Company Quick10K Filing
Quick10K
Fair Isaac
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$287.21 29 $8,330
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-K 2015-09-30 Annual: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-K 2014-09-30 Annual: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-06-24 Officers, Exhibits
8-K 2019-04-30 Earnings, Earnings, Exhibits
8-K 2019-01-30 Officers, Exhibits
8-K 2019-01-30 Earnings, Earnings, Exhibits
8-K 2018-11-01 Earnings, Earnings, Exhibits
8-K 2018-07-26 Earnings, Earnings, Exhibits
8-K 2018-05-08 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-01 Other Events, Exhibits
8-K 2018-04-30 Other Events, Exhibits
8-K 2018-03-30 Officers
8-K 2018-02-28 Shareholder Vote
JHX James Hardie Industries 5,750
AKR Acadia Realty Trust 2,330
QUOT Quotient Technology 959
GSM Ferroglobe 364
LOV Spark Networks Se 175
REED Reed's 124
SFHI Sports Field Holdings 0
ELRA Elray Resources 0
RSRT Realsource Residential 0
RPMT Rego Payment Architectures 0
FICO 2019-03-31
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ficoex-31110xqq22019.htm
EX-31.2 ficoex-31210xqq22019.htm
EX-32.1 ficoex-32110xqq22019.htm
EX-32.2 ficoex-32210xqq22019.htm

Fair Isaac Earnings 2019-03-31

FICO 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form 10-Q
 
 (Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 1-11689 
 
 
Fair Isaac Corporation
(Exact name of registrant as specified in its charter)
 
 
Delaware
94-1499887
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
 
181 Metro Drive, Suite 700
San Jose, California
95110-1346
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: 408-535-1500
 
 
 
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  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No
The number of shares of common stock outstanding on April 19, 2019 was 28,990,026 (excluding 59,866,757 shares held by us as treasury stock).
 


Table of Contents

TABLE OF CONTENTS
 
 
 
 
 
 
Item 1.
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 



i

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2019
 
September 30, 2018
 
 
 
As Adjusted
 
(In thousands, except par value data)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
76,885

 
$
90,023

Accounts receivable, net
271,632

 
266,742

Prepaid expenses and other current assets
48,483

 
39,624

Total current assets
397,000

 
396,389

Marketable securities
18,888

 
18,059

Other investments
1,702

 
1,697

Property and equipment, net
44,760

 
48,837

Goodwill
800,696

 
800,890

Intangible assets, net
11,422

 
14,536

Deferred income taxes
13,678

 
13,805

Other assets
39,965

 
36,254

Total assets
$
1,328,111

 
$
1,330,467

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
16,249

 
$
20,251

Accrued compensation and employee benefits
67,349

 
84,292

Other accrued liabilities
28,747

 
31,025

Deferred revenue
106,275

 
103,335

Current maturities on debt
218,000

 
235,000

Total current liabilities
436,620

 
473,903

Long-term debt
604,369

 
528,944

Other liabilities
39,644

 
40,183

Total liabilities
1,080,633

 
1,043,030

Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Preferred stock ($0.01 par value; 1,000 shares authorized; none issued and outstanding)

 

Common stock ($0.01 par value; 200,000 shares authorized, 88,857 shares issued and 29,056 and 29,015 shares outstanding at March 31, 2019 and September 30, 2018, respectively)
291

 
290

Additional Paid-in-capital
1,190,341

 
1,211,051

Treasury stock, at cost (59,801 and 59,842 shares at March 31, 2019 and September 30, 2018, respectively)
(2,704,305
)
 
(2,612,007
)
Retained earnings
1,837,912

 
1,764,524

Accumulated other comprehensive loss
(76,761
)
 
(76,421
)
Total stockholders’ equity
247,478

 
287,437

Total liabilities and stockholders’ equity
$
1,328,111

 
$
1,330,467



See accompanying notes.

