10-Q 1 vrsk20210930_10q.htm FORM 10-Q vrsk20210930_10q.htm
0001442145 Verisk Analytics, Inc. false --12-31 Q3 2021 24.2 17.7 0.001 0.001 2,000,000,000 2,000,000,000 544,003,038 544,003,038 161,415,070 162,817,526 382,587,968 381,185,512 798,242 274,052 1,294 1,204 11,647 276,290 492,135 1,721 288 13,637 2,192,780 572,213 182,824 57,020 35,287 1,892,187 1,308,469 137,811 25,187 35,792 0 0 20 0.5 4.125 0.6 5.8 0.1 3.625 3.625 10.4 10.7 4.125 4.125 11.3 12.4 4.00 4.00 4.5 5.4 5.50 5.50 4.2 4.3 4.125 1.1 2,000,000,000 0 0 0.29 0.29 2.5 10 3 4 4 3 1 12 3 0 7 5 6 These accumulated other comprehensive loss components, before tax, are included under "Cost of revenues" and "Selling, general and administrative" in our accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note 13. Pension and Postretirement Benefits for additional details). Includes estimated performance achievement Included in "Depreciation and amortization of fixed assets" in our accompanying condensed consolidated statements of operations Included in "Interest expense" in our accompanying condensed consolidated statements of operations Refer to Note 5. Leases Of which $15.8 million relates to a segment reclassification, refer to Note 14. Segment Reporting Refer to Note 11. 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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q

 


 

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

For the quarterly period ended September 30, 2021

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: 001-34480

 


VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

 


Delaware

26-2994223

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

  

545 Washington Boulevard

 

Jersey City

 

NJ

07310-1686

(Address of principal executive offices)

(Zip Code)

 

(201) 469-3000

(Registrant’s telephone number, including area code)

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

 

Title of each class

Trading Symbol(s)

Name of each exchange where registered

Common Stock $.001 par value

VRSK

NASDAQ Global Select Market

 


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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

 

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

 

Large accelerated filer

 

 

Accelerated filer

 

       

Non-accelerated filer

 

 

Smaller reporting company

 

       
    

Emerging growth company

 

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

As of October 29, 2021, there were 161,161,375 shares outstanding of the registrant's Common Stock, par value $.001.

 



 

 

 

Verisk Analytics, Inc.

Index to Form 10-Q

 

Table of Contents

 

 

 

Page Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

 

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations

2

Condensed Consolidated Statements of Comprehensive Income

3

Condensed Consolidated Statements of Changes in Stockholders’ Equity

4

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7

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

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

40

Item 4. Controls and Procedures

40

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

41

Item 1A. Risk Factors

41

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

41

Item 3. Defaults Upon Senior Securities

41

Item 4. Mine Safety Disclosures

41

Item 5. Other Information

42

Item 6. Exhibits

42

SIGNATURES

43

Exhibit 31.1

 

Exhibit 31.2

 

Exhibit 32.1

 

 

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

  

September 30, 2021

  

December 31, 2020

 
  

(in millions, except for share and per share data)

 

ASSETS

 

Current assets:

        

Cash and cash equivalents

 $302.1  $218.8 

Accounts receivable, net of allowance for doubtful accounts of $24.2 and $17.7, respectively

  468.0   432.4 

Prepaid expenses

  102.9   81.2 

Income taxes receivable

  21.0   25.4 

Other current assets

  40.1   36.4 

Total current assets

  934.1   794.2 

Noncurrent assets:

        

Fixed assets, net

  674.6   632.3 

Operating lease right-of-use assets, net

  257.6   267.6 

Intangible assets, net

  1,265.3   1,384.8 

Goodwill

  4,129.5   4,108.1 

Deferred income tax assets

  8.7   9.1 

Other noncurrent assets

  392.7   365.7 

Total assets

 $7,662.5  $7,561.8 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

        

Accounts payable and accrued liabilities

 $440.0  $407.3 

Short-term debt and current portion of long-term debt

  766.6   514.3 

Deferred revenues

  584.4   466.7 

Operating lease liabilities

  41.3   38.7 

Income taxes payable

  10.8   3.8 

Total current liabilities

  1,843.1   1,430.8 

Noncurrent liabilities:

        

Long-term debt

  2,343.1   2,699.6 

Deferred income tax liabilities

  434.8   396.9 

Operating lease liabilities

  259.0   271.6 

Other noncurrent liabilities

  48.7   64.7 

Total liabilities

  4,928.7   4,863.6 

Commitments and contingencies (Note 16)

          

Stockholders’ equity:

        

Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038 shares issued; 161,415,070 and 162,817,526 shares outstanding, respectively

  0.1   0.1 

Additional paid-in capital

  2,567.4   2,490.9 

Treasury stock, at cost, 382,587,968 and 381,185,512 shares, respectively

  (4,570.2)  (4,179.3)

Retained earnings

  5,145.7   4,762.2 

Accumulated other comprehensive losses

  (428.6)  (375.7)

Total Verisk stockholders' equity

  2,714.4   2,698.2 

Noncontrolling interest

 19.4    

Total stockholders’ equity

  2,733.8   2,698.2 

Total liabilities and stockholders’ equity

 $7,662.5  $7,561.8 

 

 

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

 

 

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(in millions, except for share and per share data)

 

Revenues

  $ 759.0     $ 702.7     $ 2,232.6     $ 2,071.2  

Operating expenses:

                               

Cost of revenues (exclusive of items shown separately below)

    265.3       240.0       792.6       733.4  

Selling, general and administrative

    115.1       96.4       346.3       304.8  

Depreciation and amortization of fixed assets

    52.1       49.4       153.9       141.3  

Amortization of intangible assets

    37.6       41.5       133.1       123.6  

Other operating income

                      (19.4 )

Total operating expenses

    470.1       427.3       1,425.9       1,283.7  

Operating income

    288.9       275.4       806.7       787.5  

Other income (expense):

                               

Investment income (loss) and others, net

    0.1       (0.1 )     1.3       (3.1 )

Interest expense

    (29.9 )     (35.3 )     (96.8 )     (102.9 )

Total other expense, net

    (29.8 )     (35.4 )     (95.5 )     (106.0 )

Income before income taxes

    259.1       240.0       711.2       681.5  

Provision for income taxes

    (54.2 )     (54.2 )     (186.7 )     (145.0 )

Net income

    204.9       185.8       524.5       536.5  

Less: Net income attributable to noncontrolling interest

    (3.2 )           (0.2 )      

Net income attributable to Verisk

  $ 201.7     $ 185.8     $ 524.3     $ 536.5  

Basic net income per share attributable to Verisk

  $ 1.25     $ 1.14     $ 3.24     $ 3.30  

Diluted net income per share attributable to Verisk

  $ 1.24     $ 1.12     $ 3.21     $ 3.24  

Weighted-average shares outstanding:

                               

Basic

    161,366,544       162,502,191       162,005,382       162,589,473  

Diluted

    162,792,791       165,731,226       163,425,349       165,519,899  

 

 

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

 

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(in millions)

 

Net income

  $ 204.9     $ 185.8     $ 524.5     $ 536.5  

Other comprehensive income (loss), net of tax:

                               

Foreign currency translation adjustment

    (80.4 )     115.0       (55.2 )     (57.7 )

Pension and postretirement liability adjustment

    0.7       1.3       2.3       3.7  

Total other comprehensive (loss) income

    (79.7 )     116.3       (52.9 )     (54.0 )

Comprehensive income

    125.2       302.1       471.6       482.5  

Less: Net income attributable to noncontrolling interest

    (3.2 )           (0.2 )      

Change in foreign currency translation adjustment attributable to noncontrolling interest

    0.5             0.6        

Comprehensive income attributable to Verisk

  $ 122.5     $ 302.1     $ 472.0     $ 482.5  

 

 

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

 

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For The Three Months Ended September 30, 2021 and 2020

 

  

Common Stock Issued

  

Par Value

  

Additional Paid-in Capital

  

Treasury Stock

  

Retained Earnings

  

Accumulated Other Comprehensive Losses

  

Total Verisk Stockholders' Equity

  

Noncontrolling Interest

  

Total Stockholders' Equity

 
  

(in millions, except for share data)

     

Balance, July 1, 2021

  544,003,038  $0.1  $2,534.9  $(4,423.6) $4,991.0  $(348.9) $2,753.5  $16.7  $2,770.2 

Net income

              204.9      204.9      204.9 

Other comprehensive loss

                 (79.7)  (79.7)     (79.7)

Less: Comprehensive loss attributable to noncontrolling interest

              (3.2)     (3.2)  2.7   (0.5)

