loss on Disposal of Business, no Tax Impact
—
—
—
(0.8
)
Loss from Discontinued Operations, no Tax Impact
—
—
—
(0.8
)
Net Income (Loss) Attributable to Dun & Bradstreet
$
50.2
$
54.1
$
207.1
$
114.7
Basic Earnings (Loss) Per Share of Common Stock:
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders
$
1.35
$
1.46
$
5.58
$
3.13
Loss from Discontinued Operations Attributable to Dun & Bradstreet Common Shareholders
—
—
—
(0.02
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders
$
1.35
$
1.46
$
5.58
$
3.11
Diluted Earnings (Loss) Per Share of Common Stock:
Income (Loss) from Continuing Operations Attributable to Dun & Bradstreet Common Shareholders
$
1.35
$
1.45
$
5.55
$
3.11
Loss from Discontinued Operations Attributable to Dun & Bradstreet Common Shareholders
—
—
—
(0.02
)
Net Income (Loss) Attributable to Dun & Bradstreet Common Shareholders
$
1.35
$
1.45
$
5.55
$
3.09
Weighted Average Number of Shares Outstanding-Basic
37.1
37.0
37.1
36.9
Weighted Average Number of Shares Outstanding-Diluted
37.3
37.2
37.3
37.1
Cash Dividend Paid Per Common Share
$
0.52
$
0.50
$
1.57
$
1.51
Other Comprehensive Income, Net of Income Taxes:
Net Income (Loss) from Continuing Operations
$
51.7
$
55.8
$
212.0
$
120.0
Loss from Discontinued Operations, no Tax Impact
—
—
—
(0.8
)
Net Income (Loss)
51.7
55.8
212.0
119.2
Foreign Currency Translation Adjustments, Net of Tax
(8.7
)
13.6
(8.8
)
36.5
Defined Benefit Pension Plans:
Prior Service Costs, Net of Tax Benefit (Expense) (1)
—
(0.1
)
0.1
(0.4
)
Net Actuarial Gain, Net of Tax Benefit (Expense) (2)
1.7
2.7
17.5
15.3
Derivative Financial Instrument, no tax impact
0.9
—
1.1
—
Total Other Comprehensive Income (Loss), Net of Tax
(6.1
)
16.2
9.9
51.4
Comprehensive Income (Loss), Net of Tax
45.6
72.0
221.9
170.6
Less: Comprehensive Income Attributable to the Noncontrolling Interest
(0.7
)
(1.9
)
(4.1
)
(5.3
)
Comprehensive Income (Loss) Attributable to Dun & Bradstreet
$
44.9
$
70.1
$
217.8
$
165.3
(1)
Tax Benefit (Expense) of $0.1 million and $0.3 million during the three months and nine months ended September 30, 2017, respectively.
(2)
Tax Benefit (Expense) of $(0.4) million and $(1.0) million during the three months ended September 30, 2018 and 2017, respectively. Tax Benefit (Expense) of $(5.1) million and $(7.8) million during the nine months ended September 30, 2018 and 2017, respectively.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
Loss on Disposal of Business - Discontinued Operations
—
(0.8
)
Net Income from Continuing Operations
$
212.0
$
120.0
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization
66.4
58.4
Amortization of Unrecognized Pension Loss
31.1
28.4
(Gain) Loss from Sales of Business
—
0.7
Income Tax Benefit from Stock-Based Awards
4.7
6.5
Equity-Based Compensation Expense
7.3
16.3
Restructuring Charge
23.6
22.3
Restructuring Payments
(28.0
)
(18.6
)
Changes in Deferred Income Taxes, Net
33.8
0.5
Changes in Accrued Income Taxes, Net
(45.2
)
(22.1
)
Changes in Operating Assets and Liabilities (1):
(Increase) Decrease in Accounts Receivable
59.4
159.8
(Increase) Decrease in Other Current Assets
(5.0
)
1.1
Increase (Decrease) in Deferred Revenue
(24.3
)
(45.3
)
Increase (Decrease) in Accounts Payable
(14.2
)
(8.4
)
Increase (Decrease) in Accrued Liabilities
(40.9
)
(41.9
)
Increase (Decrease) in Other Accrued and Current Liabilities
6.7
10.8
(Increase) Decrease in Other Long-Term Assets
(2.0
)
12.6
Net Increase (Decrease) in Long-Term Liabilities
(41.9
)
(50.4
)
Net, Other Non-Cash Adjustments
2.5
1.6
Net Cash Provided by Operating Activities
246.0
252.3
Cash Flows from Investing Activities:
Payments for Contingent Liabilities for Businesses Divested
(0.3
)
(1.8
)
Payments for Acquisitions of Businesses, Net of Cash Acquired
—
(150.0
)
Proceeds from Maturity and (Payment) for Debt Security Investment
0.5
0.5
Cash Settlements of Foreign Currency Contracts
(4.2
)
8.8
Capital Expenditures
(3.2
)
(6.7
)
Additions to Computer Software and Other Intangibles
(40.5
)
(42.2
)
Net, Other
0.4
0.1
Net Cash Used in Investing Activities
(47.3
)
(191.3
)
Cash Flows from Financing Activities:
Net (Payment) Proceeds Related to Stock-Based Plans
(3.2
)
(2.4
)
Payment of Debt Issuance Costs
(3.5
)
—
Payments of Dividends
(58.1
)
(55.6
)
Proceeds from Borrowings on Credit Facilities
959.6
770.0
Proceeds from Borrowings on Term Loan Facilities
300.0
—
Payments of Borrowings on Credit Facilities
(1,250.2
)
(692.2
)
Payments of Borrowings on Term Loan Facilities
(356.3
)
(15.0
)
Capital Lease and Other Long-Term Financing Obligation Payment
—
(0.1
)
Net, Other
(3.4
)
(3.0
)
Net Cash (Used in) Provided by Financing Activities
(415.1
)
1.7
Effect of Exchange Rate Changes on Cash and Cash Equivalents
2.2
15.7
Increase (Decrease) in Cash and Cash Equivalents
(214.2
)
78.4
Cash and Cash Equivalents, Beginning of Period
442.4
352.6
Cash and Cash Equivalents, End of Period
$
228.2
$
431.0
Supplemental Disclosure of Cash Flow Information:
Cash Paid for:
Income Taxes, Net of Refunds
$
44.9
$
66.1
Interest
$
33.8
$
32.6
(1)
Net of the effect of acquisitions and cumulative adjustments to the consolidated balance sheet as of January 1, 2018 due to the adoption of Topic 606. See Note 2 and Note 3 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
The accompanying notes are an integral part of the unaudited consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Tabular dollar amounts in millions, except per share data)
Note 1 --
Basis of Presentation
These interim unaudited consolidated financial statements have been prepared in accordance with the instructions to the Quarterly Report on Form 10-Q. They should be read in conjunction with the consolidated financial statements and related notes, which appear in The Dun & Bradstreet Corporation’s (“Dun & Bradstreet” or “we” or “us” or “our” or the “Company”) Annual Report on Form 10-K for the year ended December 31, 2017. The unaudited consolidated results for interim periods do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements and are not necessarily indicative of results for the full year or any subsequent period. In the opinion of our management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the unaudited consolidated financial position, results of operations and cash flows at the dates and for the periods presented have been included.
All inter-company transactions have been eliminated in consolidation.
We manage and report our business through the following two segments:
•
Americas, which consists of our operations in the United States (“U.S.”), Canada, and our Latin America Worldwide Network; and
•
Non-Americas, which consists of our operations in the United Kingdom (“U.K.”), Greater China, India and our European and Asia Pacific Worldwide Networks.
The financial statements of the subsidiaries outside of the U.S. and Canada reflect results for the three month and nine month periods ended August 31 in order to facilitate the timely reporting of the unaudited consolidated financial results and unaudited consolidated financial position.
As a result of the adoption of ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” effective January 1, 2018, we have included only the service-cost component of the net pension and postretirement benefit cost in our compensation cost and reported the other components of the net pension and postretirement benefit cost within Non-Operating Income (Expense) - Net. We have also reclassified all prior periods’ results accordingly. As a result, total other components of the net pension and postretirement benefit cost of $0.8 million and $1.5 million were reclassified from compensation cost to Non-Operating Income (Expense) - Net for the three month and nine month periods ended September 30, 2017, respectively. See Note 10 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
An $18.0 million misclassification of revenue from Risk Management Solutions (primarily Trade Credit) to Sales & Marketing Solutions (primarily Advanced Marketing) in the Americas segment related to the second quarter of 2018 was corrected in the nine months ended September 30, 2018. The reclassification did not result in a change in total company revenue, total segment revenue, total company income or total segment income and was not material to the consolidated financial statements for the second quarter of 2018.
Where appropriate, we have reclassified certain prior year amounts to conform to the current year presentation.
Note 2 --
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standards Updates (“ASUs”) and applicable authoritative guidance. The ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on our consolidated financial position and/or results of operations.
Recently Adopted Accounting Pronouncements
In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The standard expands component and fair value hedging, specifies the presentation of the effects of hedging instruments, and eliminates the separate measurement and presentation of hedge ineffectiveness. The standard is effective for annual and interim periods beginning after December 15, 2018. This authoritative guidance can be adopted early in any interim period but has to be applied retrospectively to the beginning of the annual period. We early adopted this authoritative guidance in the second quarter of 2018 and it did not have a
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
material impact on our consolidated financial statements. See Note 12 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” The standard amends the scope of modification accounting for share-based payments arrangements. An entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and after the modification. The standard was effective for annual and interim periods beginning after December 15, 2017. The adoption of this authoritative guidance in the first quarter of 2018 did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefits Cost.” The standard amends the requirements in ASC Topic 715, “Compensation - Retirement Benefits” related to the income statement presentation of the components of net periodic benefit cost for an entity's sponsored defined benefit pension and other postretirement plans. The standard requires entities to disaggregate the current service-cost component from the other components of net benefit cost and present it with other current compensation costs for related employees in the income statement and present the other components elsewhere in the income statement outside of income from operations if such subtotal is presented. Entities are required to disclose the income statement lines that contain the other components if they are not presented on appropriately described lines. An entity is only allowed to capitalize the service-cost component of net benefit cost. The standard was effective for annual and interim periods beginning after December 15, 2017. The adoption of this authoritative guidance in the first quarter of 2018 did not have a material impact on our consolidated financial statements. See Note 10 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The standard provides a framework to use in determining when a set of assets and activities is a business. The standard requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If the fair value meets this threshold, the set of transferred assets and activities is not a business. The standard also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Entities must apply the guidance prospectively to any transactions occurring within the period of adoption. The adoption of this authoritative guidance in the first quarter of 2018 did not have an impact on our consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The standard eliminates the exception within Topic 740 of the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. As a result of the removal of the exception, a reporting entity would recognize the tax expense from the sale of the asset in the seller's tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer's jurisdiction would also be recognized at the time of the transfer. The standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Entities must apply the modified retrospective approach, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of the adoption. The adoption of this authoritative guidance in the first quarter of 2018 did not have an impact on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force).” The standard amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The standard was effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Entities must apply the guidance retrospectively to all periods presented but may apply it prospectively from the earliest date practicable if retrospective application would be impracticable. The adoption of this authoritative guidance in the first quarter of 2018 did not have an impact on our consolidated financial statements.
New Revenue Recognition Standard:
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers which replaces and supersedes the existing revenue standard (Topic 605). ASU No. 2014-09 was amended in 2015 and 2016 as described in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
ASU No. 2014-09 and its related amendments (the new revenue standard or Topic 606) provides a single comprehensive model used in accounting for revenue from contracts with customers. The core principle of this guidance is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the transfer of promised goods and services to customers. The guidance also requires additional disclosure of information about the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. The new guidance also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer.
On January 1, 2018 we adopted the new revenue standard and applied it to all contracts using the modified retrospective method. We recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods (Topic 605). The adoption of the new revenue standard is not expected to have a material annual impact to our 2018 revenue. However, we anticipate material quarterly changes in our financial results. The cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2018 due to the adoption of the new revenue standard was as follows:
Balance at December 31, 2017
Adjustment Increase (Decrease)
Balance at January 1, 2018
ASSETS
Accounts Receivable (1)(3)
$
596.8
$
(318.9
)
$
277.9
Other Current Assets (2)
1.6
3.3
4.9
Deferred Income Tax (4)
57.1
25.8
82.9
Deferred Costs (5)
—
74.4
74.4
Other Non-Current Assets (2)
60.8
2.2
63.0
LIABILITIES
Accounts Payable (3)
$
37.4
$
12.1
$
49.5
Short-Term Deferred Revenue (1)(6)(7)
684.4
(145.2
)
539.2
Other Non-Current Liabilities (1)
100.7
1.3
102.0
EQUITY
Retained Earnings (4)(5)(6)(7)
$
3,176.3
$
(81.4
)
$
3,094.9
The adjustments relate to the following items:
1.
Under the new standard, we recognize a receivable when the right to consideration is unconditional and due, which is generally when we invoice. The adjustment to receivables reverses amounts where the right to the consideration was not unconditional and revenue was not recognized. Unconditional amounts received or due in advance of performance are presented as receivables and deferred revenue (contract liability). Deferred revenue represents our obligation to transfer products to a customer for which we have received consideration, or an amount is due.
2.
We recognize a contract asset when our right to consideration for products transferred to the customer is conditional on something other than the passage of time. We have non-cancelable multi-year contracts in which the consideration increases each contract year. This can result in a contract asset representing revenue we recognized before consideration is due and unconditional.
3.
Under the new standard, price concessions, refunds or credits are variable consideration representing an estimated reduction in the consideration we expect to receive from contracts with customers. This estimate is included in accounts payable because it does not relate to future performance. Under Topic 605 this amount was recognized as an allowance for sales cancellations as a reduction of receivables.
4.
The adjustment to retained earnings is net of income tax effects.
5.
Under the new standard, we deferred incremental sales commissions to obtain new contracts which are amortized over the estimated period of benefit.
6.
In contracts where we promise to provide the customer the latest set of data at scheduled intervals, we identified each data set as a distinct and separate performance obligation. Each performance obligation is satisfied at a point in time, on delivery of the data. Under Topic 605, we recognized the majority of revenue on delivering the initial data set and deferred an amount based on estimated changes to the data over the contract term.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
7.
Contracts with customers are modified frequently as they purchase additional products or change products. We elected to use a transition practical expedient and aggregated the effect of all contract modifications that occurred prior to January 1, 2018 instead of accounting for each contract modification separately.
None of the adjustments described above affected net cash provided from operating, investing or financing activities.
