Delaware | 7374 | 26-2994223 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Richard J. Sandler Ethan T. James Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000 | Eric J. Friedman Richard B. Aftanas Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 (212) 735-3000 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer | Smaller reporting company o |
Title of Each Class | Proposed Maximum Aggregate | Amount of | Proposed Maximum Aggregate | Amount of | ||||||||
of Securities to be Registered | Offering Price(1)(2) | Registration Fee | Offering Price(1)(2) | Registration Fee | ||||||||
Class A common stock, par value $0.001 per share | $750,000,000 | $29,475 | $750,000,000 | $29,475(3) | ||||||||
(1) | Includes shares of Class A common stock which the underwriters have the right to purchase to cover over-allotments. |
(2) | Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. |
(3) | Previously paid. |
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
Per Share | Total | |||
Public offering price | $ | $ | ||
Underwriting discount | $ | $ | ||
Proceeds, before expenses, to the selling stockholders | $ | $ |
BofA Merrill Lynch | Morgan Stanley |
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• | the total value of exposures in risk transactions is increasing; | |
• | the number of participants in risk transactions is often large and the asymmetry of information among participants is often substantial; and | |
• | the failure to understand risk can lead to large and rapid declines in financial performance. |
• | Our Solutions are Embedded In Our Customers’ Critical Decision Processes. Our customers use our solutions to make better risk decisions and to price risk appropriately. In the U.S. P&C insurance industry, our solutions for prospective loss costs, policy language, rating/underwriting rules and regulatory filing services are the industry standard. In the U.S. healthcare and mortgage industries, our predictive models, loss estimation tools and fraud identification applications are the primary solutions that allow customers to understand their risk exposures and proactively manage them. Over the last three years, we have retained 98% of our customers across all of our businesses, which we believe reflects our customers’ recognition of the value they derive from our solutions. | |
• | Extensive and Differentiated Data Assets and Analytic Methods. We maintain what we believe are some of the largest, most accurate, and most complete databases in the markets we serve. Much of the information we provide is not available from any other source and would be difficult and costly for another party to replicate. As a result, our accumulated experience and years of significant investment have given us a competitive advantage in serving our customers. |
• | Culture of Continuous Improvement. Our intellectual capital and focus on continuous improvement have allowed us to develop proprietary algorithms and solutions that assist our customers in making informed risk decisions. Our team includes approximately 578 individuals with advanced degrees, certifications and professional designations in such fields as actuarial science, data management, mathematics, statistics, economics, soil mechanics, meteorology and various engineering disciplines. Our compensation and benefit plans are pay-for-performance- |
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• | Attractive Operating Model. We believe we have an attractive operating model due to the recurring nature of our revenues, the scalability of our solutions and the low capital intensity of our business. |
• | Increase Sales to Insurance Customers. We expect to expand the application of our solutions in insurance customers’ internal risk and underwriting processes. Building on our deep knowledge of, and embedded position in, the insurance industry, we expect to sell more solutions to existing customers tailored to individual insurance segments. By increasing the breadth and relevance of our offerings, we believe we can strengthen our relationships with customers and increase our value to their decision making in critical ways. | |
• | Develop New, Proprietary Data Sets and Predictive Analytics. We work with our customers to understand their evolving needs. We plan to create new solutions by enriching our mix of proprietary data sets, analytic solutions and effective decision support across the markets we serve. We constantly seek to add new data sets that can further leverage our analytic methods, technology platforms and intellectual capital. | |
• | Leverage Our Intellectual Capital to Expand into Adjacent Markets and New Customer Sectors. Our organization is built on nearly four decades of intellectual property in risk management. We believe we can continue to profitably expand the use of our intellectual capital and apply our analytic methods in new markets, where significant opportunities for long-term growth exist. We also continue to pursue growth through targeted international expansion. We have already demonstrated the effectiveness of this strategy with our expansion into healthcare and non-insurance financial services. |
• | Pursue Strategic Acquisitions that Complement Our Leadership Positions. We will continue to expand our data and analytics capabilities across industries. While we expect this will occur primarily through organic growth, we have and will continue to acquire assets and businesses that strengthen our value proposition to customers. We have developed an internal capability to source, evaluate and integrate acquisitions that have created value for shareholders. As of June 30, 2009, we have acquired 15 businesses in the past five years, which in the aggregate have increased their revenue with a weighted average CAGR of 31% over the same period. |
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Class A common stock offered by the selling stockholders | shares |
Class A common stock outstanding after the offering | shares |
Over-allotment option | shares of Class A common stock from the selling stockholders |
Class B common stock outstanding after the offering | shares |
Sale and transfer restrictions on Class B common stock | The Class B (Series 1) common stock is not transferable until 18 months after the date of this prospectus and the Class B (Series 2) common stock is not transferable until 24 months after the date of this prospectus. |
These transfer restrictions are subject to limited exceptions, including transfers to another holder of Class B common stock. See “Description of Capital Stock — Common Stock — Transfer Restrictions.” |
Conversion of Class B common stock | After termination of the restrictions on transfer described above for each series of Class B common stock, such series of Class B common stock will be automatically converted into Class A common stock. No later than 24 months after the date of this prospectus, there will be no outstanding shares of Class B common stock. |
In the event that Class B common stock is transferred and converts into Class A common stock, it will have the effect of diluting the voting power of our existing holders of Class A common stock. See “Description of Capital Stock — Common Stock — Conversion.” |
Use of proceeds | The Company will not receive any proceeds from the sale of common stock in the offering. |
Dividend policy | Following this offering and subject to legally available funds, we currently intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $ per share of Class A common stock (representing a quarterly rate initially equal to $ per share) commencing with the quarter ended , 2009. Our Class B common stock will share ratably on an as-converted basis in such dividends. The declaration and payment of any dividends will be at the sole discretion of our board of directors after taking into account various factors, including our financial condition, operating results, capital requirements, covenants in our debt instruments and other factors that our board of directors deems relevant. | |
Stock symbol | “VA” |
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• | shares of Class A common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $ per share; and |
• | an aggregate of shares of Class A common stock that will be reserved for future issuances under our 2009 Equity Incentive Plan as of the closing of this offering. |
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Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Risk Assessment revenues | $ | 472,634 | $ | 485,160 | $ | 504,391 | $ | 253,356 | $ | 262,873 | ||||||||||
Decision Analytics revenues | 257,499 | 317,035 | 389,159 | 184,334 | 240,794 | |||||||||||||||
Revenues | 730,133 | 802,195 | 893,550 | 437,690 | 503,667 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of revenues | 331,804 | 357,191 | 386,897 | 190,678 | 220,501 | |||||||||||||||
Selling, general and administrative | 100,124 | 107,576 | 131,239 | 59,028 | 72,225 | |||||||||||||||
Depreciation and amortization of fixed assets | 28,007 | 31,745 | 35,317 | 16,424 | 18,913 | |||||||||||||||
Amortization of intangible assets | 26,854 | 33,916 | 29,555 | 14,937 | 16,974 | |||||||||||||||
Total expenses | 486,789 | 530,428 | 583,008 | 281,067 | 328,613 | |||||||||||||||
Operating income | 243,344 | 271,767 | 310,542 | 156,623 | 175,054 | |||||||||||||||
Other income/(expense): | ||||||||||||||||||||
Investment income and realized gains (losses) on securities, net | 6,101 | 9,308 | (327 | ) | 317 | (273 | ) | |||||||||||||
Interest expense | (16,668 | ) | (22,928 | ) | (31,316 | ) | (14,173 | ) | (16,677 | ) | ||||||||||
Total other expense, net | (10,567 | ) | (13,620 | ) | (31,643 | ) | (13,856 | ) | (16,950 | ) | ||||||||||
Income from continuing operations before income taxes | 232,777 | 258,147 | 278,899 | 142,767 | 158,104 | |||||||||||||||
Provision for income taxes | (91,992 | ) | (103,184 | ) | (120,671 | ) | (61,818 | ) | (67,250 | ) | ||||||||||
Income from continuing operations | 140,785 | 154,963 | 158,228 | 80,949 | 90,854 |
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Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Loss from discontinued operations, net of tax(1) | (1,805 | ) | (4,589 | ) | — | — | — | |||||||||||||
Net income | $ | 138,980 | $ | 150,374 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||
Basic income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 34.08 | $ | 38.58 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||
Loss from discontinued operations | (0.44 | ) | (1.14 | ) | — | — | — | |||||||||||||
Net income per share | $ | 33.64 | $ | 37.44 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||
Diluted income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 32.72 | $ | 37.03 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||
Loss from discontinued operations | (0.42 | ) | (1.10 | ) | — | — | — | |||||||||||||
Net income per share | $ | 32.30 | $ | 35.93 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 4,130,962 | 4,016,928 | 3,657,714 | 3,724,876 | 3,468,196 | |||||||||||||||
Diluted | 4,302,867 | 4,185,151 | 3,804,634 | 3,877,906 | 3,604,086 | |||||||||||||||
Other data: | ||||||||||||||||||||
EBITDA(3): | ||||||||||||||||||||
Risk Assessment EBITDA | $ | 202,872 | $ | 212,780 | $ | 222,706 | $ | 113,500 | $ | 121,197 | ||||||||||
Decision Analytics EBITDA | 95,333 | 124,648 | 152,708 | 74,484 | 89,744 | |||||||||||||||
EBITDA | $ | 298,205 | $ | 337,428 | $ | 375,414 | $ | 187,984 | $ | 210,941 | ||||||||||
Purchases of fixed assets | $ | (25,742 | ) | $ | (32,941 | ) | $ | (30,652 | ) | $ | (17,810 | ) | $ | (16,195 | ) | |||||
Net cash provided by operating activities | 223,499 | 248,521 | 247,906 | 141,929 | 184,529 | |||||||||||||||
Net cash used in investing activities | (243,452 | ) | (110,831 | ) | (130,466 | ) | (98,402 | ) | (152,683 | ) | ||||||||||
Net cash provided by/(used in) financing activities | 75,907 | (212,591 | ) | (107,376 | ) | (16,759 | ) | (19,157 | ) |
As of December 31, | As of June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 99,152 | $ | 24,049 | $ | 33,185 | $ | 50,835 | $ | 45,962 | ||||||||||
Total assets | 739,282 | 830,041 | 928,877 | 867,128 | 1,009,335 | |||||||||||||||
Total debt(4) | 448,698 | 438,330 | 669,754 | 642,182 | 689,066 | |||||||||||||||
Redeemable common stock(5) | 1,125,933 | 1,171,188 | 749,539 | 1,006,287 | 842,117 | |||||||||||||||
Stockholders’ deficit | (1,123,977 | ) | (1,203,348 | ) | (1,009,823 | ) | (1,186,569 | ) | (1,028,489 | ) |
(1) | As of December 31, 2007, we discontinued operations of our claim consulting business located in New Hope, Pennsylvania and the United Kingdom. There was no impact of discontinued operations on the results of operations for the periods subsequent to December 31, 2007. |
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(2) | In conjunction with the initial public offering, the stock of Insurance Services Office, Inc. will convert to stock of Verisk Analytics, Inc., which plans to effect a stock split of its common stock. The numbers in the above table do not reflect this stock split. Giving effect to the approximately fifty-for-one stock split that will have occurred prior to the completion of this offering, pro forma basic and diluted income/(loss) per share from continuing operations and discontinued operations would have been as follows: |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
Basic | ||||||||||||||||||||
Income from continuing operations | $ | 0.68 | $ | 0.77 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | — | — | |||||||||||||
Net Income per share | $ | 0.67 | $ | 0.75 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||
Weighted average shares | 206,548,100 | 200,846,400 | 182,885,700 | 186,243,800 | 173,409,800 | |||||||||||||||
Diluted | ||||||||||||||||||||
Income from continuing operations | $ | 0.65 | $ | 0.74 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | — | — | |||||||||||||
Net Income per share | $ | 0.64 | $ | 0.72 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||
Weighted average shares | 215,143,350 | 209,257,550 | 190,231,700 | 193,895,300 | 180,204,300 | |||||||||||||||
(3) | EBITDA is the financial measure which management uses to evaluate the performance of our segments. “EBITDA” is defined as income from continuing operations before investment income and interest expense, income taxes, depreciation and amortization. See note 19 to our audited consolidated financial statements and note 15 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. | |
Although EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our results of operations or cash flow from operating activities reported under U.S. GAAP. Management uses EBITDA in conjunction with traditional GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are: | ||
• EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; | ||
• EBITDA does not reflect changes in, or cash requirements for, our working capital needs; | ||
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future and EBITDA does not reflect any cash requirements for such replacements; and | ||
• Other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure. |
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Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Income from continuing operations | $ | 140,785 | $ | 154,963 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||
Depreciation and amortization of fixed and intangible assets | 54,861 | 65,661 | 64,872 | 31,361 | 35,887 | |||||||||||||||
Investment income and realized (gains)/losses on securities, net | (6,101 | ) | (9,308 | ) | 327 | (317 | ) | 273 | ||||||||||||
Interest expense | 16,668 | 22,928 | 31,316 | 14,173 | 16,677 | |||||||||||||||
Provision for income taxes | 91,992 | 103,184 | 120,671 | 61,818 | 67,250 | |||||||||||||||
EBITDA | $ | 298,205 | $ | 337,428 | $ | 375,414 | $ | 187,984 | $ | 210,941 |
(5) | Prior to this offering, we are required to record our Class A common stock and vested options at redemption value at each balance sheet date as the redemption of these securities is not solely within our control, due to our contractual obligations to redeem these shares. We classify this redemption value as redeemable common stock. Subsequent to this offering, we will no longer be obligated to redeem these shares and therefore we will not be required to record any redeemable common stock. |
10
• | changes in the business analytics industry; | |
• | changes in technology; | |
• | our inability to obtain or use state fee schedule or claims data in our insurance solutions; | |
• | saturation of market demand; |
11
• | loss of key customers; | |
• | industry consolidation; and | |
• | failure to execute our customer-focused selling approach. |
12
• | amendment, enactment, or interpretation of laws and regulations which restrict the access and use of personal information and reduce the supply of data available to customers; | |
• | changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions; | |
• | failure of our solutions to comply with current laws and regulations; and | |
• | failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner. |
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• | deterring customers from using our solutions; | |
• | deterring data suppliers from supplying data to us; | |
• | harming our reputation; | |
• | exposing us to liability; | |
• | increasing operating expenses to correct problems caused by the breach; | |
• | affecting our ability to meet customers’ expectations; or | |
• | causing inquiry from governmental authorities. |
14
• | failing to implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies; | |
• | paying more than fair market value for an acquired company or assets; | |
• | failing to integrate the operations and personnel of the acquired businesses in an efficient, timely manner; | |
• | assuming potential liabilities of an acquired company; | |
• | managing the potential disruption to our ongoing business; | |
• | distracting management focus from our core businesses; | |
• | difficulty in acquiring suitable businesses; | |
• | impairing relationships with employees, customers, and strategic partners; | |
• | incurring expenses associated with the amortization of intangible assets; | |
• | incurring expenses associated with an impairment of all or a portion of goodwill and other intangible assets due to changes in market conditions, weak economies in certain competitive markets, or the failure of certain acquisitions to realize expected benefits; and | |
• | diluting the share value and voting power of existing stockholders. |
15
16
• | actual or anticipated fluctuations in our quarterly operating results; | |
• | changes in financial estimates by securities research analysts; | |
• | changes in the economic performance or market valuations of other companies engaged in our industry; | |
• | regulatory developments in our industry affecting us, our customers or our competitors; | |
• | announcements of technological developments; | |
• | sales or expected sales of additional common stock; |
17
• | continued dislocations and downward pressure in the capital markets; and | |
• | terrorist attacks or natural disasters or other such events impacting countries where we or our customers have operations. |
18
• | authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares to thwart a takeover attempt; | |
• | prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors; | |
• | require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office; | |
• | limit who may call special meetings of stockholders; | |
• | authorize the issuance of authorized but unissued shares of common stock and preferred stock without stockholder approval, subject to the rules and regulations of the ; |
19
• | prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of the stockholders; and | |
• | establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. |
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4
Class A common stock offered by the selling stockholders | shares |
Class A common stock outstanding after the offering | shares |
Over-allotment option | shares of Class A common stock from the selling stockholders |
Class B common stock outstanding after the offering | shares |
Sale and transfer restrictions on Class B common stock | The Class B (Series 1) common stock is not transferable until 18 months after the date of this prospectus and the Class B (Series 2) common stock is not transferable until 24 months after the date of this prospectus. |
These transfer restrictions are subject to limited exceptions, including transfers to another holder of Class B common stock. See “Description of Capital Stock — Common Stock — Transfer Restrictions.” |
Conversion of Class B common stock | After termination of the restrictions on transfer described above for each series of Class B common stock, such series of Class B common stock will be automatically converted into Class A common stock. No later than 24 months after the date of this prospectus, there will be no outstanding shares of Class B common stock. |
In the event that Class B common stock is transferred and converts into Class A common stock, it will have the effect of diluting the voting power of our existing holders of Class A common stock. See “Description of Capital Stock — Common Stock — Conversion.” |
Use of proceeds | The Company will not receive any proceeds from the sale of common stock in the offering. |
Dividend policy | Following this offering and subject to legally available funds, we currently intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $ per share of Class A common stock (representing a quarterly rate initially equal to $ per share) commencing with the quarter ended , 2009. Our Class B common stock will share ratably on an as-converted basis in such dividends. The declaration and payment of any dividends will be at the sole discretion of our board of directors after taking into account various factors, including our financial condition, operating results, capital requirements, covenants in our debt instruments and other factors that our board of directors deems relevant. | |
Stock symbol | “VA” |
5
• | shares of Class A common stock issuable upon the |
• | an aggregate of shares of Class A common stock that will be reserved for future issuances under our 2009 Equity Incentive Plan as of the |
6
Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Risk Assessment revenues | $ | 472,634 | $ | 485,160 | $ | 504,391 | $ | 253,356 | $ | 262,873 | ||||||||||
Decision Analytics revenues | 257,499 | 317,035 | 389,159 | 184,334 | 240,794 | |||||||||||||||
Revenues | 730,133 | 802,195 | 893,550 | 437,690 | 503,667 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of revenues | 331,804 | 357,191 | 386,897 | 190,678 | 220,501 | |||||||||||||||
Selling, general and administrative | 100,124 | 107,576 | 131,239 | 59,028 | 72,225 | |||||||||||||||
Depreciation and amortization of fixed assets | 28,007 | 31,745 | 35,317 | 16,424 | 18,913 | |||||||||||||||
Amortization of intangible assets | 26,854 | 33,916 | 29,555 | 14,937 | 16,974 | |||||||||||||||
Total expenses | 486,789 | 530,428 | 583,008 | 281,067 | 328,613 | |||||||||||||||
Operating income | 243,344 | 271,767 | 310,542 | 156,623 | 175,054 | |||||||||||||||
Other income/(expense): | ||||||||||||||||||||
Investment income and realized gains (losses) on securities, net | 6,101 | 9,308 | (327 | ) | 317 | (273 | ) | |||||||||||||
Interest expense | (16,668 | ) | (22,928 | ) | (31,316 | ) | (14,173 | ) | (16,677 | ) | ||||||||||
Total other expense, net | (10,567 | ) | (13,620 | ) | (31,643 | ) | (13,856 | ) | (16,950 | ) | ||||||||||
Income from continuing operations before income taxes | 232,777 | 258,147 | 278,899 | 142,767 | 158,104 | |||||||||||||||
Provision for income taxes | (91,992 | ) | (103,184 | ) | (120,671 | ) | (61,818 | ) | (67,250 | ) | ||||||||||
Income from continuing operations | 140,785 | 154,963 | 158,228 | 80,949 | 90,854 |
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Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Loss from discontinued operations, net of tax(1) | (1,805 | ) | (4,589 | ) | — | — | — | |||||||||||||
Net income | $ | 138,980 | $ | 150,374 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||
Basic income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 34.08 | $ | 38.58 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||
Loss from discontinued operations | (0.44 | ) | (1.14 | ) | — | — | — | |||||||||||||
Net income per share | $ | 33.64 | $ | 37.44 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||
Diluted income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 32.72 | $ | 37.03 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||
Loss from discontinued operations | (0.42 | ) | (1.10 | ) | — | — | — | |||||||||||||
Net income per share | $ | 32.30 | $ | 35.93 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 4,130,962 | 4,016,928 | 3,657,714 | 3,724,876 | 3,468,196 | |||||||||||||||
Diluted | 4,302,867 | 4,185,151 | 3,804,634 | 3,877,906 | 3,604,086 | |||||||||||||||
Other data: | ||||||||||||||||||||
EBITDA(3): | ||||||||||||||||||||
Risk Assessment EBITDA | $ | 202,872 | $ | 212,780 | $ | 222,706 | $ | 113,500 | $ | 121,197 | ||||||||||
Decision Analytics EBITDA | 95,333 | 124,648 | 152,708 | 74,484 | 89,744 | |||||||||||||||
EBITDA | $ | 298,205 | $ | 337,428 | $ | 375,414 | $ | 187,984 | $ | 210,941 | ||||||||||
Purchases of fixed assets | $ | (25,742 | ) | $ | (32,941 | ) | $ | (30,652 | ) | $ | (17,810 | ) | $ | (16,195 | ) | |||||
Net cash provided by operating activities | 223,499 | 248,521 | 247,906 | 141,929 | 184,529 | |||||||||||||||
Net cash used in investing activities | (243,452 | ) | (110,831 | ) | (130,466 | ) | (98,402 | ) | (152,683 | ) | ||||||||||
Net cash provided by/(used in) financing activities | 75,907 | (212,591 | ) | (107,376 | ) | (16,759 | ) | (19,157 | ) |
As of December 31, | As of June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 99,152 | $ | 24,049 | $ | 33,185 | $ | 50,835 | $ | 45,962 | ||||||||||
Total assets | 739,282 | 830,041 | 928,877 | 867,128 | 1,009,335 | |||||||||||||||
Total debt(4) | 448,698 | 438,330 | 669,754 | 642,182 | 689,066 | |||||||||||||||
Redeemable common stock(5) | 1,125,933 | 1,171,188 | 749,539 | 1,006,287 | 842,117 | |||||||||||||||
Stockholders’ deficit | (1,123,977 | ) | (1,203,348 | ) | (1,009,823 | ) | (1,186,569 | ) | (1,028,489 | ) |
(1) | As of December 31, 2007, we discontinued operations of our claim consulting business located in |
8
(2) | In conjunction with the initial public offering, the stock of Insurance Services Office, Inc. will convert to stock of Verisk Analytics, Inc., which plans to effect a stock split of its common stock. The numbers in the above table do not reflect this stock split. Giving effect to the approximately fifty-for-one stock split that will have occurred prior to the completion of this offering, pro forma basic and diluted income/(loss) per share from continuing operations and discontinued operations would have been as follows: |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
Basic | ||||||||||||||||||||
Income from continuing operations | $ | 0.68 | $ | 0.77 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | — | — | |||||||||||||
Net Income per share | $ | 0.67 | $ | 0.75 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||
Weighted average shares | 206,548,100 | 200,846,400 | 182,885,700 | 186,243,800 | 173,409,800 | |||||||||||||||
Diluted | ||||||||||||||||||||
Income from continuing operations | $ | 0.65 | $ | 0.74 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | — | — | |||||||||||||
Net Income per share | $ | 0.64 | $ | 0.72 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||
Weighted average shares | 215,143,350 | 209,257,550 | 190,231,700 | 193,895,300 | 180,204,300 | |||||||||||||||
(3) | EBITDA is the financial measure which management uses to evaluate the performance of our segments. “EBITDA” is defined as income from continuing operations before investment income and interest expense, income taxes, depreciation and amortization. See note 19 to our audited consolidated financial statements and note 15 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. | ||
Although EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our results of operations or cash flow from operating activities reported under U.S. GAAP. Management uses EBITDA in conjunction with traditional GAAP operating performance measures as part of its overall assessment of company performance. Some of these limitations are: | |||
• EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; | |||
• EBITDA does not reflect changes in, or cash requirements for, our working capital needs; | |||
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often | |||
• |
9
Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Income from continuing operations | $ | 140,785 | $ | 154,963 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||
Depreciation and amortization of fixed and intangible assets | 54,861 | 65,661 | 64,872 | 31,361 | 35,887 | |||||||||||||||
Investment income and realized (gains)/losses on securities, net | (6,101 | ) | (9,308 | ) | 327 | (317 | ) | 273 | ||||||||||||
Interest expense | 16,668 | 22,928 | 31,316 | 14,173 | 16,677 | |||||||||||||||
Provision for income taxes | 91,992 | 103,184 | 120,671 | 61,818 | 67,250 | |||||||||||||||
EBITDA | $ | 298,205 | $ | 337,428 | $ | 375,414 | $ | 187,984 | $ | 210,941 |
(5) | Prior to this offering, we are required to record our Class A common stock and vested options at redemption value at each balance sheet date as the redemption of these securities is not solely within our control, due to our contractual obligations to redeem these shares. We classify this redemption value as redeemable common stock. Subsequent to this offering, we will no longer be obligated to redeem these shares and therefore we will not be required to record any redeemable common stock. |
10
• | ||
• | ||
• | ||
• | saturation of |
211
• | ||
• | industry consolidation; and | |
• | failure to |
12
• | ||
• | ||
• | ||
• |
13
• | deterring customers from using our solutions; | |
• | deterring data suppliers from supplying data to us; | |
• | harming our reputation; | |
• | exposing us to liability; | |
• | increasing operating expenses to correct problems caused by the breach; | |
• | affecting our ability to meet customers’ expectations; or | |
• | causing inquiry from governmental authorities. |
14
• | failing to implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies; | |
• | paying more than fair market value for an acquired company or assets; | |
• | failing to integrate the operations and personnel of the acquired businesses in an efficient, timely manner; | |
• | assuming potential liabilities of an acquired company; | |
• | managing the potential disruption to our ongoing business; | |
• | distracting management focus from our core businesses; | |
• | difficulty in acquiring suitable businesses; | |
• | impairing relationships with employees, customers, and strategic partners; | |
• | incurring expenses associated with the amortization of intangible assets; | |
• | incurring expenses associated with an impairment of all or a portion of goodwill and other intangible assets due to changes in market conditions, weak economies in certain competitive markets, or the failure of certain acquisitions to realize expected benefits; and | |
• | diluting the share value and voting power of existing stockholders. |
15
16
• | actual or anticipated fluctuations in our quarterly operating results; | |
• | changes in financial estimates by securities research analysts; | |
• | changes in the economic performance or market valuations of other companies engaged in our industry; | |
• | regulatory developments in our industry affecting us, our customers or our competitors; | |
• | announcements of technological developments; | |
• | sales or expected sales of additional common stock; |
17
• | continued dislocations and downward pressure in the capital markets; and | |
• | terrorist attacks or natural disasters or other such events impacting countries where we or our customers have operations. |
18
• | authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares to thwart a takeover attempt; | |
• | prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors; | |
• | require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office; | |
• | limit who may call special meetings of stockholders; | |
• | authorize the issuance of authorized but unissued shares of common stock and preferred stock without stockholder approval, subject to the rules and regulations of the ; |
19
• | prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of the stockholders; and | |
• | establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. |
20
3
4
Class A common stock offered by the selling stockholders | shares |
Class A common stock outstanding after the offering | shares |
Over-allotment option | shares of Class A common stock from the selling stockholders |
Class B common stock outstanding after the offering | shares |
Sale and transfer restrictions on Class B common stock | The Class B (Series 1) common stock is not transferable until 18 months after the date of this prospectus and the Class B (Series 2) common stock is not transferable until |
These transfer restrictions are subject to limited exceptions, including transfers to another holder of Class B common stock. See “Description of Capital Stock — Common Stock — Transfer Restrictions.” |
Conversion of Class B common stock | After termination of the restrictions on transfer described above for each series of Class B common stock, such series of Class B common stock will be automatically converted into Class A common stock. No later than |
In the event that Class B common stock is transferred and converts into Class A common stock, it will have the effect of diluting the voting power of our existing holders of Class A common stock. See “Description of Capital Stock — Common Stock — Conversion.” |
Use of proceeds | The Company will not receive any proceeds from the sale of |
Dividend policy | Following this offering and subject to legally available funds, we currently intend to pay a quarterly dividend, in cash, at an annual rate initially equal to $ per share of Class A common stock (representing a quarterly rate initially equal to $ per share) commencing with the quarter ended , | |
Stock symbol | “VA” |
5
5
• | shares of Class A common stock issuable upon the exercise of outstanding stock options |
• | an aggregate of shares of Class A common stock that will be reserved for future issuances under our |
6
Three Months | ||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Risk Assessment revenues | $ | 448,875 | $ | 472,634 | $ | 485,160 | $ | 121,797 | $ | 127,039 | ||||||||||
Decision Analytics revenues | 196,785 | 257,499 | 317,035 | 77,037 | 88,579 | |||||||||||||||
Revenues | 645,660 | 730,133 | 802,195 | 198,834 | 215,618 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of revenues | 294,911 | 331,804 | 357,191 | 86,987 | 93,310 | |||||||||||||||
Selling, general and administrative | 88,723 | 100,124 | 107,576 | 27,925 | 28,674 | |||||||||||||||
Depreciation and amortization of fixed assets | 22,024 | 28,007 | 31,745 | 7,582 | 7,907 | |||||||||||||||
Amortization of intangible assets | 19,800 | 26,854 | 33,916 | 8,923 | 8,041 | |||||||||||||||
�� | ||||||||||||||||||||
Total expenses | 425,458 | 486,789 | 530,428 | 131,417 | 137,932 | |||||||||||||||
Operating income | 220,202 | 243,344 | 271,767 | 67,417 | 77,686 | |||||||||||||||
Other income/(expense): | ||||||||||||||||||||
Investment income and realized gains (losses) on securities, net | 2,932 | 6,101 | 9,308 | 2,094 | (458 | ) | ||||||||||||||
Interest expense | (10,465 | ) | (16,668 | ) | (22,928 | ) | (5,773 | ) | (6,326 | ) | ||||||||||
Total other expense | (7,533 | ) | (10,567 | ) | (13,620 | ) | (3,679 | ) | (6,784 | ) | ||||||||||
Income from continuing operations before income taxes | 212,669 | 232,777 | 258,147 | 63,738 | 70,902 | |||||||||||||||
Provision for income taxes | (85,722 | ) | (86,921 | ) | (103,184 | ) | (24,867 | ) | (29,876 | ) | ||||||||||
Income from continuing operations | 126,947 | 145,856 | 154,963 | 38,871 | 41,026 |
Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Risk Assessment revenues | $ | 472,634 | $ | 485,160 | $ | 504,391 | $ | 253,356 | $ | 262,873 | ||||||||||
Decision Analytics revenues | 257,499 | 317,035 | 389,159 | 184,334 | 240,794 | |||||||||||||||
Revenues | 730,133 | 802,195 | 893,550 | 437,690 | 503,667 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of revenues | 331,804 | 357,191 | 386,897 | 190,678 | 220,501 | |||||||||||||||
Selling, general and administrative | 100,124 | 107,576 | 131,239 | 59,028 | 72,225 | |||||||||||||||
Depreciation and amortization of fixed assets | 28,007 | 31,745 | 35,317 | 16,424 | 18,913 | |||||||||||||||
Amortization of intangible assets | 26,854 | 33,916 | 29,555 | 14,937 | 16,974 | |||||||||||||||
Total expenses | 486,789 | 530,428 | 583,008 | 281,067 | 328,613 | |||||||||||||||
Operating income | 243,344 | 271,767 | 310,542 | 156,623 | 175,054 | |||||||||||||||
Other income/(expense): | ||||||||||||||||||||
Investment income and realized gains (losses) on securities, net | 6,101 | 9,308 | (327 | ) | 317 | (273 | ) | |||||||||||||
Interest expense | (16,668 | ) | (22,928 | ) | (31,316 | ) | (14,173 | ) | (16,677 | ) | ||||||||||
Total other expense, net | (10,567 | ) | (13,620 | ) | (31,643 | ) | (13,856 | ) | (16,950 | ) | ||||||||||
Income from continuing operations before income taxes | 232,777 | 258,147 | 278,899 | 142,767 | 158,104 | |||||||||||||||
Provision for income taxes | (91,992 | ) | (103,184 | ) | (120,671 | ) | (61,818 | ) | (67,250 | ) | ||||||||||
Income from continuing operations | 140,785 | 154,963 | 158,228 | 80,949 | 90,854 |
7
Three Months | ||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Loss from discontinued operations, net of tax(1) | (2,574 | ) | (1,805 | ) | (4,589 | ) | (610 | ) | — | |||||||||||
Net income | $ | 124,373 | $ | 144,051 | $ | 150,374 | $ | 38,261 | $ | 41,026 | ||||||||||
Basic income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 29.81 | $ | 35.31 | $ | 38.58 | $ | 9.49 | $ | 10.91 | ||||||||||
Loss from discontinued operations | (0.61 | ) | (0.44 | ) | (1.14 | ) | (0.15 | ) | — | |||||||||||
Net income per share | $ | 29.20 | $ | 34.87 | $ | 37.44 | $ | 9.34 | $ | 10.91 | ||||||||||
Diluted income/(loss) per share: | ||||||||||||||||||||
Income from continuing operations | $ | 28.45 | $ | 33.85 | $ | 37.03 | $ | 9.10 | $ | 10.45 | ||||||||||
Loss from discontinued operations | (0.58 | ) | (0.42 | ) | (1.10 | ) | (0.14 | ) | — | |||||||||||
Net income per share | $ | 27.87 | $ | 33.43 | $ | 35.93 | $ | 8.96 | $ | 10.45 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 4,258,989 | 4,130,962 | 4,016,928 | 4,096,320 | 3,759,913 | |||||||||||||||
Diluted | 4,462,109 | 4,308,976 | 4,185,151 | 4,269,444 | 3,926,954 | |||||||||||||||
Other data: | ||||||||||||||||||||
EBITDA(3): | ||||||||||||||||||||
Risk Assessment EBITDA | $ | 195,951 | $ | 202,872 | $ | 212,780 | $ | 51,778 | $ | 58,122 | ||||||||||
Decision Analytics EBITDA | 66,075 | 95,333 | 124,648 | 32,144 | 35,512 | |||||||||||||||
EBITDA | $ | 262,026 | $ | 298,205 | $ | 337,428 | $ | 83,922 | $ | 93,634 | ||||||||||
Purchases of fixed assets | $ | (24,019 | ) | $ | (25,742 | ) | $ | (32,941 | ) | $ | (14,406 | ) | $ | (9,766 | ) | |||||
Net cash provided by operating activities | 174,071 | 223,499 | 248,521 | 92,735 | 89,864 | |||||||||||||||
Net cash (used in) provided by investing activities | (107,444 | ) | (243,452 | ) | (110,831 | ) | (39,454 | ) | 10,415 | |||||||||||
Net cash (used in) provided by financing activities | (90,954 | ) | 75,907 | (212,591 | ) | (26,577 | ) | (98,434 | ) |
Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||
Loss from discontinued operations, net of tax(1) | (1,805 | ) | (4,589 | ) | — | — | — | |||||||||||||
Net income | $ | 138,980 | $ | 150,374 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||
Basic income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 34.08 | $ | 38.58 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||
Loss from discontinued operations | (0.44 | ) | (1.14 | ) | — | — | — | |||||||||||||
Net income per share | $ | 33.64 | $ | 37.44 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||
Diluted income/(loss) per share(2): | ||||||||||||||||||||
Income from continuing operations | $ | 32.72 | $ | 37.03 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||
Loss from discontinued operations | (0.42 | ) | (1.10 | ) | — | — | — | |||||||||||||
Net income per share | $ | 32.30 | $ | 35.93 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 4,130,962 | 4,016,928 | 3,657,714 | 3,724,876 | 3,468,196 | |||||||||||||||
Diluted | 4,302,867 | 4,185,151 | 3,804,634 | 3,877,906 | 3,604,086 | |||||||||||||||
Other data: | ||||||||||||||||||||
EBITDA(3): | ||||||||||||||||||||
Risk Assessment EBITDA | $ | 202,872 | $ | 212,780 | $ | 222,706 | $ | 113,500 | $ | 121,197 | ||||||||||
Decision Analytics EBITDA | 95,333 | 124,648 | 152,708 | 74,484 | 89,744 | |||||||||||||||
EBITDA | $ | 298,205 | $ | 337,428 | $ | 375,414 | $ | 187,984 | $ | 210,941 | ||||||||||
Purchases of fixed assets | $ | (25,742 | ) | $ | (32,941 | ) | $ | (30,652 | ) | $ | (17,810 | ) | $ | (16,195 | ) | |||||
Net cash provided by operating activities | 223,499 | 248,521 | 247,906 | 141,929 | 184,529 | |||||||||||||||
Net cash used in investing activities | (243,452 | ) | (110,831 | ) | (130,466 | ) | (98,402 | ) | (152,683 | ) | ||||||||||
Net cash provided by/(used in) financing activities | 75,907 | (212,591 | ) | (107,376 | ) | (16,759 | ) | (19,157 | ) |
As of December 31, | As of March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 42,822 | $ | 99,152 | $ | 24,049 | $ | 125,878 | $ | 25,898 | ||||||||||
Total assets | 466,244 | 744,731 | 828,483 | 846,668 | 842,445 | |||||||||||||||
Total debt(4) | 276,964 | 448,698 | 438,330 | 447,655 | 517,014 | |||||||||||||||
Redeemable common stock(5) | 901,089 | 1,125,933 | 1,171,188 | 1,158,693 | 1,017,967 | |||||||||||||||
Stockholders’ deficit | (938,294 | ) | (1,116,357 | ) | (1,195,728 | ) | (1,142,421 | ) | (1,190,826 | ) |
As of December 31, | As of June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 99,152 | $ | 24,049 | $ | 33,185 | $ | 50,835 | $ | 45,962 | ||||||||||
Total assets | 739,282 | 830,041 | 928,877 | 867,128 | 1,009,335 | |||||||||||||||
Total debt(4) | 448,698 | 438,330 | 669,754 | 642,182 | 689,066 | |||||||||||||||
Redeemable common stock(5) | 1,125,933 | 1,171,188 | 749,539 | 1,006,287 | 842,117 | |||||||||||||||
Stockholders’ deficit | (1,123,977 | ) | (1,203,348 | ) | (1,009,823 | ) | (1,186,569 | ) | (1,028,489 | ) |
(1) | As of December 31, 2007, we discontinued operations of our claim consulting business located in New Hope, Pennsylvania and the United Kingdom. There was no impact of discontinued operations on the results of operations for the periods subsequent to December 31, 2007. |
8
(2) | In conjunction with the initial public offering, the stock of Insurance Services Office, Inc. will convert to stock of Verisk Analytics, Inc., which plans to effect a stock split of its common stock. The numbers in the above table do not reflect this stock split. Giving effect to |
8
the approximately |
Year Ended December 31, | Six Months Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
Basic | ||||||||||||||||||||
Income from continuing operations | $ | 0.68 | $ | 0.77 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | — | — | |||||||||||||
Net Income per share | $ | 0.67 | $ | 0.75 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||
Weighted average shares | 206,548,100 | 200,846,400 | 182,885,700 | 186,243,800 | 173,409,800 | |||||||||||||||
Diluted | ||||||||||||||||||||
Income from continuing operations | $ | 0.65 | $ | 0.74 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | — | — | |||||||||||||
Net Income per share | $ | 0.64 | $ | 0.72 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||
Weighted average shares | 215,143,350 | 209,257,550 | 190,231,700 | 193,895,300 | 180,204,300 | |||||||||||||||
(3) | EBITDA is the financial measure which management uses to evaluate the performance of our segments. “EBITDA” is defined as income from continuing operations before investment income and interest expense, income taxes, depreciation and amortization. See note | |
Although EBITDA is frequently used by securities analysts, lenders and | ||
• EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; | ||
• EBITDA does not reflect changes in, or cash requirements for, our working capital needs; | ||
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to | ||
• Other companies |
9
Three Months | ||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Income from continuing operations | $ | 126,947 | $ | 145,856 | $ | 154,963 | $ | 38,871 | $ | 41,026 | ||||||||||
Depreciation and amortization of fixed and intangible assets | 41,824 | 54,861 | 65,661 | 16,505 | 15,948 | |||||||||||||||
Interest and investment (income) loss | (2,932 | ) | (6,101 | ) | (9,308 | ) | (2,094 | ) | 458 | |||||||||||
Interest expense | 10,465 | 16,668 | 22,928 | 5,773 | 6,326 | |||||||||||||||
Provision for income taxes | 85,722 | 86,921 | 103,184 | 24,867 | 29,876 | |||||||||||||||
EBITDA | $ | 262,026 | $ | 298,205 | $ | 337,428 | $ | 83,922 | $ | 93,634 |
Six Months | ||||||||||||||||||||
Year Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Income from continuing operations | $ | 140,785 | $ | 154,963 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||
Depreciation and amortization of fixed and intangible assets | 54,861 | 65,661 | 64,872 | 31,361 | 35,887 | |||||||||||||||
Investment income and realized (gains)/losses on securities, net | (6,101 | ) | (9,308 | ) | 327 | (317 | ) | 273 | ||||||||||||
Interest expense | 16,668 | 22,928 | 31,316 | 14,173 | 16,677 | |||||||||||||||
Provision for income taxes | 91,992 | 103,184 | 120,671 | 61,818 | 67,250 | |||||||||||||||
EBITDA | $ | 298,205 | $ | 337,428 | $ | 375,414 | $ | 187,984 | $ | 210,941 |
(5) | Prior to this offering, we are required to record our Class A common stock and vested options at redemption value at each balance sheet date as the redemption of these securities is not solely within our control, due to our contractual obligations to redeem these shares. We classify this redemption value as redeemable common stock. Subsequent to this offering, we will no longer be obligated to redeem these shares and therefore we will not be required to record any redeemable common stock. |
910
• | changes in the business analytics industry; | |
• | changes in technology; | |
• | our inability to obtain or use state fee schedule or claims data in our insurance solutions; | |
• | saturation of market demand; |
11
• | loss of key customers; |
10
• | industry consolidation; and | |
• | failure to execute our customer-focused selling approach. |
12
11
• | amendment, enactment, or interpretation of laws and regulations which restrict the access and use of personal information and reduce the supply of data available to customers; | |
• | changes in cultural and consumer attitudes to favor further restrictions on information collection and sharing, which may lead to regulations that prevent full utilization of our solutions; | |
• | failure of our solutions to comply with current laws and regulations; and | |
• | failure of our solutions to adapt to changes in the regulatory environment in an efficient, cost-effective manner. |
1213
• | deterring customers from using our solutions; | |
• | deterring data suppliers from supplying data to us; | |
• | harming our reputation; | |
• | exposing us to liability; | |
• | increasing operating expenses to correct problems caused by the breach; | |
• | affecting our ability to meet customers’ expectations; or | |
• | causing inquiry from governmental authorities. |
14
13
• | failing to implement or remediate controls, procedures and policies appropriate for a larger public company at acquired companies that prior to the acquisition lacked such controls, procedures and policies; | |
• | paying more than fair market value for an acquired company or assets; | |
• | failing to integrate the operations and personnel of the acquired businesses in an efficient, timely manner; | |
• | assuming potential liabilities of an acquired company; | |
• | managing the potential disruption to our ongoing business; | |
• | distracting management focus from our core businesses; | |
• | difficulty in acquiring suitable businesses; | |
• | impairing relationships with employees, customers, and strategic partners; | |
• | incurring expenses associated with the amortization of intangible assets; | |
• | incurring expenses associated with an impairment of all or a portion of goodwill and other intangible assets due to changes in market conditions, weak economies in certain competitive markets, or the failure of certain acquisitions to realize expected benefits; and | |
• | diluting the share value and voting power of existing stockholders. |
15
14
16
15
• | actual or anticipated fluctuations in our quarterly operating results; | |
• | changes in financial estimates by securities research analysts; | |
• | changes in the economic performance or market valuations of other companies engaged in our industry; | |
• | regulatory developments in our industry affecting us, our customers or our competitors; | |
• | announcements of technological developments; | |
• | sales or expected sales of additional common stock; |
17
• | continued dislocations and downward pressure in the capital markets; and | |
• | terrorist attacks or natural disasters or other such events impacting countries where we or our customers have operations. |
16
18
17
• | authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to increase the number of outstanding shares to thwart a takeover attempt; | |
• | prohibit cumulative voting in the election of directors, which would otherwise allow holders of less than a majority of the stock to elect some directors; | |
• | require that vacancies on the board of directors, including newly-created directorships, be filled only by a majority vote of directors then in office; | |
• | limit who may call special meetings of stockholders; | |
• | authorize the issuance of authorized but unissued shares of common stock and preferred stock without stockholder approval, subject to the rules and regulations of the ; |
19
• | prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of the stockholders; and | |
• | establish advance notice requirements for nominating candidates for election to the board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings. |
1820
1921
22
2023
• | on an actual basis; and | |
• | on an as adjusted basis to give effect to changes in the terms of our capital stock in connection with this initial public offering and the consequent expiration of our obligations to redeem our Class A common stock. |
As of March 31, 2008 | ||||||||
Actual | As Adjusted | |||||||
(in thousands, | ||||||||
except share numbers) | ||||||||
Long-term debt (including current portion of long-term debt) | $ | 517,014 | $ | 517,014 | ||||
Redeemable common stock:(1) | ||||||||
Class A redeemable common stock, stated at redemption value, $0.01 par value; 6,700,000 shares authorized; 2,986,359 shares issued and 997,567 outstanding | 1,072,702 | — | ||||||
Unearned Class A common stock ESOP shares | (3,940 | ) | — | |||||
Notes receivable from stockholders(2) | (50,795 | ) | — | |||||
Total redeemable common stock | 1,017,967 | — | ||||||
Stockholders’ deficit: | ||||||||
Class A common stock, $0.001 par value per share, 20,000,000 shares authorized; 10,004,500 shares issued and 2,863,359 shares outstanding(3) | — | 30 | ||||||
Class B (Series 1 and 2) common stock, $0.001 par value per share, shares authorized, shares issued and shares outstanding(3) | 100 | 100 | ||||||
Additional paid-in capital | 21,272 | 548,461 | ||||||
Class A common stock unearned ESOP shares | — | (3,940 | ) | |||||
Accumulated other comprehensive loss | (25,023 | ) | (25,023 | ) | ||||
(Accumulated deficit)/retained earnings | (503,181 | ) | 904,040 | |||||
Class B common stock, treasury stock, 7,140,758 shares | (683,994 | ) | (1,545,732 | ) | ||||
Total stockholders’ deficit | (1,190,826 | ) | (122,064 | ) | ||||
Total capitalization | $ | 344,155 | $ | 394,950 | ||||
As of June 30, 2009 | ||||||||
Actual | As Adjusted | |||||||
(In thousands, | ||||||||
except share numbers) | ||||||||
Long-term debt (including short-term debt and current portion of long-term debt) | $ | 689,066 | $ | 689,066 | ||||
Redeemable common stock:(1) | ||||||||
Class A redeemable common stock, stated at redemption value, $0.01 par value; 6,700,000 shares authorized 3,010,843 shares issued and 700,188 outstanding (on a pre-split basis) and vested options at intrinsic value | 845,126 | — | ||||||
Class A unearned common stock ESOP shares | (3,009 | ) | — | |||||
Total redeemable common stock | 842,117 | — | ||||||
Stockholders’ deficit: | ||||||||
Class A common stock, $0.001 par value per share, 335,000,000 shares authorized; shares issued and shares outstanding(2) | — | 30 | ||||||
Class B (Series 1 and 2) common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 500,225,000 shares issued and 143,192,100 shares outstanding(2) | 100 | 100 | ||||||
Additional paid-in capital(3) | — | 579,631 | ||||||
Class A unearned common stock ESOP shares(2) | — | (3,009 | ) | |||||
Accumulated other comprehensive loss | (79,130 | ) | (79,130 | ) | ||||
(Accumulated deficit)/retained earnings | (265,465 | ) | — | |||||
Class B (Series 1 and 2) common stock, treasury stock, 357,037,900 shares | (683,994 | ) | (683,994 | ) | ||||
Total stockholders’ deficit | (1,028,489 | ) | (186,372 | ) | ||||
Total capitalization | $ | 502,694 | $ | 502,694 | ||||
(1) | Prior to this offering, we were required to record our Class A common stock and vested options at redemption value at each balance sheet date as the redemption of these securities is not solely within our control, due to our contractual obligations to redeem these shares. We classify this redemption value as redeemable common stock. Subsequent to this offering, we will no longer be obligated to redeem these shares and therefore we will not be required to record any redeemable common stock. Refer to note 11 of the unaudited condensed consolidated interim financial statements for further information. |
(2) | ||
Giving effect to the approximately |
(3) | Prior to the completion of this offering, we intend to accelerate the allocation of a portion of the shares to the ESOP, which will result in anon-recurringnon-cash charge of approximately $50.0 million, based on the mid-point of the range set forth on the cover page of this prospectus. |
2124
Three Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Risk Assessment revenues | $ | 359,186 | $ | 403,616 | $ | 448,875 | $ | 472,634 | $ | 485,160 | $ | 121,797 | $ | 127,039 | ||||||||||||||
Decision Analytics revenues | 118,897 | 144,711 | 196,785 | 257,499 | 317,035 | 77,037 | 88,579 | |||||||||||||||||||||
Revenues | 478,083 | 548,327 | 645,660 | 730,133 | 802,195 | 198,834 | 215,618 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Cost of revenues | 256,917 | 263,332 | 294,911 | 331,804 | 357,191 | 86,987 | 93,310 | |||||||||||||||||||||
Selling, general and administrative | 75,075 | 81,020 | 88,723 | 100,124 | 107,576 | 27,925 | 28,674 | |||||||||||||||||||||
Depreciation and amortization of fixed assets | 20,261 | 19,569 | 22,024 | 28,007 | 31,745 | 7,582 | 7,907 | |||||||||||||||||||||
Amortization of intangible assets | 9,927 | 11,412 | 19,800 | 26,854 | 33,916 | 8,923 | 8,041 | |||||||||||||||||||||
Total expenses | 362,180 | 375,333 | 425,458 | 486,789 | 530,428 | 131,417 | 137,932 | |||||||||||||||||||||
Operating income | 115,903 | 172,994 | 220,202 | 243,344 | 271,767 | 67,417 | 77,686 | |||||||||||||||||||||
Other income/(expense): | ||||||||||||||||||||||||||||
Investment income and realized gains (losses) on securities, net | 3,789 | 950 | 2,932 | 6,101 | 9,308 | 2,094 | (458 | ) | ||||||||||||||||||||
Interest expense | (2,333 | ) | (5,241 | ) | (10,465 | ) | (16,668 | ) | (22,928 | ) | (5,773 | ) | (6,326 | ) | ||||||||||||||
Total other expense | 1,456 | (4,291 | ) | (7,533 | ) | (10,567 | ) | (13,620 | ) | (3,679 | ) | (6,784 | ) | |||||||||||||||
Income from continuing operations before income taxes | 117,359 | 168,703 | 212,669 | 232,777 | 258,147 | 63,738 | 70,902 | |||||||||||||||||||||
Provision for income taxes | (47,745 | ) | (68,925 | ) | (85,722 | ) | (86,921 | ) | (103,184 | ) | (24,867 | ) | (29,876 | ) | ||||||||||||||
Income from continuing operations | 69,614 | 99,778 | 126,947 | 145,856 | 154,963 | 38,871 | 41,026 | |||||||||||||||||||||
Loss from discontinued operations, net of tax(1) | (12 | ) | (508 | ) | (2,574 | ) | (1,805 | ) | (4,589 | ) | (610 | ) | — | |||||||||||||||
Net income | $ | 69,602 | $ | 99,270 | $ | 124,373 | $ | 144,051 | $ | 150,374 | $ | 38,261 | $ | 41,026 | ||||||||||||||
Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, 2009 | |||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||
Risk Assessment revenues | $ | 403,616 | $ | 448,875 | $ | 472,634 | $ | 485,160 | $ | 504,391 | $ | 253,356 | $ | 262,873 | ||||||||||||||
Decision Analytics revenues | 144,711 | 196,785 | 257,499 | 317,035 | 389,159 | 184,334 | 240,794 | |||||||||||||||||||||
Revenues | 548,327 | 645,660 | 730,133 | 802,195 | 893,550 | 437,690 | 503,667 | |||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||
Cost of revenues | 263,332 | 294,911 | 331,804 | 357,191 | 386,897 | 190,678 | 220,501 | |||||||||||||||||||||
Selling, general and administrative | 81,020 | 88,723 | 100,124 | 107,576 | 131,239 | 59,028 | 72,225 | |||||||||||||||||||||
Depreciation and amortization of fixed assets | 19,569 | 22,024 | 28,007 | 31,745 | 35,317 | 16,424 | 18,913 | |||||||||||||||||||||
Amortization of intangible assets | 11,412 | 19,800 | 26,854 | 33,916 | 29,555 | 14,937 | 16,974 | |||||||||||||||||||||
Total expenses | 375,333 | 425,458 | 486,789 | 530,428 | 583,008 | 281,067 | 328,613 | |||||||||||||||||||||
Operating income | 172,994 | 220,202 | 243,344 | 271,767 | 310,542 | 156,623 | 175,054 | |||||||||||||||||||||
Other income/(expense): | ||||||||||||||||||||||||||||
Investment income and realized gains/(losses) on securities, net | 950 | 2,932 | 6,101 | 9,308 | (327 | ) | 317 | (273 | ) | |||||||||||||||||||
Interest expense | (5,241 | ) | (10,465 | ) | (16,668 | ) | (22,928 | ) | (31,316 | ) | (14,173 | ) | (16,677 | ) | ||||||||||||||
Total other expense, net | (4,291 | ) | (7,533 | ) | (10,567 | ) | (13,620 | ) | (31,643 | ) | (13,856 | ) | (16,950 | ) | ||||||||||||||
Income from continuing operations before income taxes | 168,703 | 212,669 | 232,777 | 258,147 | 278,899 | 142,767 | 158,104 | |||||||||||||||||||||
Provision for income taxes | (68,925 | ) | (85,722 | ) | (91,992 | ) | (103,184 | ) | (120,671 | ) | (61,818 | ) | (67,250 | ) | ||||||||||||||
Income from continuing operations | 99,778 | 126,947 | 140,785 | 154,963 | 158,228 | 80,949 | 90,854 | |||||||||||||||||||||
Loss from discontinued operations, net of tax(1) | (508 | ) | (2,574 | ) | (1,805 | ) | (4,589 | ) | — | — | — | |||||||||||||||||
Net income | $ | 99,270 | $ | 124,373 | $ | 138,980 | $ | 150,374 | $ | 158,228 | $ | 80,949 | $ | 90,854 | ||||||||||||||
Basic income/(loss) per share(2): | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 20.12 | $ | 29.81 | $ | 34.08 | $ | 38.58 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||||||
Loss from discontinued operations | (0.10 | ) | (0.61 | ) | (0.44 | ) | (1.14 | ) | — | — | — | |||||||||||||||||
Net income per share | $ | 20.02 | $ | 29.20 | $ | 33.64 | $ | 37.44 | $ | 43.26 | $ | 21.73 | $ | 26.20 | ||||||||||||||
Diluted income/(loss) per share(2): | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 19.28 | $ | 28.45 | $ | 32.72 | $ | 37.03 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||||||
Loss from discontinued operations | (0.10 | ) | (0.58 | ) | (0.42 | ) | (1.10 | ) | — | — | — | |||||||||||||||||
Net income per share | $ | 19.18 | $ | 27.87 | $ | 32.30 | $ | 35.93 | $ | 41.59 | $ | 20.87 | $ | 25.21 | ||||||||||||||
2225
Three Months | ||||||||||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||||||||||
Basic income/(loss) per share(2): | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 10.91 | $ | 20.12 | $ | 29.81 | $ | 35.31 | $ | 38.58 | $ | 9.49 | $ | 10.91 | ||||||||||||||
Loss from discontinued operations | — | (0.10 | ) | (0.61 | ) | (0.44 | ) | (1.14 | ) | (0.15 | ) | — | ||||||||||||||||
Net income per share | $ | 10.91 | $ | 20.02 | $ | 29.20 | $ | 34.87 | $ | 37.44 | $ | 9.34 | $ | 10.91 | ||||||||||||||
Diluted income/(loss) per share: | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 10.62 | $ | 19.28 | $ | 28.45 | $ | 33.85 | $ | 37.03 | $ | 9.10 | $ | 10.45 | ||||||||||||||
Loss from discontinued operations | — | (0.10 | ) | (0.58 | ) | (0.42 | ) | (1.10 | ) | (0.14 | ) | — | ||||||||||||||||
Net income per share | $ | 10.62 | $ | 19.18 | $ | 27.87 | $ | 33.43 | $ | 35.93 | $ | 8.96 | $ | 10.45 | ||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 6,382,836 | 4,958,161 | 4,258,989 | 4,130,962 | 4,016,928 | 4,096,320 | 3,759,913 | |||||||||||||||||||||
Diluted | 6,557,950 | 5,174,281 | 4,462,109 | 4,308,976 | 4,185,151 | 4,269,444 | 3,926,954 | |||||||||||||||||||||
Other data: | ||||||||||||||||||||||||||||
Purchases of fixed assets | (14,385 | ) | (17,516 | ) | (24,019 | ) | (25,742 | ) | (32,941 | ) | (14,406 | ) | (9,766 | ) | ||||||||||||||
Net cash provided by operating activities | 131,340 | 174,780 | 174,071 | 223,499 | 248,521 | 92,735 | 89,864 | |||||||||||||||||||||
Net cash (used in) provided by investing activities | 19,731 | (41,851 | ) | (107,444 | ) | (243,452 | ) | (110,831 | ) | (39,454 | ) | 10,415 | ||||||||||||||||
Net cash (used in) provided by financing activities | (150,912 | ) | (114,280 | ) | (90,954 | ) | 75,907 | (212,591 | ) | (26,577 | ) | (98,434 | ) |
Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, 2009 | |||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||||||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||||||
Basic | 4,958,161 | 4,258,989 | 4,130,962 | 4,016,928 | 3,657,714 | 3,724,876 | 3,468,196 | |||||||||||||||||||||
Diluted | 5,174,281 | 4,462,109 | 4,302,867 | 4,185,151 | 3,804,634 | 3,877,906 | 3,604,086 | |||||||||||||||||||||
Other data: | ||||||||||||||||||||||||||||
Purchases of fixed assets | $ | (17,516 | ) | $ | (24,019 | ) | $ | (25,742 | ) | $ | (32,941 | ) | $ | (30,652 | ) | $ | (17,810 | ) | $ | (16,195 | ) | |||||||
Net cash provided by operating activities | 174,780 | 174,071 | 223,499 | 248,521 | 247,906 | 141,929 | 184,529 | |||||||||||||||||||||
Net cash used in investing activities | (41,851 | ) | (107,444 | ) | (243,452 | ) | (110,831 | ) | (130,466 | ) | (98,402 | ) | (152,683 | ) | ||||||||||||||
Net cash (used in)/provided by financing activities | (114,280 | ) | (90,954 | ) | 75,907 | (212,591 | ) | (107,376 | ) | (16,759 | ) | (19,157 | ) |
Year Ended December 31, | As of March 31, | |||||||||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 48,954 | $ | 67,700 | $ | 42,822 | $ | 99,152 | $ | 24,049 | $ | 125,878 | $ | 25,898 | ||||||||||||||
Total assets | 344,145 | 386,496 | 466,244 | 744,731 | 828,483 | 846,668 | 842,445 | |||||||||||||||||||||
Total debt(3) | 112,880 | 206,152 | 276,964 | 448,698 | 438,330 | 447,655 | 517,014 | |||||||||||||||||||||
Redeemable common stock(4) | 380,246 | 722,532 | 901,089 | 1,125,933 | 1,171,188 | 1,158,693 | 1,017,967 | |||||||||||||||||||||
Stockholders’ deficit | (313,240 | ) | (732,762 | ) | (938,294 | ) | (1,116,357 | ) | (1,195,728 | ) | (1,142,421 | ) | (1,190,826 | ) |
As of December 31, | As of June 30, | |||||||||||||||||||||||||||
2004 | 2005 | 2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 67,700 | $ | 42,822 | $ | 99,152 | $ | 24,049 | $ | 33,185 | $ | 50,835 | $ | 45,962 | ||||||||||||||
Total assets | 386,496 | 466,244 | 739,282 | 830,041 | 928,877 | 867,128 | 1,009,335 | |||||||||||||||||||||
Total debt(3) | 206,152 | 276,964 | 448,698 | 438,330 | 669,754 | 642,182 | 689,066 | |||||||||||||||||||||
Redeemable common stock(4) | 722,532 | 901,089 | 1,125,933 | 1,171,188 | 749,539 | 1,006,287 | 842,117 | |||||||||||||||||||||
Stockholders’ deficit | (740,478 | ) | (940,843 | ) | (1,123,977 | ) | (1,203,348 | ) | (1,009,823 | ) | (1,186,569 | ) | (1,028,489 | ) |
(1) | As of December 31, 2007, we discontinued operations of our claim consulting business located in New Hope, Pennsylvania and the United Kingdom. There was no impact of discontinued operations on the results of operations for the periods subsequent to December 31, 2007. |
(2) | In conjunction with the initial public offering, the stock of Insurance Services Office, Inc. will convert to stock of Verisk Analytics, Inc., which plans to effect a stock split of its common stock. The numbers in the above table do not reflect this stock split. Giving effect to the approximately |
Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||||||||||
Basic | 2004 | 2005 | 2006 | 2007 | 2008 | 2008 | 2009 | |||||||||||||||||||||
Income from continuing operations | $ | 0.40 | $ | 0.60 | $ | 0.68 | $ | 0.77 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||||||
Loss from discontinued operations | — | (0.02 | ) | (0.01 | ) | (0.02 | ) | — | — | — | ||||||||||||||||||
Net Income per share | $ | 0.40 | $ | 0.58 | $ | 0.67 | $ | 0.75 | $ | 0.87 | $ | 0.43 | $ | 0.52 | ||||||||||||||
Weighted average shares | 247,908,050 | 212,949,450 | 206,548,100 | 200,846,400 | 182,885,700 | 186,243,800 | 173,409,800 | |||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.39 | $ | 0.57 | $ | 0.65 | $ | 0.74 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||||||
Loss from discontinued operations | — | (0.01 | ) | (0.01 | ) | (0.02 | ) | — | — | — | ||||||||||||||||||
Net Income per share | $ | 0.39 | $ | 0.56 | $ | 0.64 | $ | 0.72 | $ | 0.83 | $ | 0.42 | $ | 0.50 | ||||||||||||||
Weighted average shares | 258,714,050 | 223,105,450 | 215,143,350 | 209,257,550 | 190,231,700 | 193,895,300 | 180,204,300 | |||||||||||||||||||||
(3) | Includes capital lease obligations. | |
(4) | Prior to this offering, we are required to record our Class A common stock and vested options at redemption value at each balance sheet date as the redemption of these securities is not solely within our control, due to our contractual obligations to redeem these shares. We classify this redemption value as redeemable common stock. Subsequent to this offering, we will no longer be obligated to redeem these shares and therefore we will not be required to record any redeemable common stock. |
2326
2427
28
25
29
2630
Three Months | ||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
401(k) matching contribution expense: | ||||||||||||||||||||
Risk Assessment | $ | 4,466 | $ | 4,703 | $ | 4,914 | $ | 1,327 | $ | 1,400 | ||||||||||
Decision Analytics | 1,689 | 2,105 | 2,788 | 733 | 823 | |||||||||||||||
Total 401(k) matching contribution expense | 6,155 | 6,808 | 7,702 | 2,060 | 2,223 | |||||||||||||||
Profit sharing contribution expenses: | ||||||||||||||||||||
Risk Assessment | — | — | 473 | 119 | 212 | |||||||||||||||
Decision Analytics | — | — | 268 | 66 | 124 | |||||||||||||||
Total profit sharing contribution expense | — | — | 741 | 185 | 336 | |||||||||||||||
ESOP allocation expense: | ||||||||||||||||||||
Risk Assessment | 5,422 | 8,105 | 8,806 | 1,903 | 1,994 | |||||||||||||||
Decision Analytics | 2,051 | 3,627 | 4,997 | 1,052 | 1,172 | |||||||||||||||
Total ESOP allocation expense | 7,473 | 11,732 | 13,803 | 2,955 | 3,166 | |||||||||||||||
Total ESOP costs | $ | 13,628 | $ | 18,540 | $ | 22,246 | $ | 5,200 | $ | 5,725 | ||||||||||
Six Months | ||||||||||||||||||||
Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
401(k) matching contribution expense: | ||||||||||||||||||||
Risk Assessment | $ | 4,703 | $ | 4,914 | $ | 5,408 | $ | 2,660 | $ | 2,459 | ||||||||||
Decision Analytics | 2,105 | 2,788 | 3,162 | 1,542 | 1,794 | |||||||||||||||
Total 401(k) matching contribution expense | 6,808 | 7,702 | 8,570 | 4,202 | 4,253 | |||||||||||||||
Profit sharing contribution expense: | ||||||||||||||||||||
Risk Assessment | — | 473 | 720 | 370 | 588 | |||||||||||||||
Decision Analytics | — | 268 | 421 | 215 | 117 | |||||||||||||||
Total profit sharing contribution expense | — | 741 | 1,141 | 585 | 705 | |||||||||||||||
ESOP allocation expense: | ||||||||||||||||||||
Risk Assessment | 8,105 | 8,807 | 7,927 | 4,289 | 3,161 | |||||||||||||||
Decision Analytics | 3,627 | 4,997 | 4,636 | 2,488 | 2,619 | |||||||||||||||
Total ESOP allocation expense | 11,732 | 13,804 | 12,563 | 6,777 | 5,780 | |||||||||||||||
Total ESOP cost | $ | 18,540 | $ | 22,247 | $ | 22,274 | $ | 11,564 | $ | 10,738 | ||||||||||
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Three Months | ||||||||||||||||||||
Year Ended December 31, | Ended March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
Statement of income data: | ||||||||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of revenues | 45.7 | % | 45.4 | % | 44.5 | % | 43.7 | % | 43.3 | % | ||||||||||
Selling, general and administrative | 13.7 | % | 13.7 | % | 13.4 | % | 14.0 | % | 13.3 | % | ||||||||||
Depreciation and amortization of fixed assets | 3.4 | % | 3.8 | % | 4.0 | % | 3.8 | % | 3.7 | % | ||||||||||
Amortization of intangible assets | 3.1 | % | 3.7 | % | 4.2 | % | 4.5 | % | 3.7 | % | ||||||||||
Total expenses | 65.9 | % | 66.7 | % | 66.1 | % | 66.1 | % | 64.0 | % | ||||||||||
Operating income | 34.1 | % | 33.3 | % | 33.9 | % | 33.9 | % | 36.0 | % | ||||||||||
Other income/(expense): | ||||||||||||||||||||
Interest and investment income (loss) | 0.5 | % | 0.8 | % | 1.2 | % | 1.1 | % | (0.2 | %) | ||||||||||
Interest expense | (1.6 | )% | (2.3 | )% | (2.9 | )% | (2.9 | )% | (2.9 | )% | ||||||||||
Total other income/(expense) | (1.2 | )% | (1.4 | )% | (1.7 | )% | (1.9 | )% | (3.1 | )% | ||||||||||
Income from continuing operations before income taxes | 32.9 | % | 31.9 | % | 32.2 | % | 32.1 | % | 32.9 | % | ||||||||||
Provision for income taxes | (13.3 | )% | (11.9 | )% | (12.9 | )% | (12.5 | )% | (13.9 | )% | ||||||||||
Income from continuing operations | 19.7 | % | 20.0 | % | 19.3 | % | 19.5 | % | 19.0 | % | ||||||||||
Loss from discontinued operations, net of tax | (0.4 | )% | (0.2 | )% | (0.6 | )% | (0.3 | )% | (— | ) | ||||||||||
Net Income | 19.3 | % | 19.7 | % | 18.7 | % | 19.2 | % | 19.0 | % | ||||||||||
EBITDA | 40.6 | % | 40.8 | % | 42.1 | % | 42.2 | % | 43.4 | % |
Six Months | ||||||||||||||||||||
Ended | ||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
Statement of income data: | ||||||||||||||||||||
Expenses: | ||||||||||||||||||||
Cost of revenues | 45.4 | % | 44.5 | % | 43.3 | % | 43.6 | % | 43.8 | % | ||||||||||
Selling, general and administrative | 13.7 | % | 13.4 | % | 14.7 | % | 13.5 | % | 14.3 | % | ||||||||||
Depreciation and amortization of fixed assets | 3.8 | % | 4.0 | % | 4.0 | % | 3.8 | % | 3.8 | % | ||||||||||
Amortization of intangible assets | 3.7 | % | 4.2 | % | 3.3 | % | 3.4 | % | 3.4 | % | ||||||||||
Total expenses | 66.7 | % | 66.1 | % | 65.2 | % | 64.2 | % | 65.2 | % | ||||||||||
Operating income | 33.3 | % | 33.9 | % | 34.8 | % | 35.8 | % | 34.8 | % | ||||||||||
Other income/(expense): | ||||||||||||||||||||
Interest and investment income/(loss) | 0.8 | % | 1.2 | % | (0.0 | )% | 0.1 | % | (0.1 | )% | ||||||||||
Interest expense | (2.3 | )% | (2.9 | )% | (3.5 | )% | (3.2 | )% | (3.3 | )% | ||||||||||
Total other income/(expense) | (1.4 | )% | (1.7 | )% | (3.5 | )% | (3.2 | )% | (3.4 | )% | ||||||||||
Income from continuing operations before income taxes | 31.9 | % | 32.2 | % | 31.2 | % | 32.6 | % | 31.4 | % | ||||||||||
Provision for income taxes | (12.6 | )% | (12.9 | )% | (13.5 | )% | (14.1 | )% | (13.4 | )% | ||||||||||
Income from continuing operations | 19.3 | % | 19.3 | % | 17.7 | % | 18.5 | % | 18.0 | % | ||||||||||
Loss from discontinued operations, net of tax | (0.3 | )% | (0.6 | )% | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||
Net Income | 19.0 | % | 18.7 | % | 17.7 | % | 18.5 | % | 18.0 | % | ||||||||||
EBITDA | 40.8 | % | 42.1 | % | 42.0 | % | 42.9 | % | 41.9 | % |
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Six Months Ended | ||||||||||||
June 30, | Percentage | |||||||||||
2008 | 2009 | Change | ||||||||||
(In thousands) | ||||||||||||
Industry standard insurance programs | $ | 165,719 | $ | 172,193 | 3.9 | % | ||||||
Property-specific rating and underwriting information | 63,344 | 65,869 | 4.0 | % | ||||||||
Statistical agency and data services | 13,820 | 14,135 | 2.3 | % | ||||||||
Actuarial services | 10,473 | 10,676 | 1.9 | % |
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Six Months Ended | ||||||||||||
June 30, | Percentage | |||||||||||
2008 | 2009 | Change | ||||||||||
(In thousands) | ||||||||||||
Fraud identification and detection solutions | $ | 102,858 | $ | 130,475 | 26.8 | % | ||||||
Loss prediction solutions | 46,260 | 66,896 | 44.6 | % | ||||||||
Loss quantification solutions | 35,216 | 43,423 | 23.3 | % |
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Year Ended | ||||||||||||
December 31, | Percentage | |||||||||||
2007 | 2008 | Change | ||||||||||
(In thousands) | ||||||||||||
Industry standard insurance programs | $ | 311,087 | $ | 329,858 | 6.0 | % | ||||||
Property-specific rating and underwriting information | 126,291 | 125,835 | (0.4 | )% | ||||||||
Statistical agency and data services | 27,282 | 27,451 | 0.6 | % | ||||||||
Actuarial services | 20,500 | 21,247 | 3.6 | % |
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Three Months | Year Ended | |||||||||||||||||||||||
Ended March 31, | Percentage | December 31, | Percentage | |||||||||||||||||||||
2007 | 2008 | Change | 2007 | 2008 | Change | |||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||
Fraud identification and detection solutions | $ | 172,726 | $ | 213,994 | 23.9 | % | ||||||||||||||||||
Loss prediction solutions | $ | 17,900 | $ | 21,434 | 19.7% | 81,110 | 95,128 | 17.3 | % | |||||||||||||||
Fraud identification and detection solutions | 44,768 | 50,320 | 12.4% | |||||||||||||||||||||
Loss quantification solutions | 14,369 | 16,825 | 17.1% | 63,199 | 80,037 | 26.6 | % |
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Year Ended | ||||||||||||
December 31, | Percentage | |||||||||||
2006 | 2007 | Change | ||||||||||
(In thousands) | ||||||||||||
Industry standard insurance programs | $ | 303,957 | $ | 311,087 | 2.3 | % | ||||||
Property-specific rating and underwriting information | 123,627 | 126,291 | 2.2 | % | ||||||||
Statistical agency and data services | 25,793 | 27,282 | 5.8 | % | ||||||||
Actuarial services | 19,257 | 20,500 | 6.5 | % |
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Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | Percentage | December 31, | Percentage | |||||||||||||||||||||
2006 | 2007 | Change | 2006 | 2007 | Change | |||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||
Fraud identification and detection solutions | $ | 168,189 | $ | 172,726 | 2.7 | % | ||||||||||||||||||
Loss prediction solutions | $ | 67,129 | $ | 81,110 | 20.8 | % | 67,129 | 81,110 | 20.8 | % | ||||||||||||||
Fraud identification and detection solutions | 168,189 | 172,726 | 2.7 | % | ||||||||||||||||||||
Loss quantification solutions | 22,181 | 63,199 | 184.9 | % | 22,181 | 63,199 | 184.9 | % |
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Year Ended | ||||||||||||
December 31, | Percentage | |||||||||||
2005 | 2006 | Change | ||||||||||
(In thousands) | ||||||||||||
Loss prediction solutions | $ | 53,527 | $ | 67,129 | 25.4 | % | ||||||
Fraud identification and detection solutions | 143,258 | 168,189 | 17.4 | % | ||||||||
Loss quantification solutions | — | 22,181 | — |
For the Quarter Ended | ||||||||||||||||||||||||||||||||
September 30, | December 31, | March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | |||||||||||||||||||||||||
2007 | 2008 | 2009 | ||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Statement of income data: | ||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Risk Assessment revenues | $ | 120,997 | $ | 119,607 | $ | 127,039 | $ | 126,317 | $ | 125,186 | $ | 125,849 | $ | 129,566 | $ | 133,307 | ||||||||||||||||
Decision Analytics revenues | 78,726 | 82,877 | 88,579 | 95,755 | 99,205 | 105,620 | 116,185 | $ | 124,609 | |||||||||||||||||||||||
Revenues | 199,723 | 202,484 | 215,618 | 222,072 | 224,391 | 231,469 | 245,751 | 257,916 | ||||||||||||||||||||||||
Expenses: | ||||||||||||||||||||||||||||||||
Cost of Revenues | 85,343 | 95,346 | 93,310 | 97,368 | 98,307 | 97,912 | 107,523 | 112,978 | ||||||||||||||||||||||||
Selling, general and administrative | 26,989 | 24,987 | 28,674 | 30,354 | 32,265 | 39,946 | 33,320 | 38,905 | ||||||||||||||||||||||||
Depreciation and amortization of fixed assets | 7,799 | 8,448 | 7,907 | 8,517 | 9,054 | 9,839 | 9,195 | 9,718 | ||||||||||||||||||||||||
Amortization of intangible assets | 7,724 | 8,952 | 8,041 | 6,896 | 7,041 | 7,577 | 8,510 | 8,464 | ||||||||||||||||||||||||
Total expenses | 127,855 | 137,733 | 137,932 | 143,135 | 146,667 | 155,274 | 158,548 | 170,065 | ||||||||||||||||||||||||
Operating income | 71,868 | 64,751 | 77,686 | 78,937 | 77,724 | 76,195 | 87,203 | 87,851 | ||||||||||||||||||||||||
Other income/(expense): | ||||||||||||||||||||||||||||||||
Investment income and realized gains/(losses) on securities, net | 1,725 | 2,620 | (458 | ) | 775 | 2 | (646 | ) | (355 | ) | 82 | |||||||||||||||||||||
Interest expense | (5,578 | ) | (5,876 | ) | (6,326 | ) | (7,847 | ) | (8,393 | ) | (8,750 | ) | (8,154 | ) | (8,523 | ) | ||||||||||||||||
Total other expense, net | (3,853 | ) | (3,256 | ) | (6,784 | ) | (7,072 | ) | (8,391 | ) | (9,396 | ) | (8,509 | ) | (8,441 | ) | ||||||||||||||||
Income from continuing operations before income taxes | 68,015 | 61,495 | 70,902 | 71,865 | 69,333 | 66,799 | 78,694 | 79,410 | ||||||||||||||||||||||||
Provision for income taxes | (28,841 | ) | (21,911 | ) | (29,876 | ) | (31,942 | ) | (28,493 | ) | (30,360 | ) | (33,779 | ) | (33,471 | ) | ||||||||||||||||
Income from continuing operations | 39,174 | 39,584 | 41,026 | 39,923 | 40,840 | 36,439 | 44,915 | 45,939 | ||||||||||||||||||||||||
Loss from discontinued operations, net of tax | (2,020 | ) | (1,267 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
Net income | $ | 37,154 | $ | 38,317 | $ | 41,026 | $ | 39,923 | $ | 40,840 | $ | 36,439 | $ | 44,915 | $ | 45,939 | ||||||||||||||||
Other data: | ||||||||||||||||||||||||||||||||
EBITDA: | ||||||||||||||||||||||||||||||||
Risk Assessment EBITDA | $ | 55,199 | $ | 52,762 | $ | 58,122 | $ | 55,378 | $ | 53,813 | $ | 55,393 | $ | 60,599 | $ | 60,598 | ||||||||||||||||
Decision Analytics EBITDA | 32,192 | 29,389 | 35,512 | 38,972 | 40,006 | 38,218 | 44,309 | 45,435 | ||||||||||||||||||||||||
EBITDA | $ | 87,391 | $ | 82,151 | $ | 93,634 | $ | 94,350 | $ | 93,819 | $ | 93,611 | $ | 104,908 | $ | 106,033 |
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For the Year Ended | For the Three Months | |||||||||||||||||||
December 31 | Ended March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net cash provided by operating activities | $ | 174,071 | $ | 223,499 | $ | 248,521 | $ | 92,735 | $ | 89,864 | ||||||||||
Net cash (used in) provided by investing activities | $ | (107,444 | ) | $ | (243,452 | ) | $ | (110,831 | ) | $ | (39,454 | ) | $ | 10,415 | ||||||
Net cash (used in) provided by financing activities | $ | (90,954 | ) | $ | 75,907 | $ | (212,591 | ) | $ | (26,577 | ) | $ | (98,434 | ) |
For the Six Months | ||||||||||||||||||||
For the Years Ended December 31, | Ended June 30, | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net cash provided by operating activities | $ | 223,499 | $ | 248,521 | $ | 247,906 | $ | 141,929 | $ | 184,529 | ||||||||||
Net cash used in investing activities | $ | (243,452 | ) | $ | (110,831 | ) | $ | (130,466 | ) | $ | (98,402 | ) | $ | (152,683 | ) | |||||
Net cash provided by/(used in) financing activities | $ | 75,907 | $ | (212,591 | ) | $ | (107,376 | ) | $ | (16,759 | ) | $ | (19,157 | ) |
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Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contractual obligations | ||||||||||||||||||||
Long-term debt | $ | 496,638 | $ | 21,512 | $ | 143,967 | $ | 149,594 | $ | 181,565 | ||||||||||
Capital lease obligations | 12,401 | 4,818 | 7,419 | 164 | — | |||||||||||||||
Operating leases | 209,409 | 19,285 | 37,115 | 35,562 | 117,447 | |||||||||||||||
ESOP contribution | 8,000 | — | — | — | 8,000 | |||||||||||||||
Earnout and contingent payment | 123,700 | 100,300 | 23,400 | — | — | |||||||||||||||
Other long-term liabilities(1) | 322,029 | 27,091 | 56,342 | 60,210 | 178,386 | |||||||||||||||
Total(2) | $ | 1,172,177 | $ | 173,006 | $ | 268,243 | $ | 245,530 | $ | 485,398 | ||||||||||
Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Total | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Contractual obligations | ||||||||||||||||||||
Long-term debt(1) | $ | 675,637 | $ | 128,890 | $ | 175,279 | $ | 186,189 | $ | 185,279 | ||||||||||
Capital lease obligations | 10,162 | 5,315 | 4,800 | 47 | — | |||||||||||||||
Operating leases | 199,662 | 20,554 | 39,714 | 36,174 | 103,220 | |||||||||||||||
Earnout and contingent payment(2) | 82,700 | 82,700 | — | — | — | |||||||||||||||
Pension and postretirement(3) | 215,221 | 11,059 | 79,773 | 70,206 | 54,183 | |||||||||||||||
Other long-term liabilities(4) | 12,914 | 377 | 1,106 | 433 | 10,998 | |||||||||||||||
Total(5) | $ | 1,196,296 | $ | 248,895 | $ | 300,672 | $ | 293,049 | $ | 353,680 | ||||||||||
(1) |
(2) | As of |
(3) | Our funding policy is to contribute an amount at least equal to the minimum legal funding requirement. |
(4) | Other long-term liabilities shown in the table above consists of our ESOP contributions and our employee-related deferred compensation plan. We also have a deferred compensation plan for our Board of |
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Directors; however, based on past performance and the uncertainty of the dollar amounts to be paid, if any, we have excluded such amounts from the above table. |
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For the Year Ended | For the Three Months Ended | |||||||||||||||||||
December 31 | March 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2008 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
2005 grants | $ | 4,094 | $ | 2,661 | $ | 2,424 | $ | 620 | $ | 579 | ||||||||||
2006 grants | 3,487 | 2,512 | 627 | 586 | ||||||||||||||||
2007 grants | 3,308 | 274 | 656 | |||||||||||||||||
2008 grants* | 231 | |||||||||||||||||||
Total stock-based compensation | $ | 4,094 | $ | 6,148 | $ | 8,244 | $ | 1,521 | $ | 2,052 |
For the Six | ||||||||||||||||||||
For the Year Ended | Months Ended | |||||||||||||||||||
December 31 | June 30 | |||||||||||||||||||
2006 | 2007 | 2008 | 2008 | 2009 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
2005 grants | $ | 2,661 | $ | 2,424 | $ | 2,209 | $ | 1,158 | $ | 724 | ||||||||||
2006 grants | 3,487 | 2,512 | 1,870 | 1,171 | 780 | |||||||||||||||
2007 grants | — | 3,308 | 2,561 | 1,313 | 757 | |||||||||||||||
2008 grants | — | — | 3,241 | 979 | 1,647 | |||||||||||||||
2009 grants | — | — | — | — | 1,607 | |||||||||||||||
Total stock-based compensation | $ | 6,148 | $ | 8,244 | $ | 9,881 | $ | 4,621 | $ | 5,515 | ||||||||||
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1% Decrease | 1% Increase | 1% Decrease | 1% Increase | |||||||||||||||||||||||||||||
Projected Benefit | Projected Benefit | Projected Benefit | Projected Benefit | |||||||||||||||||||||||||||||
Benefit Cost | Obligation | Benefit Cost | Obligation | Benefit Cost | Obligation | Benefit Cost | Obligation | |||||||||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||||||||||
Discount rate | $ | 483 | $ | 40,166 | $ | 673 | $ | (33,861 | ) | $ | 256 | $ | 41,123 | $ | 375 | $ | (34,712 | ) | ||||||||||||||
Expected return on asset | 3,326 | — | (3,326 | ) | — | 3,326 | — | (3,326 | ) | — | ||||||||||||||||||||||
Rate of compensation | (520 | ) | (2,906 | ) | 530 | 2,932 | (321 | ) | (2,217 | ) | 340 | 2,306 |
1% Decrease | 1% Increase | 1% Decrease | 1% Increase | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Effect on total of service and interest cost components | $ | (7 | ) | $ | 4 | $ | (63 | ) | $ | 59 | ||||||
Effect on the healthcare component of the accumulated postretirement benefit obligation | (136 | ) | 76 | $ | (86 | ) | $ | 24 |
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$ | ||||
0.6 million | ||||
$ | ||||
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• | our loss predictions are typically used by P&C insurance and healthcare actuaries, advanced analytics groups and loss control groups to help drive their own assessments of future losses; | |
• | our risk selection and pricing solutions are typically used by underwriters as they manage their books of business; | |
• | our fraud detection and prevention tools are used by P&C insurance, healthcare and mortgage underwriters to root out fraud prospectively and by claims departments to speed claims and find fraud retroactively; and | |
• | our tools to quantify loss are primarily used by claims departments, independent adjustors and contractors. |
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• | the total value of exposures in risk transactions is increasing; | |
• | the number of participants in risk transactions is often large and the asymmetry of information among participants is often substantial; and | |
• | the failure to understand risk can lead to large and rapid declines in financial performance. |
• | U.S. property value exposed to hurricanes continues to increase dramatically due to population dynamics and increase of wealth among other factors, with the current trend predicting a doubling of losses every ten years. At this rate, a repeat of the 1926 Great Miami hurricane could result in $500 billion in economic damage as soon as the 2020’s according to Natural Hazards Review; and | |
• | U.S. health expenditures have grown at a CAGR of 7% between 1997 and 2007 and are expected to grow | |
• |
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• | estimating replacement costs during the insurance underwriting process; | |
• | quantifying the ultimate cost of repair or reconstruction of damaged or destroyed buildings; | |
• | aiding in the settlement of insurance claims; and | |
• | tracking the process of repair or reconstruction and facilitating communication among insurers, adjusters, contractors and policyholders. |
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• | LOCATION Analyst, a new portfolio-assessment system that uses proprietary insurance industry data, visual maps and sophisticated reporting to help insurers make better risk management decisions; | |
• | 360Value, an innovative web-based system for estimating replacement values of residential, commercial and agricultural properties; and | |
• | Predictive models to help insurers classify, segment and price risks for a variety of lines of insurance. |
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Location | Square Feet | Lease Expiration Date | ||||||
Jersey City, New Jersey | 390,991 | May 21, 2021 | ||||||
Orem, Utah | 68,343 | January 1, 2017 | ||||||
Boston, Massachusetts | 47,000 | March 31, 2015 | ||||||
Agoura Hills, California | 28,666 | October 30, 2011 | ||||||
South Jordan, Utah | 23,505 | May 31, 2014 |
62
73
63
74
6475
Name | Age | Position | ||||
Frank J. Coyne | Chairman of the Board of Directors, President and Chief Executive Officer | |||||
Scott G. Stephenson | Executive Vice President and Chief Operating Officer | |||||
Mark V. Anquillare | Senior Vice President and Chief Financial Officer | |||||
Kenneth E. Thompson | Senior Vice President, General Counsel and Corporate Secretary | |||||
Carole J. Banfield | Executive Vice President — Information Services and Government Relations | |||||
Vincent Cialdella | Senior Vice President — AISG | |||||
Kevin B. Thompson | 56 | Senior Vice President — Insurance Services | ||||
J. Hyatt Brown | 71 | Director | ||||
Glen A. Dell | ||||||
Director | ||||||
Christopher M. Foskett | Director | |||||
Constantine P. Iordanou | Director | |||||
John F. Lehman, Jr. | Director | |||||
Director | ||||||
Samuel G. Liss | Director | |||||
Andrew G. Mills | Director | |||||
Arthur J. Rothkopf | ||||||
Director | ||||||
David B. Wright | Director |
6576
6677
67
78
• | between eight to ten Class A directors; and | |
• | three Class B directors. |
68
79
69
80
Fees Earned or | Stock Awards | Option Awards | Total | |||||||||||||
Name | Paid in Cash ($) | ($)(1) | ($)(1) | ($) | ||||||||||||
Joseph A. Brandon(2) | 7,500 | 25,080 | 52,271 | 84,851 | ||||||||||||
J. Hyatt Brown(3) | 32,500 | 25,080 | 97,725 | 155,305 | ||||||||||||
Glen A. Dell(4) | 10,500 | — | 152,725 | 163,225 | ||||||||||||
Henry J. Feinberg(5) | 10,500 | — | 147,725 | 158,225 | ||||||||||||
Christopher M. Foskett(6) | 31,000 | 12,540 | — | 43,540 | ||||||||||||
Constantine Iordanou(7) | — | — | 117,500 | 117,500 | ||||||||||||
John F. Lehman, Jr.(8) | — | — | 125,000 | 125,000 | ||||||||||||
Samuel G. Liss(9) | 32,000 | — | 149,996 | 181,996 | ||||||||||||
Andrew G. Mills(10) | 4,500 | — | 112,500 | 117,000 | ||||||||||||
Arthur J. Rothkopf(11) | 9,000 | 62,700 | 62,500 | 134,200 | ||||||||||||
Barbara D. Stewart(12) | 9,000 | — | 97,725 | 106,725 | ||||||||||||
David B. Wright(13) | 9,000 | 50,160 | 27,271 | 86,431 |
Fees Earned or | Stock Awards | Option Awards | Total | |||||||||||||
Name | Paid in Cash ($) | ($)(1) | ($)(1) | ($) | ||||||||||||
Joseph A. Brandon(2) | 4,500 | — | — | 4,500 | ||||||||||||
J. Hyatt Brown(3) | 32,500 | 25,000 | 48,863 | 106,363 | ||||||||||||
Glen A. Dell(4) | 10,500 | — | 103,863 | 114,363 | ||||||||||||
Henry J. Feinberg(5) | 12,000 | — | 98,863 | 110,863 | ||||||||||||
Christopher M. Foskett(6) | 12,000 | 12,500 | 87,500 | 112,000 | ||||||||||||
Constantine Iordanou(7) | — | — | 180,000 | 180,000 | ||||||||||||
John F. Lehman, Jr.(8) | — | — | 187,500 | 187,500 | ||||||||||||
Stephen W. Lilienthal(9) | — | 12,500 | — | 12,500 | ||||||||||||
Samuel G. Liss(10) | 31,000 | — | 73,863 | 104,863 | ||||||||||||
Andrew G. Mills(11) | 7,500 | — | 175,000 | 182,500 | ||||||||||||
Arthur J. Rothkopf(12) | 9,000 | 62,500 | 125,000 | 196,500 | ||||||||||||
Barbara D. Stewart(13) | 10,500 | 50,000 | 48,863 | 109,363 | ||||||||||||
David B. Wright(14) | 9,000 | 50,000 | 62,500 | 121,500 |
(1) | The amounts associated with option awards reflect the expense incurred for accounting purposes in accordance with FAS 123R for options granted in 2008 and prior years. For a discussion of the assumptions used to calculate the amounts shown in the option awards and stock awards columns, see note 2(j) of the notes to our audited consolidated financial statements included as part of this prospectus. | |
(2) | Mr. Brandon |
70
(3) | Mr. Brown received stock awards during | |
(4) | Mr. Dell received options during |
(5) | Mr. Feinberg received options during |
81
(6) | Mr. Foskett received stock awards and options during | |
(7) | Mr. Iordanou received options during | |
(8) | Mr. Lehman received options during 2008 with a fair value of $125,000. As of December 31, 2008, Mr. Lehman owned options covering 1,797 shares. The amount shown in the option column above includes expense amounts recognized, under FAS 123R, in 2008 relating to option grants made in 2007. | |
(9) | Mr. Lilienthal received stock awards during 2008 with a fair value of $12,500. Mr. Lilienthal was a director from June 27, 2008 until December 17, 2008. | |
(10) | Mr. Liss received options during 2008 with a fair value of $25,000. As of December 31, 2008, Mr. Liss owned options covering 1,982 shares. The amount shown in the option column above includes expense amounts recognized, under FAS 123R, in 2008 relating to option grants made in 2006. | |
Mr. Mills received options during | ||
Mr. Rothkopf received stock awards and options during |
(13) | Ms. Stewart received stock awards during 2008 with a fair value of | |
Mr. Wright received stock awards and options during |
82
71
• | base salary; | |
• | annual cash incentive awards; | |
• | long-term equity incentive awards; and | |
• | health, welfare and retirement plans. |
83
72
84
Revenue Growth | EBITDA Margin | |||||||
Maximum | 15 | % | 37 | % | ||||
Superior | 12 | % | 34 | % | ||||
Target | 10 | % | 30 | % | ||||
Threshold | 6 | % | 27 | % |
85
73
• | a combined 401(k) Savings Plan and ESOP, | |
• | a defined benefit pension plan with (i) a traditional final pay formula applicable to employees who were 49 years old with 15 years of service as of January 1, 2002, and (ii) a cash balance formula applicable to other employees hired prior to March 1, 2005, and | |
• | a profit sharing plan (as a component of the 401(k) plan) which is available to employees hired on or after March 1, 2005. |
86
7487
Change in Pension | ||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||
Non-Equity | Non-qualified | |||||||||||||||||||||||
Option | Incentive Plan | Deferred | ||||||||||||||||||||||
Awards ($) | Compensation ($) | Compensation | All Other | |||||||||||||||||||||
Name and Principal Position | Salary ($) | (1) | (2) | Earnings ($) | Compensation ($) | Total ($) | ||||||||||||||||||
Frank J. Coyne | 898,654 | 1,062,800 | 2,000,000 | 300,610 | 80,907 | (3) | 4,342,971 | |||||||||||||||||
Chairman, President and Chief Executive Officer | ||||||||||||||||||||||||
Mark V. Anquillare | 256,769 | 247,512 | 300,000 | 63,668 | 11,868 | (4) | 879,817 | |||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||
Scott G. Stephenson | 419,812 | 644,107 | 600,000 | 83,782 | 52,386 | (5) | 1,800,087 | |||||||||||||||||
Executive Vice President and Chief Operating Officer | ||||||||||||||||||||||||
Kenneth E. Thompson | 355,000 | 276,646 | 300,000 | — | 15,173 | (6) | 946,819 | |||||||||||||||||
Senior Vice President, General Counsel and Corporate Secretary | ||||||||||||||||||||||||
Richard Boehning(7) | 302,308 | 458,546 | 100,000 | 284,068 | 12,044 | (8) | 1,156,966 | |||||||||||||||||
Senior Vice President | ||||||||||||||||||||||||
Kenneth G. Geraghty(9) | 78,058 | 241,342 | — | 5,485 | 119,738 | (10) | 444,623 | |||||||||||||||||
Former Chief Financial Officer |
Change in Pension | ||||||||||||||||||||||||||||
Value and | ||||||||||||||||||||||||||||
Non-Equity | Non-qualified | |||||||||||||||||||||||||||
Option | Incentive Plan | Deferred | ||||||||||||||||||||||||||
Awards ($) | Compensation ($) | Compensation | All Other | |||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | (1) | (2) | Earnings ($) | Compensation ($) | Total ($) | |||||||||||||||||||||
Frank J. Coyne | 2008 | 1,036,154 | 1,062,800 | 2,800,000 | 401,539 | 59,691 | (3) | 5,360,184 | ||||||||||||||||||||
Chairman, President and | 2007 | 898,654 | 1,062,800 | 2,000,000 | 300,610 | 80,907 | (4) | 4,342,971 | ||||||||||||||||||||
Chief Executive Officer | ||||||||||||||||||||||||||||
Mark V. Anquillare | 2008 | 303,462 | 445,530 | 400,000 | 86,594 | 10,641 | (5) | 1,246,227 | ||||||||||||||||||||
Senior Vice President and | 2007 | 256,769 | 247,512 | 300,000 | 63,668 | 11,868 | (6) | 879,817 | ||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||||||
Scott G. Stephenson | 2008 | 451,539 | 923,841 | 675,000 | 92,011 | 49,758 | (7) | 2,192,149 | ||||||||||||||||||||
Executive Vice President and | 2007 | 419,812 | 644,107 | 600,000 | 83,782 | 52,386 | (8) | 1,800,087 | ||||||||||||||||||||
Chief Operating Officer | ||||||||||||||||||||||||||||
Kenneth E. Thompson | 2008 | 385,385 | 421,965 | 350,000 | — | 10,928 | (9) | 1,168,278 | ||||||||||||||||||||
Senior Vice President, | 2007 | 355,000 | 276,646 | 300,000 | — | 15,173 | (10) | 946,819 | ||||||||||||||||||||
General Counsel and Corporate Secretary | ||||||||||||||||||||||||||||
Kevin B. Thompson | 2008 | 246,538 | 293,961 | 220,000 | 46,356 | 11,230 | (11) | 818,085 | ||||||||||||||||||||
Senior Vice President |
(1) | The amounts in this column reflect the expense incurred for accounting purposes in accordance with FAS 123R for options granted in | |
(2) | The amounts in this column are cash incentive awards under the STI plan in respect of performance for the | |
(3) | Amount includes $16,429 for life insurance premiums, a 401(k) matching contribution of $10,350 and $32,912 for costs of personal benefits, including club memberships, automobile allowance and reimbursement of personal travel expenses. | |
(4) | Amount includes $15,187 for life insurance premiums, a 401(k) matching contribution of $10,125 and $55,595 for costs of personal benefits, including club memberships | |
Amount includes a 401(k) matching contribution of $10,350. | ||
(6) | Amount includes a 401(k) matching contribution of $11,625. | |
Amount includes a 401(k) matching contribution of $10,350 and $38,355 for costs of personal benefits, including commutation via commercial air carrier between the Company’s headquarters and the |
88
executive’s home and temporary living quarters near the Company’s headquarters of $25,891. Costs of commercial air travel were determined using average rates incurred for such travel. | ||
(8) | Amount includes a 401(k) matching contribution of $10,125 and $41,291 for costs of personal benefits, including commutation via commercial air carrier between the Company’s headquarters and the executive’s home at a cost of $32,367, and temporary living quarters near the Company’s | |
Amount includes a 401(k) matching contribution of |
75
Amount includes a 401(k) matching contribution of $10,125. | ||
All Other | ||||||||||||||||||||||||
Estimated | Option | Grant Date | ||||||||||||||||||||||
Future Payouts | Awards: | Fair Value of | ||||||||||||||||||||||
Under Non-Equity | Number of | Exercise or | Stock and | |||||||||||||||||||||
Incentive Plan | Securities | Base Price | Stock | Option | ||||||||||||||||||||
Awards | Underlying | of Option | Value on | Awards | ||||||||||||||||||||
Name | Grant Date | Approval Date | Target ($) | Options | Awards ($/Sh) | Grant Date | ($) | |||||||||||||||||
Frank J. Coyne | 2,700,000 | — | — | — | — | |||||||||||||||||||
Mark V. Anquillare | March 1, 2007 | February 22, 2007 | 486,000 | 2,100 | 755 | 755 | 437,703 | |||||||||||||||||
June 30, 2007 | June 18, 2007 | — | 300 | 836 | 836 | 73,443 | ||||||||||||||||||
Scott G. Stephenson | March 1, 2007 | February 22, 2007 | 756,000 | 5,200 | 755 | 755 | 1,083,836 | |||||||||||||||||
Kenneth E. Thompson | March 1, 2007 | February 22, 2007 | 648,000 | 2,000 | 755 | 755 | 416,860 | |||||||||||||||||
Richard Boehning(1) | March 1, 2007 | February 22, 2007 | 549,000 | 2,200 | 755 | 755 | 458,546 | |||||||||||||||||
Kenneth G. Geraghty(2) |
All Other | ||||||||||||||||||||||||||
Estimated | Option | Grant Date | ||||||||||||||||||||||||
Future Payouts | Awards: | Fair Value of | ||||||||||||||||||||||||
Under Non-Equity | Number of | Exercise or | Stock and | |||||||||||||||||||||||
Incentive Plan | Securities | Base Price | Stock | Option | ||||||||||||||||||||||
Awards | Underlying | of Option | Value on | Awards | ||||||||||||||||||||||
Name | Grant Date | Approval Date | Target ($) | Options | Awards ($/Sh) | Grant Date | ($) | |||||||||||||||||||
Frank J. Coyne | NA | — | — | — | — | |||||||||||||||||||||
Mark V. Anquillare | March 1, 2008 | January 30, 2008 | NA | 4,000 | 862 | 862 | 818,880 | |||||||||||||||||||
Scott G. Stephenson | March 1, 2008 | January 30, 2008 | NA | 5,500 | 862 | 862 | 1,125,960 | |||||||||||||||||||
Kenneth E. Thompson | March 1, 2008 | January 30, 2008 | NA | 3,000 | 862 | 862 | 614,160 | |||||||||||||||||||
Kevin B. Thompson | March 1, 2008 | January 30, 2008 | NA | 2,000 | 862 | 862 | 409,440 |
7689
Option Awards(1) | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | ||||||||||||||
Date of | Options (#) | Options (#) | Exercise | Option | ||||||||||||
Name | Option Grant | Exercisable | Unexercisable | Price ($) | Expiration Date | |||||||||||
Frank J. Coyne | July 1, 2000 | 10,000 | — | 100 | July 1, 2010 | |||||||||||
July 1, 2000 | 50,000 | — | 110 | July 1, 2010 | ||||||||||||
December 18, 2002 | 75,000 | — | 155 | December 18, 2012 | ||||||||||||
June 29, 2005 | 30,000 | 20,000 | 420 | June 29, 2015 | ||||||||||||
Mark V. Anquillare | March 1, 2001 | 1,250 | — | 92 | March 1, 2011 | |||||||||||
March 1, 2002 | 1,750 | — | 108 | March 1, 2012 | ||||||||||||
March 1, 2003 | 5,000 | — | 144 | March 1, 2013 | ||||||||||||
March 1, 2004 | 3,750 | 1,250 | 231 | March 1, 2014 | ||||||||||||
March 1, 2005 | 1,250 | 1,250 | 437 | March 1, 2015 | ||||||||||||
March 1, 2006 | 525 | 1,575 | 565 | March 1, 2016 | ||||||||||||
March 1, 2007 | — | 2,100 | 755 | March 1, 2017 | ||||||||||||
June 1, 2007 | — | 300 | 836 | June 1, 2017 | ||||||||||||
Scott G. Stephenson | March 1, 2003 | 18,750 | — | 144 | March 1, 2013 | |||||||||||
March 1, 2004 | 9,750 | 3,250 | 231 | March 1, 2014 | ||||||||||||
March 1, 2005 | 4,000 | 4,000 | 437 | March 1, 2015 | ||||||||||||
March 1, 2006 | 4,050 | 1,350 | 565 | March 1, 2016 | ||||||||||||
March 1, 2007 | — | 5,200 | 755 | March 1, 2017 | ||||||||||||
Kenneth E. Thompson | October 2, 2006 | 1,000 | 3,000 | 681 | October 2, 2016 | |||||||||||
March 1, 2007 | — | 2,000 | 755 | March 1, 2017 | ||||||||||||
Richard Boehning | March 1, 2003 | 1,250 | — | 144 | March 1, 2013 | |||||||||||
March 1, 2004 | 1,000 | 1,000 | 231 | March 1, 2014 | ||||||||||||
March 1, 2005 | 625 | 1,250 | 437 | March 1, 2015 | ||||||||||||
March 1, 2006 | 575 | 1,725 | 565 | March 1, 2016 | ||||||||||||
March 1, 2007 | — | 2,200 | 755 | March 1, 2017 | ||||||||||||
Kenneth G. Geraghty | — | — |
Option Awards(1) | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | |||||||||||||||
Unexercised | Unexercised | Option | ||||||||||||||
Date of | Options (#) | Options (#) | Exercise | Option | ||||||||||||
Name | Option Grant | Exercisable | Unexercisable | Price ($) | Expiration Date | |||||||||||
Frank J. Coyne | July 1, 2000 | 10,000 | — | 100 | July 1, 2010 | |||||||||||
July 1, 2000 | 50,000 | — | 110 | July 1, 2010 | ||||||||||||
December 18, 2002 | 75,000 | — | 155 | December 18, 2012 | ||||||||||||
June 29, 2005 | 40,000 | 10,000 | 420 | June 29, 2015 | ||||||||||||
Mark V. Anquillare | March 1, 2001 | 1,250 | — | 92 | March 1, 2011 | |||||||||||
March 1, 2002 | 1,750 | — | 108 | March 1, 2012 | ||||||||||||
March 1, 2003 | 5,000 | — | 144 | March 1, 2013 | ||||||||||||
March 1, 2004 | 5,000 | — | 231 | March 1, 2014 | ||||||||||||
March 1, 2005 | 1,875 | 625 | 437 | March 1, 2015 | ||||||||||||
March 1, 2006 | 1,050 | 1,050 | 565 | March 1, 2016 | ||||||||||||
March 1, 2007 | 525 | 1,575 | 755 | March 1, 2017 | ||||||||||||
June 1, 2007 | 75 | 225 | 836 | June 1, 2017 | ||||||||||||
March 1, 2008 | — | 4,000 | 862 | March 1, 2018 | ||||||||||||
Scott G. Stephenson | March 1, 2003 | 18,750 | — | 144 | March 1, 2013 | |||||||||||
March 1, 2004 | 13,000 | — | 231 | March 1, 2014 | ||||||||||||
March 1, 2005 | 6,000 | 2,000 | 437 | March 1, 2015 | ||||||||||||
March 1, 2006 | 2,700 | 2,700 | 565 | March 1, 2016 | ||||||||||||
March 1, 2007 | 1,300 | 3,900 | 755 | March 1, 2017 | ||||||||||||
March 1, 2008 | — | 5,500 | 862 | March 1, 2018 | ||||||||||||
Kenneth E. Thompson | October 2, 2006 | 2,000 | 2,000 | 681 | October 2, 2016 | |||||||||||
March 1, 2007 | 500 | 1,500 | 755 | March 1, 2017 | ||||||||||||
March 1, 2008 | — | 3,000 | 862 | March 1, 2018 | ||||||||||||
Kevin B. Thompson | March 1, 2003 | 3,000 | — | 144 | March 1, 2013 | |||||||||||
March 1, 2004 | 3,000 | — | 231 | March 1, 2014 | ||||||||||||
March 1, 2005 | 1,275 | 425 | 437 | March 1, 2015 | ||||||||||||
March 1, 2006 | 900 | 900 | 565 | March 1, 2016 | ||||||||||||
March 1, 2007 | 450 | 1,350 | 755 | March 1, 2017 | ||||||||||||
March 1, 2008 | — | 2,000 | 862 | March 1, 2018 |
(1) | The right to exercise stock options vests ratably on the first, second, third and fourth anniversaries of the date of grant for options granted to NEOs other than Mr. Coyne. A portion of Mr. Coyne’s options with an exercise price above the grant date fair market value vested immediately. |
7790
Option Awards | ||||||||
Number of | ||||||||
Shares Acquired | Value | |||||||
on Exercise | Realized on | |||||||
Name | (#) | Exercise ($) | ||||||
Frank J. Coyne | — | — | ||||||
Mark V. Anquillare | — | — | ||||||
Scott G. Stephenson | — | — | ||||||
Kenneth E. Thompson | — | — | ||||||
Richard Boehning | — | — | ||||||
Kenneth G. Geraghty | 4,850 | 2,172,400 |
Option Awards | ||||||||
Number of | ||||||||
Shares Acquired | Value | |||||||
on Exercise | Realized on | |||||||
Name | (#) | Exercise ($) | ||||||
Frank J. Coyne | — | — | ||||||
Mark V. Anquillare | — | — | ||||||
Scott G. Stephenson | — | — | ||||||
Kenneth E. Thompson | — | — | ||||||
Kevin B. Thompson | 2,674 | 2,350,446 |
Number of Years | Present Value of | Payments During | ||||||||||||
Credited Service | Accumulated Benefit | Last Fiscal Year | ||||||||||||
Name | Plan Name | (#) | ($) | ($) | ||||||||||
Frank J. Coyne | PPIO | 9 | 94,469 | — | ||||||||||
Supplemental Plan | 9 | 1,433,441 | — | |||||||||||
Mark V. Anquillare | PPIO | 16 | 168,385 | — | ||||||||||
Supplemental Plan | 16 | 99,879 | — | |||||||||||
Scott G. Stephenson | PPIO | 7 | 90,848 | — | ||||||||||
Supplemental Plan | 7 | 249,177 | — | |||||||||||
Kenneth E. Thompson | NA | NA | NA | |||||||||||
Richard Boehning | PPIO | 10 | 867,347 | — | ||||||||||
Supplemental Plan | 10 | 1,163,069 | — | |||||||||||
Kenneth G. Geraghty | PPIO | 7 | 41,737 | 65,570 | ||||||||||
Supplemental Plan | 7 | 64,364 | — |
Number of Years | Present Value of | Payments During | ||||||||||||
Credited Service | Accumulated Benefit | Last Fiscal Year | ||||||||||||
Name | Plan Name | (#) | ($) | ($) | ||||||||||
Frank J. Coyne | PPIO | 10 | 170,267 | — | ||||||||||
Supplemental Plan | 10 | 1,759,182 | — | |||||||||||
Mark V. Anquillare | PPIO | 17 | 205,114 | — | ||||||||||
Supplemental Plan | 17 | 149,744 | — | |||||||||||
Scott G. Stephenson | PPIO | 8 | 105,221 | — | ||||||||||
Supplemental Plan | 8 | 326,815 | — | |||||||||||
Kenneth E. Thompson | NA | NA | NA | |||||||||||
Kevin B. Thompson | PPIO | 35 | 698,377 | — | ||||||||||
Supplemental Plan | 35 | 305,894 | — |
7891
Aggregate | ||||||||||||||||||||
Executive | Registrant | Aggregate | Aggregate | Balance | ||||||||||||||||
Contributions | Contributions | Earnings | Withdrawals/ | at end of | ||||||||||||||||
in Last FY | in Last FY | in Last FY | Distributions | Last FY | ||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
Frank J. Coyne | — | — | — | — | — | |||||||||||||||
Mark V. Anquillare | — | — | — | — | — | |||||||||||||||
Scott G. Stephenson | — | — | — | — | — | |||||||||||||||
Kenneth E. Thompson | — | — | — | — | — | |||||||||||||||
Richard Boehning | — | — | — | — | — | |||||||||||||||
Kenneth G. Geraghty | — | — | 54,242 | — | 1,215,357 |
Aggregate | ||||||||||||||||||||
Executive | Registrant | Aggregate | Aggregate | Balance | ||||||||||||||||
Contributions | Contributions | Earnings | Withdrawals/ | at End of | ||||||||||||||||
in Last FY | in Last FY | in Last FY | Distributions | Last FY | ||||||||||||||||
Name | ($)(1) | ($) | ($) | ($) | ($) | |||||||||||||||
Frank J. Coyne | 48,369 | 1,275 | — | — | 749,566 | |||||||||||||||
Mark V. Anquillare | 5,638 | 682 | — | — | 128,571 | |||||||||||||||
Scott G. Stephenson | 13,523 | 1,275 | 3,373 | — | 154,583 | |||||||||||||||
Kenneth E. Thompson | 9,323 | 1,151 | — | — | 22,561 | |||||||||||||||
Kevin B. Thompson | 111,392 | 1,362 | 13,044 | — | 571,594 |
(1) | All amounts shown are also shown in the Executive Compensation and Benefits table in the “Salary” and/or “Non-Equity Incentive Plan Compensation” column. |
7992
a pro rata STI award; |
a severance payment equal to the executive’s base salary plus a target bonus amount times two; |
continuation of health benefits (at the executives expense) for 18 months; and |
immediate vesting of any remaining unvested options. |
93
80
94
95
8196
Year Ended | Year Ended | Year Ended | As of | |||||||||||||
December 31, 2005 | December 31, 2006 | December 31, 2007 | August 12, 2008 | |||||||||||||
(In thousands) | ||||||||||||||||
Frank J. Coyne | $ | — | $ | 6,449 | $ | — | $ | — | ||||||||
Scott G. Stephenson | 5,003 | 5,160 | 5,323 | — | ||||||||||||
Mark V. Anquillare | 487 | 503 | 519 | — | ||||||||||||
Carole J. Banfield | 3,466 | 4,193 | 4,930 | — | ||||||||||||
Vincent Cialdella | 528 | 766 | 1,428 | — | ||||||||||||
Kevin B. Thompson | 313 | — | — | — | ||||||||||||
Glen A. Dell | 1,930 | 2,496 | 3,107 | — | ||||||||||||
Henry J. Feinberg | 1,665 | 1,727 | 1,791 | — | ||||||||||||
John F. Lehman | 1,930 | 1,991 | 2,054 | — | ||||||||||||
Arthur J. Rothkopf | 1,801 | 1,862 | 1,921 | — | ||||||||||||
Barbara D. Stewart | — | 438 | 457 | — | ||||||||||||
David B. Wright | 467 | 489 | 511 | — | ||||||||||||
Kenneth G. Geraghty(1) | 7,206 | 8,716 | 10,588 | — |
Year Ended | Year Ended | Year Ended | As of | |||||||||||||
December 31, 2006 | December 31, 2007 | December 31, 2008 | June 30, 2009 | |||||||||||||
(In thousands) | ||||||||||||||||
Frank J. Coyne | $ | 6,449 | $ | — | $ | — | $ | — | ||||||||
Scott G. Stephenson | 5,160 | 5,323 | — | — | ||||||||||||
Mark V. Anquillare | 503 | 519 | — | — | ||||||||||||
Carole J. Banfield | 4,193 | 4,930 | — | — | ||||||||||||
Vincent Cialdella | 766 | 1,428 | — | — | ||||||||||||
Kevin B. Thompson | 315 | — | — | — | ||||||||||||
Glen A. Dell | 2,496 | 3,107 | — | — | ||||||||||||
Henry J. Feinberg | 1,727 | 1,791 | — | — | ||||||||||||
John F. Lehman | 1,991 | 2,054 | — | — | ||||||||||||
Arthur J. Rothkopf | 1,862 | 1,921 | — | — | ||||||||||||
Barbara D. Stewart | 438 | 457 | — | — | ||||||||||||
David B. Wright | 489 | 511 | — | — | ||||||||||||
Kenneth G. Geraghty(1) | 8,716 | 10,588 | — | — |
(1) | Mr. Geraghty was Chief Financial Officer of the Company until termination of his employment effective March 8, 2007. |
97
82
Year Ended | Year Ended | Year Ended | Six Months Ended | |||||||||||||
December 31, 2005 | December 31, 2006 | December 31, 2007 | June 30, 2008 | |||||||||||||
(In thousands) | ||||||||||||||||
Frank J. Coyne | $ | 70,262 | $ | 26,931 | $ | 16,436 | $ | — | ||||||||
Carole J. Banfield | 3,838 | 2,511 | 8,060 | 5,447 | ||||||||||||
Vincent Cialdella | 55 | 838 | 413 | 15 | ||||||||||||
Kevin B. Thompson | 546 | 1,971 | 2,525 | — | ||||||||||||
Glen A. Dell | 1,374 | 594 | 612 | — | ||||||||||||
Henry J. Feinberg | — | — | — | 13,417 | ||||||||||||
Kenneth G. Geraghty(1) | 417 | — | 916 | 62,993 | ||||||||||||
Fred R. Marcon(2) | 1,086 | 10,438 | 6,019 | 83,256 |
Year Ended | Year Ended | Year Ended | Six Months Ended | |||||||||||||
December 31, 2006 | December 31, 2007 | December 31, 2008 | June 30, 2009 | |||||||||||||
(In thousands) | ||||||||||||||||
Frank J. Coyne | $ | 26,931 | $ | 16,436 | $ | — | $ | — | ||||||||
Scott G. Stephenson | — | — | 6,505 | — | ||||||||||||
Carole J. Banfield | 2,511 | 8,060 | 5,447 | — | ||||||||||||
Vincent Cialdella | 838 | 413 | 1,923 | — | ||||||||||||
Kevin B. Thompson | 1,971 | 2,525 | 3,039 | — | ||||||||||||
Glen A. Dell | 594 | 62 | 2,031 | — | ||||||||||||
Henry J. Feinberg | — | — | 13,417 | — | ||||||||||||
John F. Lehman, Jr. | — | — | 3,815 | — | ||||||||||||
Arthur J. Rothkopf | — | — | 8,987 | — | ||||||||||||
David B. Wright | 978 | — | — | — | ||||||||||||
Kenneth G. Geraghty(1) | — | 916 | 62,993 | — | ||||||||||||
Fred R. Marcon(2) | 10,438 | 6,019 | 83,256 | — |
(1) | Mr. Geraghty was our Chief Financial Officer until termination of his employment effective March 8, 2007. | |
(2) | Mr. Marcon was our Chairman and Chief Executive Officer and was the beneficial owner of greater |
98
83
99
84100
• | each person whom we know to own beneficially more than 5% of our common stock; | |
• | each of the directors and named executive officers individually; | |
• | all directors and executive officers as a group; and | |
• | each of the selling stockholders, which consist of the entities and individuals shown as having shares listed in the column “Number of Shares Being Offered.” |
Shares Beneficially | ||||||||||||||||||||||||
Owned After the | ||||||||||||||||||||||||
Class of | Shares Beneficially Owned Before | Number | Common Stock | |||||||||||||||||||||
Name and Address of | Common | the Offering | of Shares | Beneficially | ||||||||||||||||||||
Beneficial Owner | Stock | Number | Percent | Being | Owned | Percent | ||||||||||||||||||
Principal Stockholders: | ||||||||||||||||||||||||
Employee Stock Ownership Plan | ||||||||||||||||||||||||
The Hartford Financial Services Group, Inc. | ||||||||||||||||||||||||
The Travelers Companies, Inc. | ||||||||||||||||||||||||
CNA Financial Corporation | ||||||||||||||||||||||||
American Financial Group, Inc. | ||||||||||||||||||||||||
American International Group, Inc. | ||||||||||||||||||||||||
ACE Group Holdings, Inc. | ||||||||||||||||||||||||
Berkshire Hathaway Group | ||||||||||||||||||||||||
Directors and Executive Officers: | ||||||||||||||||||||||||
Frank J. Coyne | ||||||||||||||||||||||||
Scott G. Stephenson | ||||||||||||||||||||||||
Mark V. Anquillare | ||||||||||||||||||||||||
Kenneth E. Thompson | ||||||||||||||||||||||||
Carole J. Banfield | ||||||||||||||||||||||||
Vincent Cialdella | ||||||||||||||||||||||||
Kevin B. Thompson |
101
Shares Beneficially | ||||||||||||||||||||||||
Owned After the Offering(2) | ||||||||||||||||||||||||
Class of Our | Shares Beneficially Owned Before | Number | Common Stock | |||||||||||||||||||||
Name and Address of | Common | the Offering | of Shares | Beneficially | ||||||||||||||||||||
Beneficial Owner | Stock | Number | Percent | Being Offered(1) | Owned | Percent | ||||||||||||||||||
J. Hyatt Brown | ||||||||||||||||||||||||
Glen A. Dell | ||||||||||||||||||||||||
Christopher M. Foskett | ||||||||||||||||||||||||
Constantine P. Iordanou |
85
John F. Lehman, Jr. | ||||||||||||||||||||||||
Samuel G. Liss | ||||||||||||||||||||||||
Andrew G. Mills | ||||||||||||||||||||||||
David B. Wright | ||||||||||||||||||||||||
All |
(1) | Class B common stock sold in this offering will be automatically converted into Class A common stock. |
(2) | Assumes no exercise of the underwriters’ over-allotment option. See “Underwriting.” |
86102
87103
• | any transfer to us by any person or entity; | |
• | any transfer of any shares of Class B common stock of either series to any other holder of Class B common stock or its affiliate; | |
• | any transfer of any shares of Class B common stock of any applicable series to an affiliate of such holder; and | |
• | any transfer by a holder of Class B common stock to any person that succeeds to all or substantially all of the assets of such holder, whether by merger, consolidation, amalgamation, sale of substantially all assets or other similar transactions. |
88104
• | the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; | |
• | upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or | |
• | on or subsequent to such date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder. |
• | between eight to ten Class A directors; and | |
• | three Class B directors. |
89105
90106
• | a non-resident alien individual, other than certain former citizens and residents of the United States subject to tax as expatriates, | |
• | a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of a jurisdiction other than the United States or any state or political subdivision thereof; or | |
• | an estate or trust, other than an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
91
107
• | the gain is effectively connected with a trade or business of thenon-U.S. holder in the United States, subject to an applicable income treaty providing otherwise, or | |
• | the Company is or has been a U.S. real property holding corporation at any time within the five-year period preceding the disposition or thenon-U.S. holder’s holding period, whichever period is shorter, and its common stock has ceased to be traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs. |
92108
Number of Shares of Class A Common Stock | Date | |
On the date of this prospectus. | ||
After 180 days from the date of this prospectus (subject, in some cases, to volume limitations). | ||
At various times after 180 days from the date of this prospectus (subject, in some cases, to volume limitations). |
• | one percent of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; and |
93109
• | the average weekly trading volume of our common stock on the during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
94110
111
Number of | ||||
Underwriter | Shares | |||
Merrill Lynch, Pierce, Fenner & Smith Incorporated | ||||
Morgan Stanley & Co. Incorporated | ||||
Total | ||||
95112
Per Share | Without Option | With Option | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discount | $ | $ | $ | |||||||||
Proceeds, before expenses, to the selling stockholders | $ | $ | $ |
• | the valuation multiples of publicly traded companies that the representatives believe to be comparable with us; | |
• | our financial information; | |
• | the history of, and the prospects for, our company and the industry in which we compete; | |
• | an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenues; | |
• | the present state of our business; and | |
• | the factors listed above in relation to market values and various valuation measures of other companies engaged in activities similar to ours. |
113
96
114
97
• | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
• | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; | |
• | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior content of the manager for any such offer; or | |
• | in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
• | they have complied and will comply with all applicable provisions of the Financial Services and Markets Act 2000, or FSMA, with respect to anything done by them in relation to our common stock in, from or otherwise involving the United Kingdom; they have only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by them in connection with the issue or sale of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and | |
• | they and each of their affiliates have not (i) offered or sold and will not offer or sell in Hong Kong, by means of any document, our common stock other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance or (ii) issued or had in their possession for the purposes of issue, and will not issue or have in their possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to our common stock, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to our common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance. The contents of this document have not been reviewed by any regulatory authority |
115
in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. |
98
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99117
Page | ||||
Insurance Services Office, Inc. Condensed Consolidated Financial Statements as of | ||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
Verisk Analytics, Inc. Financial Statement as of June 30, 2009 | ||||
F-30 | ||||
F-31 | ||||
F-32 | ||||
Insurance Services Office, Inc. Consolidated Financial Statements as of December 31, 2007 and 2008 and for the Years Ended December 31, 2006, 2007 and 2008 | ||||
F-1
2009 | ||||||||||||||||
2008 | 2008 | unaudited | ||||||||||||||
2007 | unaudited | (In thousands, except for share and per share data) | ||||||||||||||
(In thousands, except for share and per share data) | ||||||||||||||||
ASSETS | ASSETS | ASSETS | ||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 24,049 | $ | 25,898 | $ | 33,185 | $ | 45,962 | ||||||||
Available-for-sale securities | 28,350 | 6,663 | 5,114 | 5,023 | ||||||||||||
Accounts receivable, net (including amounts from related parties of $949 and $12,568, respectively) | 86,488 | 106,683 | ||||||||||||||
Notes receivable from stockholders | 347 | 1,246 | ||||||||||||||
Accounts receivable, net (including amounts from related parties of $3,421 and $3,974 respectively) | 83,941 | 107,151 | ||||||||||||||
Prepaid expenses | 7,609 | 14,498 | 13,010 | 17,379 | ||||||||||||
Deferred income taxes | 22,654 | 22,087 | 4,490 | 4,490 | ||||||||||||
Federal and state taxes receivable | 3,003 | — | ||||||||||||||
Federal and foreign income taxes receivable | 12,311 | 3,730 | ||||||||||||||
State and local income taxes receivable | 689 | 4,736 | ||||||||||||||
Other current assets | 8,525 | 7,773 | 16,187 | 24,024 | ||||||||||||
Total current assets | 181,025 | 184,848 | 168,927 | 212,495 | ||||||||||||
Noncurrent assets: | ||||||||||||||||
Fixed assets, net | 85,436 | 87,225 | 82,587 | 84,278 | ||||||||||||
Intangible assets, net | 141,160 | 133,119 | 112,713 | 119,547 | ||||||||||||
Goodwill | 339,891 | 346,732 | 447,372 | 487,219 | ||||||||||||
Notes receivable from stockholders | 12,356 | 9,282 | ||||||||||||||
Deferred income taxes | 55,679 | 68,126 | 100,256 | 89,893 | ||||||||||||
State income taxes receivable | 8,112 | 8,031 | ||||||||||||||
Other assets | 12,936 | 13,113 | 8,910 | 7,872 | ||||||||||||
Total assets | $ | 828,483 | $ | 842,445 | $ | 928,877 | $ | 1,009,335 | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | LIABILITIES AND STOCKHOLDERS’ DEFICIT | LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable and accrued liabilities | $ | 78,234 | $ | 47,781 | $ | 83,381 | $ | 84,668 | ||||||||
Acquisition related liabilities | 100,300 | 104,050 | 82,700 | — | ||||||||||||
Short-term debt | 35,171 | 113,820 | ||||||||||||||
Short-term debt and current portion of long-term debt | 219,398 | 160,372 | ||||||||||||||
Pension and postretirement benefits, current | 4,636 | 4,754 | 5,397 | 5,397 | ||||||||||||
Fees received in advance (including amounts from related parties of $5,817 and $11,879) | 127,907 | 197,526 | ||||||||||||||
Federal and state taxes payable | — | 11,749 | ||||||||||||||
Fees received in advance (including amounts from related parties of $3,699 and $9,252, respectively) | 114,023 | 175,453 | ||||||||||||||
Total current liabilities | 346,248 | 479,680 | 504,899 | 425,890 | ||||||||||||
Noncurrent liabilities: | ||||||||||||||||
Long-term debt | 403,159 | 403,194 | 450,356 | 528,694 | ||||||||||||
Pension benefits | 17,637 | 46,500 | 133,914 | 136,355 | ||||||||||||
Postretirement benefits | 23,894 | 23,988 | 23,798 | 22,803 | ||||||||||||
Other liabilities | 62,085 | 61,942 | 76,194 | 81,965 | ||||||||||||
Total liabilities | 853,023 | 1,015,304 | 1,189,161 | 1,195,707 | ||||||||||||
Redeemable common stock: | ||||||||||||||||
Class A redeemable common stock, stated at redemption value, $.01 par value; 6,700,000 shares authorized; 2,922,253 and 2,986,434 shares issued and 1,163,066 and 997,642 outstanding as of December 31, 2007 and March 31, 2008, respectively | 1,217,942 | 1,072,702 | ||||||||||||||
Unearned Class A common stock KSOP shares | (4,129 | ) | (3,940 | ) | ||||||||||||
Notes receivable from stockholders | (42,625 | ) | (50,795 | ) | ||||||||||||
Class A redeemable common stock, stated at redemption value, $.01 par value; 6,700,000 shares authorized; 3,007,761 and 3,010,843 shares issued and 746,139 and 700,188 outstanding as of December 31, 2008 and June 30, 2009, respectively, and vested options at intrinsic value | 752,912 | 845,126 | ||||||||||||||
Class A unearned common stock KSOP shares | (3,373 | ) | (3,009 | ) | ||||||||||||
Total redeemable common stock | 1,171,188 | 1,017,967 | 749,539 | 842,117 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders’ deficit: | ||||||||||||||||
Class B common stock, $.01 par value; 20,000,000 shares authorized; 10,004,500 shares issued and 2,873,412 and 2,863,742 outstanding as of December 31, 2007 and March 31, 2008, respectively | 100 | 100 | ||||||||||||||
Additional paid-in-capital | — | 21,272 | ||||||||||||||
Class B common stock, $.01 par value; 20,000,000 shares authorized; 10,004,500 shares issued and 2,863,742 outstanding as of December 31, 2008 and June 30, 2009 | 100 | 100 | ||||||||||||||
Accumulated other comprehensive loss | (8,699 | ) | (25,023 | ) | (82,434 | ) | (79,130 | ) | ||||||||
Accumulated deficit | (508,136 | ) | (503,181 | ) | (243,495 | ) | (265,465 | ) | ||||||||
Class B common stock, treasury stock, 7,131,088 and 7,140,758 shares in 2007 and 2008, respectively | (678,993 | ) | (683,994 | ) | ||||||||||||
Class B common stock, treasury stock, 7,140,758 shares as of December 31, 2008 and June 30, 2009 | (683,994 | ) | (683,994 | ) | ||||||||||||
Total stockholders’ deficit | (1,195,728 | ) | (1,190,826 | ) | (1,009,823 | ) | (1,028,489 | ) | ||||||||
Total liabilities and stockholders’ deficit | $ | 828,483 | $ | 842,445 | ||||||||||||
Total liabilities, redeemable common stock and stockholders’ deficit | $ | 928,877 | $ | 1,009,335 | ||||||||||||
F-2
2007 | 2008 | |||||||
(In thousands, except for share and per share data) | ||||||||
Revenues (including revenues from related parties of $22,048 and $21,136 for 2007 and 2008, respectively) | $ | 198,834 | $ | 215,618 | ||||
Expenses: | ||||||||
Cost of revenues (exclusive of items shown separately below) | 86,987 | 93,310 | ||||||
Selling, general and administrative | 27,925 | 28,674 | ||||||
Depreciation and amortization of fixed assets | 7,582 | 7,907 | ||||||
Amortization of intangible assets | 8,923 | 8,041 | ||||||
Total expenses | 131,417 | 137,932 | ||||||
Operating income | 67,417 | 77,686 | ||||||
Other income/(expense): | ||||||||
Investment income | 2,100 | 816 | ||||||
Realized gains (losses) on securities, net | 12 | (1,274 | ) | |||||
Interest expense | (5,773 | ) | (6,326 | ) | ||||
Other expense | (18 | ) | — | |||||
Total other expense, net | (3,679 | ) | (6,784 | ) | ||||
Income from continuing operations before income taxes | 63,738 | 70,902 | ||||||
Provision for income taxes | (24,867 | ) | (29,876 | ) | ||||
Income from continuing operations | 38,871 | 41,026 | ||||||
Loss from discontinued operations, net of tax benefit of $197 in 2007 | (610 | ) | — | |||||
Net income | $ | 38,261 | $ | 41,026 | ||||
Basic income/(loss) per share of Class A and Class B: | ||||||||
Income from continuing operations | $ | 9.49 | $ | 10.91 | ||||
Loss from discontinued operations | (0.15 | ) | — | |||||
Net income per share | $ | 9.34 | $ | 10.91 | ||||
Diluted income/(loss) per share of Class A and Class B: | ||||||||
Income from continuing operations | $ | 9.10 | $ | 10.45 | ||||
Loss from discontinued operations | (0.14 | ) | — | |||||
Net income per share | $ | 8.96 | $ | 10.45 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 4,096,320 | 3,759,913 | ||||||
Diluted | 4,269,444 | 3,926,954 | ||||||
Pro forma basic income/(loss) per share of Class A and Class B (unaudited): | ||||||||
Income from continuing operations | ||||||||
Loss from discontinued operations | ||||||||
Pro forma net income per share | ||||||||
Pro forma diluted income/(loss) per share of Class A and Class B (unaudited): | ||||||||
Income from continuing operations | ||||||||
Loss from discontinued operations | ||||||||
Pro forma net income per share | ||||||||
Weighted average shares used in pro forma per share amounts: | ||||||||
Basic | ||||||||
Diluted | ||||||||
2008 | 2009 | |||||||
(In thousands, except for | ||||||||
share and per share data) | ||||||||
Revenues (include revenues from related parties of $43,189 and $48,143 for 2008 and 2009, respectively) | $ | 437,690 | $ | 503,667 | ||||
Expenses: | ||||||||
Cost of revenues (exclusive of items shown separately below) | 190,678 | 220,501 | ||||||
Selling, general and administrative | 59,028 | 72,225 | ||||||
Depreciation and amortization of fixed assets | 16,424 | 18,913 | ||||||
Amortization of intangible assets | 14,937 | 16,974 | ||||||
Total expenses | 281,067 | 328,613 | ||||||
Operating income | 156,623 | 175,054 | ||||||
Other income/(expense): | ||||||||
Investment income | 1,603 | 92 | ||||||
Realized losses on securities, net | (1,286 | ) | (365 | ) | ||||
Interest expense | (14,173 | ) | (16,677 | ) | ||||
Total other expense, net | (13,856 | ) | (16,950 | ) | ||||
Income before income taxes | 142,767 | 158,104 | ||||||
Provision for income taxes | (61,818 | ) | (67,250 | ) | ||||
Net income | 80,949 | 90,854 | ||||||
Basic net income per share of Class A and Class B | $ | 21.73 | $ | 26.20 | ||||
Diluted net income per share of Class A and Class B | $ | 20.87 | $ | 25.21 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 3,724,876 | 3,468,196 | ||||||
Diluted | 3,877,906 | 3,604,086 | ||||||
Pro forma basic net income per share of Class A and Class B: | $ | 0.43 | $ | 0.52 | ||||
Pro forma diluted net income per share of Class A and Class B: | $ | 0.42 | $ | 0.50 | ||||
Weighted average shares used in pro forma per share amounts: | ||||||||
Basic | 186,243,800 | 173,409,800 | ||||||
Diluted | 193,895,300 | 180,204,300 | ||||||
F-3
Accumulated | Additional | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other | Paid-In | Total | Other | Class B Common Stock | Total | |||||||||||||||||||||||||||||||||||||||||||||||
Accumulated | Comprehensive | Class B Common Stock | Capital | Treasury | Stockholders’ | Accumulated | Comprehensive | Treasury | Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||
Deficit | Income (Loss) | Shares | Par Value | Class A | Stock | Deficit | Deficit | Loss | Shares | Par Value | Stock | Deficit | ||||||||||||||||||||||||||||||||||||||||
(In thousands, except for share data) | (In thousands, except for share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2007 | $ | (457,557 | ) | $ | (16,017 | ) | 10,004,500 | $ | 100 | $ | — | $ | (642,883 | ) | $ | (1,116,357 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive income: | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 150,374 | — | — | — | — | — | 150,374 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive gains | — | 7,318 | — | — | �� | — | 7,318 | |||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | 157,692 | |||||||||||||||||||||||||||||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | — | (36,110 | ) | (36,110 | ) | |||||||||||||||||||||||||||||||||||||||||||
KSOP shares earned | — | — | — | — | 21,463 | — | 21,463 | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 8,244 | — | 8,244 | |||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised for 72,083 shares (including tax benefit of $12,798) | (36,646 | ) | — | — | — | 12,798 | — | (23,848 | ) | |||||||||||||||||||||||||||||||||||||||||||
Cumulative effect adjustment to adopt FIN No. 48 | (10,338 | ) | — | — | — | — | — | (10,338 | ) | |||||||||||||||||||||||||||||||||||||||||||
Increase in redemption value of Class A common stock | (153,969 | ) | — | — | — | (42,505 | ) | — | (196,474 | ) | ||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | $ | (508,136 | ) | $ | (8,699 | ) | 10,004,500 | $ | 100 | $ | — | $ | (678,993 | ) | $ | (1,195,728 | ) | |||||||||||||||||||||||||||||||||||
Balance, January 1, 2008 | $ | (515,756 | ) | $ | (8,699 | ) | 10,004,500 | $ | 100 | $ | (678,993 | ) | $ | (1,203,348 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive income: | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 41,026 | — | — | — | — | — | 41,026 | 158,228 | — | — | — | — | 158,228 | |||||||||||||||||||||||||||||||||||||||
Other comprehensive losses | — | (16,324 | ) | — | — | — | — | (16,324 | ) | — | (73,735 | ) | — | — | — | (73,735 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | 24,702 | — | — | — | — | — | 84,493 | |||||||||||||||||||||||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | — | (5,001 | ) | (5,001 | ) | — | — | — | — | (5,001 | ) | (5,001 | ) | |||||||||||||||||||||||||||||||||||
KSOP shares earned | — | — | — | — | 5,536 | — | 5,536 | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,052 | — | 2,052 | |||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised for 63,561 shares (including tax benefit of $13,684) | (36,871 | ) | — | — | — | 13,684 | — | (23,187 | ) | |||||||||||||||||||||||||||||||||||||||||||
Decrease in redemption value of Class A common stock | 800 | — | — | — | — | — | 800 | 114,033 | — | — | — | — | 114,033 | |||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2008 | $ | (503,181 | ) | $ | (25,023 | ) | 10,004,500 | $ | 100 | $ | 21,272 | $ | (683,994 | ) | $ | (1,190,826 | ) | |||||||||||||||||||||||||||||||||||
Balance, December 31, 2008 | $ | (243,495 | ) | $ | (82,434 | ) | 10,004,500 | $ | 100 | $ | (683,994 | ) | $ | (1,009,823 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 90,854 | — | — | — | — | 90,854 | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | 3,304 | — | — | — | 3,304 | ||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | — | — | — | — | — | 94,158 | ||||||||||||||||||||||||||||||||||||||||||||||
Increase in redemption value of Class A common stock | (112,824 | ) | — | — | — | — | (112,824 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2009 | $ | (265,465 | ) | $ | (79,130 | ) | 10,004,500 | $ | 100 | $ | (683,994 | ) | $ | (1,028,489 | ) | |||||||||||||||||||||||||||||||||||||
F-4
2007 | 2008 | 2008 | 2009 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 38,261 | $ | 41,026 | $ | 80,949 | $ | 90,854 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization of fixed assets | 7,605 | 7,907 | 16,424 | 18,913 | ||||||||||||
Amortization of intangible assets | 8,923 | 8,041 | 14,937 | 16,974 | ||||||||||||
Allowance for doubtful accounts | 1,093 | 509 | ||||||||||||||
KSOP compensation expense | 5,230 | 5,725 | 11,564 | 10,738 | ||||||||||||
Acquisition related compensation expense | 550 | — | ||||||||||||||
Stock-based compensation | 1,521 | 2,052 | 4,621 | 5,515 | ||||||||||||
Non-cash charges associated with acquisition related payments | — | 300 | ||||||||||||||
Non-cash charges associated with other employee compensation plans | 348 | 1,175 | ||||||||||||||
Accrued interest on notes receivable from stockholders | (584 | ) | (458 | ) | ||||||||||||
Non-cash charges associated with the sale of covered call options | 275 | — | ||||||||||||||
Realized (gains) losses on securities | (12 | ) | 1,274 | |||||||||||||
Non-cash charges associated with performance based appreciation awards | 2,327 | 1,385 | ||||||||||||||
Interest income on notes receivable from stockholders | (980 | ) | — | |||||||||||||
Realized losses on securities | 1,286 | 365 | ||||||||||||||
Deferred income taxes | (381 | ) | 567 | — | (199 | ) | ||||||||||
Other operating | 14 | 14 | 30 | 30 | ||||||||||||
Loss (gain) on disposal of fixed assets | 1,419 | (9 | ) | |||||||||||||
Excess tax benefits from stock options exercised | (8,821 | ) | (13,684 | ) | ||||||||||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | ||||||||||||||||
Accounts receivable, net | (18,812 | ) | (20,195 | ) | ||||||||||||
Federal and state taxes receivable | 5,450 | 3,003 | ||||||||||||||
Loss on disposal of assets | — | 308 | ||||||||||||||
Non-cash charges associated with lease termination | — | 196 | ||||||||||||||
Excess tax benefits from exercised stock options | (17,032 | ) | (658 | ) | ||||||||||||
Changes in assets and liabilities, net of effects from acquisitions: | ||||||||||||||||
Accounts receivable | (4,937 | ) | (20,256 | ) | ||||||||||||
Prepaid expenses and other assets | (2,941 | ) | (6,753 | ) | (4,426 | ) | (3,964 | ) | ||||||||
Federal and state taxes payable | 19,256 | 25,433 | ||||||||||||||
Federal and foreign income taxes | 6,622 | 9,538 | ||||||||||||||
State and local income taxes | (1,270 | ) | (3,901 | ) | ||||||||||||
Accounts payable and accrued liabilities | (29,080 | ) | (34,581 | ) | (16,088 | ) | (11,196 | ) | ||||||||
Acquisition related liabilities | (2,200 | ) | (300 | ) | ||||||||||||
Fees received in advance | 64,747 | 69,619 | 49,151 | 60,452 | ||||||||||||
Other liabilities | 317 | (592 | ) | (692 | ) | 9,226 | ||||||||||
Net cash provided by operating activities | 92,735 | 89,864 | 141,929 | 184,529 |
F-5
2007 | 2008 | 2008 | 2009 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Acquisitions | (713 | ) | — | |||||||||||||
Acquisitions, net of cash acquired of $9,477 in 2009 | (41 | ) | (51,618 | ) | ||||||||||||
Earnout payments | (2,591 | ) | — | (98,100 | ) | (78,100 | ) | |||||||||
Proceeds from release of contingent escrows | 549 | — | ||||||||||||||
Escrow funding associated with acquisitions | (3,320 | ) | (7,000 | ) | ||||||||||||
Purchases of available-for-sale securities | (20,940 | ) | (29 | ) | (78 | ) | (398 | ) | ||||||||
Proceeds from sales of available-for-sale securities | 130 | 21,194 | ||||||||||||||
Proceeds from sales and maturities ofavailable-for-sale securities | 21,457 | 628 | ||||||||||||||
Purchases of fixed assets | (14,406 | ) | (9,766 | ) | (17,810 | ) | (16,195 | ) | ||||||||
Proceeds from receipt of notes receivable from stockholders | 151 | — | ||||||||||||||
Proceeds from repayment of notes receivable from stockholders | 184 | — | ||||||||||||||
Issuance of notes receivable from stockholders | (1,085 | ) | (984 | ) | (1,243 | ) | — | |||||||||
Net cash (used in) provided by investing activities | (39,454 | ) | 10,415 | |||||||||||||
Net cash used in investing activities | (98,402 | ) | (152,683 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from issuance of short-term debt | — | 80,000 | ||||||||||||||
Proceeds from issuance of long-term debt | 150,000 | 80,000 | ||||||||||||||
Proceeds from issuance of short-term debt, net | 70,000 | 40,000 | ||||||||||||||
Redemption of Class A common stock | (33,834 | ) | (186,022 | ) | (232,144 | ) | (38,282 | ) | ||||||||
Repurchase of Class B common stock | (506 | ) | (5,001 | ) | (5,001 | ) | — | |||||||||
Repayment of short-term debt | (1,058 | ) | (1,250 | ) | ||||||||||||
Excess tax benefits from stock options exercised | 8,821 | 13,684 | ||||||||||||||
Proceeds from exercises of stock options | — | 155 | ||||||||||||||
Repayment of current portion of long-term debt | — | (100,000 | ) | |||||||||||||
Repayment of short-term debt, net | (17,587 | ) | (2,659 | ) | ||||||||||||
Excess tax benefits from exercised stock options | 17,032 | 658 | ||||||||||||||
Proceeds from stock options exercised | 941 | 1,126 | ||||||||||||||
Net cash used in financing activities | (26,577 | ) | (98,434 | ) | (16,759 | ) | (19,157 | ) | ||||||||
Effect of exchange rate changes | 22 | 4 | 18 | 88 | ||||||||||||
Increase in cash and cash equivalents | 26,726 | 1,849 | 26,786 | 12,777 | ||||||||||||
Cash and cash equivalents, beginning of period | 99,152 | 24,049 | 24,049 | 33,185 | ||||||||||||
Cash and cash equivalents, end of period | $ | 125,878 | $ | 25,898 | $ | 50,835 | $ | 45,962 | ||||||||
Supplemental disclosures: | ||||||||||||||||
Taxes paid | $ | 55,127 | $ | 60,464 | ||||||||||||
Interest paid | $ | 12,609 | $ | 16,527 | ||||||||||||
Non-cash investing and financing activities: | ||||||||||||||||
Loans made to directors and officers in connection with the exercise of stock options | $ | 9,898 | $ | 17,183 | $ | 20,148 | $ | — | ||||||||
Stock redemptions used to repay notes receivable from stockholders’ maturities and to exercise stock options | $ | 12,741 | $ | 12,627 | ||||||||||||
Redemption of Class A common stock used to repay maturities of notes receivable from stockholders | $ | 18,663 | $ | — | ||||||||||||
KSOP stock redemption funded in the prior year | $ | 2,643 | $ | — | ||||||||||||
Redemption of Class A common stock used to fund the exercise of stock options | $ | 2,827 | $ | 456 | ||||||||||||
Deferred tax liability established on date of acquisition | $ | — | $ | (8,744 | ) | |||||||||||
Capital lease obligations | $ | — | $ | 81 | $ | 1,368 | $ | 1,972 | ||||||||
Increase in goodwill due to acquisition related liabilities | $ | 24,768 | $ | 5,618 | ||||||||||||
Capital expenditures included in accounts payable and accrued liabilities | $ | — | $ | 619 | ||||||||||||
Escrow distribution | $ | — | $ | 1,223 | ||||||||||||
Decrease in goodwill due to finalization of acquisition related liabilities | $ | — | $ | (4,300 | ) | |||||||||||
Increase in goodwill due to acquisition related escrow distributions | $ | 3,320 | $ | — | ||||||||||||
Accrual of acquisition related liabilities | $ | 11,300 | $ | — | ||||||||||||
F-6
1. | Organization: |
2. | Basis of Presentation and Summary of Significant Accounting |
F-7
F-7
F-8
F-9
3. | Concentration of Credit Risk: |
F-10
4. | Accounts Receivables: |
December 31, | March 31, | December 31, | June 30, | |||||||||||||
2007 | 2008 | 2008 | 2009 | |||||||||||||
Billed receivables | $ | 88,370 | $ | 111,157 | $ | 81,302 | $ | 107,809 | ||||||||
Unbilled receivables | 6,365 | 3,753 | 9,036 | 4,317 | ||||||||||||
Total receivables | 94,735 | 114,910 | 90,338 | 112,126 | ||||||||||||
Less allowance for doubtful accounts | (8,247 | ) | (8,227 | ) | (6,397 | ) | (4,975 | ) | ||||||||
Accounts receivable, net | $ | 86,488 | $ | 106,683 | $ | 83,941 | $ | 107,151 | ||||||||
5. |
F-9
Investments: |
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | |||||||||||||||
December 31, 2007 | Cost | Gains | Losses | Fair Value | ||||||||||||
Registered investment companies | $ | 29,036 | $ | — | $ | (686 | ) | $ | 28,350 | |||||||
Gross | Gross | Gross | Gross | |||||||||||||||||||||||||||||
Unrealized | Unrealized | Adjusted | Unrealized | Unrealized | ||||||||||||||||||||||||||||
March 31, 2008 | Cost | Gains | Losses | Fair Value | ||||||||||||||||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||||||
Registered investment companies | $ | 6,596 | $ | 67 | $ | — | $ | 6,663 | $ | 5,162 | $ | — | $ | (48 | ) | $ | 5,114 | |||||||||||||||
June 30, 2009 | ||||||||||||||||||||||||||||||||
Registered investment companies | $ | 4,566 | $ | 441 | $ | — | $ | 5,007 | ||||||||||||||||||||||||
Equity securities | 15 | 1 | — | 16 | ||||||||||||||||||||||||||||
Totalavailable-for-sale securities | $ | 4,581 | $ | 442 | $ | — | $ | 5,023 | ||||||||||||||||||||||||
June 30, | June 30, | |||||||
2008 | 2009 | |||||||
Gross realized gains/(losses) on sale of registered investment securities | $ | (1,286 | ) | $ | 21 | |||
Other than temporary impairment of registered investment securities | — | (386 | ) | |||||
Realized (losses)/gains on investments, net | $ | (1,286 | ) | $ | (365 | ) | ||
F-11
Fair Value Measurements |
F-10
Level 1 — | Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments. | |
Level 2 — | Assets and liabilities valued based on observable market data for similar instruments. | |
Level 3 — | Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a market participant would require. |
F-12
Quoted Prices | ||||||||||||||||
in Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
2008 | Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | |||||||||||||
Available-for-sale securities(1) | $ | 6,663 | $ | 6,663 | $ | — | $ | — | ||||||||
Redeemable common stock(2) | 1,072,702 | — | — | 1,072,702 |
Quoted Prices | ||||||||||||||||
in Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Total | Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | |||||||||||||
December 31, 2008 | ||||||||||||||||
Registered investment companies(1) | $ | 5,114 | $ | 5,114 | $ | — | $ | — | ||||||||
Class A redeemable common stock(2) | $ | 752,912 | $ | — | $ | — | $ | 752,912 | ||||||||
June 30, 2009 | ||||||||||||||||
Registered investment companies(1) | $ | 5,007 | $ | 5,007 | $ | — | $ | — | ||||||||
Equity securities(1) | $ | 16 | $ | 16 | $ | — | $ | — | ||||||||
Class A redeemable common stock(2) | $ | 845,126 | $ | — | $ | — | $ | 845,126 | ||||||||
Contingent consideration under FAS No. 141(R)(3) | $ | 2,800 | $ | — | $ | — | $ | 2,800 |
(1) | ||
(2) | ||
(3) | Under FAS No. 141(R), contingent consideration is recognized at fair value |
Significant | ||||
Unobservable | ||||
Inputs (Level 3) | ||||
Balance, December 31, 2008 | $ | 752,912 | ||
Redemptions and exercise of stock, net | (37,157 | ) | ||
Increase in fair value(1) | 129,371 | |||
Balance, June 30, 2009 | $ | 845,126 | ||
(1) | See Note 11 for a description of the valuation process. |
F-13
Goodwill and Intangible Assets: |
Risk | Decision | |||||||||||
Assessment | Analytics | Total | ||||||||||
Goodwill at December 31, 2007 | $ | 27,908 | $ | 311,983 | $ | 339,891 | ||||||
Escrow distribution | — | 1,223 | 1,223 | |||||||||
Earnout related payments | — | 5,618 | 5,618 | |||||||||
Goodwill at March 31, 2008 | $ | 27,908 | $ | 318,824 | $ | 346,732 | ||||||
Risk | Decision | |||||||||||
Assessment | Analytics | Total | ||||||||||
Goodwill at December 31, 2008 | $ | 27,908 | $ | 419,464 | $ | 447,372 | ||||||
Current year acquisitions | — | 44,494 | 44,494 | |||||||||
Finalization of acquisition related liabilities | — | (4,300 | ) | (4,300 | ) | |||||||
Purchase accounting reclassifications | — | (347 | ) | (347 | ) | |||||||
Goodwill at June 30, 2009 | $ | 27,908 | $ | 459,311 | $ | 487,219 | ||||||
F-11
Weighted | Weighted Average | Accumulated | ||||||||||||||||||||||||||||||
Average | Accumulated | Useful Life | Cost | Amortization | Net | |||||||||||||||||||||||||||
December 31, 2007 | Useful Life | Cost | Amortization | Net | ||||||||||||||||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||||||
Technology-based | 5 years | $ | 164,317 | $ | (80,419 | ) | $ | 83,898 | 5 years | $ | 164,127 | $ | (98,810 | ) | $ | 65,317 | ||||||||||||||||
Marketing-related | 4 years | 25,846 | (13,667 | ) | 12,179 | 4 years | 31,733 | (18,363 | ) | 13,370 | ||||||||||||||||||||||
Contract-based | 6 years | 6,555 | (5,596 | ) | 959 | 6 years | 6,555 | (5,940 | ) | 615 | ||||||||||||||||||||||
Customer-related | 13 years | 57,906 | (13,782 | ) | 44,124 | 12 years | 53,317 | (19,906 | ) | 33,411 | ||||||||||||||||||||||
Total intangible assets | $ | 254,624 | $ | (113,464 | ) | $ | 141,160 | $ | 255,732 | $ | (143,019 | ) | $ | 112,713 | ||||||||||||||||||
Weighted | ||||||||||||||||
Average | Accumulated | |||||||||||||||
March 31, 2008 | Useful Life | Cost | Amortization | Net | ||||||||||||
Technology-based | 5 years | $ | 164,317 | $ | (85,552 | ) | $ | 78,765 | ||||||||
Marketing-related | 4 years | 25,846 | (14,764 | ) | 11,082 | |||||||||||
Contract-based | 6 years | 6,555 | (5,793 | ) | 762 | |||||||||||
Customer-related | 13 years | 57,906 | (15,396 | ) | 42,510 | |||||||||||
Total intangible assets | $ | 254,624 | $ | (121,505 | ) | $ | 133,119 | |||||||||
F-14
Weighted Average | Accumulated | |||||||||||||||
Useful Life | Cost | Amortization | Net | |||||||||||||
June 30, 2009 | ||||||||||||||||
Technology-based | 6 years | $ | 176,274 | $ | (108,530 | ) | $ | 67,744 | ||||||||
Marketing-related | 4 years | 38,614 | (22,003 | ) | 16,611 | |||||||||||
Contract-based | 6 years | 6,555 | (5,995 | ) | 560 | |||||||||||
Customer-related | 12 years | 58,097 | (23,465 | ) | 34,632 | |||||||||||
Total intangible assets | $ | 279,540 | $ | (159,993 | ) | $ | 119,547 | |||||||||
Year | Amount | |||
2008 (remainder of) | $ | 21,984 | ||
2009 | 27,920 | |||
2010 | 22,721 | |||
2011 | 16,455 | |||
2012 | 14,319 | |||
Thereafter | 29,720 |
Year | Amount | |||
2009 | $ | 16,203 | ||
2010 | $ | 27,957 | ||
2011 | $ | 21,421 | ||
2012 | $ | 17,506 | ||
2013 | $ | 11,933 | ||
Thereafter | $ | 24,527 |
F-12F-15
Weighted Average | ||||||||
Useful Life | Total | |||||||
Technology-based | 10 years | $ | 12,147 | |||||
Marketing-related | 5 years | 6,881 | ||||||
Customer-related | 6 years | 4,780 | ||||||
Total intangible assets | $ | 23,808 | ||||||
March 31, | ||||
2007 | ||||
Revenues | $ | 839 | ||
Pre-tax loss | $ | (807 | ) | |
Tax benefit | 197 | |||
Loss from discontinued operations, net of tax | $ | (610 | ) | |
Income Taxes: |
F-16
F-13
Debt: |
Issuance | Maturity | December 31, | March 31, | |||||||||||||
Date | Date | 2007 | 2008 | |||||||||||||
Short-term debt: | ||||||||||||||||
Bank of America | 10/25/2006 | 4/25/2007 | $ | 15,000 | $ | — | ||||||||||
Bank of America | 10/25/2007 | 4/25/2008 | — | 15,000 | ||||||||||||
Bank of America | 3/10/2008 | 4/9/2008 | — | 25,000 | ||||||||||||
Bank of America | 3/31/2008 | 4/14/2008 | — | 10,000 | ||||||||||||
JPMorgan Chase | 12/31/2007 | 1/3/2008 | 15,000 | — | ||||||||||||
JPMorgan Chase | 3/10/2008 | 4/9/2008 | — | 20,000 | ||||||||||||
JPMorgan Chase | 3/26/2008 | 4/7/2008 | — | 10,000 | ||||||||||||
JPMorgan Chase | 3/28/2008 | 4/4/2008 | — | 10,000 | ||||||||||||
JPMorgan Chase | 3/31/2008 | 4/14/2008 | — | 20,000 | ||||||||||||
Capital lease obligations | Various | Various | 4,408 | 3,379 | ||||||||||||
Other | Various | Various | 763 | 441 | ||||||||||||
Short-term debt | $ | 35,171 | $ | 113,820 | ||||||||||||
Long-term debt: | ||||||||||||||||
Prudential senior notes: | ||||||||||||||||
4.46% Series D senior notes | 6/14/2005 | 6/13/2009 | $ | 100,000 | $ | 100,000 | ||||||||||
4.60% Series E senior notes | 6/14/2005 | 6/13/2011 | 50,000 | 50,000 | ||||||||||||
6.00% Series F senior notes | 8/8/2006 | 8/8/2011 | 25,000 | 25,000 | ||||||||||||
6.13% Series G senior notes | 8/8/2006 | 8/8/2013 | 75,000 | 75,000 | ||||||||||||
5.84% Series H senior notes | 10/26/2007 | 10/26/2013 | 17,500 | 17,500 | ||||||||||||
5.84% Series H senior notes | 10/26/2007 | 10/26/2015 | 17,500 | 17,500 | ||||||||||||
Principal senior notes: | ||||||||||||||||
6.03% Series A senior notes | 8/8/2006 | 8/8/2011 | 50,000 | 50,000 | ||||||||||||
6.16% Series B senior notes | 8/8/2006 | 8/8/2013 | 25,000 | 25,000 | ||||||||||||
New York Life senior notes: | ||||||||||||||||
5.87% Series A senior notes | 3/16/2007 | 10/26/2013 | 17,500 | 17,500 | ||||||||||||
5.87% Series A senior notes | 3/16/2007 | 10/26/2015 | 17,500 | 17,500 | ||||||||||||
Other obligations: | ||||||||||||||||
Capital lease obligations | Various | Various | 7,299 | 7,343 | ||||||||||||
Other | Various | Various | 860 | 851 | ||||||||||||
Long-term debt | $ | 403,159 | $ | 403,194 | ||||||||||||
Issuance | Maturity | December 31, | June 30, | |||||||||
Date | Date | 2008 | 2009 | |||||||||
Short-term debt and current portion of long-term debt: | ||||||||||||
Bank of America | 12/15/2008 | 1/15/2009 | $ | 5,000 | $ | — | ||||||
Bank of America | 12/17/2008 | 1/17/2009 | 30,000 | — | ||||||||
Bank of America | 12/22/2008 | 1/22/2009 | 15,000 | — | ||||||||
Bank of America | 12/24/2008 | 1/24/2009 | 5,000 | — | ||||||||
Bank of America | 6/18/2009 | 7/2/2009 | — | 30,000 | ||||||||
Bank of America | 6/18/2009 | 7/2/2009 | — | 5,000 | ||||||||
Bank of America | 6/29/2009 | 7/2/2009 | — | 15,000 | ||||||||
Bank of America | 6/26/2009 | 7/2/2009 | — | 15,000 | ||||||||
Bank of America | 6/29/2009 | 7/2/2009 | — | 50,000 | ||||||||
JPMorganChase | 12/1/2008 | 1/2/2009 | 10,000 | — | ||||||||
JPMorganChase | 12/12/2008 | 1/12/2009 | 4,000 | — | ||||||||
JPMorganChase | 12/18/2008 | 1/20/2009 | 20,000 | — | ||||||||
JPMorganChase | 12/24/2008 | 1/24/2009 | 20,000 | — | ||||||||
JPMorganChase | 12/29/2008 | 1/29/2009 | 5,000 | — | ||||||||
JPMorganChase | 6/29/2009 | 7/2/2009 | — | 19,000 | ||||||||
JPMorganChase | 6/8/2009 | 7/8/2009 | — | 20,000 | ||||||||
Prudential senior notes: | ||||||||||||
4.46% Series D senior notes | 6/14/2005 | 6/13/2009 | 100,000 | — | ||||||||
Capital lease obligations | Various | Various | 5,058 | 5,208 | ||||||||
Other | Various | Various | 340 | 1,164 | ||||||||
Short-term debt and current portion of long-term debt | $ | 219,398 | $ | 160,372 | ||||||||
F-17
Issuance | Maturity | December 31, | June 30, | |||||||||
Date | Date | 2008 | 2009 | |||||||||
Long-term debt: | ||||||||||||
Prudential senior notes: | ||||||||||||
4.60% Series E senior notes | 6/14/2005 | 6/13/2011 | $ | 50,000 | $ | 50,000 | ||||||
6.00% Series F senior notes | 8/8/2006 | 8/8/2011 | 25,000 | 25,000 | ||||||||
6.13% Series G senior notes | 8/8/2006 | 8/8/2013 | 75,000 | 75,000 | ||||||||
5.84% Series H senior notes | 10/26/2007 | 10/26/2013 | 17,500 | 17,500 | ||||||||
5.84% Series H senior notes | 10/26/2007 | 10/26/2015 | 17,500 | 17,500 | ||||||||
6.28% Series I senior notes | 4/29/2008 | 4/29/2013 | 15,000 | 15,000 | ||||||||
6.28% Series I senior notes | 4/29/2008 | 4/29/2015 | 85,000 | 85,000 | ||||||||
6.85% Series J senior notes | 6/15/2009 | 6/15/2016 | — | 50,000 | ||||||||
Principal senior notes: | ||||||||||||
6.03% Series A senior notes | 8/8/2006 | 8/8/2011 | 50,000 | 50,000 | ||||||||
6.16% Series B senior notes | 8/8/2006 | 8/8/2013 | 25,000 | 25,000 | ||||||||
New York Life senior notes: | ||||||||||||
5.87% Series A senior notes | 10/26/2007 | 10/26/2013 | 17,500 | 17,500 | ||||||||
5.87% Series A senior notes | 10/26/2007 | 10/26/2015 | 17,500 | 17,500 | ||||||||
6.35% Series B senior notes | 4/29/2008 | 4/29/2015 | 50,000 | 50,000 | ||||||||
Aviva Investors North America: | ||||||||||||
6.46% Series A senior notes | 4/27/2009 | 4/27/2013 | — | 30,000 | ||||||||
Other obligations: | ||||||||||||
Capital lease obligations | Various | Various | 4,723 | 3,319 | ||||||||
Other | Various | Various | 633 | 375 | ||||||||
Long-term debt | $ | 450,356 | $ | 528,694 | ||||||||
F-14
F-18
Redeemable Common Stock: |
F-19
F-15
Class A | Notes | Total | ||||||||||||||||||
Class A Common Stock | Unearned | Receivable | Redeemable | |||||||||||||||||
Redemption | KSOP | from | Common | |||||||||||||||||
Shares | Value | Shares | Stockholders’ | Stock | ||||||||||||||||
Balance, January 1, 2008 | 2,922,253 | $ | 1,217,942 | $ | (4,129 | ) | $ | (42,625 | ) | $ | 1,171,188 | |||||||||
Redemption of Class A common stock | — | (198,649 | ) | — | 9,012 | (189,637 | ) | |||||||||||||
KSOP shares earned | — | — | 189 | — | 189 | |||||||||||||||
Stock options exercised | 64,181 | 54,209 | — | (17,182 | ) | 37,027 | ||||||||||||||
Decrease in redemption value of Class A common stock | — | (800 | ) | — | — | (800 | ) | |||||||||||||
Balance, March 31, 2008 | 2,986,434 | $ | 1,072,702 | $ | (3,940 | ) | $ | (50,795 | ) | $ | 1,017,967 | |||||||||
Total | ||||||||||||||||||||
Class A Common Stock | Redeemable | |||||||||||||||||||
Redemption | Unearned | Additional | Common | |||||||||||||||||
Shares | Value | KS OP | Paid-in-Capital | Stock | ||||||||||||||||
Balance, December 31, 2008 | 746,139 | $ | 752,912 | $ | (3,373 | ) | $ | — | $ | 749,539 | ||||||||||
Redemption of Class A common stock | (49,047 | ) | (38,738 | ) | — | — | (38,738 | ) | ||||||||||||
KSOP shares earned | — | — | 364 | 10,374 | 10,738 | |||||||||||||||
Stock based compensation | — | — | — | 5,515 | 5,515 | |||||||||||||||
Stock options exercised (including tax benefit of $658) | 3,096 | 1,581 | — | 658 | 2,239 | |||||||||||||||
Increase in redemption value of Class A common stock | — | 129,371 | — | (16,547 | ) | 112,824 | ||||||||||||||
Balance, June 30, 2009 | 700,188 | $ | 845,126 | $ | (3,009 | ) | $ | — | $ | 842,117 | ||||||||||
Stockholders’ Deficit: |
F-16F-20
Net Income | Shares | Per-Share | ||||||||||
March 31, 2007 | (Numerator) | (Denominator) | Amount | |||||||||
Basic EPS: | ||||||||||||
Net income available to common stockholders | $ | 38,261 | 4,096,320 | $ | 9.34 | |||||||
Effect of dilutive securities | 173,124 | |||||||||||
Diluted EPS: | ||||||||||||
Net income available to common stockholders plus assumed conversions | $ | 38,261 | 4,269,444 | $ | 8.96 | |||||||
March 31, 2008 | ||||||||||||
Basic EPS: | ||||||||||||
Net income available to common stockholders | $ | 41,026 | 3,759,913 | $ | 10.91 | |||||||
Effect of dilutive securities | 167,041 | |||||||||||
Diluted EPS: | ||||||||||||
Net income available to common stockholders plus assumed conversions | $ | 41,026 | 3,926,954 | $ | 10.45 | |||||||
June 30, | June 30, | |||||||
2008 | 2009 | |||||||
Numerator used in basic and diluted EPS: | ||||||||
Net income | $ | 80,949 | $ | 90,854 | ||||
Denominator: | ||||||||
Weighted average number of common shares used in basic EPS | 3,724,876 | 3,468,196 | ||||||
Effect of dilutive shares: | ||||||||
Potential Class A redeemable common stock issuable upon the exercise of stock options | 153,030 | 135,890 | ||||||
Weighted average number of common shares and dilutive potential common shares used in diluted EPS | 3,877,906 | 3,604,086 | ||||||
Basic EPS | $ | 21.73 | $ | 26.20 | ||||
Diluted EPS | $ | 20.87 | $ | 25.21 | ||||
Pro forma basic income per share of Class A and Class B: | ||||||||
Pro forma net income per share | $ | 0.43 | $ | 0.52 | ||||
Pro forma diluted income per share of Class A and Class B : | ||||||||
Pro forma net income per share | $ | 0.42 | $ | 0.50 | ||||
Weighted average shares used in pro forma per share amounts: | ||||||||
Basic | 186,243,800 | 173,409,800 | ||||||
Diluted | 193,895,300 | 180,204,300 | ||||||
December 31, | March 31, | |||||||
2007 | 2008 | |||||||
Unrealized (losses) gains on investments | $ | (412 | ) | $ | 39 | |||
Unrealized foreign currency gains | 154 | 158 | ||||||
Pension and postretirement unfunded liability adjustment | (8,441 | ) | (25,220 | ) | ||||
Accumulated other comprehensive loss | $ | (8,699 | ) | $ | (25,023 | ) | ||
December 31, | June 30, | |||||||
2008 | 2009 | |||||||
Unrealized (losses)/gains on investments | $ | (31 | ) | $ | 262 | |||
Unrealized foreign currency losses | (773 | ) | (685 | ) | ||||
Pension and postretirement unfunded liability adjustment | (81,630 | ) | (78,707 | ) | ||||
Accumulated other comprehensive loss | $ | (82,434 | ) | $ | (79,130 | ) | ||
F-17F-21
Tax | Tax Benefit/ | |||||||||||||||||||||||
Benefit | Before Tax | (Expense) | After Tax | |||||||||||||||||||||
March 31, 2007 | Before Tax | (Expense) | After Tax | |||||||||||||||||||||
June 30, 2008 | ||||||||||||||||||||||||
Unrealized holding losses on investments arising during the year | $ | (370 | ) | $ | 146 | $ | (224 | ) | ||||||||||||||||
Reclassification adjustment for amounts included in net income | 1,120 | (448 | ) | 672 | ||||||||||||||||||||
Unrealized foreign currency gains | 18 | — | 18 | |||||||||||||||||||||
Pension and postretirement unfunded liability adjustment | (35,589 | ) | 13,907 | (21,682 | ) | |||||||||||||||||||
Total other comprehensive loss | $ | (34,821 | ) | $ | 13,605 | $ | (21,216 | ) | ||||||||||||||||
June 30, 2009 | ||||||||||||||||||||||||
Unrealized holding losses on investments arising during the year | $ | 184 | $ | (80 | ) | $ | 104 | $ | 104 | $ | (41 | ) | $ | 63 | ||||||||||
Reclassification adjustment for amounts included in net income | (12 | ) | 5 | (7 | ) | 386 | (156 | ) | 230 | |||||||||||||||
Unrealized foreign currency gains | 22 | — | 22 | 88 | — | 88 | ||||||||||||||||||
Pension and postretirement unfunded liability adjustment | 204 | 368 | 572 | 4,900 | (1,977 | ) | 2,923 | |||||||||||||||||
Total other comprehensive gain | $ | 398 | $ | 293 | $ | 691 | $ | 5,478 | $ | (2,174 | ) | $ | 3,304 | |||||||||||
March 31, 2008 | ||||||||||||||||||||||||
Unrealized holding losses on investments arising during the year | $ | (367 | ) | $ | 170 | $ | (197 | ) | ||||||||||||||||
Reclassification adjustment for amounts included in net income | 1,120 | (472 | ) | 648 | ||||||||||||||||||||
Unrealized foreign currency gains | 4 | — | 4 | |||||||||||||||||||||
Pension and postretirement unfunded liability adjustment | (29,527 | ) | 12,748 | (16,779 | ) | |||||||||||||||||||
Total other comprehensive loss | $ | (28,770 | ) | $ | 12,446 | $ | (16,324 | ) | ||||||||||||||||
Stock Option Plan: |
Weighted | Aggregate | |||||||||||
Number | Average | �� | Intrinsic | |||||||||
of Options | Exercise Price | Value | ||||||||||
Outstanding at December 31, 2008 | 463,145 | $ | 389.39 | $ | 179,981 | |||||||
Granted | 66,245 | $ | 805.00 | |||||||||
Exercised | (3,096 | ) | $ | 510.57 | $ | 891 | ||||||
Cancelled or expired | (4,110 | ) | $ | 780.06 | ||||||||
Outstanding at June 30, 2009 | 522,184 | $ | 438.32 | $ | 235,336 | |||||||
Options exercisable at June 30, 2009 | 381,417 | $ | 305.23 | $ | 222,659 | |||||||
F-18F-22
Weighted | Aggregate | |||||||||||
Number | Average | Intrinsic | ||||||||||
of Options | Exercise Price | Value | ||||||||||
Outstanding at December 31, 2007 | 496,753 | $ | 320.46 | $ | 269,012 | |||||||
Granted | 56,990 | $ | 862.00 | |||||||||
Exercised | (64,181 | ) | $ | 287.51 | 36,871 | |||||||
Cancelled or expired | (233 | ) | $ | 719.06 | ||||||||
Outstanding at March 31, 2008 | 489,329 | $ | 387.38 | $ | 234,692 | |||||||
Options exercisable at March 31, 2008 | 333,013 | $ | 242.97 | $ | 207,810 | |||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted- | Weighted- | |||||||||||||||||||||||
Average | Stock | Weighted- | Average | Stock | Weighted- | |||||||||||||||||||
Range of | Remaining | Options | Average | Remaining | Options | Average | ||||||||||||||||||
Exercise Prices | Contractual Life | Outstanding | Exercise Price | Contractual Life | Exercisable | Exercise Price | ||||||||||||||||||
$ 71 to $110 | 2.6 | 78,879 | $ | 106.47 | 2.6 | 78,879 | $ | 106.47 | ||||||||||||||||
$116 to $144 | 5.2 | 45,652 | $ | 141.91 | 5.2 | 45,652 | $ | 141.91 | ||||||||||||||||
$145 to $231 | 5.4 | 118,400 | $ | 182.21 | 5.4 | 118,400 | $ | 182.21 | ||||||||||||||||
$232 to $445 | 7.3 | 93,252 | $ | 416.87 | 7.3 | 59,824 | $ | 411.30 | ||||||||||||||||
$446 to $681 | 8.3 | 47,106 | $ | 590.46 | 8.3 | 19,771 | $ | 599.38 | ||||||||||||||||
$682 to $862 | 9.4 | 106,040 | $ | 814.96 | 8.8 | 10,487 | $ | 763.43 | ||||||||||||||||
489,329 | 333,013 | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||
Average | Stock | Average | Average | Stock | Average | |||||||||||||||||||
Range of | Remaining | Options | Exercise | Remaining | Options | Exercise | ||||||||||||||||||
Exercise Prices | Contractual Life | Outstanding | Price | Contractual Life | Exercisable | Price | ||||||||||||||||||
$92 to $110 | 1.2 | 72,329 | $ | 107.24 | 1.2 | 72,329 | $ | 107.24 | ||||||||||||||||
$111 to $148 | 3.6 | 45,102 | $ | 141.89 | 3.6 | 45,102 | $ | 141.89 | ||||||||||||||||
$149 to $231 | 3.9 | 112,475 | $ | 179.64 | 3.9 | 112,475 | $ | 179.64 | ||||||||||||||||
$232 to $445 | 5.8 | 87,360 | $ | 415.51 | 5.8 | 87,360 | $ | 415.51 | ||||||||||||||||
$446 to $681 | 6.8 | 40,171 | $ | 594.86 | 6.8 | 29,163 | $ | 598.53 | ||||||||||||||||
$682 to $755 | 7.6 | 37,284 | $ | 755.00 | 7.6 | 16,921 | $ | 755.00 | ||||||||||||||||
$756 to $836 | 9.7 | 69,520 | $ | 806.55 | 8.0 | 3,325 | $ | 836.00 | ||||||||||||||||
$837 to $892 | 8.6 | 57,943 | $ | 864.79 | 8.6 | 14,742 | $ | 864.94 | ||||||||||||||||
522,184 | 381,417 | |||||||||||||||||||||||
Number of | Fair Value | Black-Scholes | ||||||||||||||
Stock Options | of Common | Exercise | Value of | |||||||||||||
Grant Dates | Granted | Stock(1) | Price | Options | ||||||||||||
July 1, 2008 | 5,357 | $ | 892.00 | $ | 892.00 | $ | 223.56 | |||||||||
July 1, 2008 | 600 | $ | 892.00 | $ | 892.00 | $ | 241.85 | |||||||||
April 1, 2009 | 66,245 | $ | 805.00 | $ | 805.00 | $ | 234.63 |
(1) | The fair value for these shares is the current valuation in effect for the KSOP. The fair value is also utilized for all Class A share transactions for the Insurance Services Office, Inc. 1996 Incentive Plan. |
December 31, 2008 | June 30, 2009 | |||
Option pricing model | Black-Scholes | Black-Scholes | ||
Expected volatility | 28.02% | 30.95% | ||
Risk-free interest rate | 2.58% | 1.98% | ||
Expected term in years | 5.0 | 5.72 | ||
Dividend yield | 1.81% | 1.00% | ||
Weighted average grant date fair value per stock option | $206.68 | $234.63 |
F-19
F-23
Pension and Postretirement Benefits: |
For the Six Months Ended June 30, | ||||||||||||||||
Pension Plan | Postretirement Plan | |||||||||||||||
2008 | 2009 | 2008 | 2009 | |||||||||||||
Service cost | $ | 3,876 | $ | 3,830 | $ | — | $ | — | ||||||||
Interest cost | 10,844 | 10,658 | 850 | 800 | ||||||||||||
Amortization of transition obligation | — | — | 100 | 100 | ||||||||||||
Expected return on plan assets | (13,720 | ) | (9,216 | ) | — | — | ||||||||||
Amortization of prior service cost | (400 | ) | (400 | ) | — | — | ||||||||||
Amortization of net actuarial loss | 250 | 5,100 | — | 100 | ||||||||||||
Net periodic benefit cost | $ | 850 | $ | 9,972 | $ | 950 | $ | 1,000 | ||||||||
Employer contributions | $ | 2,405 | $ | 2,885 | $ | 1,816 | $ | 1,790 | ||||||||
F-20F-24
For the Three Months Ended March 31, | ||||||||||||||||
Pension Plan | Postretirement Plan | |||||||||||||||
2007 | 2008 | 2007 | 2008 | |||||||||||||
Service cost | $ | 2,038 | $ | 1,938 | $ | — | $ | — | ||||||||
Interest cost | 5,238 | 5,422 | 417 | 425 | ||||||||||||
Amortization of transition obligation | — | — | 41 | 50 | ||||||||||||
Recognized net actuarial loss | — | — | 1 | — | ||||||||||||
Expected return on Plan assets | (6,865 | ) | (6,860 | ) | — | — | ||||||||||
Amortization of prior year service cost | (200 | ) | (200 | ) | — | — | ||||||||||
Amortization of net actuarial (gain) loss | 143 | 125 | — | — | ||||||||||||
Net periodic expense | $ | 354 | $ | 425 | $ | 459 | $ | 475 | ||||||||
Employer contributions | $ | — | $ | 962 | $ | 807 | $ | 389 | ||||||||
Segment Reporting |
F-21F-25
For the Six Months Ended | ||||||||||||||||||||||||
March 31, 2007 | June 30, 2008 | |||||||||||||||||||||||
Risk | Decision | Risk | Decision | |||||||||||||||||||||
Assessment | Analytics | Total | Assessment | Analytics | Total | |||||||||||||||||||
Revenues | $ | 121,797 | $ | 77,037 | $ | 198,834 | $ | 253,356 | $ | 184,334 | $ | 437,690 | ||||||||||||
Expenses: | ||||||||||||||||||||||||
Cost of revenues | 52,793 | 34,194 | 86,987 | |||||||||||||||||||||
Selling, general, and administrative | 17,226 | 10,699 | 27,925 | |||||||||||||||||||||
Cost of revenues (exclusive of items shown separately below) | 103,140 | 87,538 | 190,678 | |||||||||||||||||||||
Selling, general and administrative | 36,716 | 22,312 | 59,028 | |||||||||||||||||||||
Segment EBITDA | 51,778 | 32,144 | 83,922 | 113,500 | 74,484 | 187,984 | ||||||||||||||||||
Depreciation and amortization of fixed assets | 4,598 | 2,984 | 7,582 | 9,278 | 7,146 | 16,424 | ||||||||||||||||||
Amortization of intangible assets | 347 | 8,576 | 8,923 | 427 | 14,510 | 14,937 | ||||||||||||||||||
Operating income | 46,833 | 20,584 | 67,417 | 103,795 | 52,828 | 156,623 | ||||||||||||||||||
Unallocated expenses: | ||||||||||||||||||||||||
Investment income | 2,100 | 1,603 | ||||||||||||||||||||||
Realized gains on securities, net | 12 | |||||||||||||||||||||||
Realized losses on securities, net | (1,286 | ) | ||||||||||||||||||||||
Interest expense | (5,773 | ) | (14,173 | ) | ||||||||||||||||||||
Other expense | (18 | ) | ||||||||||||||||||||||
Consolidated income from continuing operations before income taxes | $ | 63,738 | ||||||||||||||||||||||
Consolidated income before income taxes | $ | 142,767 | ||||||||||||||||||||||
Capital expenditures | $ | 7,818 | $ | 6,588 | $ | 14,406 | ||||||||||||||||||
Capital expenditures, including non-cash purchases of fixed assets | $ | 7,849 | $ | 11,329 | $ | 19,178 | ||||||||||||||||||
For the Six Months Ended | ||||||||||||||||||||||||
March 31, 2008 | June 30, 2009 | |||||||||||||||||||||||
Risk | Decision | Risk | Decision | |||||||||||||||||||||
Assessment | Analytics | Total | Assessment | Analytics | Total | |||||||||||||||||||
Revenues | $ | 127,039 | $ | 88,579 | $ | 215,618 | $ | 262,873 | $ | 240,794 | $ | 503,667 | ||||||||||||
Expenses: | ||||||||||||||||||||||||
Cost of revenues | 51,367 | 41,943 | 93,310 | |||||||||||||||||||||
Selling, general, and administrative | 17,550 | 11,124 | 28,674 | |||||||||||||||||||||
Cost of revenues (exclusive of items shown separately below) | 104,467 | 116,034 | 220,501 | |||||||||||||||||||||
Selling, general and administrative | 37,209 | 35,016 | 72,225 | |||||||||||||||||||||
Segment EBITDA | 58,122 | 35,512 | 93,634 | 121,197 | 89,744 | 210,941 | ||||||||||||||||||
Depreciation and amortization of fixed assets | 4,504 | 3,403 | 7,907 | 9,549 | 9,364 | 18,913 | ||||||||||||||||||
Amortization of intangible assets | 232 | 7,809 | 8,041 | 306 | 16,668 | 16,974 | ||||||||||||||||||
Operating income | 53,386 | 24,300 | 77,686 | 111,342 | 63,712 | 175,054 | ||||||||||||||||||
Unallocated expenses: | ||||||||||||||||||||||||
Investment income | 816 | 92 | ||||||||||||||||||||||
Realized gains on securities, net | (1,274 | ) | ||||||||||||||||||||||
Realized losses on securities, net | (365 | ) | ||||||||||||||||||||||
Interest expense | (6,326 | ) | (16,677 | ) | ||||||||||||||||||||
Consolidated income from continuing operations before income taxes | $ | 70,902 | ||||||||||||||||||||||
Consolidated income before income taxes | $ | 158,104 | ||||||||||||||||||||||
Capital expenditures | $ | 2,852 | $ | 6,914 | $ | 9,766 | ||||||||||||||||||
Capital expenditures, including non-cash purchases of fixed assets | $ | 4,045 | $ | 14,741 | $ | 18,786 | ||||||||||||||||||
F-22F-26
March 31, | March 31, | For the Six Months Ended | ||||||||||||||
2007 | 2008 | June 30, | June 30, | |||||||||||||
2008 | 2009 | |||||||||||||||
Risk Assessment | ||||||||||||||||
Subscription services | $ | 96,480 | $ | 102,931 | ||||||||||||
Transaction-based services | 25,317 | 24,108 | ||||||||||||||
Risk Assessment: | ||||||||||||||||
Industry standard insurance programs | $ | 165,719 | $ | 172,193 | ||||||||||||
Property-specific rating and underwriting information | 63,344 | 65,869 | ||||||||||||||
Statistical agency and data services | 13,820 | 14,135 | ||||||||||||||
Actuarial services | 10,473 | 10,676 | ||||||||||||||
Total Risk Assessment | $ | 121,797 | $ | 127,039 | 253,356 | 262,873 | ||||||||||
Decision Analytics | ||||||||||||||||
Decision Analytics: | ||||||||||||||||
Fraud identification and detection solutions | $ | 44,768 | $ | 50,320 | 102,858 | 130,475 | ||||||||||
Loss prediction solutions | 17,900 | 21,434 | 46,260 | 66,896 | ||||||||||||
Loss quantification solutions | 14,369 | 16,825 | 35,216 | 43,423 | ||||||||||||
Total Decision Analytics | $ | 77,037 | $ | 88,579 | 184,334 | 240,794 | ||||||||||
Total consolidated revenues | $ | 198,834 | $ | 215,618 | $ | 437,690 | $ | 503,667 | ||||||||
Research and Development |
Related Parties: |
Commitments and Contingencies: |
F-23F-27
F-24F-28
Subsequent Events: |
F-25F-29
F-26F-30
ASSETS | ASSETS | ASSETS | ||||||
Cash | $ | 1,000 | $ | 1,000 | ||||
Total assets | $ | 1,000 | $ | 1,000 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Total liabilities | $ | — | $ | — | ||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Stockholder’s equity: | ||||||||
Common stock, $.01 par value; 1,000 shares authorized; 100 shares issued | $ | 1 | $ | 1 | ||||
Additional paid-in capital | 999 | 999 | ||||||
Total stockholders’ equity | $ | 1,000 | ||||||
Total stockholder’s equity | $ | 1,000 | ||||||
Total liabilities and stockholders’ equity | $ | 1,000 | ||||||
Total liabilities and stockholder’s equity | $ | 1,000 | ||||||
F-27F-31
1. | Organization: |
2. | Basis of Presentation: |
3. | Commitments and Contingencies: |
4. | Subsequent Events: |
F-28F-32
F-29
2006 | 2007 | |||||||
(In thousands, except for share and per share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 99,152 | $ | 24,049 | ||||
Available-for-sale securities | 7,257 | 28,350 | ||||||
Accounts receivable, net (including amounts from related parties of $1,364 and $949, respectively) | 91,725 | 86,488 | ||||||
Notes receivable from stockholders’ | 4,271 | 347 | ||||||
Prepaid expenses | 8,929 | 7,609 | ||||||
Deferred income taxes | 19,019 | 22,654 | ||||||
Federal and state taxes receivable | 5,449 | 3,003 | ||||||
Other current assets | 13,191 | 8,525 | ||||||
Total current assets | 248,993 | 181,025 | ||||||
Noncurrent assets: | ||||||||
Fixed assets, net | 70,470 | 85,436 | ||||||
Intangible assets, net | 139,718 | 141,160 | ||||||
Goodwill | 224,680 | 339,891 | ||||||
Notes receivable from stockholders’ | 11,883 | 12,356 | ||||||
Deferred income taxes | 37,294 | 55,679 | ||||||
Other assets | 11,693 | 12,936 | ||||||
Total assets | $ | 744,731 | $ | 828,483 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 66,710 | $ | 78,234 | ||||
Acquisition related liabilities | 13,414 | 100,300 | ||||||
Short-term debt | 120,851 | 35,171 | ||||||
Pension and postretirement benefits, current | 4,324 | 4,636 | ||||||
Fees received in advance (including amounts from related parties of $8,677 and $5,817, respectively) | 124,136 | 127,907 | ||||||
Total current liabilities | 329,435 | 346,248 | ||||||
Noncurrent liabilities: | ||||||||
Long-term debt | 327,847 | 403,159 | ||||||
Pension benefits | 29,185 | 17,637 | ||||||
Postretirement benefits | 26,525 | 23,894 | ||||||
Other liabilities | 22,163 | 62,085 | ||||||
Total liabilities | 735,155 | 853,023 | ||||||
Redeemable common stock | ||||||||
Class A redeemable common stock, stated at redemption value, $.01 par value; 6,700,000 shares authorized; 2,849,885 and 2,922,253 shares issued and 1,347,540 and 1,163,066 outstanding in 2006 and 2007, respectively | 1,183,049 | 1,217,942 | ||||||
Unearned Class A common stock KSOP shares | (4,913 | ) | (4,129 | ) | ||||
Notes receivable from stockholders’ | (52,203 | ) | (42,625 | ) | ||||
Total redeemable common stock | 1,125,933 | 1,171,188 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ deficit: | ||||||||
Class B common stock, $.01 par value; 20,000,000 shares authorized; 10,004,500 shares issued and 2,945,900 and 2,873,412 outstanding in 2006 and 2007, respectively | 100 | 100 | ||||||
Accumulated other comprehensive loss | (16,017 | ) | (8,699 | ) | ||||
Accumulated deficit | (457,557 | ) | (508,136 | ) | ||||
Class B common stock, treasury stock, 7,058,600 and 7,131,088 shares in 2006 and 2007, respectively | (642,883 | ) | (678,993 | ) | ||||
Total stockholders’ deficit | (1,116,357 | ) | (1,195,728 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 744,731 | $ | 828,483 | ||||
F-30
2005 | 2006 | 2007 | ||||||||||
(In thousands, except for share | ||||||||||||
and per share data) | ||||||||||||
Revenues (includes revenues from related parties of $79,269, $83,919 and $84,891 for 2005, 2006 and 2007, respectively) | $ | 645,660 | $ | 730,133 | $ | 802,195 | ||||||
Expenses: | ||||||||||||
Cost of revenues (exclusive of items shown separately below) | 294,911 | 331,804 | 357,191 | |||||||||
Selling, general and administrative | 88,723 | 100,124 | 107,576 | |||||||||
Depreciation and amortization of fixed assets | 22,024 | 28,007 | 31,745 | |||||||||
Amortization of intangible assets | 19,800 | 26,854 | 33,916 | |||||||||
Total expenses | 425,458 | 486,789 | 530,428 | |||||||||
Operating income | 220,202 | 243,344 | 271,767 | |||||||||
Other income/(expense): | ||||||||||||
Investment income | 2,919 | 6,585 | 8,442 | |||||||||
Realized gains (losses) on securities, net | 27 | (375 | ) | 857 | ||||||||
Interest expense | (10,465 | ) | (16,668 | ) | (22,928 | ) | ||||||
Other income (expense) | (14 | ) | (109 | ) | 9 | |||||||
Total other expense, net | (7,533 | ) | (10,567 | ) | (13,620 | ) | ||||||
Income from continuing operations before income taxes | 212,669 | 232,777 | 258,147 | |||||||||
Provision for income taxes | (85,722 | ) | (86,921 | ) | (103,184 | ) | ||||||
Income from continuing operations | 126,947 | 145,856 | 154,963 | |||||||||
Loss from discontinued operations, net of tax benefit of $721, $712 and $1,496 in 2005, 2006 and 2007, respectively | (2,574 | ) | (1,805 | ) | (4,589 | ) | ||||||
Net income | $ | 124,373 | $ | 144,051 | $ | 150,374 | ||||||
Basic income/(loss) per share of Class A and Class B: | ||||||||||||
Income from continuing operations | $ | 29.81 | $ | 35.31 | $ | 38.58 | ||||||
Loss from discontinued operations | (0.61 | ) | (0.44 | ) | (1.14 | ) | ||||||
Net income per share | $ | 29.20 | $ | 34.87 | $ | 37.44 | ||||||
Diluted income/(loss) per share of Class A and Class B: | ||||||||||||
Income from continuing operations | $ | 28.45 | $ | 33.85 | $ | 37.03 | ||||||
Loss from discontinued operations | (0.58 | ) | (0.42 | ) | (1.10 | ) | ||||||
Net income per share | $ | 27.87 | $ | 33.43 | $ | 35.93 | ||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 4,258,989 | 4,130,962 | 4,016,928 | |||||||||
Diluted | 4,462,109 | 4,308,976 | 4,185,151 | |||||||||
Pro forma basic income/(loss) per share of Class A and Class B (unaudited): | ||||||||||||
Income from continuing operations | ||||||||||||
Loss from discontinued operations | ||||||||||||
Pro forma net income per share | ||||||||||||
Pro forma diluted income/(loss) per share of Class A and Class B (unaudited): | ||||||||||||
Income from continuing operations | ||||||||||||
Loss from discontinued operations | ||||||||||||
Pro forma net income per share | ||||||||||||
Weighted average shares used in pro forma per share amounts (unaudited): | ||||||||||||
Basic | ||||||||||||
Diluted | ||||||||||||
F-31
Accumulated | Additional | |||||||||||||||||||||||||||
Other | Paid-In | Total | ||||||||||||||||||||||||||
Accumulated | Comprehensive | Class B Common Stock | Capital | Treasury | Stockholders’ | |||||||||||||||||||||||
Deficit | Income (Loss) | Shares | Par Value | Class A | Stock | Deficit | ||||||||||||||||||||||
(In thousands, except for share data) | ||||||||||||||||||||||||||||
Balance, January 1, 2005 | $ | (135,830 | ) | $ | 191 | 10,004,500 | $ | 100 | $ | — | $ | (602,390 | ) | $ | (737,929 | ) | ||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | 124,373 | — | — | — | — | — | 124,373 | |||||||||||||||||||||
Other comprehensive losses | — | (2,925 | ) | — | — | — | — | (2,925 | ) | |||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | 121,448 | |||||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | — | (39,378 | ) | (39,378 | ) | |||||||||||||||||||
KSOP shares earned | — | — | — | — | 12,955 | — | 12,955 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 4,094 | — | 4,094 | |||||||||||||||||||||
Stock options exercised for 233,608 shares (including tax benefit of $27,852) | (70,854 | ) | — | — | — | 27,852 | — | (43,002 | ) | |||||||||||||||||||
Increase in redemption value of Class A common stock | (211,581 | ) | — | — | — | (44,901 | ) | — | (256,482 | ) | ||||||||||||||||||
Balance, December 31, 2005 | $ | (293,892 | ) | $ | (2,734 | ) | 10,004,500 | $ | 100 | $ | — | $ | (641,768 | ) | $ | (938,294 | ) | |||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | 144,051 | — | — | — | — | — | 144,051 | |||||||||||||||||||||
Other comprehensive gains | — | 2,352 | — | — | — | — | 2,352 | |||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | 146,403 | |||||||||||||||||||||
Adjustment to adopt FAS No. 158, net of tax of $9,317 | — | (15,635 | ) | — | — | — | — | (15,635 | ) | |||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | — | (1,115 | ) | (1,115 | ) | |||||||||||||||||||
KSOP shares earned | — | — | — | — | 17,969 | — | 17,969 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 6,148 | — | 6,148 | |||||||||||||||||||||
Stock options exercised for 179,967 shares (including tax benefit of $31,964) | (81,516 | ) | — | — | — | 31,964 | — | (49,552 | ) | |||||||||||||||||||
Increase in redemption value of Class A common stock | (226,200 | ) | — | — | — | (56,081 | ) | — | (282,281 | ) | ||||||||||||||||||
Balance, December 31, 2006 | $ | (457,557 | ) | $ | (16,017 | ) | 10,004,500 | $ | 100 | $ | — | $ | (642,883 | ) | $ | (1,116,357 | ) | |||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | 150,374 | — | — | — | — | — | 150,374 | |||||||||||||||||||||
Other comprehensive gains | — | 7,318 | — | — | — | — | 7,318 | |||||||||||||||||||||
Comprehensive income | — | — | — | — | — | — | 157,692 | |||||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | — | (36,110 | ) | (36,110 | ) | |||||||||||||||||||
KSOP shares earned | — | — | — | — | 21,463 | — | 21,463 | |||||||||||||||||||||
Stock-based compensation | — | — | — | — | 8,244 | — | 8,244 | |||||||||||||||||||||
Stock options exercised for 72,083 shares (including tax benefit of $12,798) | (36,655 | ) | — | — | — | 12,798 | — | (23,857 | ) | |||||||||||||||||||
Cumulative effect adjustment to adopt FIN No. 48 | (10,338 | ) | — | — | — | — | — | (10,338 | ) | |||||||||||||||||||
Increase in redemption value of Class A common stock | (153,960 | ) | — | — | — | (42,505 | ) | — | (196,465 | ) | ||||||||||||||||||
Balance, December 31, 2007 | $ | (508,136 | ) | $ | (8,699 | ) | 10,004,500 | $ | 100 | $ | — | $ | (678,993 | ) | $ | (1,195,728 | ) | |||||||||||
F-32
2005 | 2006 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 124,373 | $ | 144,051 | $ | 150,374 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization of fixed assets | 22,123 | 28,119 | 31,843 | |||||||||
Amortization of intangible assets | 19,800 | 26,854 | 33,916 | |||||||||
KSOP compensation expense | 13,793 | 18,779 | 22,247 | |||||||||
Stock-based compensation | 4,094 | 6,148 | 8,244 | |||||||||
Non-cash charges associated with other employee compensation plans | 601 | 1,909 | 2,182 | |||||||||
Goodwill impairment | 1,500 | — | 1,744 | |||||||||
Accrued interest on notes receivable from stockholders’ | (1,516 | ) | (2,190 | ) | (2,454 | ) | ||||||
Realized (gains) losses on securities | (27 | ) | 375 | (857 | ) | |||||||
Deferred income taxes | (7,776 | ) | (11,848 | ) | (5,698 | ) | ||||||
Other operating | 185 | 216 | 298 | |||||||||
Loss on disposal of fixed assets | — | 2,374 | 1,791 | |||||||||
Excess tax benefits from exercised stock options | (27,852 | ) | (31,964 | ) | (12,798 | ) | ||||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | ||||||||||||
Accounts receivable, net | (12,263 | ) | (3,987 | ) | 7,194 | |||||||
Prepaid expenses and other assets | (3,486 | ) | (1,751 | ) | 2,213 | |||||||
Federal and state taxes receivable | 25,938 | 19,262 | 13,062 | |||||||||
Accounts payable and accrued liabilities | 9,656 | (7,014 | ) | (8,294 | ) | |||||||
Fees received in advance | 3,682 | 27,219 | 3,751 | |||||||||
Other liabilities | 1,246 | 6,947 | (237 | ) | ||||||||
Net cash provided by operating activities | 174,071 | 223,499 | 248,521 |
F-33
2005 | 2006 | 2007 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from investing activities: | ||||||||||||
Acquisitions, net of cash acquired of $3,466, $532 and $120, respectively | (59,249 | ) | (201,617 | ) | (50,658 | ) | ||||||
Earnout payments | (10,771 | ) | — | (3,191 | ) | |||||||
Proceeds from release of contingent escrows | 2,024 | 297 | 3,039 | |||||||||
Escrow funding associated with acquisitions | (14,354 | ) | (14,600 | ) | (4,375 | ) | ||||||
Purchases of available-for-sale securities | (496 | ) | (35,081 | ) | (44,101 | ) | ||||||
Proceeds from sales and maturities of available-for-sale securities | 402 | 34,893 | 22,872 | |||||||||
Purchases of fixed assets | (24,019 | ) | (25,742 | ) | (32,941 | ) | ||||||
Proceeds from receipt of notes receivable from stockholders’ | 4 | — | 301 | |||||||||
Issuance of notes receivable from stockholders’ | (985 | ) | (1,602 | ) | (1,777 | ) | ||||||
Net cash used in investing activities | (107,444 | ) | (243,452 | ) | (110,831 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of short-term debt | 15,000 | 15,000 | 30,000 | |||||||||
Proceeds from issuance of long-term debt | 220,000 | 175,000 | 85,000 | |||||||||
Redemption of Class A common stock | (141,857 | ) | (126,857 | ) | (168,660 | ) | ||||||
Repurchase of Class B common stock | (39,378 | ) | (1,115 | ) | (36,110 | ) | ||||||
Proceeds from issuance of Class A common stock | 100 | — | — | |||||||||
Repayment of short-term debt | (172,884 | ) | (18,356 | ) | (136,008 | ) | ||||||
Excess tax benefits from exercised stock options | 27,852 | 31,964 | 12,798 | |||||||||
Proceeds from exercised stock options | 213 | 271 | 389 | |||||||||
Net cash (used in) provided by financing activities | (90,954 | ) | 75,907 | (212,591 | ) | |||||||
Effect of exchange rate changes | (551 | ) | 376 | (202 | ) | |||||||
(Decrease) increase in cash and cash equivalents | (24,878 | ) | 56,330 | (75,103 | ) | |||||||
Cash and cash equivalents, beginning of year | 67,700 | 42,822 | 99,152 | |||||||||
Cash and cash equivalents, end of year | $ | 42,822 | $ | 99,152 | $ | 24,049 | ||||||
Supplemental disclosures: | ||||||||||||
Taxes paid | $ | 66,841 | $ | 78,800 | $ | 94,258 | ||||||
Interest paid | $ | 9,814 | $ | 14,901 | $ | 22,752 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Loans made to directors and officers in connection with the exercise of stock options | $ | (12,573 | ) | $ | (24,438 | ) | $ | (15,130 | ) | |||
Stock redemptions used to repay notes receivable from stockholders’ maturities and to exercise stock options | $ | 32,720 | $ | 13,854 | $ | 35,429 | ||||||
KSOP stock redemption funded in the prior year | $ | — | $ | 10,001 | $ | 2,643 | ||||||
Deferred tax (liability) asset established on date of acquisition | $ | (8,918 | ) | $ | 7,542 | $ | 24 | |||||
Capital lease obligations | $ | 8,712 | $ | — | $ | 9,554 | ||||||
Capital expenditures included in accounts payable and accrued liabilities | $ | — | $ | — | $ | 4,688 | ||||||
Increase in goodwill due to acquisition related liabilities | $ | 1,000 | $ | 4,362 | $ | 98,343 | ||||||
2007 | 2008 | |||||||
(In thousands, except for share and per share data) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 24,049 | $ | 33,185 | ||||
Available-for-sale securities | 28,350 | 5,114 | ||||||
Accounts receivable, net (including amounts from related parties of $949 and $3,421, respectively) | 86,488 | 83,941 | ||||||
Notes receivable from stockholders | 347 | — | ||||||
Prepaid expenses | 7,609 | 13,010 | ||||||
Deferred income taxes | 22,654 | 4,490 | ||||||
Federal and foreign income taxes receivable | 4,561 | 12,311 | ||||||
State and local income taxes receivable | — | 689 | ||||||
Other current assets | 8,525 | 16,187 | ||||||
Total current assets | 182,583 | 168,927 | ||||||
Noncurrent assets: | ||||||||
Fixed assets, net | 85,436 | 82,587 | ||||||
Intangible assets, net | 141,160 | 112,713 | ||||||
Goodwill | 339,891 | 447,372 | ||||||
Notes receivable from stockholders | 12,356 | — | ||||||
Deferred income taxes | 55,679 | 100,256 | ||||||
State income taxes receivable | — | 8,112 | ||||||
Other assets | 12,936 | 8,910 | ||||||
Total assets | $ | 830,041 | $ | 928,877 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 78,234 | $ | 83,381 | ||||
Acquisition related liabilities | 100,300 | 82,700 | ||||||
Short-term debt and current portion of long term debt | 35,171 | 219,398 | ||||||
Pension and postretirement benefits, current | 4,636 | 5,397 | ||||||
Fees received in advance (including amounts from related parties of $5,817 and $3,699, respectively) | 127,907 | 114,023 | ||||||
State and local income taxes payable | 9,178 | — | ||||||
Total current liabilities | 355,426 | 504,899 | ||||||
Noncurrent liabilities: | ||||||||
Long-term debt | 403,159 | 450,356 | ||||||
Pension benefits | 17,637 | 133,914 | ||||||
Postretirement benefits | 23,894 | 23,798 | ||||||
Other liabilities | 62,085 | 76,194 | ||||||
Total liabilities | 862,201 | 1,189,161 | ||||||
Redeemable common stock: | ||||||||
Class A redeemable common stock, stated at redemption value, $.01 par value; 6,700,000 shares authorized; 2,922,253 and 3,007,761 shares issued and 1,163,066 and 746,139 outstanding in 2007 and 2008, respectively, and vested options at intrinsic value | 1,217,942 | 752,912 | ||||||
Class A unearned common stock KSOP shares | (4,129 | ) | (3,373 | ) | ||||
Notes receivable from stockholders | (42,625 | ) | — | |||||
Total redeemable common stock | 1,171,188 | 749,539 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ deficit: | ||||||||
Class B common stock, $.01 par value; 20,000,000 shares authorized; 10,004,500 shares issued and 2,873,412 and 2,863,742 outstanding in 2007 and 2008, respectively | 100 | 100 | ||||||
Accumulated other comprehensive loss | (8,699 | ) | (82,434 | ) | ||||
Accumulated deficit | (515,756 | ) | (243,495 | ) | ||||
Class B common stock, treasury stock, 7,131,088 and 7,140,758 shares in 2007 and 2008, respectively | (678,993 | ) | (683,994 | ) | ||||
Total stockholders’ deficit | (1,203,348 | ) | (1,009,823 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 830,041 | $ | 928,877 | ||||
F-34
2006 | 2007 | 2008 | ||||||||||
(In thousands, except for share and per share data) | ||||||||||||
Revenues (includes revenue from related parties of $83,919, $84,891 and $90,227 for 2006, 2007 and 2008, respectively) | $ | 730,133 | $ | 802,195 | $ | 893,550 | ||||||
Expenses: | ||||||||||||
Cost of revenues (exclusive of items shown separately below) | 331,804 | 357,191 | 386,897 | |||||||||
Selling, general and administrative | 100,124 | 107,576 | 131,239 | |||||||||
Depreciation and amortization of fixed assets | 28,007 | 31,745 | 35,317 | |||||||||
Amortization of intangible assets | 26,854 | 33,916 | 29,555 | |||||||||
Total expenses | 486,789 | 530,428 | 583,008 | |||||||||
Operating income | 243,344 | 271,767 | 310,542 | |||||||||
Other income/(expense): | ||||||||||||
Investment income | 6,585 | 8,442 | 2,233 | |||||||||
Realized (losses)/gains on securities, net | (375 | ) | 857 | (2,511 | ) | |||||||
Interest expense | (16,668 | ) | (22,928 | ) | (31,316 | ) | ||||||
Other (expense)/income | (109 | ) | 9 | (49 | ) | |||||||
Total other expense, net | (10,567 | ) | (13,620 | ) | (31,643 | ) | ||||||
Income from continuing operations before income taxes | 232,777 | 258,147 | 278,899 | |||||||||
Provision for income taxes | (91,992 | ) | (103,184 | ) | (120,671 | ) | ||||||
Income from continuing operations | 140,785 | 154,963 | 158,228 | |||||||||
Loss from discontinued operations, net of tax benefit of $712, $1,496 and $0 in 2006, 2007 and 2008, respectively | (1,805 | ) | (4,589 | ) | — | |||||||
Net income | $ | 138,980 | $ | 150,374 | $ | 158,228 | ||||||
Basic income/(loss) per share of Class A and Class B: | ||||||||||||
Income from continuing operations | $ | 34.08 | $ | 38.58 | $ | 43.26 | ||||||
Loss from discontinued operations | (0.44 | ) | (1.14 | ) | — | |||||||
Net income per share | $ | 33.64 | $ | 37.44 | $ | 43.26 | ||||||
Diluted income/(loss) per share of Class A and Class B: | ||||||||||||
Income from continuing operations | $ | 32.72 | $ | 37.03 | $ | 41.59 | ||||||
Loss from discontinued operations | (0.42 | ) | (1.10 | ) | — | |||||||
Net income per share | $ | 32.30 | $ | 35.93 | $ | 41.59 | ||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 4,130,962 | 4,016,928 | 3,657,714 | |||||||||
Diluted | 4,302,867 | 4,185,151 | 3,804,634 | |||||||||
Pro forma basic income/(loss) per share of Class A and Class B (unaudited): | ||||||||||||
Income from continuing operations | $ | 0.68 | $ | 0.77 | $ | 0.87 | ||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | |||||||
Pro forma net income per share | $ | 0.67 | $ | 0.75 | $ | 0.87 | ||||||
Pro forma diluted income/(loss) per share of Class A and Class B (unaudited): | ||||||||||||
Income from continuing operations | $ | 0.65 | $ | 0.74 | $ | 0.83 | ||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | |||||||
Pro forma net income per share | $ | 0.64 | $ | 0.72 | $ | 0.83 | ||||||
Weighted average shares used in pro forma per share amounts (unaudited): | ||||||||||||
Basic | 206,548,100 | 200,846,400 | 182,885,700 | |||||||||
Diluted | 215,143,350 | 209,257,550 | 190,231,700 | |||||||||
F-35
Accumulated | ||||||||||||||||||||||||
Other | Total | |||||||||||||||||||||||
Accumulated | Comprehensive | Class B Common Stock | Treasury | Stockholders’ | ||||||||||||||||||||
Deficit | Loss | Shares | Par Value | Stock | Deficit | |||||||||||||||||||
(In thousands, except for share data) | ||||||||||||||||||||||||
Balance, January 1, 2006 (as previously reported) | $ | (293,892 | ) | $ | (2,734 | ) | 10,004,500 | $ | 100 | $ | (641,768 | ) | $ | (938,294 | ) | |||||||||
Correction — see note 23 | (2,549 | ) | — | — | — | — | (2,549 | ) | ||||||||||||||||
Balance, January 1, 2006 (as corrected) | (296,441 | ) | (2,734 | ) | 10,004,500 | 100 | (641,768 | ) | (940,843 | ) | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | 138,980 | — | — | — | — | 138,980 | ||||||||||||||||||
Other comprehensive gains | — | 2,352 | — | — | — | 2,352 | ||||||||||||||||||
Comprehensive income | — | — | — | — | — | 141,332 | ||||||||||||||||||
Incremental adjustment to adopt FAS No. 158, net of tax of $9,317 | — | (15,635 | ) | — | — | — | (15,635 | ) | ||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | (1,115 | ) | (1,115 | ) | ||||||||||||||||
Stock options exercised for 179,967 shares (including tax benefit of $31,964) | (81,516 | ) | — | — | — | — | (81,516 | ) | ||||||||||||||||
Increase in redemption value of Class A common stock | (226,200 | ) | — | — | — | — | (226,200 | ) | ||||||||||||||||
Balance, December 31, 2006 | $ | (465,177 | ) | $ | (16,017 | ) | 10,004,500 | $ | 100 | $ | (642,883 | ) | $ | (1,123,977 | ) | |||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | 150,374 | — | — | — | — | 150,374 | ||||||||||||||||||
Other comprehensive gains | — | 7,318 | — | — | — | 7,318 | ||||||||||||||||||
Comprehensive income | — | — | — | — | — | 157,692 | ||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | (36,110 | ) | (36,110 | ) | ||||||||||||||||
Stock options exercised for 72,083 shares (including tax benefit of $12,798) | (36,655 | ) | — | — | — | — | (36,655 | ) | ||||||||||||||||
Cumulative effect adjustment to adopt FIN No. 48 | (10,338 | ) | — | — | — | — | (10,338 | ) | ||||||||||||||||
Increase in redemption value of Class A common stock | (153,960 | ) | — | — | — | — | (153,960 | ) | ||||||||||||||||
Balance, December 31, 2007 | $ | (515,756 | ) | $ | (8,699 | ) | 10,004,500 | $ | 100 | $ | (678,993 | ) | $ | (1,203,348 | ) | |||||||||
Comprehensive income: | ||||||||||||||||||||||||
Net income | 158,228 | — | — | — | — | 158,228 | ||||||||||||||||||
Other comprehensive losses | — | (73,735 | ) | — | — | — | (73,735 | ) | ||||||||||||||||
Comprehensive income | — | — | — | — | — | 84,493 | ||||||||||||||||||
Treasury stock acquired — Class B common stock | — | — | — | — | (5,001 | ) | (5,001 | ) | ||||||||||||||||
Decrease in redemption value of Class A common stock | 114,033 | — | — | — | — | 114,033 | ||||||||||||||||||
Balance, December 31, 2008 | $ | (243,495 | ) | $ | (82,434 | ) | 10,004,500 | $ | 100 | $ | (683,994 | ) | $ | (1,009,823 | ) | |||||||||
F-36
2006 | 2007 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 138,980 | $ | 150,374 | $ | 158,228 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization of fixed assets | 28,119 | 31,843 | 35,317 | |||||||||
Amortization of intangible assets | 26,854 | 33,916 | 29,555 | |||||||||
Allowance for doubtful accounts | 2,148 | 3,286 | 1,536 | |||||||||
KSOP compensation expense | 18,779 | 22,247 | 22,274 | |||||||||
Acquisition related compensation expense | 9,027 | 3,605 | 300 | |||||||||
Stock-based compensation | 6,148 | 8,244 | 9,881 | |||||||||
Non-cash charges/(credits) associated with performance based appreciation awards | 1,909 | 2,182 | (91 | ) | ||||||||
Goodwill impairment | — | 1,744 | — | |||||||||
Interest income on notes receivable from stockholders | (2,190 | ) | (2,454 | ) | (1,050 | ) | ||||||
Proceeds from payment of interest on notes receivable from stockholders | — | — | 2,318 | |||||||||
Realized losses/(gains) on securities | 375 | (857 | ) | 2,511 | ||||||||
Deferred income taxes | (11,848 | ) | (5,698 | ) | 19,895 | |||||||
Other operating | 216 | 298 | 284 | |||||||||
Loss on disposal of assets | 2,374 | 1,791 | 1,082 | |||||||||
Excess tax benefits from exercised stock options | (31,964 | ) | (12,798 | ) | (26,099 | ) | ||||||
Changes in assets and liabilities, net of effects from acquisitions and dispositions: | ||||||||||||
Accounts receivable | (6,135 | ) | 3,908 | 3,609 | ||||||||
Prepaid expenses and other assets | (1,751 | ) | 2,213 | (6,486 | ) | |||||||
Federal and foreign income taxes | 15,634 | 18,137 | 5,969 | |||||||||
State and local income taxes | 8,699 | (5,075 | ) | (5,977 | ) | |||||||
Accounts payable and accrued liabilities | 1,452 | 1,759 | 3,075 | |||||||||
Acquisition related liabilities | (17,493 | ) | (13,658 | ) | (2,200 | ) | ||||||
Fees received in advance | 27,219 | 3,751 | (1,042 | ) | ||||||||
Other liabilities | 6,947 | (237 | ) | (4,983 | ) | |||||||
Net cash provided by operating activities | 223,499 | 248,521 | 247,906 |
F-37
2006 | 2007 | 2008 | ||||||||||
(In thousands) | ||||||||||||
Cash flows from investing activities: | ||||||||||||
Acquisitions, net of cash acquired of $532, $120 and $365, respectively | (201,617 | ) | (50,658 | ) | (18,951 | ) | ||||||
Purchase of cost-method investments | — | — | (5,800 | ) | ||||||||
Earnout payments | — | (3,191 | ) | (98,100 | ) | |||||||
Proceeds from release of contingent escrows | 297 | 3,039 | 558 | |||||||||
Escrow funding associated with acquisitions | (14,600 | ) | (4,375 | ) | (1,500 | ) | ||||||
Purchases of available-for-sale securities | (35,081 | ) | (44,101 | ) | (361 | ) | ||||||
Proceeds from sales and maturities of available-for-sale securities | 34,893 | 22,872 | 21,724 | |||||||||
Purchases of fixed assets | (25,742 | ) | (32,941 | ) | (30,652 | ) | ||||||
Proceeds from repayment of notes receivable from stockholders | — | 301 | 3,863 | |||||||||
Issuance of notes receivable from stockholders | (1,602 | ) | (1,777 | ) | (1,247 | ) | ||||||
Net cash used in investing activities | (243,452 | ) | (110,831 | ) | (130,466 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from issuance of short-term debt, net | 15,000 | 30,000 | 114,000 | |||||||||
Proceeds from issuance of long-term debt | 175,000 | 85,000 | 150,000 | |||||||||
Redemption of Class A common stock | (126,857 | ) | (168,660 | ) | (387,561 | ) | ||||||
Repurchase of Class B common stock | (1,115 | ) | (36,110 | ) | (5,001 | ) | ||||||
Repayment of short-term debt | (18,356 | ) | (136,008 | ) | (35,287 | ) | ||||||
Excess tax benefits from exercised stock options | 31,964 | 12,798 | 26,099 | |||||||||
Proceeds from repayment of exercise price loans classified as a component of redeemable common stock | — | — | 29,482 | |||||||||
Proceeds from stock options exercised | 271 | 389 | 892 | |||||||||
Net cash provided by/(used in) financing activities | 75,907 | (212,591 | ) | (107,376 | ) | |||||||
Effect of exchange rate changes | 376 | (202 | ) | (928 | ) | |||||||
Increase/(decrease) in cash and cash equivalents | 56,330 | (75,103 | ) | 9,136 | ||||||||
Cash and cash equivalents, beginning of year | 42,822 | 99,152 | 24,049 | |||||||||
Cash and cash equivalents, end of year | $ | 99,152 | $ | 24,049 | $ | 33,185 | ||||||
Supplemental disclosures: | ||||||||||||
Taxes paid | $ | 78,800 | $ | 94,258 | $ | 99,323 | ||||||
Interest paid | $ | 14,901 | $ | 22,752 | $ | 28,976 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Loans made to directors and officers in connection with the exercise of stock options | $ | (24,438 | ) | $ | (15,130 | ) | $ | (20,148 | ) | |||
Redemption of Class A common stock used to repay maturities of notes receivable from stockholders | $ | 12,577 | $ | 32,389 | $ | 42,202 | ||||||
Redemption of Class A common stock used to fund the exercise of stock options | $ | 1,277 | $ | 3,040 | $ | 4,281 | ||||||
KSOP stock redemption funded in the prior year | $ | 10,001 | $ | 2,643 | $ | — | ||||||
Deferred tax asset/(liability) established on date of acquisition | $ | 7,542 | $ | 24 | $ | (2,963 | ) | |||||
Capital lease obligations | $ | — | $ | 9,554 | $ | 2,610 | ||||||
Capital expenditures included in accounts payable and accrued liabilities | $ | — | $ | 4,688 | $ | — | ||||||
Increase in goodwill due to acquisition related liabilities | $ | 4,362 | $ | 98,343 | $ | 82,400 | ||||||
Increase in goodwill due to acquisition related escrow distributions | $ | 1,936 | $ | 4,455 | $ | 4,388 | ||||||
F-38
1. | Organization: |
2. | Basis of Presentation and Summary of Significant Accounting Policies: |
F-39
(a) | Intercompany Accounts and Transactions |
(b) | Revenue Recognition
|
F-40
F-36
(c) | Fees Received in Advance |
F-41
F-37
F-42
F-38
F-43
2006 | 2007 | 2008 | ||||||||||
Option pricing model | Black-Scholes | Black-Scholes | Black-Scholes | |||||||||
Expected volatility | 13.53 | % | 13.40 | % | 28.02 | % | ||||||
Risk-free interest rate | 4.59 | % | 4.54 | % | 2.58 | % | ||||||
Expected term in years | 6.18 | 6.19 | 5.0 | |||||||||
Dividend yield | — | — | 1.81 | % | ||||||||
Weighted average grant date fair value per stock option | $ | 166.25 | $ | 210.69 | $ | 206.68 |
F-39
2005 | 2006 | 2007 | ||||||||||
Option pricing model | Black-Scholes | Black-Scholes | Black-Scholes | |||||||||
Expected volatility | 13.77 | % | 13.53 | % | 13.40 | % | ||||||
Risk-free interest rate | 4.08 | % | 4.59 | % | 4.54 | % | ||||||
Expected term in years | 6.13 | 6.18 | 6.19 | |||||||||
Dividend yield | — | — | — |
F-44
F-40
Increase in non-current deferred income taxes | $ | 13,933 | $ | 13,933 | ||||
Increase in federal and state taxes receivable | $ | 7,620 | ||||||
Decrease in federal and state taxes payable | $ | 7,620 | ||||||
Increase in other liabilities | $ | 31,891 | $ | 31,891 | ||||
Increase in accumulated deficit | $ | 10,338 | $ | 10,338 |
(l) | Earnings Per Share |
F-45
(m) | Pension and Postretirement Benefits |
(n) | Product Warranty Obligations |
F-41
(o) | Loss contingencies |
(p) | Recent Accounting Pronouncements |
F-46
F-42
F-47
3. | Concentration of Credit Risk: |
F-43
4. | Cash and Cash Equivalents: |
F-48
5. | Accounts Receivables: |
2006 | 2007 | 2007 | 2008 | |||||||||||||
Billed receivables | $ | 90,366 | $ | 88,370 | $ | 88,370 | $ | 81,302 | ||||||||
Unbilled receivables | 6,632 | 6,365 | 6,365 | 9,036 | ||||||||||||
Total receivables | 96,998 | 94,735 | 94,735 | 90,338 | ||||||||||||
Less allowance for doubtful accounts | (5,273 | ) | (8,247 | ) | (8,247 | ) | (6,397 | ) | ||||||||
Accounts receivable, net | $ | 91,725 | $ | 86,488 | $ | 86,488 | $ | 83,941 | ||||||||
6. | Notes Receivable from Stockholders: |
F-44
7. | Investments: |
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | |||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
2006 | ||||||||||||||||
U.S. common stock | $ | 15 | $ | — | $ | — | $ | 15 | ||||||||
Registered investment companies | 6,736 | 506 | — | 7,242 | ||||||||||||
Total available-for-sale securities | $ | 6,751 | $ | 506 | $ | — | $ | 7,257 | ||||||||
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | |||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
2007 | ||||||||||||||||
Registered investment companies | $ | 29,036 | $ | — | $ | (686 | ) | $ | 28,350 | |||||||
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | |||||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
2007 Registered investment companies | $ | 29,036 | $ | — | $ | (686 | ) | $ | 28,350 | |||||||
2008 Registered investment companies | $ | 5,162 | $ | — | $ | (48 | ) | $ | 5,114 | |||||||
F-49
2005 | 2006 | 2007 | 2006 | 2007 | 2008 | |||||||||||||||||||
Gross realized gains/(losses) on sale of registered investment securities | $ | 114 | $ | 922 | $ | (1,306 | ) | |||||||||||||||||
Other than temporary impairment of registered investment securities | — | — | (1,205 | ) | ||||||||||||||||||||
Gross realized gains on U.S. common stock | $ | — | $ | — | $ | 135 | — | 135 | — | |||||||||||||||
Gross realized gains on registered investment companies | 27 | 114 | 922 | |||||||||||||||||||||
Impairment of U.S. common stock | — | (205 | ) | — | (205 | ) | — | — | ||||||||||||||||
Impairment of private equity securities | — | (284 | ) | (200 | ) | (284 | ) | (200 | ) | — | ||||||||||||||
Realized gains (losses) on securities, net | $ | 27 | $ | (375 | ) | $ | 857 | |||||||||||||||||
Realized (losses)/gains on investments, net | $ | (375 | ) | $ | 857 | $ | (2,511 | ) | ||||||||||||||||
8. | Fair Value Measurements |
Level 1 — | Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments. | |
Level 2 — | Assets and liabilities valued based on observable market data for similar instruments. |
F-45F-50
Level 3 — | Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which is internally-developed, and considers risk premiums that a market participant would require. |
Quoted Prices | ||||||||||||||||||||
in Active Markets | Significant Other | Significant | ||||||||||||||||||
December 31, | for Identical | Observable | Unobservable | |||||||||||||||||
2008 | Assets (Level 1) | Inputs (Level 2) | Inputs (Level 3) | |||||||||||||||||
Available-for-sale securities(1) | $ | 5,114 | $ | 5,114 | $ | — | $ | — | ||||||||||||
Redeemable common stock(2) | $ | 752,912 | $ | — | $ | — | $ | 752,912 |
(1) | Available-for-sale equity securities are valued using quoted prices in active market multiplied by the number of shares owned. | |
(2) | The fair value of the Company’s Class A redeemable common stock is established for purposes of the ISO 401 (K) Savings and Employee Stock Ownership Plan (“KSOP”) generally on the final day of the quarter and such price is utilized for all share transactions in the subsequent quarter. The current valuation in effect for the KSOP is also considered the fair value for Class A redeemable common stock and related transactions within the Insurance Services Office, Inc. 1996 Incentive Plan. See Note 15 for a description of the valuation process. |
Significant | ||||
Unobservable | ||||
Inputs (Level 3) | ||||
Balance, January 1, 2008 | $ | 1,217,942 | ||
Redemptions, exercise and issuance of stock, net | (408,495 | ) | ||
Decrease in fair value(1) | (56,535 | ) | ||
Balance, December 31, 2008 | $ | 752,912 | ||
(1) | See Note 15 for a description of the valuation process. |
F-51
Fixed Assets: |
Accumulated | Accumulated | |||||||||||||||||||||||||||||||
Depreciation and | Depreciation and | |||||||||||||||||||||||||||||||
Useful Life | Cost | Amortization | Net | Useful Life | Cost | Amortization | Net | |||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||||
Furniture and office equipment | 3-10 years | $ | 77,372 | $ | (56,252 | ) | $ | 21,120 | ||||||||||||||||||||||||
Leasehold improvements | Lease term | 23,573 | (6,271 | ) | 17,302 | |||||||||||||||||||||||||||
Purchased software | 3 years | 25,663 | (20,759 | ) | 4,904 | |||||||||||||||||||||||||||
Software development costs | 3 years | 58,047 | (38,048 | ) | 19,999 | |||||||||||||||||||||||||||
Leased equipment | 3-4 years | 21,093 | (13,948 | ) | 7,145 | |||||||||||||||||||||||||||
Total fixed assets | $ | 205,748 | $ | (135,278 | ) | $ | 70,470 | |||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||
Furniture and office equipment | 3-10 years | $ | 102,745 | $ | (67,687 | ) | $ | 35,058 | 3-10 years | $ | 102,745 | $ | (67,687 | ) | $ | 35,058 | ||||||||||||||||
Leasehold improvements | Lease term | 24,049 | (7,876 | ) | 16,173 | Lease term | 24,049 | (7,876 | ) | 16,173 | ||||||||||||||||||||||
Purchased software | 3 years | 30,918 | (25,431 | ) | 5,487 | 3 years | 30,918 | (25,431 | ) | 5,487 | ||||||||||||||||||||||
Software development costs | 3 years | 69,758 | (45,632 | ) | 24,126 | 3 years | 69,758 | (45,632 | ) | 24,126 | ||||||||||||||||||||||
Leased equipment | 3-4 years | 17,080 | (12,488 | ) | 4,592 | 3-4 years | 17,080 | (12,488 | ) | 4,592 | ||||||||||||||||||||||
Total fixed assets | $ | 244,550 | $ | (159,114 | ) | $ | 85,436 | $ | 244,550 | $ | (159,114 | ) | $ | 85,436 | ||||||||||||||||||
2008 | ||||||||||||||||||||||||||||||||
Furniture and office equipment | 3-10 years | $ | 97,900 | $ | (74,429 | ) | 23,471 | |||||||||||||||||||||||||
Leasehold improvements | Lease term | 27,624 | (9,920 | ) | 17,704 | |||||||||||||||||||||||||||
Purchased software | 3 years | 41,419 | (30,869 | ) | 10,550 | |||||||||||||||||||||||||||
Software development costs | 3 years | 78,046 | (55,304 | ) | 22,742 | |||||||||||||||||||||||||||
Leased equipment | 3-4 years | 17,556 | (9,436 | ) | 8,120 | |||||||||||||||||||||||||||
Total fixed assets | $ | 262,545 | $ | (179,958 | ) | $ | 82,587 | |||||||||||||||||||||||||
Goodwill and Intangible Assets: |
F-46F-52
Risk | Decision | Risk | Decision | |||||||||||||||||||||
Assessment | Analytics | Total | Assessment | Analytics | Total | |||||||||||||||||||
Goodwill at December 31, 2005 | $ | 23,303 | $ | 126,295 | $ | 149,598 | ||||||||||||||||||
Goodwill at December 31, 2006 | $ | 27,665 | $ | 197,015 | $ | 224,680 | ||||||||||||||||||
Accrual of acquisition related liabilities | 243 | 98,100 | 98,343 | |||||||||||||||||||||
Current year acquisitions | — | 69,328 | 69,328 | — | 14,157 | 14,157 | ||||||||||||||||||
Earnout related payments | 4,362 | 8,934 | 13,296 | |||||||||||||||||||||
Reclassifications to deferred income taxes | — | (7,542 | ) | (7,542 | ) | |||||||||||||||||||
Goodwill at December 31, 2006 | 27,665 | 197,015 | 224,680 | |||||||||||||||||||||
Current year acquisitions | — | 14,157 | 14,157 | |||||||||||||||||||||
Earnout related payments | 243 | 102,555 | 102,798 | |||||||||||||||||||||
Escrow distribution | — | 4,455 | 4,455 | |||||||||||||||||||||
Impairment charge | — | (1,744 | ) | (1,744 | ) | — | (1,744 | ) | (1,744 | ) | ||||||||||||||
Goodwill at December 31, 2007 | $ | 27,908 | $ | 311,983 | $ | 339,891 | 27,908 | 311,983 | 339,891 | |||||||||||||||
Accrual of acquisition related liabilities | — | 82,400 | 82,400 | |||||||||||||||||||||
Current year acquisitions | — | 12,845 | 12,845 | |||||||||||||||||||||
Purchase accounting reclassification | — | 7,848 | 7,848 | |||||||||||||||||||||
Escrow distribution | — | 4,388 | 4,388 | |||||||||||||||||||||
Goodwill at December 31, 2008 | $ | 27,908 | $ | 419,464 | $ | 447,372 | ||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||||||||||
Average | Accumulated | Average | Accumulated | |||||||||||||||||||||||||||||
Useful Life | Cost | Amortization | Net | Useful Life | Cost | Amortization | Net | |||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||
Technology-based | 6 years | $ | 157,946 | $ | (55,869 | ) | $ | 102,077 | 5 years | $ | 164,317 | $ | (80,419 | ) | $ | 83,898 | ||||||||||||||||
Marketing-related | 4 years | 16,990 | (10,678 | ) | 6,312 | 4 years | 25,846 | (13,667 | ) | 12,179 | ||||||||||||||||||||||
Contract-based | 6 years | 6,555 | (4,641 | ) | 1,914 | 6 years | 6,555 | (5,596 | ) | 959 | ||||||||||||||||||||||
Customer-related | 9 years | 37,775 | (8,360 | ) | 29,415 | 13 years | 57,906 | (13,782 | ) | 44,124 | ||||||||||||||||||||||
Total intangible assets | $ | 219,266 | $ | (79,548 | ) | $ | 139,718 | $ | 254,624 | $ | (113,464 | ) | $ | 141,160 | ||||||||||||||||||
Weighted | ||||||||||||||||
Average | Accumulated | |||||||||||||||
Useful Life | Cost | Amortization | Net | |||||||||||||
2007 | ||||||||||||||||
Technology-based | 5 years | $ | 164,317 | $ | (80,419 | ) | $ | 83,898 | ||||||||
Marketing-related | 4 years | 25,846 | (13,667 | ) | 12,179 | |||||||||||
Contract-based | 6 years | 6,555 | (5,596 | ) | 959 | |||||||||||
Customer-related | 13 years | 57,906 | (13,782 | ) | 44,124 | |||||||||||
Total intangible assets | $ | 254,624 | $ | (113,464 | ) | $ | 141,160 | |||||||||
F-47F-53
Weighted Average | Accumulated | |||||||||||||||
Useful Life | Cost | Amortization | Net | |||||||||||||
2008 | ||||||||||||||||
Technology-based | 5 years | $ | 164,127 | $ | (98,810 | ) | $ | 65,317 | ||||||||
Marketing-related | 4 years | 31,733 | (18,363 | ) | 13,370 | |||||||||||
Contract-based | 6 years | 6,555 | (5,940 | ) | 615 | |||||||||||
Customer-related | 12 years | 53,317 | (19,906 | ) | 33,411 | |||||||||||
Total intangible assets | $ | 255,732 | $ | (143,019 | ) | $ | 112,713 | |||||||||
Year | Amount | Amount | ||||||
2008 | $ | 30,025 | ||||||
2009 | $ | 27,920 | $ | 29,698 | ||||
2010 | $ | 22,721 | $ | 24,502 | ||||
2011 | $ | 16,455 | $ | 17,932 | ||||
2012 | $ | 14,319 | $ | 14,034 | ||||
2013 | $ | 8,461 | ||||||
Thereafter | $ | 29,720 | $ | 18,086 |
Acquisitions and Discontinued Operations: |
F-54
Xactware | All other | Total | ||||||||||
Current assets | $ | 7,061 | $ | 926 | $ | 7,987 | ||||||
Property and equipment | 2,320 | 107 | 2,427 | |||||||||
Other assets | 11 | — | 11 | |||||||||
Intangible assets | 121,603 | 7,234 | 128,837 | |||||||||
Goodwill(1) | 63,309 | 6,019 | 69,328 | |||||||||
Total assets acquired | 194,304 | 14,286 | 208,590 | |||||||||
Current liabilities | 6,348 | 93 | 6,441 | |||||||||
Total liabilities assumed | 6,348 | 93 | 6,441 | |||||||||
Net assets acquired | $ | 187,956 | $ | 14,193 | $ | 202,149 | ||||||
(1) | These amounts do not include earnout payments or the release of contingent escrows. |
2006 | ||||
Pro forma revenues | $ | 761,192 | ||
Pro forma net income | $ | 142,939 | ||
Pro forma basic income per share of Class A and Class B | $ | 34.60 | ||
Pro forma diluted income per share of Class A and Class B | $ | 33.22 |
F-55
Weighted | ||||||||||||||||
Average | ||||||||||||||||
Useful Life | Xactware | All Other | Total | |||||||||||||
Technology-based | 6 years | $ | 94,604 | $ | 5,221 | $ | 99,825 | |||||||||
Marketing-related | 3 years | 4,640 | 1,074 | 5,714 | ||||||||||||
Customer-related | 12 years | 22,359 | 939 | 23,298 | ||||||||||||
Total intangible assets | 7 years | $ | 121,603 | $ | 7,234 | $ | 128,837 | |||||||||
F-56
F-48
Weighted Average | Weighted Average | |||||||||||||||
Useful Life | Total | Useful Life | Total | |||||||||||||
Technology-based | 4 years | $ | 6,371 | 4 years | $ | 6,181 | ||||||||||
Marketing-related | 4 years | 8,856 | 4 years | 8,856 | ||||||||||||
Customer-related | 19 years | 20,131 | 23 years | 13,312 | ||||||||||||
Total intangible assets | $ | 35,358 | $ | 28,349 | ||||||||||||
F-49F-57
Xactware | All other | Total | ||||||||||
Current assets | $ | 7,061 | $ | 926 | $ | 7,987 | ||||||
Property and equipment | 2,320 | 107 | 2,427 | |||||||||
Other assets | 11 | — | 11 | |||||||||
Intangible assets | 121,603 | 7,234 | 128,837 | |||||||||
Goodwill | 63,309 | 6,019 | 69,328 | |||||||||
Total assets acquired | 194,304 | 14,286 | 208,590 | |||||||||
Current liabilities | 6,348 | 93 | 6,441 | |||||||||
Total liabilities assumed | 6,348 | 93 | 6,441 | |||||||||
Net assets acquired | $ | 187,956 | $ | 14,193 | $ | 202,149 | ||||||
2005 | 2006 | |||||||
(unaudited) | ||||||||
Pro forma revenues | $ | 686,851 | $ | 761,192 | ||||
Pro forma net income | $ | 122,901 | $ | 148,009 | ||||
Pro forma basic income per share of Class A and Class B | $ | 28.86 | $ | 35.83 | ||||
Pro forma diluted income per share of Class A and Class B | $ | 27.54 | $ | 34.35 |
F-50
Weighted Average | Weighted Average | |||||||||||||||||||||||
Useful Life | Xactware | All other | Total | Useful Life | Total | |||||||||||||||||||
Technology-based | 6 years | $ | 94,604 | $ | 5,221 | $ | 99,825 | |||||||||||||||||
Marketing-related | 3 years | 4,640 | 1,074 | 5,714 | 3 years | $ | 5,887 | |||||||||||||||||
Customer-related | 12 years | 22,359 | 939 | 23,298 | 5 years | 2,230 | ||||||||||||||||||
Total intangible assets | $ | 121,603 | $ | 7,234 | $ | 128,837 | $ | 8,117 | ||||||||||||||||
F-51
F-58
2005 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||
Revenues | $ | 4,249 | $ | 4,456 | $ | 2,352 | $ | 4,456 | $ | 2,352 | ||||||||||
Pre-tax loss | $ | (3,295 | ) | $ | (2,517 | ) | $ | (6,085 | ) | $ | (2,517 | ) | $ | (6,085 | ) | |||||
Tax benefit | 721 | 712 | 1,496 | 712 | 1,496 | |||||||||||||||
Loss from discontinued operations, net of tax | $ | (2,574 | ) | $ | (1,805 | ) | $ | (4,589 | ) | $ | (1,805 | ) | $ | (4,589 | ) | |||||
F-52
Income Taxes: |
2006 | 2007 | 2007 | 2008 | |||||||||||||
Employee wages, pensions and other benefits | $ | 12,633 | $ | 18,118 | $ | 18,118 | $ | 14,970 | ||||||||
Postretirement benefits | 11,923 | 11,231 | 11,231 | 10,163 | ||||||||||||
Fixed assets | (4,700 | ) | (3,281 | ) | (3,281 | ) | (6,645 | ) | ||||||||
Deferred revenue adjustment | 4,632 | 7,391 | 7,391 | 8,979 | ||||||||||||
Deferred rent adjustment | 3,289 | 3,598 | 3,598 | 4,508 | ||||||||||||
Net operating loss carryover | 5,768 | 6,383 | 6,383 | 1,772 | ||||||||||||
Pension and postretirement unfunded liability adjustment | 9,947 | 5,621 | 5,621 | 55,146 | ||||||||||||
Adjustment for unrealized (gains) losses | (189 | ) | 274 | |||||||||||||
Adjustment for unrealized losses | 274 | 17 | ||||||||||||||
State tax adjustments | — | 15,686 | 15,686 | 8,283 | ||||||||||||
Goodwill amortization | 13,159 | 8,586 | 8,586 | 3,774 | ||||||||||||
Other | 1,995 | 6,260 | 11,655 | 10,689 | ||||||||||||
Valuation allowance | (2,144 | ) | (1,534 | ) | (1,534 | ) | (2,098 | ) | ||||||||
Internally developed software | (5,395 | ) | (4,812 | ) | ||||||||||||
Net deferred tax assets | $ | 56,313 | $ | 78,333 | ||||||||||||
Net deferred tax asset | $ | 78,333 | $ | 104,746 | ||||||||||||
F-59
Years | Amount | |||
2009-2016 | $ | 56,803 | ||
2017-2021 | 577 | |||
2022-2028 | 30,850 | |||
$ | 88,230 | |||
F-53
2005 | 2006 | 2007 | 2006 | 2007 | 2008 | |||||||||||||||||||
Current: | ||||||||||||||||||||||||
Federal and foreign | $ | 82,723 | $ | 86,297 | $ | 96,277 | $ | 91,368 | $ | 96,277 | $ | 93,522 | ||||||||||||
State and local | 10,718 | 12,663 | 17,843 | 12,663 | 17,843 | 12,358 | ||||||||||||||||||
$ | 93,441 | $ | 98,960 | $ | 114,120 | $ | 104,031 | $ | 114,120 | $ | 105,880 | |||||||||||||
Deferred: | ||||||||||||||||||||||||
Federal and foreign | $ | (5,944 | ) | $ | (9,800 | ) | $ | (7,041 | ) | $ | (9,800 | ) | $ | (7,041 | ) | $ | 9,789 | |||||||
State and local | (1,775 | ) | (2,239 | ) | (3,895 | ) | (2,239 | ) | (3,895 | ) | 5,002 | |||||||||||||
$ | (7,719 | ) | $ | (12,039 | ) | $ | (10,936 | ) | $ | (12,039 | ) | $ | (10,936 | ) | $ | 14,791 | ||||||||
Provision for income taxes | $ | 85,722 | $ | 86,921 | $ | 103,184 | $ | 91,992 | $ | 103,184 | $ | 120,671 | ||||||||||||
F-60
2005 | 2006 | 2007 | 2006 | 2007 | 2008 | |||||||||||||||||||
Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||||||
State and local taxes, net of federal tax benefit | 2.7 | % | 2.9 | % | 3.2 | % | 2.9 | % | 3.2 | % | 5.0 | % | ||||||||||||
Non-deductible KSOP expenses | 2.1 | % | 2.7 | % | 2.9 | % | 2.7 | % | 2.9 | % | 2.7 | % | ||||||||||||
State tax adjustments | (0.1 | )% | (3.1 | )% | (0.3 | )% | (0.9 | )% | (0.3 | )% | 0.0 | % | ||||||||||||
Other | 0.6 | % | (0.2 | )% | (0.8 | )% | (0.2 | )% | (0.8 | )% | 0.6 | % | ||||||||||||
Effective tax rate for continuing operations | 40.3 | % | 37.3 | % | 40.0 | % | 39.5 | % | 40.0 | % | 43.3 | % | ||||||||||||
Unrecognized tax benefit at January 1, 2007 | $ | 27,052 | ||||||||||
2007 | 2008 | |||||||||||
Unrecognized tax benefit at January 1 | $ | 27,052 | $ | 32,030 | ||||||||
Gross increase in tax positions in prior period | — | — | 5,958 | |||||||||
Gross decrease in tax positions in prior period | — | — | (3,548 | ) | ||||||||
Gross increase in tax positions in current period | 7,662 | 7,662 | 4,454 | |||||||||
Settlements | — | — | (3,240 | ) | ||||||||
Lapse of statute of limitations | (2,684 | ) | (2,684 | ) | (3,995 | ) | ||||||
Unrecognized tax benefit, December 31, 2007 | $ | 32,030 | ||||||||||
Unrecognized tax benefit at December 31 | $ | 32,030 | $ | 31,659 | ||||||||
F-54
F-61
Composition of Certain Financial Statement Captions: |
2006 | 2007 | 2007 | 2008 | |||||||||||||
Other current assets: | ||||||||||||||||
Acquisition contingent escrows | $ | 11,465 | $ | 5,767 | ||||||||||||
Other current assets | ||||||||||||||||
Acquisition related escrows | $ | 5,767 | $ | 12,724 | ||||||||||||
Other current assets | 1,726 | 2,758 | 2,758 | 3,463 | ||||||||||||
Total other current assets | $ | 13,191 | $ | 8,525 | $ | 8,525 | $ | 16,187 | ||||||||
Accounts payable and accrued liabilities: | ||||||||||||||||
Accrued salaries, benefits and other related costs | $ | 43,175 | $ | 48,417 | $ | 48,417 | $ | 44,913 | ||||||||
Other current liabilities | 23,535 | 29,817 | 29,817 | 38,468 | ||||||||||||
Total accounts payable and accrued liabilities | $ | 66,710 | $ | 78,234 | $ | 78,234 | $ | 83,381 | ||||||||
Other liabilities: | ||||||||||||||||
Unrecognized tax benefits | $ | — | $ | 39,023 | $ | 39,023 | $ | 39,735 | ||||||||
Deferred rent | 10,044 | 11,028 | 11,028 | 11,883 | ||||||||||||
Other liabilities | 12,119 | 12,034 | 12,034 | 24,576 | ||||||||||||
Total other liabilities | $ | 22,163 | $ | 62,085 | $ | 62,085 | $ | 76,194 | ||||||||
F-55F-62
Debt: |
As of December 31, | Issuance | Maturity | ||||||||||||||||||||||||||||||
Issuance Date | Maturity Date | 2006 | 2007 | Date | Date | 2007 | 2008 | |||||||||||||||||||||||||
Short-term debt: | ||||||||||||||||||||||||||||||||
Prudential senior notes: | ||||||||||||||||||||||||||||||||
4.11% Series B senior notes | 6/10/2004 | 6/10/2007 | $ | 60,000 | $ | — | ||||||||||||||||||||||||||
4.12% Series C senior notes | 6/28/2004 | 6/28/2007 | 40,000 | — | ||||||||||||||||||||||||||||
Short-term and current portion of long-term debt: | ||||||||||||||||||||||||||||||||
Bank of America | 10/25/2006 | 4/25/2007 | 15,000 | — | 10/25/2007 | 4/25/2008 | $ | 15,000 | $ | — | ||||||||||||||||||||||
Bank of America | 10/25/2007 | 4/25/2008 | — | 15,000 | 12/15/2008 | 1/15/2009 | — | 5,000 | ||||||||||||||||||||||||
JPMorgan Chase | 12/31/2007 | 1/3/2008 | — | 15,000 | ||||||||||||||||||||||||||||
Bank of America | 12/17/2008 | 1/17/2009 | — | 30,000 | ||||||||||||||||||||||||||||
Bank of America | 12/22/2008 | 1/22/2009 | — | 15,000 | ||||||||||||||||||||||||||||
Bank of America | 12/24/2008 | 1/24/2009 | — | 5,000 | ||||||||||||||||||||||||||||
JPMorganChase | 12/31/2007 | 1/3/2008 | 15,000 | — | ||||||||||||||||||||||||||||
JPMorganChase | 12/1/2008 | 1/2/2009 | — | 10,000 | ||||||||||||||||||||||||||||
JPMorganChase | 12/12/2008 | 1/12/2009 | — | 4,000 | ||||||||||||||||||||||||||||
JPMorganChase | 12/18/2008 | 1/20/2009 | — | 20,000 | ||||||||||||||||||||||||||||
JPMorganChase | 12/24/2008 | 1/24/2009 | — | 20,000 | ||||||||||||||||||||||||||||
JPMorganChase | 12/29/2008 | 1/29/2009 | — | 5,000 | ||||||||||||||||||||||||||||
Prudential: 4.46% Series D senior notes | 6/14/2005 | 6/13/2009 | — | 100,000 | ||||||||||||||||||||||||||||
Capital lease obligations | Various | Various | 5,463 | 4,408 | Various | Various | 4,408 | 5,058 | ||||||||||||||||||||||||
Other | Various | Various | 388 | 763 | Various | Various | 763 | 340 | ||||||||||||||||||||||||
Short-term debt | $ | 120,851 | $ | 35,171 | ||||||||||||||||||||||||||||
Short-term debt and current portion of long-term debt | $ | 35,171 | $ | 219,398 | ||||||||||||||||||||||||||||
Long-term debt: | ||||||||||||||||||||||||||||||||
Prudential senior notes: | ||||||||||||||||||||||||||||||||
4.46% Series D senior notes | 6/14/2005 | 6/13/2009 | $ | 100,000 | $ | 100,000 | 6/14/2005 | 6/13/2009 | $ | 100,000 | $ | — | ||||||||||||||||||||
4.60% Series E senior notes | 6/14/2005 | 6/13/2011 | 50,000 | 50,000 | 6/14/2005 | 6/13/2011 | 50,000 | 50,000 | ||||||||||||||||||||||||
6.00% Series F senior notes | 8/8/2006 | 8/8/2011 | 25,000 | 25,000 | 8/8/2006 | 8/8/2011 | 25,000 | 25,000 | ||||||||||||||||||||||||
6.13% Series G senior notes | 8/8/2006 | 8/8/2013 | 75,000 | 75,000 | 8/8/2006 | 8/8/2013 | 75,000 | 75,000 | ||||||||||||||||||||||||
5.84% Series H senior notes | 10/26/2007 | 10/26/2013 | — | 17,500 | 10/26/2007 | 10/26/2013 | 17,500 | 17,500 | ||||||||||||||||||||||||
5.84% Series H senior notes | 10/26/2007 | 10/26/2015 | — | 17,500 | 10/26/2007 | 10/26/2015 | 17,500 | 17,500 | ||||||||||||||||||||||||
6.28% Series I senior notes | 4/29/2008 | 4/29/2013 | — | 15,000 | ||||||||||||||||||||||||||||
6.28% Series I senior notes | 4/29/2008 | 4/29/2015 | — | 85,000 | ||||||||||||||||||||||||||||
Principal senior notes: | ||||||||||||||||||||||||||||||||
6.03% Series A senior notes | 8/8/2006 | 8/8/2011 | 50,000 | 50,000 | 8/8/2006 | 8/8/2011 | 50,000 | 50,000 | ||||||||||||||||||||||||
6.16% Series B senior notes | 8/8/2006 | 8/8/2013 | 25,000 | 25,000 | 8/8/2006 | 8/8/2013 | 25,000 | 25,000 | ||||||||||||||||||||||||
New York Life senior notes: | ||||||||||||||||||||||||||||||||
5.87% Series A senior notes | 3/16/2007 | 10/26/2013 | — | 17,500 | 10/26/2007 | 10/26/2013 | 17,500 | 17,500 | ||||||||||||||||||||||||
5.87% Series A senior notes | 3/16/2007 | 10/26/2015 | — | 17,500 | 10/26/2007 | 10/26/2015 | 17,500 | 17,500 | ||||||||||||||||||||||||
6.35% Series B senior notes | 4/29/2008 | 4/29/2015 | — | 50,000 | ||||||||||||||||||||||||||||
Other obligations: | ||||||||||||||||||||||||||||||||
Capital lease obligations | Various | Various | 1,814 | 7,299 | Various | Various | 7,299 | 4,723 | ||||||||||||||||||||||||
Other | Various | Various | 1,033 | 860 | Various | Various | 860 | 633 | ||||||||||||||||||||||||
Long-term debt | $ | 327,847 | $ | 403,159 | $ | 403,159 | $ | 450,356 | ||||||||||||||||||||||||
F-63
F-56
F-64
F-57
Year | Amount | Amount | ||||||
2008 | $ | 35,171 | ||||||
2009 | 104,272 | $ | 219,398 | |||||
2010 | 3,548 | $ | 4,617 | |||||
2011 | 125,305 | $ | 125,693 | |||||
2012 | 34 | $ | 46 | |||||
2013 and thereafter | 170,000 | |||||||
2013 | $ | 150,000 | ||||||
2014 and thereafter | $ | 170,000 |
F-65
Maximum | ||||||||||||||||||||||||||||||||||||||||||||
Effective | Expiration | Available | Interest | Borrowings | Effective | Expiration | Maximum Available | Interest | Borrowings | |||||||||||||||||||||||||||||||||||
Description | Date | Date | Committed | Uncommitted | Rate | Outstanding | Date | Date | Committed | Uncommitted | Rate | Outstanding | ||||||||||||||||||||||||||||||||
2006: | ||||||||||||||||||||||||||||||||||||||||||||
JPMorgan Chase | 9/30/2006 | 9/30/2007 | $ | 25,000 | $ | 50,000 | LIBOR + .65% | $ | — | |||||||||||||||||||||||||||||||||||
2007: | ||||||||||||||||||||||||||||||||||||||||||||
JPMorganChase | 10/1/2007 | 9/30/2008 | $ | 25,000 | $ | 50,000 | LIBOR + .65% | $ | 15,000 | |||||||||||||||||||||||||||||||||||
Bank of America | 9/30/2006 | 9/30/2007 | 10,000 | 40,000 | LIBOR + .75% | 15,000 | 9/30/2007 | 9/30/2008 | 10,000 | 50,000 | LIBOR + .65% | 15,000 | ||||||||||||||||||||||||||||||||
Citibank | 10/1/2006 | 10/31/2007 | 20,000 | 30,000 | PRIME −1.0% | — | 10/31/2007 | 10/29/2008 | 20,000 | 30,000 | LIBOR + .65% | — | ||||||||||||||||||||||||||||||||
Morgan Stanley | 8/29/2006 | 8/28/2007 | — | 50,000 | Determined at the time of borrowing | — | 8/29/2007 | 8/28/2008 | — | 50,000 | Determined at the time of borrowing | — | ||||||||||||||||||||||||||||||||
Total | $ | 55,000 | $ | 170,000 | $ | 15,000 | $ | 55,000 | $ | 180,000 | $ | 30,000 | ||||||||||||||||||||||||||||||||
2007: | ||||||||||||||||||||||||||||||||||||||||||||
JPMorgan Chase | 10/1/2007 | 9/30/2008 | $ | 25,000 | $ | 50,000 | LIBOR + .65% | $ | 15,000 | |||||||||||||||||||||||||||||||||||
2008: | ||||||||||||||||||||||||||||||||||||||||||||
JPMorganChase | 10/31/2008 | 9/30/2009 | $ | 25,000 | $ | 50,000 | LIBOR + .80% | $ | 59,000 | |||||||||||||||||||||||||||||||||||
Bank of America | 9/30/2007 | 9/30/2008 | 10,000 | 50,000 | LIBOR + .65% | 15,000 | 9/30/2008 | 9/30/2009 | 110,000 | — | LIBOR + .95% | 55,000 | ||||||||||||||||||||||||||||||||
Citibank | 10/31/2007 | 10/29/2008 | 20,000 | 30,000 | LIBOR + .65% | — | ||||||||||||||||||||||||||||||||||||||
Morgan Stanley | 8/29/2007 | 8/28/2008 | — | 50,000 | Determined at the time of borrowing | — | 12/9/2008 | 12/8/2009 | 30,000 | — | Determined at the time of borrowing | — | ||||||||||||||||||||||||||||||||
Total | $ | 165,000 | $ | 50,000 | $ | 114,000 | ||||||||||||||||||||||||||||||||||||||
$ | 55,000 | $ | 180,000 | $ | 30,000 | |||||||||||||||||||||||||||||||||||||||
F-58
F-66
Redeemable Common Stock: |
F-67
F-59F-68
Notes | Total | Notes | Total | |||||||||||||||||||||||||||||||||||||||||
Class A Common Stock | Receivable | Redeemable | Class A Common Stock | Receivable | Redeemable | |||||||||||||||||||||||||||||||||||||||
Redemption | Unearned | from | Common | Redemption | Unearned | Additional | from | Common | ||||||||||||||||||||||||||||||||||||
Shares | Value | KSOP | Stockholders | Stock | Shares | Value | KSOP | Paid-in-Capital | Stockholders’ | Stock | ||||||||||||||||||||||||||||||||||
Balance, January 1, 2005 | 2,435,584 | $ | 764,973 | $ | (6,561 | ) | $ | (35,880 | ) | $ | 722,532 | |||||||||||||||||||||||||||||||||
Balance, January 1, 2006 | 1,420,341 | $ | 943,854 | $ | (5,723 | ) | $ | — | $ | (37,042 | ) | $ | 901,089 | |||||||||||||||||||||||||||||||
Redemption of Class A common stock | — | (88,305 | ) | — | 11,411 | (76,894 | ) | (253,000 | ) | (105,670 | ) | — | — | 9,277 | (96,393 | ) | ||||||||||||||||||||||||||||
KSOP shares earned | — | — | 838 | — | 838 | — | — | 810 | 17,969 | — | 18,779 | |||||||||||||||||||||||||||||||||
Stock options exercised | 233,608 | 10,484 | — | (12,573 | ) | (2,089 | ) | |||||||||||||||||||||||||||||||||||||
Stock based compensation | — | — | — | 6,148 | — | 6,148 | ||||||||||||||||||||||||||||||||||||||
Stock options exercised (including tax benefit of $31,964) | 179,967 | 62,435 | — | 31,964 | (24,438 | ) | 69,961 | |||||||||||||||||||||||||||||||||||||
Other stock issuances | 494 | 220 | — | — | 220 | 232 | 149 | — | — | — | 149 | |||||||||||||||||||||||||||||||||
Increase in redemption value of Class A common stock | — | 256,482 | — | — | 256,482 | — | 282,281 | — | (56,081 | ) | — | 226,200 | ||||||||||||||||||||||||||||||||
Balance, December 31, 2005 | 2,669,686 | $ | 943,854 | $ | (5,723 | ) | $ | (37,042 | ) | $ | 901,089 | |||||||||||||||||||||||||||||||||
Redemption of Class A common stock | — | (105,670 | ) | — | 9,277 | (96,393 | ) | |||||||||||||||||||||||||||||||||||||
KSOP shares earned | — | — | 810 | — | 810 | |||||||||||||||||||||||||||||||||||||||
Stock options exercised | 179,967 | 62,435 | — | (24,438 | ) | 37,997 | ||||||||||||||||||||||||||||||||||||||
Other stock issuances | 232 | 149 | — | — | 149 | |||||||||||||||||||||||||||||||||||||||
Increase in redemption value of | ||||||||||||||||||||||||||||||||||||||||||||
Class A common stock | — | 282,281 | — | — | 282,281 | |||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2006 | 2,849,885 | $ | 1,183,049 | $ | (4,913 | ) | $ | (52,203 | ) | $ | 1,125,933 | 1,347,540 | $ | 1,183,049 | $ | (4,913 | ) | $ | — | $ | (52,203 | ) | $ | 1,125,933 | ||||||||||||||||||||
Redemption of Class A common stock | — | (190,336 | ) | — | 24,708 | (165,628 | ) | (256,842 | ) | (190,336 | ) | — | — | 24,708 | (165,628 | ) | ||||||||||||||||||||||||||||
KSOP shares earned | — | — | 784 | — | 784 | — | — | 784 | 21,463 | — | 22,247 | |||||||||||||||||||||||||||||||||
Stock options exercised | 72,083 | 28,526 | — | (15,130 | ) | 13,396 | ||||||||||||||||||||||||||||||||||||||
Stock based compensation | — | �� | — | — | 8,244 | — | 8,244 | |||||||||||||||||||||||||||||||||||||
Stock options exercised (including tax benefit of $12,798) | 72,083 | 28,526 | — | 12,798 | (15,130 | ) | 26,194 | |||||||||||||||||||||||||||||||||||||
Other stock issuances | 285 | 238 | — | — | 238 | 285 | 238 | — | — | — | 238 | |||||||||||||||||||||||||||||||||
Increase in redemption value of Class A common stock | — | 196,465 | — | — | 196,465 | — | 196,465 | — | (42,505 | ) | — | 153,960 | ||||||||||||||||||||||||||||||||
Balance, December 31, 2007 | 2,922,253 | $ | 1,217,942 | $ | (4,129 | ) | $ | (42,625 | ) | $ | 1,171,188 | 1,163,066 | $ | 1,217,942 | $ | (4,129 | ) | $ | — | $ | (42,625 | ) | $ | 1,171,188 | ||||||||||||||||||||
Redemption of Class A common stock | (502,435 | ) | (434,044 | ) | — | — | 62,773 | (371,271 | ) | |||||||||||||||||||||||||||||||||||
KSOP shares earned | — | — | 756 | 21,518 | — | 22,274 | ||||||||||||||||||||||||||||||||||||||
Stock based compensation | — | — | — | 9,881 | — | 9,881 | ||||||||||||||||||||||||||||||||||||||
Stock options exercised (including tax benefit of $26,099) | 85,256 | 25,324 | — | 26,099 | (20,148 | ) | 31,275 | |||||||||||||||||||||||||||||||||||||
Other stock issuances | 252 | 225 | — | — | — | 225 | ||||||||||||||||||||||||||||||||||||||
Decrease in redemption value of Class A common stock | — | (56,535 | ) | — | (57,498 | ) | — | (114,033 | ) | |||||||||||||||||||||||||||||||||||
Balance, December 31, 2008 | 746,139 | $ | 752,912 | $ | (3,373 | ) | $ | — | $ | — | $ | 749,539 | ||||||||||||||||||||||||||||||||
Stockholders’ Deficit: |
F-69
F-60
Net Income | Shares | Amount | ||||||||||
(Numerator) | (Denominator) | Per-Share | ||||||||||
2005 | ||||||||||||
Basic EPS: | ||||||||||||
Net income available to common stockholders | $ | 124,373 | 4,258,989 | $ | 29.20 | |||||||
Effect of dilutive securities | 203,120 | |||||||||||
Diluted EPS: | ||||||||||||
Net income available to common stockholders plus assumed conversions | $ | 124,373 | 4,462,109 | $ | 27.87 | |||||||
2006 | ||||||||||||
Basic EPS: | ||||||||||||
Net income available to common stockholders | $ | 144,051 | 4,130,962 | $ | 34.87 | |||||||
Effect of dilutive securities | 178,014 | |||||||||||
Diluted EPS: | ||||||||||||
Net income available to common stockholders plus assumed conversions | $ | 144,051 | 4,308,976 | $ | 33.43 | |||||||
2007 | ||||||||||||
Basic EPS: | ||||||||||||
Net income available to common stockholders | $ | 150,374 | 4,016,928 | $ | 37.44 | |||||||
Effect of dilutive securities | 168,223 | |||||||||||
Diluted EPS: | ||||||||||||
Net income available to common stockholders plus assumed conversions | $ | 150,374 | 4,185,151 | $ | 35.93 | |||||||
2006 | 2007 | 2008 | ||||||||||
Numerator used in basic and diluted EPS: | ||||||||||||
Income from continuing operations | $ | 140,785 | $ | 154,963 | $ | 158,228 | ||||||
Loss from discontinued operations, net of tax benefit | (1,805 | ) | (4,589 | ) | — | |||||||
Net income | $ | 138,980 | $ | 150,374 | $ | 158,228 | ||||||
Denominator: | ||||||||||||
Weighted average number of common shares used in basic EPS | 4,130,962 | 4,016,928 | 3,657,714 | |||||||||
Effect of dilutive shares: | ||||||||||||
Potential Class A redeemable common stock issuable upon the exercise of stock options | 171,905 | 168,223 | 146,920 | |||||||||
Weighted average number of common shares and dilutive potential common shares used in diluted EPS | 4,302,867 | 4,185,151 | 3,804,634 | |||||||||
Basic EPS: | ||||||||||||
Income from continuing operations | $ | 34.08 | $ | 38.58 | $ | 43.26 | ||||||
Loss from discontinued operations, net of tax benefit | (0.44 | ) | (1.14 | ) | — | |||||||
Basic EPS | $ | 33.64 | $ | 37.44 | $ | 43.26 | ||||||
Diluted EPS: | ||||||||||||
Income from continuing operations | $ | 32.72 | $ | 37.03 | $ | 41.59 | ||||||
Loss from discontinued operations, net of tax benefit | (0.42 | ) | (1.10 | ) | — | |||||||
Diluted EPS | $ | 32.30 | $ | 35.93 | $ | 41.59 | ||||||
Pro forma basic income/(loss) per share of Class A and Class B (unaudited): | ||||||||||||
Income from continuing operations | $ | 0.68 | $ | 0.77 | $ | 0.87 | ||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | |||||||
Pro forma net income per share | $ | 0.67 | $ | 0.75 | $ | 0.87 | ||||||
Pro forma diluted income/(loss) per share of Class A and Class B (unaudited): | ||||||||||||
Income from continuing operations | $ | 0.65 | $ | 0.74 | $ | 0.83 | ||||||
Loss from discontinued operations | (0.01 | ) | (0.02 | ) | — | |||||||
Pro forma net income per share | $ | 0.64 | $ | 0.72 | $ | 0.83 | ||||||
Weighted average shares used in pro forma per share amounts (unaudited): | ||||||||||||
Basic | 206,548,100 | 200,846,400 | 182,885,700 | |||||||||
Diluted | 215,143,350 | 209,257,550 | 190,231,700 | |||||||||
F-70
F-61
2006 | 2007 | 2007 | 2008 | |||||||||||||
Unrealized gains (losses) on investments | $ | 318 | $ | (412 | ) | |||||||||||
Unrealized foreign currency gains | 357 | 154 | ||||||||||||||
Unrealized losses on investments | $ | (412 | ) | $ | (31 | ) | ||||||||||
Unrealized foreign currency gains/(losses) | 154 | (773 | ) | |||||||||||||
Pension and postretirement unfunded liability adjustment | (16,692 | ) | (8,441 | ) | (8,441 | ) | (81,630 | ) | ||||||||
Accumulated other comprehensive loss | $ | (16,017 | ) | $ | (8,699 | ) | $ | (8,699 | ) | $ | (82,434 | ) | ||||
Tax Benefit | Tax Benefit/ | |||||||||||||||||||||||
2005 | Before Tax | (Expense) | After Tax | |||||||||||||||||||||
2006 | Before Tax | (Expense) | After Tax | |||||||||||||||||||||
Unrealized holding gains on investments arising during the year | $ | 176 | $ | (70 | ) | $ | 106 | $ | 467 | $ | (176 | ) | $ | 291 | ||||||||||
Reclassification adjustment for amounts included in net income | (27 | ) | 9 | (18 | ) | 91 | (34 | ) | 57 | |||||||||||||||
Unrealized foreign currency losses | (549 | ) | — | (549 | ) | |||||||||||||||||||
Minimum pension liability adjustment | (4,126 | ) | 1,662 | (2,464 | ) | |||||||||||||||||||
Total other comprehensive loss | $ | (4,526 | ) | $ | 1,601 | $ | (2,925 | ) | ||||||||||||||||
2006 | ||||||||||||||||||||||||
Unrealized holding gains on investments arising during the year | $ | 467 | $ | (176 | ) | $ | 291 | |||||||||||||||||
Reclassification adjustment for amounts included in net income | 91 | (34 | ) | 57 | ||||||||||||||||||||
Unrealized foreign currency gain | 376 | — | 376 | |||||||||||||||||||||
Unrealized foreign currency gains | 376 | — | 376 | |||||||||||||||||||||
Minimum pension liability adjustment | 2,814 | (1,186 | ) | 1,628 | 2,814 | (1,186 | ) | 1,628 | ||||||||||||||||
Total other comprehensive gain | $ | 3,748 | $ | (1,396 | ) | $ | 2,352 | $ | 3,748 | $ | (1,396 | ) | $ | 2,352 | ||||||||||
2007 | ||||||||||||||||||||||||
Unrealized holding losses on investments arising during the year | $ | (2,250 | ) | $ | 885 | $ | (1,365 | ) | $ | (2,250 | ) | $ | 885 | $ | (1,365 | ) | ||||||||
Reclassification adjustment for amounts included in net income | 1,057 | (422 | ) | 635 | 1,057 | (422 | ) | 635 | ||||||||||||||||
Unrealized foreign currency losses | (203 | ) | — | (203 | ) | (203 | ) | — | (203 | ) | ||||||||||||||
Pension and postretirement unfunded liability adjustment | 12,577 | (4,326 | ) | 8,251 | ||||||||||||||||||||
Minimum pension liability adjustment | 12,577 | (4,326 | ) | 8,251 | ||||||||||||||||||||
Total other comprehensive gain | $ | 11,181 | $ | (3,863 | ) | $ | 7,318 | $ | 11,181 | $ | (3,863 | ) | $ | 7,318 | ||||||||||
2008 | ||||||||||||||||||||||||
Unrealized holding losses on investments arising during the year | $ | (1,687 | ) | $ | 666 | $ | (1,021 | ) | ||||||||||||||||
Reclassification adjustment for amounts included in net income | 2,325 | (923 | ) | 1,402 | ||||||||||||||||||||
Unrealized foreign currency losses | (927 | ) | — | (927 | ) | |||||||||||||||||||
Pension and postretirement unfunded liability adjustment | (122,714 | ) | 49,525 | (73,189 | ) | |||||||||||||||||||
Total other comprehensive loss | $ | (123,003 | ) | $ | 49,268 | $ | (73,735 | ) | ||||||||||||||||
F-71
Compensation Plans: |
F-62
F-72
2006 | 2007 | 2007 | 2008 | |||||||||||||
Shares released for ESOP allocation | 848,730 | 865,166 | 865,166 | 879,948 | ||||||||||||
Shares released for 401(k) matching | 125,670 | 135,382 | ||||||||||||||
Shares released for 401(k) match | 135,382 | 145,205 | ||||||||||||||
Shares released for the Profit Sharing Plan | — | 860 | 860 | 2,327 | ||||||||||||
Unreleased shares | 169,400 | 142,392 | 142,392 | 116,320 | ||||||||||||
Total KSOP shares | 1,143,800 | 1,143,800 | 1,143,800 | 1,143,800 | ||||||||||||
Fair value of unreleased shares | $ | 127,897 | $ | 122,742 | $ | 122,742 | $ | 90,497 | ||||||||
F-63
F-73
Weighted | Aggregate | Weighted | Aggregate | |||||||||||||||||||||
Number | Average | Intrinsic | Number | Average | Intrinsic | |||||||||||||||||||
of Options | Exercise Price | Value | of Options | Exercise Price | Value | |||||||||||||||||||
Outstanding at January 1, 2005 | 765,800 | $ | 135.40 | $ | 215,649 | |||||||||||||||||||
Granted | 129,303 | $ | 431.03 | |||||||||||||||||||||
Exercised | (233,608 | ) | $ | 110.96 | $ | 70,854 | ||||||||||||||||||
Cancelled or expired | (14,467 | ) | $ | 247.07 | ||||||||||||||||||||
Outstanding at December 31, 2005 | 647,028 | $ | 200.89 | $ | 235,589 | |||||||||||||||||||
Outstanding at January 1, 2006 | 647,028 | $ | 200.89 | $ | 235,589 | |||||||||||||||||||
Granted | 69,441 | $ | 586.53 | 69,441 | $ | 586.53 | ||||||||||||||||||
Exercised | (179,967 | ) | $ | 144.16 | $ | 81,516 | (179,967 | ) | $ | 144.16 | $ | 81,516 | ||||||||||||
Cancelled or expired | (12,734 | ) | $ | 360.11 | (12,734 | ) | $ | 360.11 | ||||||||||||||||
Outstanding at December 31, 2006 | 523,768 | $ | 267.64 | $ | 255,264 | 523,768 | $ | 267.64 | $ | 255,264 | ||||||||||||||
Granted | 55,979 | $ | 760.35 | 55,979 | $ | 760.35 | ||||||||||||||||||
Exercised | (72,083 | ) | $ | 257.46 | $ | 36,655 | (72,083 | ) | $ | 257.46 | $ | 36,655 | ||||||||||||
Cancelled or expired | (10,911 | ) | $ | 458.18 | (10,911 | ) | $ | 458.18 | ||||||||||||||||
Outstanding at December 31, 2007 | 496,753 | $ | 320.46 | $ | 269,012 | 496,753 | $ | 320.46 | $ | 269,012 | ||||||||||||||
Granted | 62,947 | $ | 864.84 | |||||||||||||||||||||
Exercised | (85,256 | ) | $ | 297.05 | $ | 48,399 | ||||||||||||||||||
Cancelled or expired | (11,299 | ) | $ | 704.11 | ||||||||||||||||||||
Outstanding at December 31, 2008 | 463,145 | $ | 389.39 | $ | 179,981 | |||||||||||||||||||
Options exercisable at December 31, 2008 | 328,994 | $ | 253.95 | $ | 172,408 | |||||||||||||||||||
Options exercisable at December 31, 2007 | 329,503 | $ | 208.35 | $ | 215,380 | 329,503 | $ | 208.35 | $ | 215,380 | ||||||||||||||
Options exercisable at December 31, 2006 | 287,617 | $ | 179.04 | $ | 165,656 | |||||||||||||||||||
F-64
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Number | Grant-Date | Number | Grant-Date | |||||||||||||
of Options | Fair Value | of Options | Fair Value | |||||||||||||
Nonvested balance at January 1, 2005 | 449,486 | $ | 42.71 | |||||||||||||
Granted | 129,303 | $ | 103.94 | |||||||||||||
Vested | (248,810 | ) | $ | 51.18 | ||||||||||||
Cancelled or expired | (14,467 | ) | $ | 53.39 | ||||||||||||
Nonvested balance at December 31, 2005 | 315,512 | $ | 60.63 | |||||||||||||
Nonvested balance at January 1, 2006 | 315,512 | $ | 60.63 | |||||||||||||
Granted | 69,441 | $ | 167.49 | 69,441 | $ | 166.25 | ||||||||||
Vested | (136,068 | ) | $ | 54.86 | (136,068 | ) | $ | 54.86 | ||||||||
Cancelled or expired | (12,734 | ) | $ | 89.34 | (12,734 | ) | $ | 89.34 | ||||||||
Nonvested balance at December 31, 2006 | 236,151 | $ | 93.83 | 236,151 | $ | 93.83 | ||||||||||
Granted | 55,979 | $ | 210.69 | 55,979 | $ | 210.69 | ||||||||||
Vested | (113,969 | ) | $ | 76.89 | (113,969 | ) | $ | 76.89 | ||||||||
Cancelled or expired | (10,911 | ) | $ | 117.45 | (10,911 | ) | $ | 117.45 | ||||||||
Nonvested balance at December 31, 2007 | 167,250 | $ | 142.94 | 167,250 | $ | 142.94 | ||||||||||
Granted | 62,947 | $ | 206.68 | |||||||||||||
Vested | (84,747 | ) | $ | 123.87 | ||||||||||||
Cancelled or expired | (11,299 | ) | $ | 184.97 | ||||||||||||
Nonvested balance at December 31, 2008 | 134,151 | $ | 220.60 | |||||||||||||
F-74
Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||||||||||||||||||
Options Outstanding | Options Exercisable | Weighted- | ||||||||||||||||||||||||||||||||||||||||||||||
Weighted- | Weighted- | Weighted- | Weighted- | Average | Weighted- | |||||||||||||||||||||||||||||||||||||||||||
Average | Stock | Weighted- | Average | Stock | Weighted- | Average | Stock | Average | Remaining | Stock | Average | |||||||||||||||||||||||||||||||||||||
Range of | Remaining | Options | Average | Remaining | Options | Average | Remaining | Options | Exercise | Contractual | Options | Exercise | ||||||||||||||||||||||||||||||||||||
Exercise Prices | Contractual Life | Outstanding | Exercise Price | Contractual Life | Exercisable | Exercise Price | Contractual Life | Outstanding | Price | Life | Exercisable | Price | ||||||||||||||||||||||||||||||||||||
$ 71 to $110 | 2.9 | 97,260 | $ | 104.45 | 2.9 | 97,260 | $ | 104.45 | ||||||||||||||||||||||||||||||||||||||||
$111 to $144 | 5.2 | 53,460 | $ | 142.01 | 5.2 | 53,460 | $ | 142.01 | ||||||||||||||||||||||||||||||||||||||||
$145 to $231 | 5.5 | 135,117 | $ | 186.53 | 5.3 | 109,967 | $ | 176.36 | ||||||||||||||||||||||||||||||||||||||||
$92 to $110 | 1.7 | 72,329 | $ | 107.24 | 1.7 | 72,329 | $ | 107.24 | ||||||||||||||||||||||||||||||||||||||||
$111 to $148 | 4.1 | 45,102 | $ | 141.89 | 4.1 | 45,102 | $ | 141.89 | ||||||||||||||||||||||||||||||||||||||||
$149 to $231 | 4.4 | 113,250 | $ | 179.99 | 4.4 | 113,250 | $ | 179.99 | ||||||||||||||||||||||||||||||||||||||||
$232 to $445 | 7.3 | 101,504 | $ | 418.50 | 7.3 | 53,369 | $ | 408.19 | 6.3 | 88,150 | $ | 415.70 | 6.3 | 66,260 | $ | 411.23 | ||||||||||||||||||||||||||||||||
$446 to $681 | 8.2 | 54,337 | $ | 586.88 | 8.3 | 13,776 | $ | 607.84 | 7.3 | 41,396 | $ | 593.97 | 7.3 | 20,411 | $ | 612.91 | ||||||||||||||||||||||||||||||||
$682 to $836 | 9.1 | 55,075 | $ | 760.11 | 9.4 | 1,671 | $ | 807.89 | ||||||||||||||||||||||||||||||||||||||||
$682 to $892 | 8.8 | 102,918 | $ | 821.75 | 8.4 | 11,642 | $ | 794.60 | ||||||||||||||||||||||||||||||||||||||||
496,753 | 329,503 | 463,145 | 328,994 | |||||||||||||||||||||||||||||||||||||||||||||
Number of | Fair Value | Black-Scholes | ||||||||||||||
Stock Options | of Common | Exercise | Value of | |||||||||||||
Grant Dates | Granted | Stock(1) | Price | Options | ||||||||||||
March 1, 2008 | 56,990 | $ | 862.00 | $ | 862.00 | $ | 204.72 | |||||||||
July 1, 2008 | 5,357 | $ | 892.00 | $ | 892.00 | $ | 223.56 | |||||||||
July 1, 2008 | 600 | $ | 892.00 | $ | 892.00 | $ | 241.85 |
(1) | The fair value of these shares is the current valuation in effect for the KSOP. This fair value is also utilized for all Class A share transactions for the Insurance Services Office, Inc. 1996 Incentive Plan. |
F-65
F-75
Pension and Postretirement Benefits: |
F-66
Percentage of Plan Assets | Target | Target | Percentage of Plan Assets | |||||||||||||||||||||
Asset Category | 2006 | 2007 | Allocation | Allocation | 2007 | 2008 | ||||||||||||||||||
Equity securities | 62 | % | 62 | % | 60 | % | 60 | % | 62 | % | 51 | % | ||||||||||||
Debt securities | 36 | % | 36 | % | 40 | % | 40 | % | 36 | % | 46 | % | ||||||||||||
Other | 2 | % | 2 | % | 0 | % | 0 | % | 2 | % | 3 | % | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % |
F-76
December 31, 2006 | ||||
Decrease in accrued and minimum pension liability | $ | 1,687 | ||
Increase in postretirement benefits obligations — current | (4,070 | ) | ||
Decrease in postretirement benefits obligations — noncurrent | 679 | |||
Increase in pension benefits obligation | (23,248 | ) | ||
Increase in accumulated other comprehensive loss, pre-tax | (24,952 | ) | ||
Increase in deferred income tax | 9,317 | |||
Increase in accumulated other comprehensive loss, net of tax | $ | (15,635 | ) | |
F-67
Pension Plan | Postretirement Plan | Pension Plan | Postretirement Plan | |||||||||||||||||||||||||||||
2006 | 2007 | 2006 | 2007 | 2007 | 2008 | 2007 | 2008 | |||||||||||||||||||||||||
Change in benefit obligation: | ||||||||||||||||||||||||||||||||
Benefit obligation at beginning of year | $ | 373,375 | $ | 373,674 | $ | 32,561 | $ | 30,595 | $ | 373,674 | $ | 363,840 | $ | 30,595 | $ | 28,340 | ||||||||||||||||
Service cost | 8,464 | 8,152 | 5 | — | 8,152 | 7,789 | — | — | ||||||||||||||||||||||||
Interest cost | 20,054 | 20,952 | 1,716 | 1,669 | 20,952 | 21,698 | 1,669 | 1,689 | ||||||||||||||||||||||||
Actuarial (gain) loss | (8,612 | ) | (15,934 | ) | (476 | ) | 441 | |||||||||||||||||||||||||
Actuarial (gain)/loss | (15,934 | ) | (4,869 | ) | 441 | 2,650 | ||||||||||||||||||||||||||
Plan participants’ contributions | — | — | 1,894 | 2,227 | — | — | 2,227 | 2,738 | ||||||||||||||||||||||||
Benefits paid | (19,607 | ) | (23,004 | ) | (5,497 | ) | (6,936 | ) | (23,004 | ) | (21,537 | ) | (6,936 | ) | (6,777 | ) | ||||||||||||||||
Federal subsidy on benefits paid | — | — | 392 | 344 | — | — | 344 | — | ||||||||||||||||||||||||
Benefit obligation at end of year | $ | 373,674 | $ | 363,840 | $ | 30,595 | $ | 28,340 | $ | 363,840 | $ | 366,921 | $ | 28,340 | $ | 28,640 | ||||||||||||||||
Accumulated benefit obligation at end of year | $ | 350,378 | $ | 341,829 | $ | 341,829 | $ | 356,622 | ||||||||||||||||||||||||
Weighted-average assumptions as of December 31, used to determine benefit obligation: | ||||||||||||||||||||||||||||||||
Discount rate | 5.75 | % | 6.25 | % | 5.75 | % | 5.75 | % | 6.25 | % | 6.00 | % | 5.75 | % | 6.00 | % | ||||||||||||||||
Rate of compensation increase | 3.75 | % | 4.25 | % | N/A | N/A | 4.25 | % | 4.00 | % | N/A | N/A | ||||||||||||||||||||
Change in plan assets: | ||||||||||||||||||||||||||||||||
Fair value of plan assets at beginning of year | $ | 338,338 | $ | 344,235 | $ | — | $ | — | $ | 344,235 | $ | 346,013 | $ | — | $ | — | ||||||||||||||||
Actual return on plan assets, net of expenses | 25,280 | 24,604 | — | — | 24,604 | (97,595 | ) | — | — | |||||||||||||||||||||||
Employer contributions | 224 | 178 | 3,211 | 4,365 | 178 | 5,571 | 4,365 | 4,039 | ||||||||||||||||||||||||
Plan participants’ contributions | — | — | 1,894 | 2,227 | — | — | 2,227 | 2,738 | ||||||||||||||||||||||||
Benefits paid | (19,607 | ) | (23,004 | ) | (5,497 | ) | (6,936 | ) | (23,004 | ) | (21,537 | ) | (6,936 | ) | (6,777 | ) | ||||||||||||||||
Subsidies received/receivable | — | — | 392 | 344 | — | — | 344 | — | ||||||||||||||||||||||||
Fair value of plan assets at end of year | $ | 344,235 | $ | 346,013 | $ | — | $ | — | $ | 346,013 | $ | 232,452 | $ | — | $ | — | ||||||||||||||||
Unfunded status at end of year | $ | (29,439 | ) | $ | (17,827 | ) | $ | (30,595 | ) | $ | (28,340 | ) | $ | 17,827 | $ | 134,469 | $ | 28,340 | $ | 28,640 | ||||||||||||
F-77
Pension Plan | Postretirement Plan | Pension Plan | Postretirement Plan | |||||||||||||||||||||||||||||
2006 | 2007 | 2006 | 2007 | 2007 | 2008 | 2007 | 2008 | |||||||||||||||||||||||||
Transition obligation | $ | — | $ | — | $ | 997 | $ | 831 | $ | — | $ | — | $ | 831 | $ | 665 | ||||||||||||||||
Prior service benefit | (4,918 | ) | $ | (4,117 | ) | — | $ | — | (4,117 | ) | (3,316 | ) | — | |||||||||||||||||||
Actuarial losses | 28,166 | 14,515 | 2,394 | 2,833 | 14,515 | 134,183 | 2,833 | 5,244 | ||||||||||||||||||||||||
Accumulated other comprehensive loss, pretax | $ | 23,248 | $ | 10,398 | $ | 3,391 | $ | 3,664 | $ | 10,398 | $ | 130,867 | $ | 3,664 | $ | 5,909 | ||||||||||||||||
F-68
Pension Plan | Postretirement Plan | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2005 | 2006 | 2007 | |||||||||||||||||||
Service cost | $ | 8,413 | $ | 8,464 | $ | 8,152 | $ | 18 | $ | 5 | $ | — | ||||||||||||
Interest cost | 19,755 | 20,054 | 20,952 | 1,866 | 1,716 | 1,669 | ||||||||||||||||||
Amortization of transition obligation | — | — | — | 166 | 166 | 166 | ||||||||||||||||||
Recognized net actuarial loss | — | — | — | 21 | 4 | 2 | ||||||||||||||||||
Expected return on plan assets | (27,219 | ) | (26,430 | ) | (27,458 | ) | — | — | — | |||||||||||||||
Amortization of prior service cost | (801 | ) | (801 | ) | (801 | ) | — | — | — | |||||||||||||||
Amortization of net actuarial loss | 607 | 901 | 572 | — | — | — | ||||||||||||||||||
Net periodic expense | $ | 755 | $ | 2,188 | $ | 1,417 | $ | 2,071 | $ | 1,891 | $ | 1,837 | ||||||||||||
Pension Plan | Postretirement Plan | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2005 | 2006 | 2007 | |||||||||||||||||||
Transition obligation | N/A | N/A | $ | — | N/A | N/A | $ | (166 | ) | |||||||||||||||
Amortization of actuarial (gains) losses | N/A | N/A | (572 | ) | N/A | N/A | — | |||||||||||||||||
Amortization of prior service benefit | N/A | N/A | 801 | N/A | N/A | — | ||||||||||||||||||
Actuarial (gains) losses | N/A | N/A | (13,079 | ) | N/A | N/A | 439 | |||||||||||||||||
Total recognized in other comprehensive income | N/A | N/A | (12,850 | ) | N/A | N/A | 273 | |||||||||||||||||
Total recognized in net periodic expense and other comprehensive income | $ | 755 | $ | 2,188 | $ | (11,433 | ) | $ | 2,071 | $ | 1,891 | $ | 2,110 | |||||||||||
Pension Plan | Postretirement Plan | |||||||||||||||||||||||
2006 | 2007 | 2008 | 2006 | 2007 | 2008 | |||||||||||||||||||
Service cost | $ | 8,464 | $ | 8,152 | $ | 7,789 | $ | 5 | $ | — | $ | — | ||||||||||||
Interest cost | 20,054 | 20,952 | 21,698 | 1,716 | 1,669 | 1,689 | ||||||||||||||||||
Amortization of transition obligation | — | — | — | 166 | 166 | 166 | ||||||||||||||||||
Recognized net actuarial loss | — | — | — | 4 | 2 | 241 | ||||||||||||||||||
Expected return on plan assets | (26,430 | ) | (27,458 | ) | (27,441 | ) | — | — | — | |||||||||||||||
Amortization of prior service cost | (801 | ) | (801 | ) | (801 | ) | — | — | — | |||||||||||||||
Amortization of net actuarial loss | 901 | 572 | 499 | — | — | — | ||||||||||||||||||
Net periodic benefit cost | $ | 2,188 | $ | 1,417 | $ | 1,744 | $ | 1,891 | $ | 1,837 | $ | 2,096 | ||||||||||||
Transition obligation | N/A | $ | — | $ | — | N/A | $ | (166 | ) | $ | (166 | ) | ||||||||||||
Amortization of actuarial gains | N/A | (572 | ) | (499 | ) | N/A | — | — | ||||||||||||||||
Amortization of prior service benefit | N/A | 801 | 801 | N/A | — | — | ||||||||||||||||||
Actuarial (gains)/losses | N/A | (13,079 | ) | 120,167 | N/A | 439 | 2,411 | |||||||||||||||||
Total recognized in other comprehensive (gains)/losses | N/A | (12,850 | ) | 120,469 | N/A | 273 | 2,245 | |||||||||||||||||
Total recognized in net periodic cost and other comprehensive losses /(gains) | $ | 2,188 | $ | (11,433 | ) | $ | 122,213 | $ | 1,891 | $ | 2,110 | $ | 4,341 | |||||||||||
Pension | Postretirement | Pension | Postretirement | |||||||||||||||||||||
Plan | Plan | Total | Plan | Plan | Total | |||||||||||||||||||
Transition obligation | $ | — | $ | 166 | $ | 166 | $ | — | $ | 166 | $ | 166 | ||||||||||||
Prior service benefit | (801 | ) | — | (801 | ) | (801 | ) | — | (801 | ) | ||||||||||||||
Actuarial losses | 470 | — | 470 | 10,506 | 180 | 10,686 | ||||||||||||||||||
Total | $ | (331 | ) | $ | 166 | $ | (165 | ) | $ | 9,705 | $ | 346 | $ | 10,051 | ||||||||||
F-69F-78
Pension Plan | Postretirement Plan | Pension Plan | Postretirement Plan | |||||||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2005 | 2006 | 2007 | 2006 | 2007 | 2008 | 2006 | 2007 | 2008 | |||||||||||||||||||||||||||||||||||||
Weighted-average assumptions as of January 1, used to determine net benefit cost: | ||||||||||||||||||||||||||||||||||||||||||||||||
Discount rate | 5.75 | % | 5.50 | % | 5.75 | % | 5.75 | % | 5.50 | % | 5.75 | % | 5.50 | % | 5.75 | % | 6.25 | % | 5.50 | % | 5.75 | % | 5.75 | % | ||||||||||||||||||||||||
Expected return on plan assets | 8.50 | % | 8.25 | % | 8.25 | % | N/A | N/A | N/A | 8.25 | % | 8.25 | % | 8.25 | % | N/A | N/A | N/A | ||||||||||||||||||||||||||||||
Rate of compensation increase | 3.75 | % | 3.75 | % | 3.75 | % | N/A | N/A | N/A | 3.75 | % | 3.75 | % | 4.25 | % | N/A | N/A | N/A | ||||||||||||||||||||||||||||||
Amounts recognized in the consolidated balance sheets consist of: | ||||||||||||||||||||||||||||||||||||||||||||||||
Short-term accrued benefit liability | $ | (254 | ) | $ | (190 | ) | $ | (4,070 | ) | $ | (4,446 | ) | ||||||||||||||||||||||||||||||||||||
Accrued benefit liability | (29,185 | ) | (17,637 | ) | (26,525 | ) | (23,894 | ) | ||||||||||||||||||||||||||||||||||||||||
Pension and postretirement benefits, current | $ | 254 | $ | 190 | $ | 555 | $ | 4,070 | $ | 4,446 | $ | 4,842 | ||||||||||||||||||||||||||||||||||||
Pension and postretirement benefits, noncurrent | 29,185 | 17,637 | 133,914 | 26,525 | 23,894 | 23,798 | ||||||||||||||||||||||||||||||||||||||||||
Total accrued benefit liability | $ | (29,439 | ) | $ | (17,827 | ) | $ | (30,595 | ) | $ | (28,340 | ) | ||||||||||||||||||||||||||||||||||||
Total pension and postretirement benefits | $ | 29,439 | $ | 17,827 | $ | 134,469 | $ | 30,595 | $ | 28,340 | $ | 28,640 | ||||||||||||||||||||||||||||||||||||
Pension | Postretirement | Pension | Postretirement | |||||||||||||
Plan | Plan | Plan | Plan | |||||||||||||
2008 | $ | 22,139 | $ | 4,574 | ||||||||||||
2009 | $ | 23,051 | $ | 4,368 | $ | 23,634 | $ | 4,987 | ||||||||
2010 | $ | 24,184 | $ | 4,062 | $ | 24,352 | $ | 4,709 | ||||||||
2011 | $ | 25,522 | $ | 3,722 | $ | 25,410 | $ | 4,382 | ||||||||
2012 | $ | 26,998 | $ | 3,291 | $ | 26,458 | $ | 3,943 | ||||||||
2013-2017 | $ | 164,039 | $ | 11,156 | ||||||||||||
2013 | $ | 28,114 | $ | 3,487 | ||||||||||||
2014-2018 | $ | 159,723 | $ | 11,186 |
1% Decrease | 1% Increase | 1% Decrease | 1% Increase | |||||||||||||
Effect on total of service and interest cost components of net periodic postretirement healthcare benefit cost | $ | (7 | ) | $ | 4 | |||||||||||
Effect of total service and interest cost components of net periodic postretirement healthcare benefit cost | $ | (63 | ) | $ | 59 | |||||||||||
Effect on the healthcare component of the accumulated postretirement benefit obligation | $ | (136 | ) | $ | 76 | $ | (86 | ) | $ | 24 | ||||||
F-79
Segment Reporting |
F-70
F-71F-80
2005 | 2006 | |||||||||||||||||||||||
Risk | Decision | Risk | Decision | |||||||||||||||||||||
Assessment | Analytics | Total | Assessment | Analytics | Total | |||||||||||||||||||
Revenues | $ | 448,875 | $ | 196,785 | $ | 645,660 | $ | 472,634 | $ | 257,499 | $ | 730,133 | ||||||||||||
Expenses: | ||||||||||||||||||||||||
Cost of revenues (exclusive of items shown separately below) | 191,516 | 103,395 | 294,911 | 203,878 | 127,926 | 331,804 | ||||||||||||||||||
Selling, general, and administrative | 61,408 | 27,315 | 88,723 | 65,884 | 34,240 | 100,124 | ||||||||||||||||||
Segment EBITDA | 195,951 | 66,075 | 262,026 | 202,872 | 95,333 | 298,205 | ||||||||||||||||||
Depreciation and amortization of fixed assets | 14,373 | 7,651 | 22,024 | 17,931 | 10,076 | 28,007 | ||||||||||||||||||
Amortization of intangible assets | 3,239 | 16,561 | 19,800 | 3,001 | 23,853 | 26,854 | ||||||||||||||||||
Operating income | 178,339 | 41,863 | 220,202 | 181,940 | 61,404 | 243,344 | ||||||||||||||||||
Unallocated expenses: | ||||||||||||||||||||||||
Investment income | 2,919 | 6,585 | ||||||||||||||||||||||
Realized gains on securities, net | 27 | |||||||||||||||||||||||
Realized losses on securities, net | (375 | ) | ||||||||||||||||||||||
Interest expense | (10,465 | ) | (16,668 | ) | ||||||||||||||||||||
Other expense | (14 | ) | (109 | ) | ||||||||||||||||||||
Consolidated income from continuing operations before income taxes | $ | 212,669 | $ | 232,777 | ||||||||||||||||||||
Capital expenditures | $ | 15,667 | $ | 8,352 | $ | 24,019 | $ | 11,753 | $ | 13,989 | $ | 25,742 | ||||||||||||
2007 | ||||||||||||
Risk | Decision | |||||||||||
Assessment | Analytics | Total | ||||||||||
Revenues | $ | 485,160 | $ | 317,035 | $ | 802,195 | ||||||
Expenses: | ||||||||||||
Cost of revenues (exclusive of items shown separately below) | 204,182 | 153,009 | 357,191 | |||||||||
Selling, general, and administrative | 68,198 | 39,378 | 107,576 | |||||||||
Segment EBITDA | 212,780 | 124,648 | 337,428 | |||||||||
Depreciation and amortization of fixed assets | 19,397 | 12,348 | 31,745 | |||||||||
Amortization of intangible assets | 1,047 | 32,869 | 33,916 | |||||||||
Operating income | 192,336 | 79,431 | 271,767 | |||||||||
Unallocated expenses: | ||||||||||||
Investment income | 8,442 | |||||||||||
Realized gains on securities, net | 857 | |||||||||||
Interest expense | (22,928 | ) | ||||||||||
Other expense | 9 | |||||||||||
Consolidated income from continuing operations before income taxes | $ | 258,147 | ||||||||||
Capital expenditures | $ | 33,059 | $ | 14,124 | $ | 47,183 | ||||||
F-72F-81
2006 | ||||||||||||
Risk | Decision | |||||||||||
Assessment | Analytics | Total | ||||||||||
Revenues | $ | 472,634 | $ | 257,499 | $ | 730,133 | ||||||
Expenses: | ||||||||||||
Cost of revenues (exclusive of items shown separately below) | 203,878 | 127,926 | 331,804 | |||||||||
Selling, general, and administrative | 65,884 | 34,240 | 100,124 | |||||||||
Segment EBITDA | 202,872 | 95,333 | 298,205 | |||||||||
Depreciation and amortization of fixed assets | 17,931 | 10,076 | 28,007 | |||||||||
Amortization of intangible assets | 3,001 | 23,853 | 26,854 | |||||||||
Operating income | 181,940 | 61,404 | 243,344 | |||||||||
Unallocated expenses: | ||||||||||||
Investment income | 6,585 | |||||||||||
Realized losses on securities, net | (375 | ) | ||||||||||
Interest expense | (16,668 | ) | ||||||||||
Other expense | (109 | ) | ||||||||||
Consolidated income from continuing operations before income taxes | $ | 232,777 | ||||||||||
Capital expenditures | $ | 11,753 | $ | 13,989 | $ | 25,742 | ||||||
2007 | ||||||||||||
Risk | Decision | |||||||||||
Assessment | Analytics | Total | ||||||||||
Revenues | $ | 485,160 | $ | 317,035 | $ | 802,195 | ||||||
Expenses: | ||||||||||||
Cost of revenues (exclusive of items shown separately below) | 204,182 | 153,009 | 357,191 | |||||||||
Selling, general, and administrative | 68,198 | 39,378 | 107,576 | |||||||||
Segment EBITDA | 212,780 | 124,648 | 337,428 | |||||||||
Depreciation and amortization of fixed assets | 19,397 | 12,348 | 31,745 | |||||||||
Amortization of intangible assets | 1,047 | 32,869 | 33,916 | |||||||||
Operating income | 192,336 | 79,431 | 271,767 | |||||||||
Unallocated expenses: | ||||||||||||
Investment income | 8,442 | |||||||||||
Realized gains on securities, net | 857 | |||||||||||
Interest expense | (22,928 | ) | ||||||||||
Other income | 9 | |||||||||||
Consolidated income from continuing operations before income taxes | $ | 258,147 | ||||||||||
Capital expenditures | $ | 20,258 | $ | 12,683 | $ | 32,941 | ||||||
F-73
2008 | ||||||||||||
Risk | Decision | |||||||||||
Assessment | Analytics | Total | ||||||||||
Revenues | $ | 504,391 | $ | 389,159 | $ | 893,550 | ||||||
Expenses: | ||||||||||||
Cost of revenues (exclusive of items shown separately below) | 199,872 | 187,025 | 386,897 | |||||||||
Selling, general, and administrative | 81,813 | 49,426 | 131,239 | |||||||||
Segment EBITDA | 222,706 | 152,708 | 375,414 | |||||||||
Depreciation and amortization of fixed assets | 19,447 | 15,870 | 35,317 | |||||||||
Amortization of intangible assets | 806 | 28,749 | 29,555 | |||||||||
Operating income | 202,453 | 108,089 | 310,542 | |||||||||
Unallocated expenses: | ||||||||||||
Investment income | 2,233 | |||||||||||
Realized losses on securities, net | (2,511 | ) | ||||||||||
Interest expense | (31,316 | ) | ||||||||||
Other income | (49 | ) | ||||||||||
Consolidated income from continuing operations before income taxes | $ | 278,899 | ||||||||||
Capital expenditures | $ | 12,598 | $ | 20,664 | $ | 33,262 | ||||||
For the Years Ended December 31, | For the Years Ended December 31, | |||||||||||||||||||||||
2005 | 2006 | 2007 | 2006 | 2007 | 2008 | |||||||||||||||||||
Risk Assessment | ||||||||||||||||||||||||
Subscription services | $ | 343,899 | $ | 361,382 | $ | 389,344 | ||||||||||||||||||
Transaction-based services | 104,976 | 111,252 | 95,816 | |||||||||||||||||||||
Industry standard insurance programs | $ | 303,957 | $ | 311,087 | $ | 329,858 | ||||||||||||||||||
Property-specific rating and underwriting information | 123,627 | 126,291 | 125,835 | |||||||||||||||||||||
Statistical agency and data services | 25,793 | 27,282 | 27,451 | |||||||||||||||||||||
Actuarial services | 19,257 | 20,500 | 21,247 | |||||||||||||||||||||
Total Risk Assessment | 448,875 | 472,634 | 485,160 | 472,634 | 485,160 | 504,391 | ||||||||||||||||||
Decision Analytics | ||||||||||||||||||||||||
Fraud identification and detection solutions | 143,258 | 168,189 | 172,726 | 168,189 | 172,726 | 213,994 | ||||||||||||||||||
Loss prediction solutions | 53,527 | 67,129 | 81,110 | 67,129 | 81,110 | 95,128 | ||||||||||||||||||
Loss quantification solutions | — | 22,181 | 63,199 | 22,181 | 63,199 | 80,037 | ||||||||||||||||||
Total Decision Analytics | 196,785 | 257,499 | 317,035 | 257,499 | 317,035 | 389,159 | ||||||||||||||||||
Total consolidated revenues | $ | 645,660 | $ | 730,133 | $ | 802,195 | $ | 730,133 | $ | 802,195 | $ | 893,550 | ||||||||||||
Related Parties: |
F-82
F-74
Commitments and Contingencies: |
Operating | Capital | Operating | Capital | |||||||||||||||||
Years Ending | Leases | Leases | Leases | Leases | ||||||||||||||||
2008 | $ | 19,285 | $ | 4,818 | ||||||||||||||||
2009 | 18,900 | 4,136 | $ | 20,554 | $ | 5,315 | ||||||||||||||
2010 | 18,215 | 3,283 | 20,127 | 4,418 | ||||||||||||||||
2011 | 18,250 | 164 | 19,587 | 382 | ||||||||||||||||
2012 | 17,312 | — | 18,470 | 47 | ||||||||||||||||
2013-2017 | 75,445 | — | ||||||||||||||||||
2018-2022 | 42,002 | — | ||||||||||||||||||
2013 | 17,704 | — | ||||||||||||||||||
2014-2018 | 71,987 | — | ||||||||||||||||||
2019-2023 | 31,233 | — | ||||||||||||||||||
Net minimum lease payments | $ | 209,409 | $ | 12,401 | $ | 199,662 | $ | 10,162 | ||||||||||||
Less amount representing interest | (694 | ) | 381 | |||||||||||||||||
Present value of net minimum lease capital payments | $ | 11,707 | $ | 9,781 | ||||||||||||||||
F-83
F-75
F-84
Subsequent Events |
23. | Correction of Errors |
F-76F-85
For the Year Ended December 31, 2005 | ||||||||||||||||
Adjustment for | ||||||||||||||||
As Previously | Discontinued | Correction | As | |||||||||||||
Caption of Consolidated Statement of Operations | Reported | Operations | of Errors | Corrected | ||||||||||||
Revenues | $ | 651,340 | $ | (4,249 | ) | $ | (1,431 | ) | $ | 645,660 | ||||||
Operating income | 218,275 | 3,358 | (1,431 | ) | 220,202 | |||||||||||
Income from continuing operations before income taxes | 210,805 | 3,295 | (1,431 | ) | 212,669 | |||||||||||
Provision for income taxes | (85,534 | ) | (721 | ) | 533 | (85,722 | ) | |||||||||
Income from continuing operations | 125,271 | 2,574 | (898 | ) | 126,947 | |||||||||||
Net income | 125,271 | — | (898 | ) | 124,373 | |||||||||||
Basic income per share of Class A and Class B from continuing operations | 29.41 | 0.61 | (0.21 | ) | 29.81 | |||||||||||
Basic net income per share of Class A and Class B | 29.41 | — | (0.21 | ) | 29.20 | |||||||||||
Diluted income per share of Class A and Class B from continuing operations | 28.08 | 0.58 | (0.21 | ) | 28.45 | |||||||||||
Diluted net income per share of Class A and Class B | 28.08 | — | (0.21 | ) | 27.87 |
For the year ended December 31, 2006 | ||||||||||||
As Previously | Correction of | |||||||||||
Caption of Consolidated Statement of Operations | Reported | Error | As Corrected | |||||||||
(In thousands, except for share and per share data) | ||||||||||||
Provision for income taxes | $ | (86,921 | ) | $ | (5,071 | ) | $ | (91,992 | ) | |||
Income from continuing operations | 145,856 | (5,071 | ) | 140,785 | ||||||||
Net income | $ | 144,051 | $ | (5,071 | ) | $ | 138,980 | |||||
Basic income per share of Class A and Class B: | ||||||||||||
Income from continuing operations per share | $ | 35.31 | $ | (1.23 | ) | $ | 34.08 | |||||
Net income per share | 34.87 | (1.23 | ) | 33.64 | ||||||||
Diluted income per share of Class A and Class B: | ||||||||||||
Income from continuing operations per share | $ | 33.85 | $ | (1.13 | ) | $ | 32.72 | |||||
Net income per share | 33.43 | (1.13 | ) | 32.30 | ||||||||
Weighted average diluted shares outstanding | 4,308,976 | (6,109 | ) | 4,302,867 |
F-77
For the Year Ended December 31, 2006 | ||||||||||||
As Previously | Correction | |||||||||||
Caption of Consolidated Statement of Operations | Reported | of Errors | As Corrected | |||||||||
Revenues | $ | 731,636 | $ | (1,503 | ) | $ | 730,133 | |||||
Operating income | 244,847 | (1,503 | ) | 243,344 | ||||||||
Income from continuing operations before income taxes | 234,280 | (1,503 | ) | 232,777 | ||||||||
Provision for income taxes | (87,498 | ) | 577 | (86,921 | ) | |||||||
Income from continuing operations | 146,782 | (926 | ) | 145,856 | ||||||||
Net income | 144,977 | (926 | ) | 144,051 | ||||||||
Basic income per share of Class A and Class B from continuing operations | 35.54 | (0.23 | ) | 35.31 | ||||||||
Basic net income per share of Class A and Class B | 35.10 | (0.23 | ) | 34.87 | ||||||||
Diluted income per share of Class A and Class B from continuing operations | 34.07 | (0.22 | ) | 33.85 | ||||||||
Diluted net income per share of Class A and Class B | 33.65 | (0.22 | ) | 33.43 |
For the year ended December 31, 2006 | ||||||||||||||||
As Previously | Correction of | |||||||||||||||
Caption of Consolidated Statement of Cash Flows | Reported | Error | Reclassification (1) | As Corrected | ||||||||||||
Net income | $ | 144,051 | $ | (5,071 | ) | $ | — | $ | 138,980 | |||||||
Federal and state taxes receivable | 19,262 | 5,071 | (24,333 | ) | — | |||||||||||
Federal and foreign income taxes | — | — | 15,634 | 15,634 | ||||||||||||
State and local income taxes | — | — | 8,699 | 8,699 |
For the Year Ended December 31, 2007 | ||||||||||||||||
As Previously | Other | Correction | As | |||||||||||||
Caption of Consolidated Statement of Operations | Reported | Adjustments(1) | of Errors | Corrected | ||||||||||||
Revenues | $ | 803,700 | $ | — | $ | (1,505 | ) | $ | 802,195 | |||||||
Operating income | 273,272 | — | (1,505 | ) | 271,767 | |||||||||||
Income from continuing operations before income taxes | 259,652 | — | (1,505 | ) | 258,147 | |||||||||||
Provision for income taxes | (102,546 | ) | (1,221 | ) | 583 | (103,184 | ) | |||||||||
Income from continuing operations | 157,106 | (1,221 | ) | (922 | ) | 154,963 | ||||||||||
Net income | 152,517 | (1,221 | ) | (922 | ) | 150,374 | ||||||||||
Basic income per share of Class A and Class B from continuing operations | 39.11 | (0.30 | ) | (0.23 | ) | 38.58 | ||||||||||
Basic net income per share of Class A and Class B | 37.97 | (0.30 | ) | (0.23 | ) | 37.44 | ||||||||||
Diluted income per share of Class A and Class B from continuing operations | 37.53 | (0.28 | ) | (0.22 | ) | 37.03 | ||||||||||
Diluted net income per share of Class A and Class B | 36.43 | (0.28 | ) | (0.22 | ) | 35.93 |
As of December 31, 2006 | ||||||||||||||||
As Previously | Other | Correction | ||||||||||||||
Caption of Consolidated Balance Sheet | Reported | Adjustments(1) | of Errors | As Corrected | ||||||||||||
Current deferred income taxes | $ | 14,387 | $ | — | $ | 4,632 | $ | 19,019 | ||||||||
Total current assets | 244,361 | — | 4,632 | 248,993 | ||||||||||||
Deferred income taxes | 37,315 | — | (21 | ) | 37,294 | |||||||||||
Total assets | 740,120 | — | 4,611 | 744,731 | ||||||||||||
Fees received in advance | 112,509 | — | 11,627 | 124,136 | ||||||||||||
Total current liabilities | 317,554 | 254 | 11,627 | 329,435 | ||||||||||||
Total liabilities | 723,528 | — | 11,627 | 735,155 | ||||||||||||
Accumulated other comprehensive loss | (15,996 | ) | — | (21 | ) | (16,017 | ) | |||||||||
Retained earnings (accumulated deficit) | 729,971 | (1,180,533 | ) | (6,995 | ) | (457,557 | ) | |||||||||
Total stockholders’ equity (deficit) | 16,592 | (1,125,933 | ) | (7,016 | ) | (1,116,357 | ) | |||||||||
Total liabilities and stockholders’ deficit | 740,120 | — | 4,611 | 744,731 |
F-78
As of December 31, 2007 | As of December 31, 2007 | |||||||||||||||||||||||||||
As Previously | Other | Correction | As Previously | Correction of | ||||||||||||||||||||||||
Caption of Consolidated Balance Sheet | Reported | Adjustments(1) | of Errors | As Corrected | Reported | Error | As Corrected | |||||||||||||||||||||
Current deferred income taxes | $ | 17,373 | $ | 66 | $ | 5,215 | $ | 22,654 | ||||||||||||||||||||
Federal and state taxes receivable | $ | 3,003 | $ | (3,003 | ) | $ | — | |||||||||||||||||||||
Federal and foreign income taxes receivable | — | 4,561 | 4,561 | |||||||||||||||||||||||||
Total current assets | 172,741 | 3,069 | 5,215 | 181,025 | 181,025 | 1,558 | 182,583 | |||||||||||||||||||||
Deferred income taxes | 37,859 | 17,756 | 64 | 55,679 | ||||||||||||||||||||||||
Total assets | 802,379 | 20,825 | 5,279 | 828,483 | 828,483 | 1,558 | 830,041 | |||||||||||||||||||||
Fees received in advance | 114,776 | — | 13,131 | 127,907 | ||||||||||||||||||||||||
State and local income taxes payable | — | 9,178 | 9,178 | |||||||||||||||||||||||||
Total current liabilities | 339,566 | (6,449 | ) | 13,131 | 346,248 | 346,248 | 9,178 | 355,426 | ||||||||||||||||||||
Total liabilities | 807,507 | 32,385 | 13,131 | 853,023 | 853,023 | 9,178 | 862,201 | |||||||||||||||||||||
Accumulated other comprehensive loss | (8,763 | ) | — | 64 | (8,699 | ) | ||||||||||||||||||||||
Retained earnings (accumulated deficit) | 882,488 | (1,382,708 | ) | (7,916 | ) | (508,136 | ) | |||||||||||||||||||||
Accumulated deficit | (508,136 | ) | (7,620 | ) | (515,756 | ) | ||||||||||||||||||||||
Total stockholders’ deficit | (5,128 | ) | (1,182,748 | ) | (7,852 | ) | (1,195,728 | ) | (1,195,728 | ) | (7,620 | ) | (1,203,348 | ) | ||||||||||||||
Total liabilities and stockholders’ deficit | 802,379 | 20,825 | 5,279 | 828,483 | 828,483 | 1,558 | 830,041 |
(1) |
F-79
F-80
December 31 | ||||||||
2005 | 2004 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,636,914 | $ | 7,560,755 | ||||
Marketable securities | — | 58,800 | ||||||
Accounts receivable, net of allowance of $170,000 and $85,000 in 2005 and 2004, respectively | 3,450,648 | 2,600,970 | ||||||
Unbilled receivables | 117,267 | 995,062 | ||||||
Current portion of notes receivable from related parties | — | 99,513 | ||||||
Prepaid expenses and other current assets | 433,839 | 320,369 | ||||||
Total current assets | 16,638,668 | 11,635,469 | ||||||
Property and equipment: | �� | |||||||
Furniture and fixtures | 156,078 | 174,867 | ||||||
Computer equipment and software | 13,574,229 | 14,126,285 | ||||||
Leasehold improvements | 316,463 | 269,461 | ||||||
Other | 228,531 | 527,499 | ||||||
14,275,301 | 15,098,112 | |||||||
Accumulated depreciation | (9,298,899 | ) | (8,415,292 | ) | ||||
Net property and equipment | 4,976,402 | 6,682,820 | ||||||
Long-term portion of notes receivable from related parties | 145,320 | 107,652 | ||||||
Other non-current assets | 368,616 | 302,892 | ||||||
Total assets | $ | 22,129,006 | $ | 18,728,833 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,097,437 | $ | 832,608 | ||||
Accrued compensation | 1,884,386 | 1,628,702 | ||||||
Other accrued expenses | 101,825 | 35,088 | ||||||
Deferred revenue | 3,822,190 | 2,394,736 | ||||||
Current portion of long-term debt | — | 2,003,746 | ||||||
Total current liabilities | 6,905,838 | 6,894,880 | ||||||
Long-term debt | — | 1,700,243 | ||||||
Total liabilities | 6,905,838 | 8,595,123 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Common stock — no par value, 100,000,000 shares authorized; 20,836,870 shares issued and outstanding in 2005 and 2004 | 304,347 | 304,347 | ||||||
Retained earnings | 14,918,821 | 9,829,363 | ||||||
Total stockholders’ equity | 15,223,168 | 10,133,710 | ||||||
Total liabilities and stockholders’ equity | $ | 22,129,006 | $ | 18,728,833 | ||||
F-81
Years Ended December 31 | ||||||||
2005 | 2004 | |||||||
Net revenues | $ | 41,190,993 | $ | 32,700,070 | ||||
Cost of revenues | 4,964,774 | 4,307,031 | ||||||
Research and development expenses | 12,133,116 | 10,617,525 | ||||||
Sales and marketing expenses | 3,387,532 | 2,566,494 | ||||||
General and administrative expenses | 7,350,424 | 6,808,460 | ||||||
Total costs and expenses | 27,835,846 | 24,299,510 | ||||||
Income from operations | 13,355,147 | 8,400,560 | ||||||
Interest expense | (135,013 | ) | (252,524 | ) | ||||
Interest and other income | 213,228 | 98,477 | ||||||
Net income | $ | 13,433,362 | $ | 8,246,513 | ||||
F-82
Common Stock | Total | |||||||||||||||
Number | Retained | Stockholders’ | ||||||||||||||
of Shares | Amount | Earnings | Equity | |||||||||||||
Balance at January 1, 2004 | 20,836,870 | $ | 304,347 | $ | 7,938,264 | $ | 8,242,611 | |||||||||
Distributions paid to stockholders | (6,355,414 | ) | (6,355,414 | ) | ||||||||||||
Net income | 8,246,513 | 8,246,513 | ||||||||||||||
Balance at December 31, 2004 | 20,836,870 | 304,347 | 9,829,363 | 10,133,710 | ||||||||||||
Distributions paid to stockholders | — | — | (8,343,904 | ) | (8,343,904 | ) | ||||||||||
Net income | — | — | 13,433,362 | 13,433,362 | ||||||||||||
Balance at December 31, 2005 | 20,836,870 | $ | 304,347 | $ | 14,918,821 | $ | 15,223,168 | |||||||||
F-83
Years Ended December 31 | ||||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 13,433,362 | $ | 8,246,513 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 2,528,710 | 2,602,690 | ||||||
Gain (loss) on disposal of assets | 37,755 | (55 | ) | |||||
(Gain) loss on marketable securities | (1,817 | ) | (33,572 | ) | ||||
Purchase of marketable securities classified as trading | — | (37,741 | ) | |||||
Proceeds from sale of marketable securities classified as trading | 60,617 | 58,013 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (849,678 | ) | (281,675 | ) | ||||
Unbilled Receivables | 877,795 | (995,062 | ) | |||||
Prepaid expenses and other current assets | (113,470 | ) | (19,028 | ) | ||||
Other non-current assets | (65,724 | ) | (74,559 | ) | ||||
Accounts payable | 264,829 | (423,275 | ) | |||||
Other accrued expenses | 66,737 | 15,558 | ||||||
Accrued compensation | 255,684 | 242,661 | ||||||
Deferred revenue | 1,427,454 | 197,181 | ||||||
Net cash provided by operating activities | 17,922,254 | 9,497,649 | ||||||
Cash flows from investing activities: | ||||||||
Change in notes receivable from related parties | 61,845 | 52,838 | ||||||
Purchase of property and equipment | (2,262,854 | ) | (2,588,874 | ) | ||||
Proceeds from sale of assets | 158,600 | 1,087 | ||||||
Net cash used in investing activities | (2,042,409 | ) | (2,534,949 | ) | ||||
Cash flow from financing activities: | ||||||||
Proceeds from long-term debt | — | 3,334,739 | ||||||
Payment on long-term debt | (3,703,989 | ) | (2,655,553 | ) | ||||
Distributions paid to stockholders | (7,099,697 | ) | (6,355,414 | ) | ||||
Net cash used in financing activities | (10,803,686 | ) | (5,676,228 | ) | ||||
Net increase in cash and cash equivalents | 5,076,159 | 1,286,472 | ||||||
Cash and cash equivalents at beginning of year | 7,560,755 | 6,274,283 | ||||||
Cash and cash equivalents at end of year | $ | 12,636,914 | $ | 7,560,755 | ||||
Noncash and supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 135,013 | $ | 244,053 | ||||
Distribution of assets to stockholders | $ | 1,244,207 | — |
F-84
F-85
F-86
F-87
December 31 | ||||||||
2005 | 2004 | |||||||
Net income, as reported | $ | 13,433,362 | $ | 8,246,513 | ||||
Less stock compensation expense determined under the fair value method | (16,066 | ) | (17,327 | ) | ||||
Pro forma net income | $ | 13,417,296 | $ | 8,229,186 | ||||
F-88
December 31 | ||||||||
2005 | 2004 | |||||||
Note receivable from a limited liability corporation owned by the Company’s majority stockholder, unsecured, due in monthly installments of $526, including interest at 10.00%, due July 2006 | $ | — | $ | 9,209 | ||||
Note receivable from a limited liability corporation owned by the Company’s majority stockholder, unsecured, due in monthly installments of $1,373, including interest at 10.00%, due July 2006 | — | 24,040 | ||||||
Note receivable from a stockholder, unsecured, due in annual installments of $17,751, plus accrued interest at 2.88%, due in April 2005 | — | 17,710 | ||||||
Note receivable from a stockholder, unsecured, due in annual installments of $27,465, plus accrued interest at 2.88%, due in April 2005 | — | 27,399 | ||||||
Note receivable from a related party, unsecured, due in full plus accrued interest at 4% in August 2005 | — | 10,000 | ||||||
Note receivable from a related party, unsecured, due in full plus accrued interest at 4.5% in September 2005 | — | 12,000 | ||||||
Note receivable from a limited liability corporation owned by the Company’s majority stockholder, unsecured, due in monthly installments of $1,461, including interest at 5.44%, due May 2012 | — | 106,807 | ||||||
Note receivable from a related party, unsecured, due in full plus accrued interest at 8.25% in December 2008 | 20,320 | — | ||||||
Note receivable from a related party, unsecured, due in full plus accrued interest at 3.83% in December 2014 | 125,000 | — | ||||||
145,320 | 207,165 | |||||||
Current portion | — | (99,513 | ) | |||||
$ | 145,320 | $ | 107,652 | |||||
F-89
December 31 | ||||||||
2005 | 2004 | |||||||
Note payable to bank, collateralized by equipment, guaranteed by majority stockholder, payable in monthly installments of $44,935 including interest at the bank’s prime rate plus 0.75%, due June 2006 | $ | — | $ | 893,258 | ||||
Note payable to bank, collateralized by equipment, guaranteed by majority stockholder, payable in quarterly principal installments of $28,571, with interest payable monthly at the bank’s prime rate plus 1.00%, due July 2006 | — | 198,925 | ||||||
Note payable to bank, collateralized by equipment, guaranteed by majority stockholder, payable in monthly installments of $45,872, including interest at the banks prime rate plus 1.5%, due May 2005 | — | 223,968 | ||||||
Note payable to bank, collateralized by equipment, guaranteed by majority stockholder, payable in monthly installments including interest at the banks prime rate plus 0.5%, due March 2007 | — | 1,155,475 | ||||||
Note payable to bank, collateralized by equipment, guaranteed by majority stockholder, payable in monthly installments of $44,815 including interest at 4.75%, due March 2007 | — | 1,142,523 | ||||||
Note payable to financial institution, collateralized by a software license, payable in quarterly installments of $30,842, including interest at 5.92%, due August 2005 | — | 89,840 | ||||||
— | 3,703,989 | |||||||
Current maturities | — | (2,003,746 | ) | |||||
$ | — | $ | 1,700,243 | |||||
F-90
2006 | $ | 189,549 | ||
2007 | 106,356 | |||
2008 | 40,166 | |||
2009 | 12,335 | |||
2010 and thereafter | — | |||
Total minimum lease payments | $ | 348,406 | ||
Shares | Outstanding Stock Options | Weighted- | ||||||||||||||
Available | Number of | Price per | Average | |||||||||||||
for Grant | Shares | Share | Exercise Price | |||||||||||||
Balance at December 31, 2003 | 4,725,283 | 574,717 | $ | 0.93 | $ | 0.93 | ||||||||||
Granted | — | — | — | — | ||||||||||||
Cancelled | 12,238 | (12,238 | ) | $ | 0.93 | $ | 0.93 | |||||||||
Balance at December 31, 2004 | 4,737,521 | 562,479 | $ | 0.93 | $ | 0.93 | ||||||||||
Granted | — | — | — | — | ||||||||||||
Cancelled | 19,114 | (19,114 | ) | $ | 0.93 | $ | 0.93 | |||||||||
Balance at December 31, 2005 | 4,756,635 | 543,365 | $ | 0.93 | $ | 0.93 | ||||||||||
F-91
F-92
Amount | Amount | |||||||||||||||
to be Paid | to be Paid | |||||||||||||||
Registration fee | $ | 29,475 | $ | 29,475 | ||||||||||||
FINRA filing fee | $ | 75,500 | $ | 75,500 | ||||||||||||
Listing fees | * | * | ||||||||||||||
Transfer agent’s fees | * | * | ||||||||||||||
Printing and engraving expenses | * | * | ||||||||||||||
Legal fees and expenses | * | * | ||||||||||||||
Accounting fees and expenses | * | * | ||||||||||||||
Blue Sky fees and expenses | * | |||||||||||||||
Miscellaneous | * | * | ||||||||||||||
Total | $ | * | $ | * | ||||||||||||
* | To be completed by amendment. |
Item 14. | Indemnification of Directors and Officers. |
II-1
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement* | ||
3 | .1 | Amended and Restated Certificate of Incorporation* | ||
3 | .2 | Amended and Restated By-Laws* | ||
4 | .1 | Form of Common Stock Certificate* | ||
5 | .1 | Opinion of Davis Polk & Wardwell* | ||
10 | .1 | 401(k) Savings Plan and Employee Stock Ownership Plan | ||
10 | .2 | Verisk Analytics, Inc. 2008 Equity Incentive Plan* | ||
21 | .1 | Subsidiaries of the Registrant* | ||
23 | .1 | Consent of Deloitte & Touche LLP | ||
23 | .2 | Consent of Deloitte & Touche LLP | ||
23 | .3 | Consent of Ernst & Young LLP | ||
23 | .4 | Consent of Davis Polk & Wardwell (included in Exhibit 5.1)* | ||
24 | .1 | Power of Attorney (included on signature page) |
Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement** | ||
3 | .1 | Amended and Restated Certificate of Incorporation* | ||
3 | .2 | Amended and Restated By-Laws* | ||
4 | .1 | Form of Common Stock Certificate* | ||
4 | .2 | Prudential Uncommitted Master Shelf Agreement, dated as of June 13, 2003, among Insurance Services Office, Inc., The Prudential Insurance Company of America, U.S. Private Placement Fund, Baystate Investments, LLC, United of Omaha Life Insurance Company and Prudential Investment Management, Inc.** | ||
4 | .3 | Amendment No. 1 to the Prudential Uncommitted Master Shelf Agreement, dated February 1, 2005, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .4 | Amendment No. 2 to the Prudential Uncommitted Master Shelf Agreement, dated June 1, 2005, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .5 | Amendment No. 3 to the Prudential Uncommitted Master Shelf Agreement, dated January 23, 2006, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .6 | Waiver and Amendment No. 4 to the Prudential Uncommitted Master Shelf Agreement, dated February 28, 2007, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .7 | New York Life Uncommitted Master Shelf Agreement, dated as of March 16, 2007, among Insurance Services Office, Inc., New York Life Insurance Company and the other purchasers party thereto** | ||
5 | .1 | Opinion of Davis Polk & Wardwell* | ||
10 | .1 | 401(k) Savings Plan and Employee Stock Ownership Plan** | ||
10 | .2 | Verisk Analytics, Inc. 2009 Equity Incentive Plan* | ||
10 | .3 | Form of Letter Agreement** | ||
10 | .4 | Form of Master License Agreement and Participation Supplement** | ||
10 | .5 | Schedule of Master License Agreements Substantially Identical in All Material Respects to the Form of Master License Agreement and Participation Supplement filed as Exhibit 10.4** | ||
10 | .6 | Credit Agreement, dated as of July 2, 2009, between Insurance Services Office, Inc. and Bank of America, N.A., as Administrative Agent, and the lenders party thereto. |
II-2
Exhibit | ||||
Number | Description | |||
21 | .1 | Subsidiaries of the Registrant* | ||
23 | .1 | Consent of Deloitte & Touche LLP | ||
23 | .2 | Consent of Deloitte & Touche LLP | ||
23 | .3 | Consent of Davis Polk & Wardwell (included in Exhibit 5.1)* | ||
24 | .1 | Power of Attorney** |
* | To be filed by amendment. | |
** | Previously filed |
Schedule | ||||
Number | Description | |||
Schedule II | Valuation and Qualifying Accounts and Reserves | |||
Years Ended December 31, |
II-2II-3
Item 17. | Undertakings |
II-3II-4
By: | /s/ Frank J. Coyne |
Title: | Chief Executive Officer, President and Chairman of the Board of Directors |
Signature | Title | Date | ||||
/s/ Frank J. Coyne Frank J. Coyne | Chief Executive Officer, President and Chairman of the Board of Directors (principal executive officer) | August | ||||
/s/ Mark V. Anquillare Mark V. Anquillare | Chief Financial Officer (principal financial officer and principal accounting officer) | August | ||||
/s/ J. Hyatt Brown | Director | August | ||||
/s/ Glen A. Dell | Director | August | ||||
/s/ | Director | August | ||||
/s/ | Director | August | ||||
/s/ | Director | August | ||||
/s/ | Director | August |
II-4II-5
Signature | Title | Date | ||||
/s/ | Director | August | ||||
/s/ | Director | August | ||||
/s/ | Director | August | ||||
/s/ | Director | August | ||||
*By: | /s/ | |||||
Attorney-in-Fact | ||||||
August |
II-5II-6
Balance at | Charged to | Balance at | Charged to | |||||||||||||||||||||||||||||
Beginning | Costs and | Deductions — | Balance at | Beginning | Costs and | Deductions — | Balance at | |||||||||||||||||||||||||
Description | of Year | Expenses(1) | Write-offs(2) | End of Year | of Year | Expenses(1) | Write-offs(2) | End of Year | ||||||||||||||||||||||||
Year ended December 31, 2005: | ||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 3,750 | $ | 1,554 | $ | (1,681 | ) | $ | 3,623 | |||||||||||||||||||||||
Valuation allowance for income taxes | $ | — | $ | 2,144 | $ | — | $ | 2,144 | ||||||||||||||||||||||||
Year ended December 31, 2006: | ||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 3,623 | $ | 3,069 | $ | (1,419 | ) | $ | 5,273 | $ | 3,623 | $ | 2,148 | $ | (498 | ) | $ | 5,273 | ||||||||||||||
Valuation allowance for income taxes | $ | 2,144 | $ | — | $ | — | $ | 2,144 | $ | 2,144 | $ | — | $ | — | $ | 2,144 | ||||||||||||||||
Year ended December 31, 2007: | ||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 5,273 | $ | 6,807 | $ | (3,833 | ) | $ | 8,247 | $ | 5,273 | $ | 3,286 | $ | (312 | ) | $ | 8,247 | ||||||||||||||
Valuation allowance for income taxes | $ | 2,144 | $ | — | $ | (610 | ) | $ | 1,534 | $ | 2,144 | $ | — | $ | (610 | ) | $ | 1,534 | ||||||||||||||
Year ended December 31, 2008: | ||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | $ | 8,247 | $ | 1,536 | $ | (3,386 | ) | $ | 6,397 | |||||||||||||||||||||||
Valuation allowance for income taxes | $ | 1,534 | $ | 564 | $ | — | $ | 2,098 | ||||||||||||||||||||||||
(1) | Primarily additional reserves for bad debts. | |
(2) | Primarily accounts receivable balances written off, net of recoveries, and the expiration of loss carryforwards. |
S-1
Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement* | ||
3 | .1 | Amended and Restated Certificate of Incorporation* | ||
3 | .2 | Amended and Restated By-Laws* | ||
4 | .1 | Form of Common Stock Certificate* | ||
5 | .1 | Opinion of Davis Polk & Wardwell* | ||
10 | .1 | 401(k) Savings Plan and Employee Stock Ownership Plan | ||
10 | .2 | Verisk Analytics, Inc. 2008 Equity Incentive Plan* | ||
21 | .1 | Subsidiaries of the Registrant* | ||
23 | .1 | Consent of Deloitte & Touche LLP | ||
23 | .2 | Consent of Deloitte & Touche LLP | ||
23 | .3 | Consent of Ernst & Young LLP | ||
23 | .4 | Consent of Davis Polk & Wardwell (included in Exhibit 5.1)* | ||
24 | .1 | Power of Attorney (included on signature page) |
Exhibit | ||||
Number | Description | |||
1 | .1 | Form of Underwriting Agreement** | ||
3 | .1 | Amended and Restated Certificate of Incorporation* | ||
3 | .2 | Amended and Restated By-Laws* | ||
4 | .1 | Form of Common Stock Certificate* | ||
4 | .2 | Prudential Uncommitted Master Shelf Agreement, dated as of June 13, 2003, among Insurance Services Office, Inc., The Prudential Insurance Company of America, U.S. Private Placement Fund, Baystate Investments, LLC, United of Omaha Life Insurance Company and Prudential Investment Management, Inc.** | ||
4 | .3 | Amendment No. 1 to the Prudential Uncommitted Master Shelf Agreement, dated February 1, 2005, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .4 | Amendment No. 2 to the Prudential Uncommitted Master Shelf Agreement, dated June 1, 2005, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .5 | Amendment No. 3 to the Prudential Uncommitted Master Shelf Agreement, dated January 23, 2006, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .6 | Waiver and Amendment No. 4 to the Prudential Uncommitted Master Shelf Agreement, dated February 28, 2007, among Insurance Services Office, Inc., The Prudential Insurance Company of America, Prudential Investment Management, Inc. and the other purchasers party thereto** | ||
4 | .7 | New York Life Uncommitted Master Shelf Agreement, dated as of March 16, 2007, among Insurance Services Office, Inc., New York Life Insurance Company and the other purchasers party thereto** | ||
5 | .1 | Opinion of Davis Polk & Wardwell* | ||
10 | .1 | 401(k) Savings Plan and Employee Stock Ownership Plan** | ||
10 | .2 | Verisk Analytics, Inc. 2009 Equity Incentive Plan* | ||
10 | .3 | Form of Letter Agreement** | ||
10 | .4 | Form of Master License Agreement and Participation Supplement** | ||
10 | .5 | Schedule of Master License Agreements Substantially Identical in All Material Respects to the Form of Master License Agreement and Participation Supplement filed as Exhibit 10.4** | ||
10 | .6 | Credit Agreement, dated as of July 2, 2009, between Insurance Services Office, Inc. and Bank of America, N.A., as Administrative Agent, and the lenders party thereto. | ||
21 | .1 | Subsidiaries of the Registrant* | ||
23 | .1 | Consent of Deloitte & Touche LLP | ||
23 | .2 | Consent of Deloitte & Touche LLP | ||
23 | .3 | Consent of Davis Polk & Wardwell (included in Exhibit 5.1)* | ||
24 | .1 | Power of Attorney** |
* | To be filed by amendment. | |
** | Previously Filed. |