Common stock dividend (1)

              (47.0)     (47.0)     (47.0)

Treasury stock acquired (798,242 shares)

           (150.0)        (150.0)     (150.0)

Stock options exercised (274,052 shares transferred from treasury stock)

        20.1   3.2         23.3      23.3 

Restricted stock and performance share units lapsed (1,294 shares transferred from treasury stock)

                           

Stock-based compensation expense

        11.2            11.2      11.2 

Net share settlement from restricted stock awards (1,204 shares withheld for tax settlement)

        (0.2)           (0.2)     (0.2)

Other stock issuances (11,647 shares transferred from treasury stock)

        1.4   0.2         1.6      1.6 

Balance, September 30, 2021

  544,003,038  $0.1  $2,567.4  $(4,570.2) $5,145.7  $(428.6) $2,714.4  $19.4  $2,733.8 
                                     

Balance, July 1, 2020

  544,003,038  $0.1  $2,432.8  $(4,088.4) $4,488.8  $(657.2) $2,176.1  $  $2,176.1 

Net income

              185.8      185.8      185.8 

Other comprehensive income

                 116.3   116.3      116.3 

Common stock dividend (1)

              (44.2)     (44.2)     (44.2)

Treasury stock acquired (276,290 shares)

           (50.0)        (50.0)     (50.0)

Stock options exercised (492,135 shares transferred from treasury stock)

        20.7   5.3         26.0      26.0 

Restricted stock lapsed (1,721 shares transferred from treasury stock)

                           

Stock-based compensation expense

        10.0            10.0      10.0 

Net share settlement from restricted stock awards (288 shares withheld for tax settlement)

                           

Other stock issuances (13,637 shares transferred from treasury stock)

        1.1   0.2         1.3      1.3 

Balance, September 30, 2020

  544,003,038  $0.1  $2,464.6  $(4,132.9) $4,630.4  $(540.9) $2,421.3  $  $2,421.3 

_______________

(1) Refer to Note 11. Stockholders' Equity for discussion related to quarterly cash dividends declared per share

 

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

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For The Nine Months Ended September 30, 2021 and 2020

 

  

Common Stock Issued

  

Par Value

  

Additional Paid-in Capital

  

Treasury Stock

  

Retained Earnings

  

Accumulated Other Comprehensive Losses

  

Total Verisk Stockholders' Equity

  

Noncontrolling Interest

  

Total Stockholders' Equity

 
  

(in millions, except for share data)

     

Balance, January 1, 2021

  544,003,038  $0.1  $2,490.9  $(4,179.3) $4,762.2  $(375.7) $2,698.2  $  $2,698.2 

Net income

              524.5      524.5      524.5 

Other comprehensive loss

                 (52.9)  (52.9)     (52.9)

Less: Comprehensive loss attributable to noncontrolling interest

              (0.2)     (0.2)  (0.4)  (0.6)

Investment in noncontrolling interest

                       19.8   19.8 

Common stock dividend (1)

              (140.8)     (140.8)     (140.8)

Treasury stock acquired (2,192,780 shares)

           (400.0)        (400.0)     (400.0)

Stock options exercised (572,213 shares transferred from treasury stock)

        38.0   6.6         44.6      44.6 

Restricted stock and performance share units lapsed (182,824 shares transferred from treasury stock)

        (2.1)  2.1                

Stock-based compensation expense

        47.4            47.4      47.4 

Net share settlement from restricted stock awards (57,020 shares withheld for tax settlement)

        (11.2)           (11.2)     (11.2)

Other stock issuances (35,287 shares transferred from treasury stock)

        4.4   0.4         4.8      4.8 

Balance, September 30, 2021

  544,003,038  $0.1  $2,567.4  $(4,570.2) $5,145.7  $(428.6) $2,714.4  $19.4  $2,733.8 
                                     

Balance, January 1, 2020

  544,003,038  $0.1  $2,369.1  $(3,849.9) $4,228.4  $(486.9) $2,260.8  $  $2,260.8 

Adjustment to opening retained earnings related to Topic 326

              (2.4)     (2.4)     (2.4)

Net income

              536.5      536.5      536.5 

Other comprehensive loss

                 (54.0)  (54.0)     (54.0)

Common stock dividend (1)

              (132.1)     (132.1)     (132.1)

Treasury stock acquired (1,892,187 shares)

