UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

  

OR

For the transition period from              to

(Exact name of registrant as specified in its charter)

 

 

 

(Registrant’s telephone number, including area code)

 

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

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

 

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).

 

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

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

Table of Contents

 

 

Condensed Consolidated Balance Sheets

 

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

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

(Unaudited)

 

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

Condensed Consolidated Statements of Cash Flows

(Unaudited)

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

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

(Unaudited)

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

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

(Unaudited)

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

CoreLogic, Inc., together with its subsidiaries (collectively "we"“the Company”, "us"“we”, “us” or "our"“our”), is a leading global property information, insight, analytics and data-enabled solutions provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory and proprietary sources provides detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets we serve include real estate and mortgage finance, insurance, capital markets and the public sector. We deliver value to clients through unique data, analytics, workflow technology, advisory and managed solutions. Clients rely on us to help identify and manage growth opportunities, improve performance and mitigate risk.

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

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination and mortgage servicing markets. Approximately 30%31% and 32% of our operating revenues for the three months ended JuneSeptember 30, 2019 and 2018, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues for the three months ended JuneSeptember 30, 2019 nor 2018. Approximately 29%30% and 33%32% of our operating revenues for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively, were generated from our top ten clients with none of our clients individually accounting for greater than 10% of our operating revenues during thethese periods.

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

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

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

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

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

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

For the three and sixnine months ended JuneSeptember 30, 2019, we did not have any operating revenues related to our investment in affiliates and had $0.3 million and $0.6$0.9 million for the three and sixnine months ended JuneSeptember 30, 2018, respectively. We recorded operating expenses of $0.5$0.4 million and $2.0$1.0 million related to our investment in affiliates for the three months ended JuneSeptember 30, 2019 and 2018, respectively, and $0.7$1.1 million and $5.3$6.3 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.

As of JuneSeptember 30, 2019, and December 31, 2018, we had insignificant accounts payable and accounts receivable with these affiliates.

In September 2014, we completed the sale of our collateral solutions and field services businesses, which were included in the former reporting segment Asset Management and Processing Solutions. In September 2012, we completed the wind-down of our consumer services business and our former appraisal management company business. In September 2011, we closed our marketing services business. In December 2010, we completed the sale of our Employer and Litigation Services businesses.

In connection with previous divestitures, we retain the prospect ofretained certain contingent liabilities of the businesses that were disposed of. These contingent liabilities include, among other items, liability for certain litigation matters, indemnification obligations orand potential breaches of representations or warranties. With respect to one suchour Employer and Litigation Services divestiture, we retained certain liabilities and, in September 2016, a jury returned an unfavorable verdict against athis discontinued operating unit, that, ifwhich we appealed. In August 2019, the verdict was upheld on appeal, could result in indemnification exposure upappeal. We have accrued a potential loss of $21.7 million as of September 30, 2019 with respect to $25.0 million, including interest. We do not consider this outcome to be probable andverdict, although we are pursuing an appealfurther review of the verdict to eliminate or substantially reduce any potential post-divestiture contingency. Any actualverdict. The liability that comes to fruition would beis reflected in our results from discontinued operations.

As of JuneSeptember 30, 2019, and December 31, 2018, we recorded assets of discontinued operations of $6.3 million and $0.6 million, respectively, within prepaid expenses and other current assets within our condensed consolidated balance sheets.sheets, mainly consisting of tax-related assets. Additionally, as of JuneSeptember 30, 2019 and December 31, 2018, we recorded liabilities of $2.1$24.1 million and $2.2 million, respectively, within accounts payable and other accrued expenses, which mainly consistingconsisted of legal relatedlegal-related accruals.

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

In April 2019, the Financial Accounting Standards Board ("FASB"(“FASB”) issued guidance to amend or clarify certain areas within three previously issued standards related to financial instruments which includes clarification for fair value using the measurement alternative, measuring credit losses and accounting for derivatives and hedging. The amendments in this guidance are largely effective for fiscal years beginning after December 15, 2019 with early adoption permitted. We have not elected early adoption and do not anticipate that this guidance will have a material impact on our consolidated financial statements.