The impact of the adoption of the new revenue standard on our consolidated financial statements for the three month and nine month periods ended September 30, 2018 was as follows:
For the Three Months Ended
September 30, 2018
For the Nine Months Ended
September 30, 2018
Income Statement
As Reported
Without Adoption of Topic 606
Effect of Change Higher (Lower)
As Reported
Without Adoption of Topic 606
Effect of Change Higher (Lower)
Revenue
$
407.3
$
416.7
$
(9.4
)
$
1,265.1
$
1,195.8
$
69.3
Selling and Administrative Expenses
158.2
162.9
(4.7
)
465.6
485.5
(19.9
)
Operating Income
82.2
86.9
(4.7
)
289.1
199.9
89.2
Income (Loss) Before Provision for Income Taxes and Equity in Net Income of Affiliates
67.1
71.8
(4.7
)
248.5
159.3
89.2
Less: Provision for Income Taxes
16.1
17.3
(1.2
)
38.3
18.3
20.0
Net Income (Loss) from Continuing Operations
51.7
55.2
(3.5
)
212.0
142.8
69.2
Net Income (Loss) Attributable to Dun & Bradstreet
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
For the Nine Months Ended September 30, 2018
Cash Flows
As Reported
Without Adoption of Topic 606
Effect of Change Higher (Lower)
Net Income from Continuing Operations
$
212.0
$
142.8
$
69.2
Changes in Deferred Income Taxes, Net
33.8
16.1
17.7
Changes in Accrued Income Taxes, Net
(45.2
)
(47.4
)
2.2
(Increase) Decrease in Accounts Receivable
59.4
171.2
(111.8
)
(Increase) Decrease in Other Current Assets
(5.0
)
(4.5
)
(0.5
)
Increase (Decrease) in Deferred Revenue
(24.3
)
(66.1
)
41.8
Increase (Decrease) in Accounts Payable
(14.2
)
(3.8
)
(10.4
)
(Increase) Decrease in Other Long-Term Assets
(2.0
)
4.8
(6.8
)
Net Increase (Decrease) in Long-Term Liabilities
(41.9
)
(40.5
)
(1.4
)
Net Cash Provided by Operating Activities
246.0
246.0
—
None of the adjustments described above affected net cash from operating, investing or financing activities.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract: Disclosures for Implementation Costs Incurred for Internal-Use
Software and Cloud Computing Arrangements - a consensus of the EITF.” The standard aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Entities are permitted to apply either a retrospective or prospective transition approach to adopt the guidance. When prospective transition is chosen, entities must apply the transition requirements to any eligible costs incurred after adoption. The guidance may be early adopted in any annual or interim period for which financial statements have not yet been issued or made available for issuance. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years beginning after December 15, 2019. We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-
General (Topic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans.” The standard amends ASC 715, “Compensation - Retirement Benefits,” to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendments are to be applied retrospectively. The standard is effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The adoption of this authoritative guidance will not have a material impact on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. Entities will have to disclose significantly more information, including information they use to track credit quality by year of origination for most financing receivables. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019. The guidance requires entities to apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). For certain assets (such as debt securities for which an other-than-temporary impairment has been recognized before the effective date), a prospective transition approach is required. We do not expect the adoption of this authoritative guidance will have a material impact on our consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
New Lease Standard:
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This standard requires entities that lease assets to recognize on the balance sheet, subject to certain exceptions, the assets and liabilities for the rights and obligations created by those leases. The standard is effective for fiscal years and the interim periods within those fiscal years beginning after December 15, 2018. The guidance is required to be applied by the modified retrospective transition approach. Early adoption is permitted.
In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842 - Leases.” The standard provides narrow amendments and technical corrections to clarify certain aspects of the new leases standard. The standard has the same effective date as ASU No. 2016-02.
In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842) - Targeted Improvements.” The standard adds a transition option to the new leases standard that allows entities the option not to adopt the standard as of the earliest period presented but rather provides the opportunity to be applied as of the adoption date. The standard also provides a practical expedient that gives lessors an option to combine non-lease and associated lease components when certain criteria are met and requires a lessor to account for the combined component in accordance with the new revenue standard if the associated non-lease components are the predominant component. The standard has the same effective date as ASU No. 2016-02.
We are currently assessing the impact of the adoption of this authoritative guidance on our consolidated financial statements. However, we anticipate that the adoption of this standard will have a material impact on our consolidated balance sheet. We are planning on electing the package of practical expedients which permits us to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. We are also evaluating other practical expedients available under the guidance.
Note 3 -- Revenue
We generate revenue from licensing our data and providing related data services to our customers. Our data is integrated into our hosted or on-premise software applications. Data is also delivered directly into customer third-party applications (or our on-premise applications) using our application programming interfaces (“API”) or as computer files. Some of our data and reports can be purchased through our websites individually or in packages.
Most of our revenue comes from customers we contract with directly. We also license data, trademarks and related technology and support services to our Worldwide Network partners for exclusive distribution of our products to customers in their territories. We also license our data to our alliance partners who use the data to enhance their own products or enable it to be seamlessly delivered to their customers.
Revenue is net of any sales or indirect taxes collected from customers, which are subsequently remitted to government authorities.
Performance Obligations and Revenue Recognition
All our customers license our data and/or software applications. The license term is generally a minimum of 12 months and non-cancelable. If the customer can benefit from the license only in conjunction with a related service, the license is not distinct and is combined with the other services as a single performance obligation.
We recognize revenue when (or as) we satisfy a performance obligation by transferring promised licenses and or services underlying the performance obligation to the customer. Some of our performance obligations are satisfied over time as the product is transferred to the customer. Performance obligations which are not satisfied over time are satisfied at a point in time.
Determining whether the products and services in a contract are distinct and identifying the performance obligations requires significant judgment. When we assess contracts with customers we determine if the data we promise to transfer to the customer is individually distinct or is combined with other licenses or services which together form a distinct product or service and a performance obligation. We also consider if we promise to transfer a specific quantity of data or provide unlimited access to data.
We determined that when customers can purchase a specified quantity of data based on their selection criteria and data layout, each data record is distinct and a performance obligation, satisfied on delivery. If we promise to update the initial data set at specified intervals, each update is a performance obligation, which we satisfy when the update data is delivered.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
When we provide customers continuous access to the latest data using our API-based and online products, the customer can consume and benefit from this content daily as we provide access to the data. We determined that for this type of offering our overall promise is a service of daily access to data which represents a single performance obligation satisfied over time. We recognize revenue ratably for this type of performance obligation.
Customers can purchase unlimited access to data in many of our products for the non-cancelable contract term. These contracts are priced based on their anticipated usage volume of the product and we have the right to increase the transaction price in the following contract year if usage in the current contract year exceeds certain prescribed limits. The limits are set at a level that the customer is unlikely to exceed so in general, we fully constrain any variable consideration until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. For these contracts the performance obligation is satisfied over time as we provide continuous access to the data. We recognize revenue ratably over the contract term.
For products sold under our annual and monthly discount plans the customer receives a discount based on the amount they commit to spend annually, or the actual amount spent at the end of each monthly billing cycle. Each report or data packet purchased is a separate performance obligation which is satisfied when the report or data packet is delivered. The customer can also purchase a monitoring service on the report or data packet which is a performance obligation satisfied over time because the customer benefits from the service as we monitor the data and provide alerts when the data changes. We recognize revenue ratably over the monitoring period.
In some contracts, including annual discount plans, the customer commits to spend a fixed amount on the products. Breakage occurs if the customer does not exercise all their purchasing rights under the contract. We recognize breakage at the end of the contract when the likelihood of the customer exercising their remaining rights becomes remote.
Many of our contracts provide the customer an option to purchase additional products. If the option provides the customer a discount which is incremental to discounts typically given for those products, the contract provides the customer a material right that it would not receive without entering into the contract. An amount of the transaction price is allocated to the material right performance obligation and is recognized when the customer exercises the option or when the option expires.
We have long-term contracts with our Worldwide Network partners. These contracts are typically for an initial term of up to 10 years and automatically renew for further terms unless notice is given before the end of the initial or renewal term. We grant each Partner the exclusive right to sell our products in the countries that constitute their territory. We provide them access to data, use of our brand and technology and other services and support necessary for them to sell our products and services in their territory. We determined this arrangement is a series of distinct services and represents a single performance obligation satisfied over time. These contracts contain multiple streams of consideration, some of which are fixed and some are variable. These variable amounts are allocated to the specific service period during which the sales or usage occurred if the variable amount is commensurate with the benefit to the customer of the additional service and is consistent with our customary pricing practices. Otherwise the variable amount is accounted for as a change in the transaction price for the contract. We recognize revenue ratably for this performance obligation.
We license our data to our alliance partners. Most contracts specify the number of licensed records or data sets to be delivered. If the licenses are distinct, we satisfy them on delivery of the data. Contract consideration is often a sales or usage-based royalty, sometimes accompanied by a guaranteed minimum amount. Any fixed consideration is allocated to each performance obligation based on the standalone selling price of the data. We apply the variable consideration exception for license revenue in the form of royalties when the license is the sole or predominant item to which the royalty relates. Royalty revenue is recognized when the later of the following events have occurred: (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all the royalty has been allocated has been satisfied (or partially satisfied).
Contracts with Multiple Performance Obligations
Our contracts with customers often include promises to transfer multiple performance obligations. For these contracts we allocate the transaction price to each performance obligation in the contract on a relative standalone selling price basis. The standalone selling price is the price at which we would sell the promised service separately to a customer. We use the observable price based on prices in contracts with similar customers in similar circumstances.
We allocate variable consideration to a performance obligation or a distinct product if the terms of the variable payment relate specifically to our efforts to satisfy the performance obligation or transfer the distinct product and the allocation is consistent with the allocation objective. If these conditions are not met or the transaction price changes for other reasons after contract inception, we allocate the change on the same basis as at contract inception.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
Contract Combinations and Modifications
Many of our customers have multiple contracts for various products. Contracts entered into at or near the same time with the same customer are combined into a single contract when they are negotiated together with a single commercial objective or the contracts are related in other ways.
Contract modifications are accounted for as a separate contract if additional products are distinct and the transaction price increases by an amount that reflects the standalone selling prices of the additional products. Otherwise, we generally account for the modifications as if they were the termination of the existing contracts and creation of new contracts if the remaining products are distinct from the products transferred before the modification. The new transaction price is the unrecognized revenue from the existing contracts plus the new consideration. This amount is allocated to the remaining performance obligations based on the relative standalone selling prices.
The total amount of the transaction price for our revenue contracts allocated to performance obligations that are unsatisfied (or partially unsatisfied) is as follows:
Fourth Quarter of 2018
2019
2020
2021
Thereafter
Total
Future Revenue
$
392.6
$
824.0
$
318.9
$
146.4
$
369.6
$
2,051.5
The table of future revenue does not include any amount of variable consideration that is a sales or usage-based royalty in exchange for distinct data licenses or that is allocated to a distinct service period within a single performance obligation that is a series of distinct service periods.
Contract Balances
At September 30, 2018
At January 1, 2018
Accounts Receivable
$
223.3
$
277.9
Short-Term Contract Assets
1.7
3.3
Long-Term Contract Assets
3.1
2.2
Short-Term Deferred Revenue
516.1
539.2
Long-Term Deferred Revenue
12.8
6.2
We recognize a receivable when we have an unconditional right to consideration and only the passage of time is required before payment of that consideration is due. If we recognize a receivable before we transfer products to the customer, we also recognize deferred revenue, which is also defined as a contract liability under the new revenue guidance. Deferred revenue represents our obligation to transfer products to the customer for which we have received consideration (or an amount of consideration is due) from the customer. When we transfer products or services to the customer before payment is received or is due, and our right to consideration is conditional on future performance or other factors in the contract, we recognize a contract asset. We assess each contract to determine if the net contract position is a net contract liability or net contract asset.
The decrease in deferred revenues and contract assets of $16.5 million and $0.7 million, respectively, for the nine months ended September 30, 2018 is primarily due to the following factors: The decrease in deferred revenue is primarily due to approximately $450.5 million of revenues recognized that were included in the deferred revenue balance at January 1, 2018, offset by cash payments received or due in advance of satisfying our performance obligations. The decrease in contract assets is primarily due to approximately $5.5 million of contract assets included in the balance at January 1, 2018 that were reclassified to receivables when they became unconditional, largely offset by new contract assets recognized in the period, net of new amounts reclassified to receivables.
Assets Recognized for the Costs to Obtain a Contract
We have annual incentive plans under which we pay commissions to our sales people for initial and renewal contracts with customers. These commissions are incremental costs of obtaining these contracts and when recoverable are capitalizable as commission assets. We capitalize the commissions paid on new business which we expect to renew when the amount paid is
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
proportionately higher than the amount paid on renewals. Commission assets are amortized on a straight-line basis over the period of benefit which is estimated at 2 to 7 years. We elected to use the practical expedient to expense commissions paid on renewals because the expected period of benefit is 12 months or less.
At September 30, 2018, commission assets, net of accumulated amortization included in Deferred Costs were $93.0 million. Amortization of commission assets for the three month and nine month periods ended September 30, 2018 were $6.2 million and $20.0 million, respectively.
Revenue Disaggregated by Major Product Category
For the Three Months Ended
September 30, 2018
For the Nine Months Ended
September 30, 2018
Total
Americas
Non-Americas
Total
Americas
Non-Americas
Risk Management Solutions:
Trade Credit
$
158.9
$
115.6
$
43.3
$
490.3
$
364.5
$
125.8
Other Enterprise Risk Management
79.4
64.4
15.0
234.5
189.5
45.0
Sales & Marketing Solutions:
Sales Acceleration
75.4
69.7
5.7
235.7
216.9
18.8
Advanced Marketing Solutions
93.6
86.6
7.0
304.6
279.0
25.6
Total Revenue
$
407.3
$
336.3
$
71.0
$
1,265.1
$
1,049.9
$
215.2
For the Three Months Ended
September 30, 2017
For the Nine Months Ended
September 30, 2017
Total
Americas
Non-Americas
Total
Americas
Non-Americas
Risk Management Solutions:
Trade Credit
$
170.9
$
126.6
$
44.3
$
499.5
$
372.8
$
126.7
Other Enterprise Risk Management
91.9
76.0
15.9
240.3
195.1
45.2
Sales & Marketing Solutions:
Sales Acceleration
75.6
68.7
6.9
224.3
204.1
20.2
Advanced Marketing Solutions
89.9
80.7
9.2
251.4
228.1
23.3
Total Revenue
$
428.3
$
352.0
$
76.3
$
1,215.5
$
1,000.1
$
215.4
See Note 11 for additional information on the disaggregation of revenue by customer solution set and geographical market.
Note 4 -- Restructuring Charge
We incurred restructuring charges (which generally consist of employee severance and termination costs, contract terminations and/or costs to terminate lease obligations less assumed sublease income). These charges were incurred as a result of eliminating, consolidating, standardizing and/or automating our business functions.
Restructuring charges have been recorded in accordance with ASC 712-10, “Nonretirement Postemployment Benefits,” or “ASC 712-10” and/or ASC 420-10, “Exit or Disposal Cost Obligations,” or “ASC 420-10”, as appropriate.
We record severance costs provided under an ongoing benefit arrangement once they are both probable and reasonably estimable in accordance with the provisions of ASC 712-10.
We account for one-time termination benefits, contract terminations and/or costs to terminate lease obligations less assumed sublease income in accordance with ASC 420-10, which addresses financial accounting and reporting for costs associated with restructuring activities. Under ASC 420-10, we establish a liability for costs associated with an exit or disposal activity, including severance and lease termination obligations, and other related costs, when the liability is incurred, rather than
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
at the date that we commit to an exit plan. We reassess the expected cost to complete the exit or disposal activities at the end of each reporting period and adjust our remaining estimated liabilities, if necessary.
The determination of when we accrue for severance costs and which standard applies depends on whether the termination benefits are provided under an ongoing arrangement as described in ASC 712-10 or under a one-time benefit arrangement as defined by ASC 420-10. Inherent in the estimation of the costs related to the restructurings are assessments related to the most likely expected outcome of the significant actions to accomplish the exit or disposal activities. In determining the charges related to the restructurings, we had to make estimates related to the expenses associated with the restructurings. These estimates may vary significantly from actual costs depending, in part, upon factors that may be beyond our control. We will continue to review the status of our restructuring obligations on a quarterly basis and, if appropriate, record changes to these obligations in current operations based on management’s most current estimates.
Three Months Ended September 30, 2018 vs. Three Months Ended September 30, 2017
During the three months ended September 30, 2018, we recorded a $2.1 million restructuring charge. This charge was comprised of:
•
Severance costs of $0.3 million, net of an adjustment of $1.0 million, in accordance with the provisions of ASC 712-10. Approximately 25 employees were impacted. Most of the employees impacted exited the Company by the end of the third quarter of 2018. The cash payments for these employees are expected to be completed by the end of the second quarter of 2019; and
•
Contract termination, lease termination obligations and other exit costs, including those to consolidate or close facilities of $1.8 million.
During the three months ended September 30, 2017, we recorded a $5.8 million restructuring charge. This charge was comprised of:
•
Severance costs of $3.6 million in accordance with the provisions of ASC 712-10. Approximately 50 employees were impacted. Most of the employees impacted exited the Company by the end of the third quarter of 2017. The cash payments for these employees were completed by the end of the third quarter of 2018; and
•
Contract termination, lease termination obligations and other exit costs, including those to consolidate or close facilities of $2.2 million.
Nine Months Ended September 30, 2018 vs. Nine Months Ended September 30, 2017
During the nine months ended September 30, 2018, we recorded an $23.6 million restructuring charge. This charge was comprised of:
•
Severance costs of $20.9 million, net of an adjustment of $1.0 million, in accordance with the provisions of ASC 712-10. Approximately 330 employees were impacted. Most of the employees impacted exited the Company by the end of the third quarter of 2018. The cash payments for these employees are expected to be completed by the end of the second quarter of 2019; and
•
Contract termination, lease termination obligations and other exit costs, including those to consolidate or close facilities of $2.7 million.
During the nine months ended September 30, 2017, we recorded a $22.3 million restructuring charge. This charge was comprised of:
•
Severance costs of $15.6 million and $1.6 million in accordance with the provisions of ASC 712-10 and ASC 420-10, respectively. Approximately 320 employees were impacted. Of these 320 employees, approximately 285 employees exited the Company by the end of the third quarter of 2017, with the remaining primarily having exited by the end of the fourth quarter of 2017. The cash payments for these employees were completed by the end of the third quarter of 2018; and
•
Contract termination, lease termination obligations and other exit costs, including those to consolidate or close facilities of $5.1 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
Note 5 -- Notes Payable and Indebtedness
Our borrowings are summarized in the following table:
September 30, 2018
At December 31, 2017
Maturity
Principal Amount
Debt Issuance Costs and Discount*
Carrying Value
Principal Amount
Debt Issuance Costs and Discount*
Carrying Value
Debt Maturing Within One Year:
2018 Term Loan Facility
$
15.0
$
—
$
15.0
$
—
$
—
$
—
2015 Term Loan Facility
—
—
—
32.5
—
32.5
2018 Revolving Credit Facility
3.5
—
3.5
—
—
—
Total Short-Term Debt
$
18.5
$
—
$
18.5
$
32.5
$
—
$
32.5
Debt Maturing After One Year:
Ten Year 4.37% senior notes (1) (2)
December 1, 2022
$
300.0
$
2.2
$
297.8
$
300.0
$
2.6
$
297.4
Five Year 4.00% senior notes (1) (3)
June 15, 2020
300.0
1.4
298.6
300.0
2.0
298.0
2018 Term Loan Facility
June 19, 2023
281.2
0.6
280.6
—
—
—
2015 Term Loan Facility
Retired
—
—
—
320.0
0.9
319.1
2018 Revolving Credit Facility
June 19, 2023
437.0
—
437.0
—
—
—
2014 Revolving Credit Facility
Retired
—
—
—
731.1
—
731.1
Total Long-Term Debt
$
1,318.2
$
4.2
$
1,314.0
$
1,651.1
$
5.5
$
1,645.6
*Represents unamortized portion of debt issuance costs and discounts.
(1) The notes contain certain covenants that limit our ability to create liens, enter into sale and leaseback transactions and consolidate, merge or sell assets to another entity. We were in compliance with these non-financial covenants at September 30, 2018 and December 31, 2017. The notes do not contain any financial covenants.
(2)
The interest rates are subject to an upward adjustment if our debt ratings decline three levels below the Standard & Poor’s® and/or Fitch® BBB+ credit ratings that we held on the date of issuance. After a rate adjustment, if our debt ratings are subsequently upgraded, the adjustment(s) would reverse. The maximum adjustment is 2.00% above the initial interest rates and the rates cannot adjust below the initial interest rates (see further discussion below).
(3) The interest rate is subject to an upward adjustment if our debt ratings decline one level below the Standard & Poor’s BBB- credit rating and/or two levels below the Fitch BBB credit rating that we held on the date of issuance. After a rate adjustment, if our debt ratings are subsequently upgraded, the adjustment(s) would reverse. The maximum adjustment is 2.00% above the initial interest rate and the rate cannot adjust below the initial interest rate (see further discussion below).
On March 27, 2017, Standard & Poor’s Ratings Services downgraded our corporate credit rating to BB+ from BBB-. As a result, and in accordance with the provisions of their indentures, the interest rates on each of our senior notes were adjusted above their initial stated coupons (shown above) by 25 basis points commencing with the interest period during which the downgrade occurred. On May 22, 2017, Fitch Ratings downgraded our corporate credit rating to BBB- from BBB. The interest rates on each of our senior notes were not impacted as a result of the downgrade. Any further downgrade in our corporate credit rating by either rating agency would result in additional increases in the interest rates of our senior notes. In addition, further downgrades may increase our overall cost of borrowing and/or may negatively impact our ability to raise additional debt capital.
In accordance with ASC 470, “Debt,” a short-term obligation that will be refinanced with successive short-term obligations may be classified as non-current as long as the cumulative period covered by the financing agreement is uninterrupted and extends beyond one year. Accordingly, the outstanding balances associated with the revolving credit facility were classified as “Long-Term Debt” as of September 30, 2018 and December 31, 2017, excluding outstanding borrowings that were subsequently repaid utilizing operating funds.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-continued
(Tabular dollar amounts in millions, except per share data)
Term Loan Facility
On June 19, 2018, we replaced our then existing term loan with a new $300 million term loan credit agreement (“2018 Term Loan Facility”). The 2018 Term Loan Facility matures on June 19, 2023, replacing the prior term loan facility entered into on May 14, 2015, with a maturity date of November 13, 2020 (“2015 Term Loan Facility”). The transaction was accounted for as a debt extinguishment in accordance with ASC 470-50, “Debt - Modifications and Extinguishments.” Unamortized debt issuance costs of $0.7 million related to the 2015 Term Loan Facility were written off as “Non-Operating Expenses.” Debt issuance costs of $0.6 million related to the 2018 Term Loan Facility were recorded as a reduction of the carrying amount of the 2018 Term Loan Facility and will be amortized over the term of the 2018 Term Loan Facility. Borrowings under the 2018 Term Loan Facility bear interest at a rate of LIBOR plus a spread of 150.0 basis points. We borrowed the full $300 million available under the 2018 Term Loan Facility and utilized the proceeds, together with proceeds from a borrowing under a new revolving credit facility (described below), to pay all amounts then outstanding under our 2015 Term Loan Facility. We committed to repay the borrowings in prescribed installments over the five-year period. Repayments expected to be made within one year are classified as “Short-Term Debt” and the remaining outstanding balance is classified as “Long-Term Debt.” The weighted average interest rates associated with the outstanding balances related to the 2018 and 2015 Term Loan Facilities as of September 30, 2018 and December 31, 2017 were 3.73% and 2.91%, respectively.
Both term loan facilities require the maintenance of interest coverage and total debt to Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”) ratios, which are defined in the respective term loan facility credit agreement and which are generally identical to those contained in the $1 billion revolving credit facility in effect. We were in compliance with the term loan facility financial and non-financial covenants at September 30, 2018 and December 31, 2017.
Revolving Credit Facility
On June 19, 2018, we replaced our then existing credit facility with a new $1 billion revolving credit facility (“2018 Revolving Credit Facility”). The 2018 Revolving Credit Facility expires on June 19, 2023, replacing the prior $1 billion credit facility entered into on July 23, 2014, with a maturity date of July 23, 2019 (“2014 Revolving Credit Facility”). The transaction was accounted for as a debt modification in accordance with ASC 470-50. Debt issuance costs of $2.8 million related to the 2018 Revolving Credit Facility, together with the unamortized debt issuance costs of the 2014 Revolving Credit Facility, were included in “Other Non-Current Assets” on the consolidated balance sheet and will be amortized over the term of the 2018 Revolving Credit Facility. Borrowings under the 2018 Revolving Credit Facility bear interest at a rate of LIBOR plus a spread of 120.0 basis points. We borrowed under the 2018 Revolving Credit Facility in order to pay all amounts outstanding under our 2014 Revolving Credit Facility and a portion of our 2015 Term Loan Facility. The weighted average interest rates associated with the outstanding balances related to the 2018 and 2014 Revolving Credit Facilities as of September 30, 2018 and December 31, 2017 were 3.52% and 2.80%, respectively.
Both credit facilities require the maintenance of interest coverage and total debt to EBITDA ratios which are defined in the respective revolving credit facility agreement in effect. We were in compliance with the revolving credit facility financial and non-financial covenants at September 30, 2018 and December 31, 2017.
Other
We were contingently liable under open standby letters of credit and bank guarantees issued by our banks in favor of third parties totaling $2.7 million at September 30, 2018 and $2.9 million at December 31, 2017.
Interest paid for all outstanding debt totaled $33.8 million and $32.6 million during the nine months ended September 30, 2018 and 2017, respectively.
On April 20, 2018, we entered into three-year interest rate swaps with an aggregate notional amount of $300 million in year 1, $214 million in year 2 and $129 million in year 3. The objective of the swaps is to mitigate the variation of future cash flows from changes in the floating interest rates on our existing debt. See Note 12 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
Note 6 -- Earnings Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding restricted stock unit awards, stock options, and contingently issuable shares using the treasury stock method.