           (298.8)        (298.8)     (298.8)

Stock options exercised (1,308,469 shares transferred from treasury stock)

        57.9   13.9         71.8      71.8 

Restricted stock lapsed (137,811 shares transferred from treasury stock)

        (1.5)  1.5                

Stock-based compensation expense

        39.1            39.1      39.1 

Net share settlement from restricted stock awards (25,187 shares withheld for tax settlement)

        (3.5)           (3.5)     (3.5)

Other stock issuances (35,792 shares transferred from treasury stock)

        3.5   0.4         3.9      3.9 

Balance, September 30, 2020

  544,003,038  $0.1  $2,464.6  $(4,132.9) $4,630.4  $(540.9) $2,421.3  $  $2,421.3 

_______________

(1) Refer to Note 11. Stockholders' Equity for discussion related to quarterly cash dividends declared per share

 

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

 

 

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For The Three and Nine Months Ended September 30, 2021 and 2020

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 
   

(in millions)

 

Cash flows from operating activities:

                               

Net income

  $ 204.9     $ 185.8     $ 524.5     $ 536.5  

Adjustments to reconcile net income to net cash provided by operating activities:

                               

Depreciation and amortization of fixed assets

    52.1       49.4       153.9       141.3  

Amortization of intangible assets

    37.6       41.5       133.1       123.6  

Amortization of debt issuance costs and original issue discount, net of original issue premium

    0.4       0.5       1.1       1.3  

Provision for doubtful accounts

    4.3       1.4       13.0       6.8  

Gain on sale of assets

                      (19.4 )

Stock-based compensation expense

    11.2       10.0       47.4       39.1  

Deferred income taxes

    1.3       12.4       33.9       10.9  

Loss on disposal of fixed assets, net

    0.1       0.1       0.1       0.5  

Changes in assets and liabilities, net of effects from acquisitions:

                               

Accounts receivable

    (7.9 )     26.8       (48.9 )     (3.6 )

Prepaid expenses and other assets

    (4.4 )     (8.3 )     (27.5 )     (62.1 )

Operating lease right-of-use assets, net

    9.9       9.3       30.9       28.6  

Income taxes

    10.9       (63.3 )     11.5       3.3  

Accounts payable and accrued liabilities

    49.2       39.2       29.2       (75.5 )

Deferred revenues

    (71.2 )     (90.5 )     116.5       94.3  

Operating lease liabilities

    (10.5 )     (8.7 )     (31.0 )     (16.6 )

Other liabilities

    (2.7 )     1.5       (20.6 )     10.2  

Net cash provided by operating activities

    285.2       207.1       967.1       819.2  

Cash flows from investing activities:

                               

Acquisitions and purchase of controlling interest, net of cash acquired of $0.0 and $5.2; and $5.7 and $5.2, respectively

    (17.9 )     (151.9 )     (49.4 )     (151.9 )

Proceeds from sale of assets

                      23.1  

Investments in nonpublic companies

    (6.0 )           (21.1 )     (63.8 )

Escrow funding associated with acquisitions

    (2.4 )     (8.0 )     (7.2 )     (8.0 )

Capital expenditures

    (61.4 )     (64.8 )     (183.1 )     (174.4 )

Payment of contingent liability related to acquisitions

                (1.2 )      

Other investing activities, net

          5.7       0.8       10.3  

Net cash used in investing activities

    (87.7 )     (219.0 )     (261.2 )     (364.7 )

Cash flows from financing activities:

                               

Proceeds (repayments) from short-term debt, net

    15.0             355.0       (495.0 )

Repayment of current portion of long-term debt

                (450.0 )      

Proceeds from issuance of short-term debt with original maturities greater than three months

                      20.0  

Repayment of short-term debt with original maturities greater than three months

                      (20.0 )

Proceeds from issuance of long-term debt, inclusive of original issue premium and net of original issue discount

                      494.8  

Payment of debt issuance costs

          (0.1 )           (5.7 )

Repurchases of common stock

    (150.0 )     (50.0 )     (400.0 )     (298.8 )

Proceeds from stock options exercised

    23.9       26.0       44.9       68.3  

Net share settlement of taxes from restricted stock and performance share awards

    (0.2 )           (11.2 )     (3.5 )

Dividends paid

    (46.8 )     (43.9 )     (141.0 )     (131.8 )

Payment of contingent liability related to acquisitions

                      (34.2 )