In August 2017, the FASB issued guidance to amend and improve the accounting for hedging activities. The amendment eliminates the requirement to separately measure and report hedge ineffectiveness. An initial quantitative assessment to establish that the hedge is highly effective is still required but the amendment allows until the end of the first quarter it is designated to perform the assessment. After initial qualification, a qualitative assessment can be performed if the hedge is highly effective and the documentation at inception can reasonably support an expectation of high effectiveness throughout the hedge’s term. The amendment requires companies to present all hedged accounting elements that affect earnings in the same income statement line as the hedged item. For highly effective cash flow hedges, fair value changes will be recorded in other comprehensive loss and reclassified to earnings when the hedged item impacts earnings. The guidance isbecame effective prospectively for fiscal years beginning after December 15, 2018. In October 2018, the FASB issued incremental guidance to this update to permit the Overnight Index Swap Rate and the Secured Overnight Financing Rate to be utilized as US benchmark interest rates for hedge accounting purposes. We have adopted this guidance in the currentbeginning with fiscal year 2019 as required, which has not had a material impact on our consolidated financial statements.

In February 2016, the FASB issued guidance on lease accounting which requires leases, regardless of classification, to be recognized on the balance sheet as lease assets and liabilities. The objective of this standard is to provide greater transparency on the amount, timing and uncertainty of cash flows arising from leasing arrangements. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee depends upon its classification as a finance or operating lease. On January 1, 2019, we adopted the new lease accounting standard, and all related amendments, using the modified retrospective approach. Comparative information has not been restated and continues to be reported under the standards in effect for those prior periods as allowed by the guidance. As part of our adoption we elected the package of practical expedients permitted under the transition guidance which allows us to carry forward our historical lease classification of pre-existing leases, treatment of pre-existing indirect costs, as well as our conclusions of whether a pre-existing contract contains a lease. We have implemented internal controls to enable the preparation of financial information upon our adoption in the first quarter of 2019.

Adoption of the new lease accounting standard resulted in the recording of operating lease assets and lease liabilities of approximately $67.7 million and $103.9 million, respectively, as of January 1, 2019. There was no impact to opening equity as a result of adoption as the difference between the asset and liability balance is attributable to reclassesreclassifications of pre-existing balances, such as deferred and prepaid rent, into the lease asset balance. The adoption of this standard has not materially impacted our consolidated statement of operations or presentation of cash flows and we do not anticipate a material impact in the future based on our current operations. See below for our accounting policy reflecting the updated guidance.

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

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

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

Depreciation expense for property and equipment, net was approximately $22.5$22.1 million and $22.4$22.6 million for the three months ended JuneSeptember 30, 2019 and 2018, respectively, and $45.9$68.0 million and $44.2$66.8 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.

 

Other intangible assets, net consists of the following:

Amortization expense for other intangible assets, net was $15.4$14.4 million and $16.3 million for the three months ended JuneSeptember 30, 2019 and 2018, respectively, and $32.0$46.4 million and $31.5$47.8 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.

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

Our long-term debt consists of the following:

In May 2019, we amended and restated our credit agreement (the "Credit Agreement"“Credit Agreement”) with Bank of America, N.A., as the administrative agent, and other financial institutions. The Credit Agreement provides for a $1.8 billion five-year term loan A facility (the "Term Facility"“Term Facility”), and a $750.0 million five-year revolving credit facility (the "Revolving Facility"“Revolving Facility”). The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multi-currency revolving sub-facility and a $50.0 million letter of credit sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility by up to $300.0 million in the aggregate; however, the lenders are not obligated to do so.

The loans under the Credit Agreement bear interest, at the election of the Company, at (i) the Alternate Base Rate (defined as the greater of (a) Bank of America's "prime rate", (b) the Federal Funds effective rate plus 0.50% and (c) the reserve adjusted London interbank offering rate for a one-month Eurocurrency borrowing plus 1.00%) plus the Applicable Rate (as defined in the Credit Agreement) or (ii) the London interbank offering rate for Eurocurrency borrowings, adjusted for statutory reserves ("Adjusted Eurocurrency Rate") plus the Applicable Rate. The initial Applicable Rate for Alternate Base Rate borrowings is 0.75% and for Adjusted Eurocurrency Rate borrowings is 1.75%. After September 2019, the Applicable Rate will vary depending upon the Company's leverage ratio. The minimum Applicable Rate for Alternate Base Rate borrowings will be 0.25% and the maximum will be 1.00%. The minimum Applicable Rate for Adjusted Eurocurrency Rate borrowings will be 1.25% and the maximum will be 2.00%. The Credit Agreement also requires the Company to pay a commitment fee for the unused portion of the Revolving Facility, which will be a minimum of 0.20% and a maximum of 0.35%, depending on the Company's leverage ratio.