1

Table of Contents

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

 
Quarter Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
 
 
 
As Adjusted
 
 
 
As Adjusted
 
(In thousands, except per share data)
Revenues:
 
 
 
 
 
 
 
Transactional and maintenance
$
211,779

 
$
192,791

 
$
405,972

 
$
363,194

Professional services
50,555

 
46,731

 
91,363

 
89,859

License
15,900

 
16,738

 
43,155

 
35,568

Total revenues
278,234

 
256,260

 
540,490

 
488,621

Operating expenses:
 
 
 
 
 
 
 
Cost of revenues *
85,568

 
79,493

 
161,634

 
153,925

Research and development
37,684

 
32,519

 
73,110

 
61,493

Selling, general and administrative *
104,930

 
96,125

 
205,188

 
186,467

Amortization of intangible assets *
1,503

 
1,684

 
3,005

 
3,472

Total operating expenses
229,685

 
209,821

 
442,937

 
405,357

Operating income
48,549

 
46,439

 
97,553

 
83,264

Interest expense, net
(10,008
)
 
(7,116
)
 
(19,684
)
 
(13,576
)
Other income (expense), net
1,433

 
(161
)
 
(739
)
 
352

Income before income taxes
39,974

 
39,162

 
77,130

 
70,040

Provision for income taxes
6,593

 
7,993

 
3,742

 
5,992

Net income
33,381

 
31,169

 
73,388

 
64,048

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments
2,925

 
9,125

 
(340
)
 
12,196

Comprehensive income
$
36,306

 
$
40,294

 
$
73,048

 
$
76,244

Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.15

 
$
1.04

 
$
2.53

 
$
2.13

Diluted
$
1.10

 
$
1.00

 
$
2.42

 
$
2.04

Shares used in computing earnings per share:
 
 
 
 
 
 
 
Basic
29,074

 
29,985

 
29,017

 
30,032

Diluted
30,259

 
31,300

 
30,297

 
31,431

 
 
* Cost of revenues and selling, general and administrative expenses exclude the amortization of intangible assets. See Note 4.
See accompanying notes.


2

Table of Contents

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
 
Common Stock
 
Additional
Paid-in-Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other
Comprehensive Loss
 
Total
Stockholders’ Equity
(In thousands) 
Shares
 
Par Value
 
 
 
 
 
Balance at December 31, 2018
29,056

 
$
291

 
$
1,176,770

 
$
(2,674,011
)
 
$
1,804,531

 
$
(79,686
)
 
$
227,895

Share-based compensation

 

 
20,482

 

 

 

 
20,482

Issuance of treasury stock under employee stock plans
150

 
2

 
(6,911
)
 
6,727

 

 

 
(182
)
Repurchases of common stock
(150
)
 
(2
)
 

 
(37,021
)
 

 

 
(37,023
)
Net income

 

 

 

 
33,381

 

 
33,381

Foreign currency translation adjustments

 

 

 

 

 
2,925

 
2,925

Balance at March 31, 2019
29,056

 
$
291

 
$
1,190,341

 
$
(2,704,305
)
 
$
1,837,912

 
$
(76,761
)
 
$
247,478

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Additional
Paid-in-Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other
Comprehensive Loss
 
Total
Stockholders’ Equity
(In thousands) 
Shares
 
Par Value
 
 
 
 
 
Balance at December 31, 2017 (As Adjusted)
30,246

 
$
302

 
$
1,160,274

 
$
(2,337,205
)
 
$
1,670,921

 
$
(63,424
)
 
$
430,868

Share-based compensation

 

 
19,239

 

 

 

 
19,239

Issuance of treasury stock under employee stock plans
50

 
1

 
(2,608
)
 
2,038

 

 

 
(569
)
Repurchases of common stock
(461
)
 
(5
)
 

 
(75,004
)
 

 

 
(75,009
)
Net income

 

 

 

 
31,169

 

 
31,169

Foreign currency translation adjustments

 

 

 

 

 
9,125

 
9,125

Balance at March 31, 2018 (As Adjusted)
29,835

 
$
298

 
$
1,176,905

 
$
(2,410,171
)
 
$
1,702,090

 
$
(54,299
)
 
$
414,823

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Additional
Paid-in-Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other
Comprehensive Loss
 
Total
Stockholders’ Equity
(In thousands) 
Shares
 
Par Value
 
 
 
 
 
Balance at September 30, 2018 (As Adjusted)
29,015

 
$
290

 
$
1,211,051

 
$
(2,612,007
)
 
$
1,764,524

 
$
(76,421
)
 
$
287,437

Share-based compensation

 

 
42,336

 

 

 

 
42,336

Issuance of treasury stock under employee stock plans
616

 
6

 
(63,046
)
 
27,420

 

 

 
(35,620
)
Repurchases of common stock
(575
)
 
(5
)
 

 
(119,718
)
 

 

 
(119,723
)
Net income

 

 

 

 
73,388

 

 
73,388

Foreign currency translation adjustments

 

 

 

 

 
(340
)
 
(340
)
Balance at March 31, 2019
29,056

 
$
291

 
$
1,190,341

 
$
(2,704,305
)
 
$
1,837,912

 
$
(76,761
)
 
$
247,478

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Additional
Paid-in-Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other
Comprehensive Loss
 
Total
Stockholders’ Equity
(In thousands) 
Shares
 
Par Value
 
 
 
 
 
Balance at September 30, 2017 (As Adjusted)
30,243

 
$
302

 
$
1,195,431

 
$
(2,301,097
)
 
$
1,638,042

 
$
(66,495
)
 
$
466,183

Share-based compensation

 

 
35,749

 

 

 

 
35,749

Issuance of treasury stock under employee stock plans
388

 
4

 
(54,275
)
 
15,529

 

 

 
(38,742
)
Repurchases of common stock
(796
)
 
(8
)
 

 
(124,603
)
 

 

 
(124,611
)
Net income

 

 

 

 
64,048

 

 
64,048

Foreign currency translation adjustments

 

 

 

 

 
12,196

 
12,196

Balance at March 31, 2018 (As Adjusted)
29,835

 
$
298

 
$
1,176,905

 
$
(2,410,171
)
 
$
1,702,090

 
$
(54,299
)
 
$
414,823

See accompanying notes.

3

Table of Contents

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended March 31,
 
2019
 
2018
 
 
 
As Adjusted
 
(In thousands)
Cash flows from operating activities:
 
 
 
Net income
$
73,388

 
$
64,048

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
15,786

 
15,095

Share-based compensation
42,336

 
35,749

Deferred income taxes
74

 
(3,152
)
Net (gain) loss on marketable securities
1,300

 
(198
)
Provision for doubtful accounts, net
391

 
482

Net (gain) loss on sales of property and equipment
(5
)
 
27

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(5,015
)
 
(9,019
)
Prepaid expenses and other assets
(12,219
)
 
(5,904
)
Accounts payable
(2,210
)
 
(515
)
Accrued compensation and employee benefits
(16,970
)
 
(20,650
)
Other liabilities
(2,672
)
 
(418
)
Deferred revenue
2,462

 
2,465

Net cash provided by operating activities
96,646

 
78,010

Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(10,644
)
 
(11,111
)
Proceeds from sales of marketable securities
2,267

 
2,383

Purchases of marketable securities
(4,396
)
 
(4,528
)
Net cash used in investing activities
(12,773
)
 
(13,256
)
Cash flows from financing activities:
 
 
 
Proceeds from revolving line of credit
138,000

 
147,000

Payments on revolving line of credit
(80,000
)
 
(48,000
)
Payments on debt issuance costs

 
(240
)
Proceeds from issuance of treasury stock under employee stock plans
12,850

 
1,706

Taxes paid related to net share settlement of equity awards
(48,470
)
 
(40,448
)
Repurchases of common stock
(119,723
)
 
(124,715
)
Net cash used in financing activities
(97,343
)
 
(64,697
)
Effect of exchange rate changes on cash
332

 
2,193

Increase (decrease) in cash and cash equivalents
(13,138
)
 
2,250

Cash and cash equivalents, beginning of period
90,023

 
105,618

Cash and cash equivalents, end of period
$
76,885

 
$
107,868

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for income taxes, net of refunds
$
7,962

 
$
6,669

Cash paid for interest
$
19,686

 
$
13,324

Supplemental disclosures of non-cash investing and financing activities:
 
 
 
Purchase of property and equipment included in accounts payable
$
77

 
$
6,006

Unsettled repurchases of common stock
$

 
$
5,557


See accompanying notes.

4

Table of Contents

FAIR ISAAC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business
Fair Isaac Corporation
Incorporated under the laws of the State of Delaware, Fair Isaac Corporation (“FICO”) is a provider of analytic, software and data management products and services that enable businesses to automate, improve and connect decisions. FICO provides a range of analytical solutions, credit scoring and credit account management products and services to banks, credit reporting agencies, credit card processing agencies, insurers, retailers, telecommunications providers, pharmaceutical companies, healthcare organizations, public agencies and organizations in other industries.
In this Quarterly Report on Form 10-Q, Fair Isaac Corporation is referred to as “FICO,” “we,” “us,” “our,” or “the Company.”
Principles of Consolidation and Basis of Presentation
We have prepared the accompanying unaudited interim condensed consolidated financial statements in accordance with the instructions to Form 10-Q and the applicable accounting guidance. Consequently, we have not necessarily included all information and footnotes required for audited financial statements. In our opinion, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our financial position and results of operations. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with our audited consolidated financial statements and notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. The interim financial information contained in this report is not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year.
Effective October 1, 2018, we adopted Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) using the full retrospective method. In connection with this adoption, the results and related disclosures for the comparative fiscal 2018 periods presented in this Form 10-Q were adjusted to be presented as if ASU 2014‑09 had been in effect during such fiscal 2018 periods. See “New Accounting Pronouncements” below and Note 8. All amounts and disclosures set forth in this Form 10-Q reflect these changes.
The condensed consolidated financial statements include the accounts of FICO and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates
We make estimates and assumptions that affect the amounts reported in the financial statements and the disclosures made in the accompanying notes. For example, we use estimates in determining the collectability of accounts receivable; the appropriate levels of various accruals; labor hours in connection with fixed-fee service contracts; the amount of our tax provision and the realizability of deferred tax assets. We also use estimates in determining the remaining economic lives and carrying values of acquired intangible assets, property and equipment, and other long-lived assets. In addition, we use assumptions to estimate the fair value of reporting units and share-based compensation. Actual results may differ from our estimates.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.
See Note 8 for further discussion on revenues.

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New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09. The standard’s core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (“full retrospective method”), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (“modified retrospective method”).
We adopted ASU 2014-09 in the first quarter of our fiscal 2019 using the full retrospective method which required us to adjust each prior reporting period presented. This adoption primarily affected timing of revenue recognition of license revenue on term licenses and transactional revenue on guaranteed minimum fees related to our on-premises software products. Under the new standard, we recognize revenue when control of the license is transferred to the customer, rather than at the date payments become due and payable when there are extended payment terms, or ratably over the term of the contract as required under the previous standard. In addition, revenue attributable to a software license renewal is recognized at the beginning of the applicable renewal period rather than at the signing of the renewal agreement as required under the previous standard. Additionally, under the new standard, when we enter into noncancellable contracts that provide unconditional rights to payment from our customers for services we have not yet completed or services we will provide in the near future, we present receivables — our unconditional rights to payments — and deferred revenues on a gross basis, rather than on a net basis. Finally, under the new standard we capitalize and amortize contract acquisition costs such as commissions paid for software-as-a-service (“SaaS”) cloud services contracts in excess of one year. Following the adoption of ASU 2014-09, the revenue recognition for our other sales arrangements remained materially consistent with our historical practice.
Upon adoption of ASU 2014-09, we applied the standard’s practical expedients that permit the omission of prior-period information about our performance obligations.
Adoption of the standard impacted our previously reported results as follows:
Condensed Consolidated Balance Sheets
 
September 30, 2018
 
As Previously Reported
 
Adjustment
 
As Adjusted
 
(In thousands)
Accounts receivable, net
208,865

 
57,877

 
266,742

Deferred income taxes
20,117

 
(6,312
)
 
13,805

Other assets
12,431

 
23,823

 
36,254

Other accrued liabilities
30,457

 
568

 
31,025

Deferred revenue
52,215

 
51,120

 
103,335

Stockholders’ equity
263,737

 
23,700

 
287,437



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Condensed Consolidated Statements of Income and Comprehensive Income
 
Quarter Ended March 31, 2018
 
Six Months Ended March 31, 2018
 
As Previously Reported
 
Adjustment
 
As Adjusted
 
As Previously Reported
 
Adjustment
 
As Adjusted
 
(In thousands, except per share amounts)
Revenues
257,858

 
(1,598
)
 
256,260

 
493,179

 
(4,558
)
 
488,621

Cost of revenues
78,519

 
974

 
79,493

 
152,878

 
1,047

 
153,925

Selling, general and administrative
97,057

 
(932
)
 
96,125

 
187,353

 
(886
)
 
186,467

Provision for income taxes
8,527

 
(534
)
 
7,993

 
15,185

 
(9,193
)
 
5,992

Net income
32,275

 
(1,106
)
 
31,169

 
59,574

 
4,474

 
64,048

Comprehensive income
41,400

 
(1,106
)
 
40,294

 
71,770

 
4,474

 
76,244

Basic earnings per share
1.08

 
(0.04
)
 
1.04

 
1.98

 
0.15

 
2.13

Diluted earnings per share
1.03

 
(0.03
)
 
1.00

 
1.90

 
0.14

 
2.04


Condensed Consolidated Statement of Cash Flows
 
Six Months Ended March 31, 2018
 
As Previously Reported
 
Adjustment
 
As Adjusted
 
(In thousands)
Cash flows from operating activities:
 
 
 
 
 
Net income
59,574

 
4,474

 
64,048

Deferred income taxes
6,041

 
(9,193
)
 
(3,152
)
Changes in operating assets and liabilities
(38,760
)
 
4,719

 
(34,041
)

Recent Accounting Pronouncements Not Yet Adopted
In February 2018, the FASB issued ASU No. 2018-02, “Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 allows reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act (defined below) and requires certain disclosures about stranded tax effects. The guidance is effective for fiscal years and interim periods beginning after December 15, 2018, which means it will be effective for our fiscal year beginning October 1, 2019. ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. We do not believe that adoption of ASU 2018-02 will have a significant impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” and subsequent amendments to the initial guidance: ASU 2017-13, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively, Topic 842). Topic 842 requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use assets. Topic 842 is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018, which means it will be effective for our fiscal year beginning October 1, 2019. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of Topic 842 on our consolidated financial statements. We expect that most of our operating leases will be recognized as right-of-use assets and corresponding lease liabilities on our consolidated balance sheets, which will increase our total assets and total liabilities upon adoption.
2. Fair Value Measurements
Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting guidance establishes a three-level hierarchy for disclosure that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities.
 
Level 1 - uses unadjusted quoted prices that are available in active markets for identical assets or liabilities. Our Level 1 assets are comprised of money market funds and certain equity securities. We do not have any liabilities that are valued using inputs identified under a Level I hierarchy as of March 31, 2019 and September 30, 2018.

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Level 2 - uses inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data. We do not have any assets that are valued using inputs identified under a Level 2 hierarchy as of March 31, 2019 and September 30, 2018. We measure the fair value of the Senior Notes based on Level 2 inputs, which include quoted market prices and interest rate spreads of similar securities.
Level 3 - uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation. We do not have any assets or liabilities that are valued using inputs identified under a Level 3 hierarchy as of March 31, 2019 and September 30, 2018.
The following tables represent financial assets that we measured at fair value on a recurring basis at March 31, 2019 and September 30, 2018:
March 31, 2019
Active Markets for
Identical Instruments
(Level 1)
 
Fair Value as of March 31, 2019
 
(In thousands)
Assets:
 
 
 
Cash equivalents (1)
$
22,607

 
$
22,607

Marketable securities (2)
18,888

 
18,888

Total
$
41,495

 
$
41,495

 
 
 
 
September 30, 2018
Active Markets for
Identical Instruments
(Level 1)
 
Fair Value as of September 30, 2018
 
(In thousands)
Assets:
 
 
 
Cash equivalents (1)
$
18,413

 
$
18,413

Marketable securities (2)
18,059

 
18,059

Total
$
36,472

 
$
36,472

(1)
Included in cash and cash equivalents on our condensed consolidated balance sheet at March 31, 2019 and September 30, 2018. Not included in these tables are cash deposits of $54.3 million and $71.6 million at March 31, 2019 and September 30, 2018, respectively.
(2)
Represents securities held under a supplemental retirement and savings plan for senior management employees, which are distributed upon termination or retirement of the employees. Included in marketable securities on our condensed consolidated balance sheet at March 31, 2019 and September 30, 2018.
We have not changed our valuation techniques in measuring the fair value of any financial assets and liabilities during the period. For the fair value of our derivative instruments and senior notes, see Note 3 and Note 7, respectively.

3. Derivative Financial Instruments
We use derivative instruments to manage risks caused by fluctuations in foreign exchange rates. The primary objective of our derivative instruments is to protect the value of foreign-currency-denominated receivable and cash balances from the effects of volatility in foreign exchange rates that might occur prior to conversion to their respective functional currencies. We principally utilize foreign currency forward contracts, which enable us to buy and sell foreign currencies in the future at fixed exchange rates and economically offset changes in foreign exchange rates. We routinely enter into contracts to offset exposures denominated in the British pound, Euro, and Singapore dollar.

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Foreign-currency-denominated receivable and cash balances are remeasured at foreign exchange rates in effect on the balance sheet date with the effects of changes in foreign exchange rates reported in other income (expense), net. The forward contracts are not designated as hedges and are marked to market through other income (expense), net. Fair value changes in the forward contracts help mitigate the changes in the value of the remeasured receivable and cash balances attributable to changes in foreign exchange rates. The forward contracts are short-term in nature and typically have average maturities at inception of less than three months.
The following tables summarize our outstanding foreign currency forward contracts, by currency, at March 31, 2019 and September 30, 2018:
 
March 31, 2019
 
Contract Amount
 
Fair Value
 
Foreign
Currency
 
US$
 
US$
 
(In thousands)
Sell foreign currency:
 
 
 
 
 
 
Euro (EUR)
EUR 
8,400

 
$
9,443

 
$

Buy foreign currency:
 
 
 
 
 
 
British pound (GBP)
GBP 
8,851

 
$
11,600

 
$

Singapore dollar (SGD)
SGD
5,689

 
$
4,200

 
$

 
September 30, 2018
 
Contract Amount
 
Fair Value
 
Foreign
Currency
 
US$
 
US$
 
(In thousands)
Sell foreign currency:
 
 
 
 
 
 
Euro (EUR)
EUR 
9,000

 
$
10,372

 
$

Buy foreign currency:
 
 
 
 
 
 
British pound (GBP)
GBP 
8,598

 
$
11,200

 
$

Singapore dollar (SGD)
SGD
9,580

 
$
7,000

 
$


The foreign currency forward contracts were entered into on March 31, 2019 and September 30, 2018, respectively; therefore, their fair value was $0 on each of these dates.
Gains on derivative financial instruments are recorded in our condensed consolidated statements of income and comprehensive income as a component of other income (expense), net, and consisted of the following: 
 
Quarter Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Gains on foreign currency forward contracts
$
720

 
$
425

 
$
316

 
$
619




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4. Goodwill and Intangible Assets

Amortization expense associated with our intangible assets are reflected as a separate operating expense caption — amortization of intangible assets — and are excluded from cost of revenues and selling, general and administrative expenses within the accompanying condensed consolidated statements of income and comprehensive income. Amortization expense consisted of the following: 
 
Quarter Ended March 31,
 
Six Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Completed technology
$
494

 
$
615

 
$
988

 
$
1,321

Other intangible assets
1,009

 
1,069

 
2,017

 
2,151

       Total
$
1,503

 
$
1,684

 
$
3,005

 
$
3,472



Estimated future intangible asset amortization expense associated with intangible assets existing at March 31, 2019 was as follows (in thousands):
Year Ending September 30,
 
2019 (excluding the six months ended March 31, 2019)
$
2,907

2020
3,619

2021
2,412

2022
2,267

2023
217


$
11,422


The following table summarizes changes to goodwill during the six months ended March 31, 2019, both in total and as allocated to our segments:
 
Applications
 
Scores
 
Decision Management Software
 
Total
 
(In thousands)
Balance at September 30, 2018
$
585,161

 
$
146,648

 
$
69,081

 
$
800,890

Addition from acquisitions
980

 

 

 
980

Foreign currency translation adjustment
(1,254
)
 

 
80

 
(1,174
)
Balance at March 31, 2019
$
584,887

 
$
146,648

 
$
69,161

 
$
800,696



5. Composition of Certain Financial Statement Captions
The following table summarizes property and equipment, and the related accumulated depreciation and amortization, at March 31, 2019 and September 30, 2018:
 
March 31,
2019
 
September 30,
2018
 
(In thousands)
Property and equipment
$
163,687

 
$
156,154

Less: accumulated depreciation and amortization
(118,927
)
 
(107,317
)
 
$
44,760

 
$
48,837



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6. Revolving Line of Credit
We have a $400 million unsecured revolving line of credit with a syndicate of banks that expires on May 8, 2023 with an option to increase it by another $100 million. Proceeds from the credit facility can be used for working capital and general corporate purposes and may also be used for the refinancing of existing debt, acquisitions and the repurchase of our common stock. Interest on amounts borrowed under the credit facility is based on (i) a base rate, which is the greater of (a) the prime rate, (b) the Federal Funds rate plus 0.500% and (c) the one-month LIBOR rate plus 1.000%, plus, in each case, an applicable margin, or (ii) an adjusted LIBOR rate plus an applicable margin. The applicable margin for base rate borrowings ranges from 0% to 0.875% and for LIBOR borrowings ranges from 1.000% to 1.875%, and is determined based on our consolidated leverage ratio. In addition, we must pay credit facility fees. The credit facility contains certain restrictive covenants including maintaining a maximum consolidated leverage ratio of 3.25, subject to a step up to 3.75 following certain permitted acquisitions; and a minimum fixed charge ratio of 2.50 through the maturity of our 2010 Senior Notes in July 2020, upon which maintaining a minimum interest coverage ratio of 3.00. The credit agreement also contains other covenants typical of unsecured facilities. As of March 31, 2019, we had $315.0 million in borrowings outstanding at a weighted average interest rate of 3.869%, of which $125.0 million