Other financing activities, net

    (11.1 )     (8.5 )     (14.8 )     (13.0 )

Net cash used in financing activities

    (169.2 )     (76.5 )     (617.1 )     (418.9 )

Effect of exchange rate changes

    (2.5 )     0.8       (5.5 )     1.3  

Net increase (decrease) in cash and cash equivalents

    25.8       (87.6 )     83.3       36.9  

Cash and cash equivalents classified within current assets held for sale, beginning of period

                      0.3  

Cash and cash equivalents, beginning of period

    276.3       309.4       218.8       184.6  

Cash and cash equivalents, end of period

  $ 302.1     $ 221.8     $ 302.1     $ 221.8  

Supplemental disclosures:

                               

Income taxes paid

  $ 45.8     $ 107.1     $ 144.7     $ 132.8  

Interest paid

  $ 21.2     $ 19.2     $ 90.9     $ 82.9  

Noncash investing and financing activities:

                               

Deferred tax liability established on date of acquisition

  $ 1.1     $ 1.8     $ 5.5     $ 1.8  

Finance lease additions

  $ 1.9     $ 23.8     $ 4.5     $ 25.4  

Operating lease additions, net of terminations

  $ 11.6     $ 2.3     $ 21.0     $ 47.5  

Fixed assets included in accounts payable and accrued liabilities

  $ 10.5     $ 1.1     $ 10.5     $ 1.1  

Gain on sale of assets included in other current and long-term assets

  $     $     $     $ 3.5  

Held for sale assets contributed to a nonpublic company

  $     $     $     $ 65.9  

 

 

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

 

 

VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in millions, except for share and per share data, unless otherwise stated)

 

 

1. Organization:

 

Verisk Analytics, Inc. is a data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using various technologies to collect and analyze billions of records, we draw on numerous data assets and domain expertise to provide first-to-market innovations that are integrated into customer workflows. We offer predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, commercial banking and finance, and many other fields. Around the world, we help customers protect people, property, and financial assets. 

 

We were established to serve as the parent holding company of Insurance Services Office, Inc. ("ISO") upon the completion of the initial public offering ("IPO"), which occurred on October 9, 2009. ISO was formed in 1971 as an advisory and rating organization for the property and casualty ("P&C") insurance industry to provide statistical and actuarial services, to develop insurance programs, and to assist insurance companies in meeting state regulatory requirements. Over the past decade, we broadened our data assets, entered new markets, placed a greater emphasis on analytics, and pursued strategic acquisitions. We trade under the ticker symbol "VRSK" on the Nasdaq Global Select Market.

 

Since January 2020, an outbreak of the 2019 novel coronavirus ("COVID-19") has evolved into a worldwide pandemic. We have modified our operations in line with our business continuity plans due to COVID-19. While our facilities generally remain open, we are making extensive use of the work-from-home model at this moment. On a daily basis, management is reviewing our operations and there have been to date minimal interruptions in our customer-facing operations. Given the digital nature of our business and the move toward cloud enablement, we expect to remain operationally stable and fully available to our customers. We are in compliance with all financial and non-financial covenants and have not observed a loss of any significant customers, a significant deterioration in the collectability of receivables, a significant reduction in our liquidity, nor a significant decline in subscription renewal rates.

 

 

 

2. Basis of Presentation and Summary of Significant Accounting Policies:

 

Our accompanying unaudited condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. ("U.S. GAAP"). The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill, the realization of deferred tax assets and liabilities, acquisition-related liabilities, fair value of stock-based compensation for stock options and performance share units granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates.

 

Our condensed consolidated financial statements as of  September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly our financial position, results of operations, and cash flows. Our operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year. Our condensed consolidated financial statements and related notes as of and for the three and nine months ended September 30, 2021 have been prepared on the same basis as and should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the SEC. We believe the disclosures made are adequate to keep the information presented from being misleading.

 

7

 

Recent Accounting Pronouncements

 

Accounting Standard

Description

Effective Date

Effect on Consolidated Financial Statements or Other Significant Matters

Income Tax (Topic 740), In December 2019, FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes" ("ASU No. 2019-12")

The amendments in this guidance reflect the FASB’s effort to reduce the complexity of accounting standards while maintaining or enhancing the helpfulness of information provided to financial statement users. Changes include treatment of Hybrid tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, separate financial statements of legal entities not subject to tax, intraperiod tax allocation, ownership changes in investments, interim-period accounting for enacted changes in tax law, year-to-date loss limitation in interim-period tax accounting, income statement presentation of tax benefits of tax-deductible dividends, and impairment of investment in qualified affordable housing projects accounted for under the equity method.

Fiscal years beginning after December 15, 2020 with early adoption permitted.

We adopted this amendment on January 1, 2021 on a prospective basis. We evaluated ASU No. 2019-12 and determined that there was no material impact on our Condensed Consolidated Financial Statements.

Compensation-Retirement Benefits-Defined Benefit Plans - General (Subtopic 715-20), In August 2018, the FASB issued ASU No. 2018-14, "Changes to the Disclosure requirements for defined benefit plans" ("ASU No. 2018-14")

This amendment removes certain disclosures that are not considered cost beneficial and helps clarify certain required disclosures along with adding additional disclosures. This impacts employers that sponsor defined benefit pension and/or other postretirement plans. The amendment clarifies guidance in ASC 715-20-50-3 to disclose projected benefit obligation (PBO) and accumulated benefit obligation (ABO).

Fiscal years ending after December 15, 2020 with early adoption permitted.

We adopted ASU No. 2018-14 on December 31, 2020 on a retroactive basis and applied to each comparative period presented in our Consolidated Financial Statements. The adoption of ASU No. 2018-14 did not have a material impact on our Condensed Consolidated Financial Statements.

 

 

3. Revenues:

 

Disaggregated revenues by type of service and by country are provided below for the three and nine months ended September 30, 2021 and 2020. No individual customer or country outside of the U.S. accounted for 10.0% or more of our consolidated revenues for the three and nine months ended September 30, 2021 or 2020.

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 
                 

Insurance:

                

Underwriting & rating

 $390.5  $353.6  $1,156.0  $1,052.9 

Claims

  167.4   150.7   487.5   438.9 

Total Insurance

  557.9   504.3   1,643.5   1,491.8 

Energy and Specialized Markets

  165.9   158.1   484.4   460.8 

Financial Services

  35.2   40.3   104.7   118.6 

Total revenues

 $759.0  $702.7  $2,232.6  $2,071.2 

 

 

  

Three Months Ended September 30,

  

Nine Months Ended September 30,

 
  

2021

  

2020

  

2021

  

2020

 

Revenues:

                

United States ("U.S.")

 $568.4  $537.6  $1,698.3  $1,584.2 

United Kingdom ("U.K.")

  53.4   46.2   152.1   136.0 

Other countries

  137.2   118.9   382.2   351.0 

Total revenues

 $759.0  $702.7  $2,232.6  $2,071.2 

 

 

8

 

Contract assets are defined as an entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time. As of September 30, 2021 and December 31, 2020, we had no contract assets. Contract liabilities are defined as an entity's obligation to transfer goods or services to a customer for which the entity has received consideration (an amount of consideration is due) from the customer. As of September 30, 2021 and December 31, 2020, we had contract liabilities of $587.0 million and $468.2 million, respectively, which relate to future performance obligations that have not been satisfied. The $118.8 million increase in contract liabilities from December 31, 2020 to September 30, 2021 was primarily due to billings of $449.1 million that were paid in advance, partially offset by $330.3 million of revenue recognized in the nine months ended September 30, 2021. Contract liabilities, which are current and noncurrent, are included in "Deferred revenues" and "Other noncurrent liabilities" in our condensed consolidated balance sheets, respectively, as of September 30, 2021 and December 31, 2020.

 

Our most significant remaining performance obligations relate to providing customers with the right to use and update the online content over the remaining contract term. The disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. These performance obligations, which are expected to be satisfied within one year, comprised approximately 98% and 99% of the balance at September 30, 2021 and December 31, 2020, respectively.

 

We recognize an asset for incremental costs of obtaining a contract with a customer if we expect the benefits of those costs to be longer than one year. As of September 30, 2021 and December 31, 2020, we had deferred commissions of $84.0 million and $73.8 million, respectively, which have been included in "Prepaid expenses" and "Other noncurrent assets" in our accompanying condensed consolidated balance sheets.

 

 

4. Fair Value Measurements:

 

We have certain assets and liabilities that are reported at fair value in our accompanying condensed consolidated balance sheets. To increase consistency and comparability of assets and liabilities recorded at fair value, Accounting Sta