The Credit Agreement provides that loans under the Term Facility shall be repaid in equal quarterly installments of $21.9 million, commencing on the last day of the next full fiscal quarterSeptember 30, 2019 and continuing on each three-month anniversary thereafter.thereafter, subject to the application of prepayments to quarterly installments. The outstanding balance of the term loans will be due in May 2024.

The Credit Agreement contains the following financial maintenance covenants: (i) a maximum total leverage ratio not to exceed 4.50:1.00 (stepped down to 4.25:1.00 starting with the fiscal quarter ending on September 2020, with a further step down to 4.00:1.00 starting with the fiscal quarter ending on September 2021, followed by a final step down to 3.75:1.00 starting with the fiscal quarter ending on September 2022) and (ii) a minimum interest coverage ratio of 3.00:1.00.

As of JuneSeptember 30, 2019, we had a remaining borrowing capacity of $740.0$750.0 million under the Revolving Facility and we were in compliance with all financial and restrictive covenants under the Credit Agreement.

In connection with the amendment and restatement of the Credit Agreement, in May 2019, we incurred approximately $9.9$9.7 million of debt issuance costs of which $9.6 million were initially capitalized within long-term debt, net of current in the accompanying condensed consolidated balance sheets. In addition, when we amended and restated the Credit Agreement, we wrote-off previously unamortized debt issuance costs of $1.5 million within gain/(loss)/gain on investments and other, net in the accompanying consolidated statement of operations; resultingoperations, which resulted in a remaining $14.6 million of previously unamortized costs. We will amortize all of these costs over the term of the Credit Agreement. For both the three months ended JuneSeptember 30, 2019 and 2018, $1.3$1.2 million wasand $1.4 million, respectively, were recognized in the accompanying condensed consolidated statementstatements of operations related to the amortization of debt issuance costs. For the sixnine months ended JuneSeptember 30, 2019 and 2018, $2.6$3.8 million and $2.7$4.1 million, respectively, were recognized in the accompanying condensed consolidated statements of operations related to the amortization of debt issuance costs.

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

We have entered into amortizing interest rate swaps ("Swaps"(“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month London interbank offering rate. The notional balances, terms and maturities of our Swaps are designed to have at least 50% of our debt as fixed rate.

As of JuneSeptember 30, 2019, the Swaps have a combined remaining notional balance of $1.4$1.3 billion, a weighted average fixed interest rate of 2.00%2.05% (rates range from 1.03% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts of between $1.4$1.3 billion and $1.2 billion through September 2020,2021, then $1.2$1.1 billion and $1.0 billion through August 2022, and $416.0 million and $400.0 million thereafter until December 2025. Approximate weighted average fixed interest rates for the aforementioned time intervals are 2.18%2.39%, 2.61%2.64%, and 2.95%, respectively.

We have designated the Swaps as cash flow hedges. The estimated fair values of these cash flow hedges are recorded in prepaid expenses and other current assets as well as other assets and other liabilities in the accompanying condensed consolidated balance sheets. As of JuneSeptember 30, 2019, the estimated fair value of certain of these cash flow hedges resulted in an asset of $2.2$1.2 million recorded within prepaid and other current assets, with the remainder resulting inas well as a liability of $48.5$58.3 million. As of December 31, 2018, the estimated fair value of certain of these cash flow hedges resulted in an asset of $13.3 million, of which $0.6 million is classifiedwas recorded within prepaid expenses and other current assets, with the remainder resulting inas well as a liability of $15.2 million.

Unrealized losses of $21.1$8.1 million (net of $7.0$2.7 million in deferred taxes) and unrealized gains of $4.1$2.5 million (net $1.4of $0.8 million in deferred taxes) for the three months ended JuneSeptember 30, 2019 and 2018, respectively, were recognized in other comprehensive loss related to the Swaps. Unrealized losses of $33.3$41.4 million (net of $11.1$13.8 million in deferred taxes) and unrealized gains of $8.2$10.8 million (net of $2.7$3.6 million in deferred taxes) for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively, were recognized in other comprehensive loss related to the Swaps.

We have entered into renewable commitment agreements for certain real estate facilities and equipment, such as computers and printers, which we individually classify as either operating or finance leases. We possess contractual options to renew certain leases ranging from 62 months to 5 years at a time, as well as, in certain instances, contractual options to terminate leases with varying notification requirements and potential termination fees. As of JuneSeptember 30, 2019, our leases with initial terms greater than twelve months had remaining lease terms of up to 13 years.

The following table provides a breakdown of lease balances within our condensed consolidated balance sheet as of JuneSeptember 30, 2019 and December 31, 2018: