Solera (SLH) 10-Q 2013 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

OR

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

For the transition period from         to   

Commission File Number 001-33461

Solera Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	26-1103816
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7 Village Circle, Suite 100 Westlake, Texas 76262	(817) 961-2100
(Address of Principal Executive Offices, including Zip Code)	(Registrant’s Telephone Number, Including Area Code)

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

The number of shares outstanding of the issuer’s common stock as of November 2, 2012 was 68,815,307.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2012 and June 30, 2012	3
	Condensed Consolidated Statements of Income for the three month periods ended September 30,  2012 and 2011	4
	Condensed Consolidated Statements of Comprehensive Income for the three month periods ended September 30, 2012 and 2011	5
	Condensed Consolidated Statements of Cash Flows for the three month periods ended September 30, 2012 and 2011	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures.	36
PART II	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	51
	Signatures	52

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	September 30, 2012			June 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	542,910		$	508,246
Accounts receivable, net of allowance for doubtful accounts of $2,463 and $2,356 at September 30, 2012 and June 30, 2012, respectively	134,981			129,264
Other receivables	15,466			20,953
Other current assets	23,773			23,015
Deferred income tax assets	5,825			7,709
Total current assets	722,955			689,187
Property and equipment, net	61,146			58,533
Goodwill	1,015,969			999,892
Intangible assets, net	320,761			329,741
Other noncurrent assets	25,795			27,209
Noncurrent deferred income tax assets	60,768			47,254
Total assets	$	2,207,394		$	2,151,816
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,811		$	26,940
Accrued expenses and other current liabilities	141,714			139,276
Income taxes payable	11,421			7,279
Deferred income tax liabilities	1,530			2,216
Current portion of long-term debt	2,902			2,861
Total current liabilities	183,378			178,572
Long-term debt	1,145,828			1,143,012
Other noncurrent liabilities	35,858			32,181
Noncurrent deferred income tax liabilities	26,277			22,067
Total liabilities	1,391,341			1,375,832
Redeemable noncontrolling interests	90,297			88,603
Stockholders’ equity:
Solera Holdings, Inc. stockholders’ equity:
Common shares, $0.01 par value: 150,000 shares authorized; 68,753 and 68,895 issued and outstanding as of September 30, 2012 and June 30, 2012, respectively	587,079			582,693
Retained earnings	160,152			141,814
Accumulated other comprehensive loss	(30,998		)	(47,273		)
Total Solera Holdings, Inc. stockholders’ equity	716,233			677,234
Noncontrolling interests	9,523			10,147
Total stockholders’ equity	725,756			687,381
Total liabilities and stockholders’ equity	$	2,207,394		$	2,151,816

See accompanying notes to condensed consolidated financial statements.

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SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,
	2012		2011
Revenues	$	195,719	$	198,693
Cost of revenues:
Operating expenses	42,340		43,618
Systems development and programming costs	17,857		19,045
Total cost of revenues (excluding depreciation and amortization)	60,197		62,663
Selling, general and administrative expenses	50,909		48,421
Depreciation and amortization	24,195		26,008
Restructuring charges, asset impairments, and other costs associated with exit and disposal activities	1,454		198
Acquisition and related costs	3,158		1,356
Interest expense	17,300		12,294
Other expense, net	398		55
	157,611		150,995
Income before provision for income taxes	38,108		47,698
Income tax provision	1,697		13,252
Net income	36,411		34,446
Less: Net income attributable to noncontrolling interests	2,770		3,207
Net income attributable to Solera Holdings, Inc.	$	33,641	$	31,239
Net income attributable to Solera Holdings, Inc. per common share:
Basic	$	0.49	$	0.44
Diluted	$	0.48	$	0.44
Dividends paid per share	$	0.125	$	0.10
Weighted-average shares used in the calculation of net income attributable to Solera Holdings, Inc. per common share:
Basic	68,890		70,837
Diluted	69,094		71,250

See accompanying notes to condensed consolidated financial statements.

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SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	Three Months Ended September 30,
	2012			2011
Net income	$	36,411		$	34,446
Other comprehensive income (loss):
Foreign currency translation adjustments	18,721			(41,240		)
Unrealized losses on derivative financial instruments, net of tax	(44		)	—
Total other comprehensive income (loss)	18,677			(41,240		)
Total comprehensive income (loss)	55,088			(6,794		)
Comprehensive income (loss) attributable to noncontrolling interests	5,172			(3,248		)
Comprehensive income (loss) attributable to Solera Holdings, Inc.	$	49,916		$	(3,546	)

See accompanying notes to condensed consolidated financial statements.

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SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net income	$	36,411		$	34,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,195			26,008
Provision for doubtful accounts	563			764
Stock-based compensation	4,024			3,606
Deferred income taxes	(8,580		)	(211		)
Gain on derivative financial instruments	3,492			—
Other	19			71
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Increase in accounts receivable	(3,254		)	(1,876		)
Increase in other assets	6,643			4,331
Decrease in accounts payable	(530		)	(6,171		)
Increase (decrease) in accrued expenses and other liabilities	5,236			(10,765		)
Net cash provided by operating activities	68,219			50,203
Cash flows from investing activities:
Capital expenditures	(8,839		)	(9,567		)
Acquisitions and capitalization of intangible assets	(713		)	(347		)
Proceeds from sale of property and equipment	—			1,104
Acquisitions of and investments in businesses, net of cash acquired	(6,623		)	(8,749		)
(Increase) decrease in restricted cash	(553		)	917
Net cash used in investing activities	(16,728		)	(16,642		)
Cash flows from financing activities:
Payments of debt issuance costs	(554		)	(254		)
Payment of contingent purchase consideration	(125		)	—
Principal payments on financed asset acquisitions	(305		)	(580		)
Repayments of long-term debt	(715		)	(1,570		)
Cash dividends paid on common shares and participating securities	(8,682		)	(7,127		)
Cash dividends paid to noncontrolling interests	(2,360		)	—
Cash paid to repurchase common stock	(8,511		)	—
Proceeds from stock purchase plan and exercise of stock options	489			535
Net cash used in financing activities	(20,763		)	(8,996		)
Effect of foreign currency exchange rate changes on cash and cash equivalents	3,936			(17,581		)
Net change in cash and cash equivalents	34,664			6,984
Cash and cash equivalents, beginning of period	508,246			371,101
Cash and cash equivalents, end of period	$	542,910		$	378,085
Supplemental cash flow information:
Cash paid for interest	$	2,799		$	3,990
Cash paid for income taxes	$	5,301		$	7,714
Supplemental disclosure of non-cash investing and financing activities:
Capital assets financed	$	258		$	415
Accrued contingent purchase consideration	$	—		$	1,712
Receivable for proceeds from sale of shares of majority-owned subsidiary	$	—		$	2,139

See accompanying notes to condensed consolidated financial statements.

6

SOLERA HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Description of Business

Solera Holdings, Inc. and subsidiaries (the “Company”, “Solera”, “we”, “us” or “our”) is a leading global provider of software and services to the automobile insurance claims processing industry. Our software and services help our customers: estimate the costs to repair damaged vehicles; determine pre-collision fair market values for vehicles damaged beyond repair; automate steps of the claims process; outsource steps of the claims process that insurance companies have historically performed internally; and monitor and manage their businesses through data reporting and analysis. We are active in over 60 countries and derive most of our revenues from our estimating and workflow software. Through our acquisitions of HPI, Ltd. (“HPI”) in December 2008 and AUTOonline GmbH In-formationssysteme (“AUTOonline”) in October 2009, we also provide used vehicle validation services in the United Kingdom and operate an eSalvage vehicle exchange platform in several European and Latin American countries as well as India. Through our acquisition of Explore Information Services, LLC (“Explore”) in June 2011, we also provide data and analytics services used by automotive property and casualty insurers in the United States (“U.S.”).

Financial Statement Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), and therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated financial statements for the periods presented reflect all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows. These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the fiscal year ended June 30, 2012, included in our Annual Report on Form 10-K filed with the SEC on August 29, 2012. Our operating results for the three month period ended September 30, 2012 are not necessarily indicative of the results that may be expected for any future periods.

Principles of Consolidation

The unaudited condensed consolidated financial statements include our accounts and those of our wholly-owned and majority-owned subsidiaries. Our consolidated, majority-owned subsidiaries include AUTOonline, our subsidiaries located in Belgium, France, Portugal, Spain, and certain of our subsidiaries in Mexico. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the accompanying consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ from those estimates. The reported amounts of assets, liabilities, revenues and expenses are affected by estimates and assumptions which are used for, but not limited to, the accounting for sales allowances, allowance for doubtful accounts, fair value of derivatives, valuation of goodwill and intangible assets, amortization of intangibles, restructurings, liabilities under defined benefit plans, stock-based compensation, redeemable noncontrolling interests and income taxes.

Recently Adopted Accounting Pronouncements

In June 2011, the FASB issued ASU Topic No. 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income, which updates the presentation requirements related to comprehensive income. The update is effective for annual periods beginning after December 15, 2011, other than the provisions for which adoption was deferred indefinitely in accordance with ASU Topic No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of

7

Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, issued in December 2011. We adopted ASU Topic No. 2011-05 during the quarter ended September 30, 2012 and elected to present the total of comprehensive income, the components of net income, and the components of other comprehensive income as two separate but consecutive statements.

New Accounting Pronouncements Not Yet Adopted

In September 2011, the FASB issued ASU Topic No. 2011-08, Testing Goodwill for Impairment, which amends current guidance on testing goodwill for impairment to provide entities with the option of performing a qualitative assessment before calculating the fair value of the reporting unit. If it is determined that the fair value of the reporting unit is more likely than not less than the carrying amount based on qualitative factors, the two-step impairment test would be required. ASU Topic No. 2011-08 is effective for our fiscal year 2013 annual goodwill impairment assessment.

In July 2012, the FASB issued ASU Topic No. 2012-02, Intangibles-Goodwill and Other (Topic 350), which amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment to provide entities with the option of performing a qualitative assessment before calculating the fair value of the asset. If it is determined that the fair value of the asset is more likely than not less than the carrying amount based on qualitative factors, the two-step impairment test would be required. ASU Topic No. 2012-02 is effective for our fiscal year 2014, although early adoption is permitted.

2. Net Income Attributable to Solera Holdings, Inc. Per Common Share

Our restricted common shares subject to repurchase and substantially all of our restricted stock units have the right to receive non-forfeitable dividends on an equal basis with common stock and therefore are considered participating securities that must be included in the calculation of net income per share using the two-class method. Under the two-class method, basic and diluted net income per share is determined by calculating net income per share for common stock and participating securities based on the cash dividends paid and participation rights in undistributed earnings. Diluted net income per share also considers the dilutive effect of in-the-money stock options and unvested restricted stock units and performance share units that have the right to forfeitable dividends, calculated using the treasury stock method. Under the treasury stock method, the amount of assumed proceeds from unexercised stock options and unvested restricted stock units includes the amount of compensation cost attributable to future services not yet recognized, proceeds from the exercise of the options, and any excess income tax benefit or liability.

8

The computation of basic and diluted net income attributable to Solera Holdings, Inc. per common share using the two-class method is as follows (in thousands, except per share amounts):

	Three Months Ended September 30,
	2012			2011
Basic net income attributable to Solera Holdings, Inc. per common share:
Net income attributable to Solera Holdings, Inc.	$	33,641		$	31,239
Less: Dividends paid and undistributed earnings allocated to participating securities	(154		)	(133		)
Net income attributable to common shares – basic	$	33,487		$	31,106
Weighted-average number of common shares	68,890			70,838
Less: Weighted-average common shares subject to repurchase	—			(1		)
Weighted-average number of common shares used to compute basic net income attributable to Solera Holdings, Inc. per common share	68,890			70,837
Basic net income attributable to Solera Holdings, Inc. per common share	$	0.49		$	0.44
Diluted net income attributable to Solera Holdings, Inc. per common share:
Net income attributable to Solera Holdings, Inc.	$	33,641		$	31,239
Less: Dividends paid and undistributed earnings allocated to participating securities	(154		)	(133		)
Net income attributable to common shares – diluted	$	33,487		$	31,106

Weighted-average number of common shares used to compute basic net income attributable to Solera Holdings, Inc. per common share	68,890		70,837
Dilutive effect of options to purchase common stock, restricted stock units and performance share units	204		413
Weighted-average number of common shares used to compute diluted net income attributable to Solera Holdings, Inc. per common share	69,094		71,250
Diluted net income attributable to Solera Holdings, Inc. per common share	$	0.48	$	0.44

The following securities that could potentially dilute earnings per share in the future are not included in the determination of diluted net income attributable to Solera Holdings, Inc. per common share (in thousands):

	Three Months Ended September 30,
	2012	2011
Antidilutive options to purchase common stock and restricted stock units	313	63

3. Contingent Purchase Consideration

In connection with our business combinations, we may be required to make contingent cash payments through fiscal year 2016 subject to the achievement of certain financial performance, product-related, integration and other objectives. At September 30, 2012, the maximum aggregate amount of remaining contingent cash payments to be paid is $25.9 million, of which $5.9 million was accrued at the acquisition date and included in the purchase price, and the remaining $20.0 million will be charged to acquisition and related costs in the statement of income as earned.

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4. Goodwill and Intangible Assets

Intangible Assets

Intangible assets consist of the following (in thousands):

	September 30, 2012							June 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, net		Gross Carrying Amount		Accumulated Amortization			Intangible Assets, net
Amortized intangible assets:
Internally developed software	$	23,027	$	(11,246	)	$	11,781	$	21,992	$	(10,108	)	$	11,884
Purchased customer relationships	299,208		(158,258		)	140,950		292,733		(149,423		)	143,310
Purchased trade names and trademarks	34,290		(23,320		)	10,970		33,910		(22,049		)	11,861
Purchased software and database technology	414,987		(292,575		)	122,412		407,907		(279,398		)	128,509
Other	5,544		(3,918		)	1,626		5,544		(3,454		)	2,090
	$	777,056	$	(489,317	)	$	287,739	$	762,086	$	(464,432	)	$	297,654
Intangible assets not subject to amortization:
Purchased trade names and trademarks with indefinite lives	33,022		—			33,022		32,087		—			32,087
	$	810,078	$	(489,317	)	$	320,761	$	794,173	$	(464,432	)	$	329,741

Goodwill

The following table summarizes the activity in goodwill for the three months ended September 30, 2012 (in thousands):

	Balance at Beginning of Period		Current year Acquisitions		Other		Foreign Currency Translation Effect		Balance at End of Period
EMEA	$	546,782	$	—	$	—	$	13,797	$	560,579
Americas	453,110		1,678		5		597		455,390
Total	$	999,892	$	1,678	$	5	$	14,394	$	1,015,969

5. Restructuring Initiatives and Other Exit and Disposal Activities

The objectives of our restructuring initiatives and other exit and disposal activities have primarily been to eliminate waste and improve operational efficiencies. The liabilities associated with our restructuring initiatives and other exit and disposal activities are included in accrued expenses and other current liabilities and in other noncurrent liabilities in the accompanying consolidated balance sheets. We report all amounts incurred in connection with our restructuring initiatives and other exit and disposal activities in restructuring charges, asset impairments and other costs associated with exit and disposal activities in the accompanying condensed consolidated statements of income. We expect to incur additional restructuring charges in future years as we continue to undertake additional efforts to improve efficiencies in our business.

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The following table summarizes the activity in the liabilities associated with our restructuring initiatives and other exit and disposal activities for the three months ended September 30, 2012 (in thousands):

	Employee Termination Benefits			Leases			Other			Total
Balance at June 30, 2012	$	5,757		$	2,888		$	—		$	8,645
Restructuring charges	1,292			60			102			1,454
Cash payments	(2,287		)	(989		)	(102		)	(3,378		)
Other	—			24			—			24
Effect of foreign exchange	102			—			—			102
Balance at September 30, 2012	$	4,864		$	1,983		$	—		$	6,847

In prior fiscal years, we initiated restructuring plans in our EMEA, Americas and Corporate segments (the “Prior Restructuring Plans”). Under the Prior Restructuring Plans, as of September 30, 2012, we have a remaining liability for employee termination benefits of $4.5 million, which we will pay through fiscal year 2013, and a remaining lease-related restructuring liability of $2.0 million, which we will pay through January 2013.

The following table summarizes restructuring charges, asset impairments and other costs associated with exit and disposal activities for the periods indicated (in thousands):

	Other Restructuring Plans		Prior Restructuring Plans			Total
Three Months Ended September 30, 2012
Employee termination benefits	$	1,310	$	(18	)	$	1,292
Leases	—		60			60
Other	11		91			102
Total restructuring charges, asset impairments, and other costs associated with exit and disposal activities	$	1,321	$	133		$	1,454
Three Months Ended September 30, 2011
Employee termination benefits	$	—	$	129		$	129
Leases	—		30			30
Other	—		39			39
Total restructuring charges, asset impairments, and other costs associated with exit and disposal activities	$	—	$	198		$	198

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6. Stockholders’ Equity and Redeemable Noncontrolling Interests

The following table summarizes the activity in stockholders’ equity and redeemable noncontrolling interests for the periods indicated (in thousands):

	Stockholders’ Equity Attributable to Solera Holdings, Inc.
	Common Shares
	Shares		Amount			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Solera Holdings, Inc. Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity			Redeemable Noncontrolling Interests
Balance at June 30, 2012	68,895		$	582,693		$	141,814		$	(47,273	)	$	677,234		$	10,147		$	687,381		$	88,603
Net income	—		—			33,641			—			33,641			1,103			34,744			1,667
Other comprehensive income	—		—			—			16,275			16,275			633			16,908			1,769
Stock-based compensation	—		4,024			—			—			4,024			—			4,024			—
Purchases of Solera Holdings, Inc. common shares(1)	(200	)	(1,679		)	(6,832		)	—			(8,511		)	—			(8,511		)	—
Issuance of common shares under stock award plans, net	58		510			—			—			510			—			510			—
Dividends paid on common stock and participating securities	—		—			(8,682		)	—			(8,682		)	—			(8,682		)	—
Dividends paid to noncontrolling owners	—		—			—			—			—			(2,360		)	(2,360		)	—
Revaluation of and additions to noncontrolling interests	—		1,531			211			—			1,742			—			1,742			(1,742		)
Balance at September 30, 2012	68,753		$	587,079		$	160,152		$	(30,998	)	$	716,233		$	9,523		$	725,756		$	90,297

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	Stockholders’ Equity Attributable to Solera Holdings, Inc.
	Common Shares
	Shares	Amount		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Solera Holdings, Inc. Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity			Redeemable Noncontrolling Interests
Balance at June 30, 2011	70,795	$	587,265	$	151,366		$	36,413		$	775,044		$	10,065		$	785,109		$	94,841
Net income	—	—		31,239			—			31,239			1,285			32,524			1,922
Other comprehensive loss	—	—		—			(34,785		)	(34,785		)	(673		)	(35,458		)	(5,782		)
Stock-based compensation	—	3,606		—			—			3,606			—			3,606			—
Issuance of common shares under stock award plans, net	66	675		—			—			675			—			675			—
Dividends paid on common stock and participating securities	—	—		(7,127		)	—			(7,127		)	—			(7,127		)	—
Sale of shares of majority-owned subsidiary(2)	—	2,037		—			—			2,037			102			2,139			—
Revaluation of and additions to noncontrolling interests	—	1,374		(1,149		)	—			225			—			225			(225		)
Balance at September 30, 2011	70,861	594,957		174,329			1,628			770,914			10,779			781,693			90,756

(1) Please refer to Note 7 for further information on repurchases of our common stock. In accordance with ASC Topic No. 505-30-30, we have allocated the cost of the shares repurchased between paid-in capital and retained earnings based on the excess of the repurchase price over the stated value.

(2) In September 2011, we sold a 2.5% ownership interest in one of our majority-owned subsidiaries for €1.5 million ($2.1 million).

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7. Share Repurchase Program

In November 2011, our Board of Directors approved a share repurchase program for up to a total of $180 million of our common stock through November 10, 2013. Share repurchases are made from time to time in open market transactions at prevailing market prices or in privately negotiated transactions. The repurchase program does not require us to purchase any specific number or amount of shares, and the timing and amount of such purchases will be determined by management based upon market conditions and other factors. In addition, the program may be amended or terminated at the discretion of our Board of Directors. During three months ended September 30, 2012, we purchased 0.2 million shares for $8.5 million. Through September 30, 2012, we have repurchased approximately 2.4 million shares for $112.0 million under the share repurchase program.

8. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes our assets and liabilities that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):

			Fair Value Measurements Using:
	Fair Value		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Fair value at September 30, 2012:
Cash and cash equivalents	$	542,910	$	542,910	$	—	$	—
Restricted cash (1)	3,993		3,993		—		—
Derivative financial instruments classified as assets (2)	151		—		151		—
Derivative financial instruments classified as liabilities (3)	1,408		—		1,408		—
Accrued contingent purchase consideration (4)	4,816		—		—		4,816
Redeemable noncontrolling interests (5)	75,780		—		—		75,780
Fair value at June 30, 2012:
Cash and cash equivalents	$	508,246	$	508,246	$	—	$	—
Restricted cash (1)	2,548		2,548		—		—
Derivative financial instruments classified as assets (2)	2,197		—		2,197		—
Accrued contingent purchase consideration (4)	4,941		—		—		4,941
Redeemable noncontrolling interests (5)	74,118		—		—		74,118

(1) Included in other current assets and other noncurrent assets in the accompanying consolidated balance sheets. The restricted cash primarily relates to funds held in escrow for the benefit of customers and the sellers of acquired businesses, and facility lease deposits.

(2) Included in other noncurrent assets in the accompanying consolidated balance sheet.

(3) Included in other noncurrent liabilities in the accompanying consolidated balance sheet.

(4) Included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet.

(5) Does not include the redeemable noncontrolling interest of AUTOonline, which is not measured at fair value on a recurring basis.

Cash and cash equivalents and restricted cash. Our cash and cash equivalents and restricted cash, primarily consist of bank deposits, money market funds and bank certificates of deposit. The fair value of our cash and cash equivalents and restricted cash are determined using quoted market prices for identical assets (Level 1 inputs).

Derivative financial instruments. We estimate the fair value of our cross-currency swaps using an income approach and standard valuation techniques that utilize market-based observable inputs including spot and forward interest and foreign currency exchange rates, volatilities and interest rate curves at observable intervals (Level 2 inputs). We estimate the fair value of our interest rate swaps using industry standard valuation techniques to extrapolate future reset rates from period-end yield curves and standard valuation models based on a discounted cash flow model. Market-based observable inputs including spot

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and forward rates, volatilities and interest rate curves at observable intervals are used as inputs to the models (Level 2 inputs). Our estimate of fair value also considers the risk that the swap contracts will not be fulfilled.

Accrued contingent purchase consideration. We accrue contingent future cash payments related to business combinations at fair value as of the acquisition date and re-assess the fair value measurement at each reporting date. Fair value is determined by estimating the weighted probabilities of potential future payments that would be earned upon achievement by the acquired business of certain financial performance, product-related, integration and other objectives. We estimate such probabilities using information as of the reporting date, including recent financial performance of the acquired businesses (Level 3 inputs).

The net decrease in accrued contingent purchase consideration during the three months ended September 30, 2012 was primarily due to payments of previously accrued contingent purchase consideration.

Redeemable noncontrolling interests. We estimate the fair value of our redeemable noncontrolling interests through an income approach, utilizing a discounted cash flow model, and a market approach, which considers comparable companies and transactions, including transactions with the noncontrolling stockholders of our majority-owned subsidiaries.

Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specific projection period and a residual value related to future cash flows beyond the projection period. Both values are discounted to reflect the degree of risk inherent in an investment in the reporting unit and achieving the projected cash flows. A weighted average cost of capital of a market participant, which is an unobservable input, is used as the discount rate. The residual value is generally determined by applying a constant terminal growth rate to the estimated net cash flows at the end of the projection period. Alternatively, the present value of the residual value may be determined by applying a market multiple at the end of the projection period.

Under the market approach, fair value is determined based on multiples of revenues and earnings before interest, taxes, depreciation and amortization for each reporting unit. For our calculation, we determined the multiples based on a selection of comparable companies and acquisition transactions, discounted for each reporting unit to reflect the relative size, diversification and risk of the reporting unit in comparison to the indexed companies and transactions.

At September 30, 2012 and June 30, 2012, we estimated the fair value of the redeemable noncontrolling interest in one of our majority-owned subsidiaries based on recent stock transactions with the noncontrolling stockholders, a Level 2 input, and a discounted cash flow model, a Level 3 input.

The significant unobservable inputs in the valuation of redeemable noncontrolling interests include a discount rate and long-term growth rates.

The discount rate used in the determination of the estimated fair value of the redeemable noncontrolling interests as of September 30, 2012 using the income approach ranged between 13.5% and 14.9%, with a weighted average discount rate of 13.6%, reflecting a market participant's perspective as a noncontrolling shareholder in a privately-held subsidiary. The long-term growth rate used in the determination of the estimated fair value of the redeemable noncontrolling interests as of September 30, 2012 using the income approach ranged between 2.0% and 4.0%, with a weighted average long-term growth rate of 3.8%.

The following table summarizes the activity in redeemable noncontrolling interests which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) (in thousands):

	Three Months Ended September 30,
	2012			2011
Balance at beginning of period	$	74,118		$	71,641
Net income attributable to redeemable noncontrolling interests	1,467			1,441
Change in fair value	(1,530		)	(1,374		)
Effect of foreign exchange	1,725			(4,014		)
Balance at end of period	$	75,780		$	67,694

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Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

No assets or liabilities were required to be measured at fair value on a nonrecurring basis during the three months ended September 30, 2012.

Fair Value of Other Financial Instruments

The carrying amounts of certain of our financial instruments, including accounts receivable, accounts payable and accrued expenses, approximate fair value due to their short-term nature. The carrying value of our senior secured credit facility approximates fair value due to the facility’s variable interest rate. Based on the original issue price of the Senior Notes that we issued in April 2012, we believe that the fair value of the Senior Notes is approximately $873.1 million as compared to the carrying value at September 30, 2012 of $850.0 million.

9. Derivative Financial Instruments

In the normal course of business, we are exposed to variability in interest rates and foreign currency exchange rates. We use derivatives to mitigate risks associated with this variability. We do not use derivatives for speculative purposes.

In April 2012, in order to hedge our exposure to variability in the Euro-denominated cash flows associated with two intercompany loans, we entered into two pay fixed Euros / received fixed U.S. dollar cross-currency swaps in the aggregate notional amount of €109.0 million. We pay Euro fixed coupon payments at 6.99% and receive U.S. dollar fixed coupon payments at 6.75% on the notional amount. The maturity date of the swaps is June 15, 2018.

These cross-currency swaps were designated, at inception, as cash flow hedges of the intercompany loans and we evaluate the swaps for effectiveness quarterly. We report the effective portion of the gain or loss on these hedges as a component of accumulated other comprehensive income (loss) in stockholders' equity and reclassify these gains or losses into earnings when the hedged transaction affects earnings. Accordingly, any foreign exchange gain or loss recognized in our consolidated statements of income resulting from the periodic re-measurement of the intercompany loans into U.S. dollars is mitigated by an offsetting gain or loss, as the case may be, resulting from the change in the fair value of the swaps. To date, there has been no hedge ineffectiveness.

In order to reduce our exposure to interest rate volatility associated with our USD and Euro denominated term loans, in August 2012, we entered into two pay fixed / receive floating interest rate swaps with notional amounts of $80.0 million and €64.5 million, respectively. The maturity date of both swaps is May 16, 2017 which coincides with the maturity of our USD and Euro denominated term loans, and the swaps bear an interest rate of 0.8225% plus a 3.0% margin for the US dollar denominated swap and 0.7550% plus a 3.0% margin for the Euro denominated swap.

We designated and documented these interest rate swaps at their inception as cash flow hedges of our outstanding term loans under the Amended and Restated First Lien Credit and Guaranty Agreement and we evaluate the swaps for effectiveness quarterly. We report the effective portion of the gain or loss on these hedges as a component of accumulated other comprehensive income (loss) in stockholders’ equity and reclassify these gains or losses into earnings when the hedged transaction affects earnings. We recognize the ineffective portion of these cash flow hedges in interest expense. To date, hedge ineffectiveness has been insignificant.

We determined the estimated fair value of our derivatives using an income approach and standard valuation techniques that utilize market-based observable inputs including spot and forward interest and foreign currency exchange rates, volatilities and interest rate curves at observable intervals. Our estimate of fair value also considers the risk that the swap contracts will not be fulfilled.

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The following table summarizes the fair value of our derivative financial instruments, which are included in other noncurrent assets and other noncurrent liabilities in the accompanying condensed consolidated balance sheets (in thousands):

	September 30, 2012		June 30, 2012
Derivative financial instruments classified as assets
Cross-currency swaps	$	151	$	2,197
Derivative financial instruments classified as liabilities
U.S. dollar interest rate swaps	$	801	$	—
Euro interest rate swaps	607		—
Total	$	1,408	$	—

The following table summarizes the effect of our derivative financial instruments, designated as cash flow hedges, on the consolidated statements of income and accumulated other comprehensive income (loss) (“AOCI”) for the three months ended September 30, 2012 (in thousands). No derivative instruments were outstanding during the three months ended September 30, 2011.

Derivative Financial Instruments	Loss Recognized in AOCI on Derivatives (1)			Location of Loss Reclassified from AOCI into Income (1)	Loss Reclassified from AOCI into Income (1)			Location of Loss Recognized in Income on Derivatives (2)	Loss Recognized in Income on Derivatives (2)
Three Months Ended September 30, 2012:
Cross-currency swaps	$	(1,830	)	Interest Expense	$	(24	)	N/A	$	—
				Other Expense, net	(3,074		)	N/A	—
U.S. dollar interest rate swaps	(812		)	Interest Expense	(16		)	Interest Expense	(6,402		)
Euro interest rate swaps	(625		)	Interest Expense	(19		)	Interest Expense	(675		)
Total	$	(3,267	)		$	(3,133	)		$	(7,077	)

(1) Effective portion.

(2) Ineffective portion and amount excluded from effectiveness testing.

10. Share-Based Compensation

Share-Based Award Activity

The following table summarizes restricted stock unit and performance share unit activity during the three months ended September 30, 2012:

	Number of Shares (in thousands)			Weighted Average Grant Date Fair Value per Share
Nonvested at June 30, 2012	471			$	52.24
Granted	125			$	39.50
Vested	(72	)		$	48.81
Forfeited	(20	)	��	$	40.22
Nonvested at September 30, 2012	504			$	50.04

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The following table summarizes stock option activity during the three months ended September 30, 2012:

	Number of Shares (in thousands)		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2012	1,906		$	40.59
Granted	680		$	41.55
Exercised	(19	)	$	23.29
Canceled	(11	)	$	42.61
Outstanding at September 30, 2012	2,556		$	40.92	5.6	$	15,056
Exercisable at September 30, 2012	1,022		$	34.89	4.9	$	11,222

Of the stock options outstanding at September 30, 2012, approximately 2.4 million are vested or expected to vest.

Cash received from the exercise of stock options was $0.4 million during the three months ended September 30, 2012. The intrinsic value of stock options exercised during the three months ended September 30, 2012 and 2011 totaled $0.4 million and $0.7 million, respectively.

Valuation of Share-Based Awards

We utilized the Black-Scholes option pricing model for estimating the grant date fair value of stock options with the following assumptions:

	Risk-Free Interest Rate		Expected Term (in years)	Weighted  Average Expected Stock Price Volatility		Expected Dividend Yield		Weighted Average Per Share Grant Date Fair Value
Three Months Ended September 30, 2012	0.6	%	4.6	33	%	1.2	%	$	10.54
Three Months Ended September 30, 2011	1.1	%	4.6	33	%	0.7	%	$	16.15

We based the risk-free interest rates on the implied yield available on U.S. Treasury constant maturities in effect at the time of the grant with remaining terms equivalent to the respective expected terms of the options. Because we have a limited history of stock option exercises, we calculated the expected award life as the average of the contractual term and the vesting period. We determined the expected volatility based on a combination of implied market volatilities, our historical stock price volatility and other factors. The dividend yield is based on our quarterly dividend of $0.125 and $0.10 per share declared and paid during the three months ended September 30, 2012 and 2011, respectively.

The weighted average grant date fair value of restricted stock units and performance share units granted during the three months ended September 30, 2012 and 2011, excluding performance share units that are earned based on our relative total stockholder return (“TSR”), was $39.50 and $57.77, respectively, determined based on the market price of our common stock on the date of grant, which approximates the intrinsic value.

To estimate the grant date fair value of performance share units that are earned based on our relative TSR, we utilized a Monte-Carlo simulation model which simulates a range of our possible future stock prices and certain peer companies and assumes that the performance share units will be earned at target. Based on the Monte-Carlo simulation model, the grant date fair value of performance share units granted during the three months ended September 30, 2011 that are earned based on our relative TSR was $54.61 per share.

Share-Based Compensation Expense

Share-based compensation expense, which is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income, was $4.0 million and $3.6 million for the three months ended September 30, 2012 and 2011, respectively. At September 30, 2012, the estimated total remaining unamortized share-based compensation expense, net of forfeitures, was $43.3 million, which we expect to recognize over a weighted-average period of 3.0 years.

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11. Defined Benefit Pension Plans

Our foreign subsidiaries sponsor various defined benefit pension plans and individual defined benefit arrangements covering certain eligible employees. We base the benefits under these pension plans on years of service and compensation levels. Funding is limited to statutory requirements.

The components of net pension expense were as follows for the periods indicated (in thousands):

	Three Months Ended September 30,
	2012			2011
Service cost — benefits earned during the period	$	975		$	1,064
Interest cost on projected benefits	807			964
Expected return on plan assets	(608		)	(678		)
Amortization of gain	100			25
Net pension expense	$	1,274		$	1,375

12. Provision For Income Taxes

We recorded an income tax provision of $1.7 million and $13.3 million for the three months ended September 30, 2012 and 2011, respectively. The expected tax provision derived from applying the U.S. federal statutory rate to our pre-tax income for the three months ended September 30, 2012 differed from our recorded income tax provision primarily due to an enacted tax law change that will allow for the realization of tax benefits for certain foreign net operating loss carryforwards, and higher earnings in jurisdictions with lower income tax rates which are indefinitely reinvested. This was partially offset by the impact of the expiration of the look through rule for related controlled foreign corporations and certain discrete tax charges for the quarter.

Gross unrecognized tax benefits as of September 30, 2012 and June 30, 2012 were $11.0 million and $9.6 million, respectively. No significant interest and penalties have been accrued during the three months ended September 30, 2012. While there is no assurance to the outcome, we believe it is reasonably possible within the next 12 months to recognize between $1.0 million to $4.0 million of tax benefit due to a favorable resolution associated with a disputed foreign tax ruling previously received by the Company.

Pursuant to the terms of the acquisition agreements, the sellers in our business combinations have indemnified us for all tax liabilities related to the pre-acquisition periods. We are liable for any tax assessments for the post-acquisition periods for our U.S. and foreign jurisdictions.

13. Segment and Geographic Information

We have aggregated our operating segments into two reportable segments: EMEA and Americas. Our EMEA reportable segment encompasses our operations in Europe, the Middle East, Africa, Asia and Australia. Our Americas reportable segment encompasses our operations in North, Central and South America.

Our chief operating decision maker is our Chief Executive Officer. We evaluate the performance of our reportable segments based on revenues, income before provision for income taxes and adjusted EBITDA, a non-GAAP financial measure that represents GAAP net income excluding interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairments and other costs associated with exit and disposal activities, acquisition and related costs, litigation related expenses and other (income) expense, net. We do not allocate certain costs to reportable segments, including costs related to our financing activities, business development and oversight, and tax, audit and other professional fees, to our reportable segments. Instead, we manage these costs at the Corporate level.

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(in thousands)	EMEA		Americas		Corporate			Total
Three Months Ended September 30, 2012
Revenues	$	110,092	$	85,627	$	—		$	195,719
Income before provision for income taxes	40,696		31,201		(33,789		)	38,108
Significant items included in income before provision for income taxes:
Depreciation and amortization	11,274		12,845		76			24,195
Interest expense	3		—		17,297			17,300
Capital expenditures	2,569		6,270		—			8,839
Total Assets September 30, 2012	1,200,291		806,984		200,119			2,207,394
Total Assets June 30, 2012	1,150,287		738,725		262,804			2,151,816
Three Months Ended September 30, 2011
Revenues	$	118,556	$	80,137	$	—		$	198,693
Income before provision for income taxes	44,938		28,639		(25,879		)	47,698
Significant items included in income before provision for income taxes:
Depreciation and amortization	13,066		12,942		—			26,008
Interest expense	381		12		11,901			12,294
Capital expenditures	7,485		2,082		—			9,567

Geographic revenue information is based on the location of the customer and was as follows for the periods presented (in thousands):

	Europe *	United States	United Kingdom	Germany	All Other	Total
Three Months Ended September 30, 2012	62,592	62,047	23,871	20,018	27,191	195,719
Three Months Ended September 30, 2011	67,443	57,294	25,287	22,341	26,328	198,693

*    Excludes the United Kingdom and Germany.

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14. Subsequent Events

On November 5, 2012, we announced that the Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.125 per share of outstanding common stock and per outstanding restricted stock unit. The Audit Committee also approved a quarterly stock dividend equivalent of $0.125 per outstanding restricted stock unit granted to certain of our executive officers since fiscal year 2011 in lieu of the cash dividend, which dividend equivalent will be paid to the restricted stock unit holders as the restricted stock unit vests. The dividends are payable on December 4, 2012 to stockholders and restricted stock unit holders of record at the close of business on November 19, 2012.

On October 11, 2012, we acquired the remaining 7% ownership interest in our AUTOonline GmbH In-formationssysteme (“AUTOonline”) majority-owned subsidiary for a cash payment of €10.9 million ($14.1 million).

In October 2012, we completed the acquisitions of Title Technologies, Inc. (“TitleTec”) and substantially all of the assets of PS Holdings, L.L.C. (“APU”) for approximately $88.0 million in cash paid at closing. TitleTec’s proprietary web-based platform allows automotive dealerships to streamline operations and improve the customer purchasing experience by assembling and processing the data necessary to electronically register a vehicle, produce a title, and issue a permanent or temporary tag real-time at the point of sale. APU is a cloud-based locator of recycled, aftermarket, reconditioned and surplus original equipment parts for the U.S. vehicle repair industry.

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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” and similar terms and phrases, including references to assumptions. However, these words are not the exclusive means of identifying such statements. These statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies and include, but are not limited to, statements about: increase in customer demand for our software and services; growth rates for the automobile insurance claims industry; growth rates for vehicle purchases and car parcs; customer adoption rates for automated claims processing software and services; increases in customer spending on automated claims processing software and services; efficiencies resulting from automated claims processing; performance and benefits of our products and services; development or acquisition of claims processing products and services in areas other than automobile insurance; our relationship with insurance company customers as they continue global expansion; revenue growth resulting from the launch of new software and services; improvements in operating margins resulting from operational efficiency initiatives; increased utilization of our software and services resulting from increased severity; our expectations regarding the growth rates for vehicle insurance; changes in the amount of our existing unrecognized tax benefits; our revenue mix; our income taxes, including the periods during which tax benefits may be recognized; restructuring plans, potential restructuring charges and their impact on our revenues; our operating expense growth and operating expenses as a percentage of our revenues; stability of our development and programming costs; growth of our selling, general and administrative expenses; increase in total depreciation and amortization expense; increase in interest expense and possible impact of future foreign currency fluctuations; growth of our acquisition and related costs; our ability to realize our U.S. deferred tax assets during the respective carryforward and reversal periods; our use of cash and liquidity position going forward; cash needs to service our debt; and our ability to grow in all types of markets.

Actual results could differ materially from those projected, implied or anticipated by our forward-looking statements. Some of the factors that could cause actual results to differ include: those set forth in the sections titled “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and elsewhere as described in this Quarterly Report on Form 10-Q. These factors include, but are not limited to: our reliance on a limited number of customers for a substantial portion of our revenues; effects of competition on our software and service pricing and our business; unpredictability and volatility of our operating results, which include the volatility associated with foreign currency exchange risks, our sales cycle, seasonality, changes in the amount of our income tax provision (benefit) or other factors; effects of the global economic downturn on demand for or utilization of our products and services; risks associated with and possible negative consequences of acquisitions, joint ventures, divestitures and similar transactions, including risks related to our ability to successfully integrate our acquired businesses; our ability to increase market share, successfully introduce new software and services and expand our operations to new geographic locations; time and expenses associated with customers switching from competitive software and services to our software and services; rapid technology changes in our industry; effects of changes in or violations by us or our customers of government regulations; costs and possible future losses or impairments relating to our acquisitions; use of cash to service our debt; country-specific risks associated with operating in multiple countries; damage to our business or reputation resulting from system failures, delays and other problems; and other factors that are described from time to time in our periodic filings with the SEC.

All forward-looking statements are qualified in their entirety by this cautionary statement, and we undertake no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2012 filed with the SEC on August 29, 2012. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

All percentage amounts and ratios were calculated using the underlying data in whole dollars and may reflect rounding adjustments. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for any future period. We describe the effects on our results that are attributed to the change in foreign currency exchange rates by measuring the incremental difference between translating the current and prior period results at the monthly average rates for the same period from the prior year.

Overview of the Business

We are the leading global provider of software and services to the automobile insurance claims processing industry. At the core of our software and services are our proprietary databases, each of which has been adapted to our local markets. We also provide products and services that complement our insurance claims processing software and services and extend beyond our core offerings. These products and services include used vehicle validation, fraud detection software and services, disposition of salvage vehicles and data and analytics services used by automotive property and casualty insurers in the U.S. Our automobile insurance claims processing customers include insurance companies, collision repair facilities, independent assessors and automotive recyclers. We help our customers:

• estimate the costs to repair damaged vehicles and determine pre-collision fair market values for damaged vehicles for which the repair costs exceed the vehicles’ value;

• automate and outsource steps of the claims process that insurance companies have historically performed internally; and

• improve their ability to monitor and manage their businesses through data reporting and analysis.

We serve over 75,000 customers and are active in over 60 countries across six continents with approximately 2,500 employees. Our customers include more than 1,500 automobile insurance companies, 36,500 collision repair facilities, 7,000 independent assessors and 30,000 automotive recyclers, auto dealers and others. We derive revenues from many of the world’s largest automobile insurance companies, including the ten largest automobile insurance companies in Europe and eight of the ten largest automobile insurance companies in North America.

At the core of our software and services are our proprietary databases, which are localized to each geographical market we serve. Our insurance claims processing software and services are typically integrated into our customers’ systems, operations and processes, making it costly and time consuming to switch to another provider. This customer integration, along with our long-standing customer relationships, has contributed to our successful customer retention rate.

Segments

We have aggregated our operating segments into two reportable segments: EMEA and Americas. Our EMEA reportable segment encompasses our operations in Europe, the Middle East, Africa, Asia and Australia, while our Americas reportable segment encompasses our operations in North, Central and South America.

We evaluate the performance of our reportable segments based on revenues, income before provision for income taxes and adjusted EBITDA, a non-GAAP financial measure that represents GAAP net income excluding interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, restructuring charges, asset impairments and other costs associated with exit and disposal activities, acquisition and related costs, litigation related expenses and other (income) expense, net. We do not allocate certain costs to reportable segments, including costs related to our financing activities, business development and oversight, and tax, audit and other professional fees, to our reportable segments. Instead, we manage these costs at the Corporate level.

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The table below sets forth our revenues by reportable segment and as a percentage of our total revenues for the periods indicated (dollars in millions):

	Three Months Ended September 30,
	2012				2011
EMEA	$	110.1	56.3	%	$	118.6	59.7	%
Americas	85.6		43.7		80.1		40.3	%
Total	$	195.7	100.0	%	$	198.7	100.0	%

For the three months ended September 30, 2012, the United States, the United Kingdom and Germany were the only countries that individually represented more than 10% of total revenues.

Components of Revenues and Expenses

Revenues

We generate revenues from the sale of software and services to our customers pursuant to negotiated contracts or pricing agreements. Pricing for our software and services is set forth in these agreements and negotiated with each customer. We generally bill our customers monthly under one or more of the following bases:

• price per transaction;

• fixed monthly amount for a prescribed number of transactions;

• fixed monthly subscription rate;

• price per set of services rendered; and

• price per system delivered.

Our software and services are often sold as packages, without individual pricing for each component. Our revenues are reflected net of customer sales allowances, which we estimate based on both our examination of a subset of customer accounts and historical experience.

Our core offering is our estimating and workflow software, which is used by our insurance company, collision repair facility and independent assessor customers, representing the majority of our revenues. Our salvage and recycling software, business intelligence and consulting services, vehicle data validation, salvage disposition, driver violation reporting services and other offerings represent in the aggregate a smaller portion of our revenues. We believe that our estimating and workflow software will continue to represent the majority of our revenue for the foreseeable future.

Cost of revenues (excluding depreciation and amortization)

Our costs and expenses applicable to revenues represent the total of operating expenses and systems development and programming costs, which are discussed below.

Operating expenses

Our operating expenses include: compensation and benefit costs for our operations, database development and customer service personnel; other costs related to operations, database development and customer support functions; third-party data and royalty costs; costs related to computer software and hardware used in the delivery of our software and services; and the costs of purchased data from state departments of motor vehicles.

Systems development and programming costs

Systems development and programming costs include: compensation and benefit costs for our product development and product management personnel; other costs related to our product development and product management functions; and costs related to external software consultants involved in systems development and programming activities.

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Selling, general and administrative expenses

Our selling, general and administrative expenses include: compensation and benefit costs for our sales, marketing, administration and corporate personnel; costs related to our facilities; professional and legal fees; and share-based compensation expense.

Depreciation and amortization

Depreciation includes depreciation attributable to buildings, leasehold improvements, data processing and computer equipment, purchased software, and furniture and fixtures. Amortization includes amortization attributable to software developed or obtained for internal use and intangible assets acquired in business combinations, particularly our acquisition of the Claims Services Group from Automated Data Processing, Inc. in 2006 (the “CSG Acquisition”) and our acquisition of Explore Information Services, LLC (“Explore”).

Restructuring charges, asset impairments and other costs associated with exit and disposal activities

Restructuring charges, asset impairments and other costs associated with exit and disposal activities primarily represent costs incurred in relation to our restructuring initiatives. Restructuring charges primarily include employee termination benefits charges and charges related to the lease and vendor contract liabilities that we do not expect to provide future economic benefits due to the implementation of our restructuring initiatives.

Acquisition and related costs

Acquisition and related costs include legal and other professional fees and other transaction costs associated with completed and contemplated business combinations and asset acquisitions, costs associated with integrating acquired businesses, including costs incurred to eliminate workforce redundancies and for product rebranding, and other charges incurred as a direct result of our acquisition efforts. These other charges include changes to the fair value of contingent purchase consideration, acquired assets and assumed liabilities subsequent to the completion of the purchase price allocation purchase consideration that is deemed to be compensatory in nature, incentive compensation arrangements with continuing employees of acquired companies and gains and losses resulting from the settlement of a pre-existing contractual relationship with an acquiree as a result of the applicable acquisition.

Interest expense

Interest expense consists primarily of payments of interest on our debt and amortization of related debt issuance costs.

Other expense, net

Other expense, net consists of foreign exchange gains and losses on notes receivable and notes payable to affiliates, interest income and other miscellaneous income and expense.

Income tax provision

Income taxes have been provided for all items included in the statements of income included herein, regardless of when such items were reported for tax purposes or when the taxes were actually paid or refunded.

Net income attributable to noncontrolling interests

Several of our customers and other entities own noncontrolling interests in seven of our operating subsidiaries. Net income attributable to noncontrolling interests reflect such owners’ proportionate interest in the earnings of such operating subsidiaries.

Factors Affecting Our Operating Results

Below is a summary description of several external factors that have or may have an effect on our operating results.

Foreign currency. During the three months ended September 30, 2012 and 2011, we generated approximately 68% and 71%, respectively, of our revenues and incurred a majority of our costs, in currencies other than the U.S. dollar, primarily the Euro. We translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during a

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reporting period for our consolidated statement of income and certain components of stockholders’ equity and the exchange rate at the end of that period for the consolidated balance sheet. These translations resulted in foreign currency translation adjustments of $16.3 million and $(34.8) million for the three months ended September 30, 2012 and 2011, respectively, which are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction losses (income) recognized in our consolidated statements of income were $0.5 million and $(0.1) million during the three months ended September 30, 2012 and 2011, respectively.

Exchange rates between most of the major foreign currencies we use to transact our business and the U.S. dollar have fluctuated significantly over the last few years and we expect that they will continue to fluctuate during fiscal year 2013. The majority of our revenues and costs are denominated in Euros, Pound Sterling, Swiss francs, Canadian dollars and other foreign currencies. The following table provides the average quarterly exchange rates for the Euro and Pound Sterling since the beginning of fiscal year 2012:

Period	Average Euro-to-U.S. Dollar Exchange Rate		Average Pound Sterling-to-U.S. Dollar Exchange Rate
Quarter ended September 30, 2011	$	1.42	$	1.61
Quarter ended December 31, 2011	1.35		1.57
Quarter ended March 31, 2012	1.31		1.57
Quarter ended June 30, 2012	1.28		1.58
Quarter ended September 30, 2012	1.25		1.58

During the three months ended September 30, 2012 as compared to the three months ended September 30, 2011, the U.S. dollar strengthened against most major foreign currencies we use to transact our business. The average U.S. dollar strengthened versus the Euro by 11.6% and the Pound Sterling by 2.0%, which decreased our revenues and expenses for the three months ended September 30, 2012. A hypothetical 5% increase or decrease in the U.S. dollar versus other currencies in which we transact our business would have resulted in an increase or decrease, as the case may be, to our revenues of $6.7 million during the three months ended September 30, 2012.

In April 2012, in order to hedge our exposure to variability in the Euro-denominated cash flows associated with two intercompany loans, we entered into two pay fixed Euros / received fixed U.S. dollar cross-currency swaps in the aggregate notional amount of €109.0 million. These cross-currency swaps were designated, at inception, as cash flow hedges of the intercompany loans. Accordingly, any foreign exchange gain or loss recognized in our consolidated statements of income resulting from the periodic re-measurement of the intercompany loans into U.S. dollars is mitigated by an offsetting gain or loss, as the case may be, resulting from the change in the fair value of the swaps.

Factors that affect business volume. The following external factors have or may have an effect on the number of claims that are submitted and/or our volume of transactions, any of which can affect our revenues:

• Number of insurance claims made. In fiscal year 2012, the number of insurance claims made increased slightly versus fiscal year 2011. However, in several of our large western European markets, the number of insurance claims for vehicle damage submitted by owners to their insurance carriers declined slightly. The number of insurance claims made can be influenced by factors such as unemployment levels, the number of miles driven, rising gasoline prices, the number of uninsured drivers, rising insurance premiums and insured opting for lower coverage or higher deductible levels, among other things. Fewer claims made can reduce the transaction-based fees that we generate.

• Sales of new and used vehicles. According to industry sources, new vehicle sales fell in 2008, 2009, 2010 and 2011 in markets wherein automobile insurance is generally government-mandated and claims processing is automated (“advanced markets”). Sales in these markets are projected to grow at a 0.9% compound annual growth rate through 2020. In other markets, sales continued to grow from 2008 through 2011, and are projected to grow at a 5.7% compound annual growth rate through 2020. Fewer new light vehicle sales can result in fewer insured vehicles on the road and fewer automobile accidents, which can reduce the transaction-based fees that we generate.

• Damaged vehicle repair costs. The cost to repair damaged vehicles, also known as severity, includes labor, parts and other related costs. Severity has steadily risen for a number of years. According to the Insurance Information Institute, from 2001 through 2010, the price index for body work has increased by 30.5% compared with a 23.2% increase in the general cost of living index. Insurance companies purchase our products and services to help

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standardize the cost of repair. Should the cost of labor, parts and other related items continue to increase over time, insurance companies may seek to purchase and utilize an increasing number of our products and services to help improve the standardization of the cost of repair.

• Penetration Rate of Vehicle Insurance. An increasing rate of procuring vehicle insurance will result in an increase in the number of insurance claims made for damaged vehicles. An increasing number of insurance claims submitted can increase the transaction-based fees that we generate for partial-loss and total-loss estimates. This is due in part to both increased regulation and increased use of financing in the purchase of new and used vehicles. We expect that the rate of vehicle insurance in our less mature international markets will continue to increase during the next eighteen months.

• Automobile usage—number of miles driven. Several factors can influence miles driven including gasoline prices and economic conditions. Through August of calendar year 2012, miles driven in the United States increased by 0.9% compared to the same period in the prior year. Higher miles driven can result in a greater number of automobile accidents, which can increase the transaction-based fees that we generate.

• Seasonality. Our business is subject to seasonal and other fluctuations. In particular, we have historically experienced higher revenues during the second quarter and third quarter versus the first quarter and fourth quarter during each fiscal year. This seasonality is caused primarily by more days of inclement weather during the second quarter and third quarter in most of our markets, which contributes to a greater number of vehicle accidents and damage during these periods. In addition, our business is subject to fluctuations caused by other factors, including the occurrence of extraordinary weather events and the timing of certain public holidays. For example, the Easter holiday occurs during the third quarter in certain fiscal years and occurs during the fourth quarter in other fiscal years, resulting in a change in the number of business days during the quarter in which the holiday occurs.

Share-based compensation expense. We incurred pre-tax, non-cash share-based compensation charges of $4.0 million and $3.6 million during the three months ended September 30, 2012 and 2011, respectively. We expect to recognize additional pre-tax, non-cash share-based compensation charges related to share-based awards outstanding at September 30, 2012 of approximately $43.3 million ratably over the remaining weighted-average vesting period of 3.0 years.

Restructuring charges. We have incurred restructuring charges in each period presented and also expect to incur additional restructuring charges, primarily relating to severance costs, over the next several quarters as we work to improve efficiencies in our business. We do not expect reduced revenues or an increase in other expenses as a result of continued implementation of our restructuring initiatives.

Other factors. Other factors that have or may have an effect on our operating results include:

• gain and loss of customers;

• pricing pressures;

• acquisitions, joint ventures or similar transactions;

• expenses to develop new software or services; and

• expenses and restrictions related to indebtedness.

We do not believe inflation has had a material effect on our financial condition or results of operations in recent years.

Results of Operations

Our results of operations include the results of operations of acquired companies from the date of the respective acquisitions.

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The table below sets forth statement of income data, including the amount and percentage changes for the periods indicated (dollars in thousands):

	Three Months Ended September 30,
	2012	2011	Change
	$	$	$		%
Revenues	195,719	198,693	(2,974	)	(1.5	)
Cost of revenues:
Operating expenses	42,340	43,618	(1,278	)	(2.9	)
Systems development and programming costs	17,857	19,045	(1,188	)	(6.2	)
Total cost of revenues (excluding depreciation and amortization)	60,197	62,663	(2,466	)	(3.9	)
Selling, general & administrative expenses	50,909	48,421	2,488		5.1
Depreciation and amortization	24,195	26,008	(1,813	)	(7.0	)
Restructuring charges, asset impairments and other costs associated with exit and disposal activities	1,454	198	1,256		634.3
Acquisition and related costs	3,158	1,356	1,802		132.9
Interest expense	17,300	12,294	5,006		40.7
Other expense, net	398	55	343		623.6
	157,611	150,995	6,616		4.4
Income before provision for income taxes	38,108	47,698	(9,590	)	(20.1	)
Income tax provision	1,697	13,252	(11,555	)	(87.2	)
Net income	36,411	34,446	1,965		5.7
Less: Net income attributable to noncontrolling interests	2,770	3,207	(437	)	(13.6	)
Net income attributable to Solera Holdings, Inc.	33,641	31,239	2,402		7.7

The table below sets forth our statement of income data expressed as a percentage of revenues for the periods indicated:

	Three Months Ended September 30,
	2012		2011
Revenues	100.0	%	100.0	%
Cost of revenues:
Operating expenses	21.6		22.0
Systems development and programming costs	9.1		9.6
Total cost of revenues (excluding depreciation and amortization)	30.8		31.5
Selling, general & administrative expenses	26.0		24.4
Depreciation and amortization	12.4		13.1
Restructuring charges, asset impairments and other costs associated with exit and disposal activities	0.7		0.1
Acquisition and related costs	1.6		0.7
Interest expense	8.8		6.2
Other expense, net	0.2		—
	80.5		76.0
Income before provision for income taxes	19.5		24.0
Income tax provision	0.9		6.7
Net income	18.6		17.3
Less: Net income attributable to noncontrolling interests	1.4		1.6
Net income attributable to Solera Holdings, Inc.	17.2	%	15.7	%

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Revenues

During the three months ended September 30, 2012, revenues decreased $3.0 million, or 1.5%. After adjusting for changes in foreign currency exchange rates, revenues increased $11.6 million, or 5.8%, during the three months ended September 30, 2012 resulting from growth in transaction and subscription revenues in several countries from sales to new customers and increased transaction volume from and sales of new software and services to existing customers.

Our EMEA revenues decreased $8.5 million, or 7.1%, to $110.1 million. After adjusting for changes in foreign currency exchange rates, EMEA revenues increased $3.5 million, or 2.9%, during the three months ended September 30, 2012 resulting from growth in transaction revenues in several countries from sales to new customers and increased transaction volume from and sales of new software and services to existing customers.

Our Americas revenues increased $5.5 million, or 6.9%, to $85.6 million. After adjusting for changes in foreign currency exchange rates, Americas revenues increased $8.1 million, or 10.2%, during the three months ended September 30, 2012 resulting from incremental revenue contributions from immaterial acquisitions completed in fiscal year 2012, revenue growth in our Explore business due to an increase in drivers and households monitored, and growth in transaction and subscription revenues from sales to new customers and increased transaction volume from and sales of new software and services to existing customers in Latin America.

Set forth below are revenues from each of our principal customer categories and as a percentage of revenues for the periods indicated (dollars in millions):

	Three Months Ended September 30,				Three Months Ended September 30,
	2012				2011
Insurance companies	$	88.9	45.4	%	$	90.1	45.4	%
Collision repair facilities	64.4		32.9		64.6		32.5
Independent assessors	17.6		9.0		19.2		9.7
Automotive recyclers and other	24.8		12.7		24.8		12.4
Total	$	195.7	100.0	%	$	198.7	100.0	%

Revenue growth for each of our customer categories was as follows:

	Three Months Ended September 30, 2012
(dollars in millions)	Revenue Growth			Percentage Change
Insurance companies	$	(1.2	)	(1.3	)%
Collision repair facilities	(0.2		)	(0.3	)
Independent assessors	(1.6		)	(8.7	)
Automotive recyclers and other	—			0.2
Total	$	(3.0	)	(1.5	)%

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Revenue growth for each of our customer categories after adjusting for changes in foreign currency exchange rates was as follows:

	Three Months Ended September 30, 2012
(dollars in millions)	Revenue Growth		Percentage Change
Insurance companies	$	4.9	5.4	%
Collision repair facilities	5.2		8.1
Independent assessors	0.7		3.5
Automotive recyclers and other	0.8		3.5
Total	$	11.6	5.8	%

Operating expenses

During the three months ended September 30, 2012, operating expenses decreased $1.3 million, or 2.9%. After adjusting for changes in foreign currency exchange rates, operating expenses increased $1.4 million, or 3.3%, during the three months ended September 30, 2012 primarily due to an increase in operating expenses in our Americas segment.

Our EMEA operating expenses decreased $2.7 million, or 11.6%. After adjusting for changes in foreign currency exchange rates, EMEA operating expenses decreased $0.3 million, or 1.5%, during the three months ended September 30, 2012 primarily due to ongoing waste reduction and cost containment initiatives.

Our Americas operating expenses increased $1.3 million or 6.2%. After adjusting for changes in foreign currency exchange rates, Americas operating expenses increased $1.6 million, or 7.9%, during the three months ended September 30, 2012 primarily due to an increase in the costs of data purchased from state departments of motor vehicles consistent with the revenue growth in our Explore business.

Systems development and programming costs

During the three months ended September 30, 2012, systems development and programming costs (“SD&P”) decreased $1.2 million, or 6.2%. After adjusting for changes in foreign currency exchange rates, SD&P increased $0.3 million, or 1.8%, during the three months ended September 30, 2012 primarily due to an increase in SD&P expenses in our Americas segment partially offset by a decrease in SD&P expenses in our EMEA segment.

Our EMEA SD&P decreased $2.3 million, or 17.8%. After adjusting for changes in foreign currency exchange rates, EMEA SD&P decreased $0.9 million, or 6.7%, during the three months ended September 30, 2012 primarily due to a decrease in personnel related expenses resulting from ongoing waste reduction and cost containment initiatives.

Our Americas SD&P increased $1.2 million, or 19.7%. After adjusting for changes in foreign currency exchange rates, Americas SD&P increased $1.2 million, or 20.9%, during the three months ended September 30, 2012 primarily due to an increase in personnel related expenses resulting from increased investment in new product development.

Selling, general and administrative expenses

During the three months ended September 30, 2012, selling, general and administrative expenses (“SG&A”) increased $2.5 million, or 5.1%. After adjusting for changes in foreign currency exchange rates, SG&A increased $5.9 million, or 12.1%, primarily due to a $4.8 million increase in personnel and recruiting expenses primarily related to the expansion of our corporate and regional functions to support continued growth and incremental contributions from immaterial acquisitions during fiscal year 2012, a $0.5 million increase in advertising and other general and administrative expenses, a $0.4 million increase in stock-based compensation expense and $0.5 million of legal fees incurred in connection with our patent infringement lawsuit against Mitchell, partially offset by a $0.7 million decrease in professional fees.

Notwithstanding the impact of fluctuations in the value of the U.S. dollar versus certain foreign currencies in which we transact business, we expect SG&A to continue to increase in the future in absolute dollars as we continue to expand our business into new markets, incur costs related to acquisitions and continue to incur costs associated with being a public company.

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Depreciation and amortization

During the three months ended September 30, 2012, depreciation and amortization decreased by $1.8 million, or 7.0%. After adjusting for changes in foreign currency exchange rates, depreciation and amortization decreased $0.3 million, or 1.3% for the three months ended September 30, 2012 primarily due to the continued decrease in amortization expense related to the intangible assets acquired in the CSG Acquisition since these intangible assets are being amortized on an accelerated basis.

We generally amortize intangible assets on an accelerated basis to reflect the pattern in which the economic benefits of the intangible assets are realized. Notwithstanding the impact of fluctuations in the value of the U.S. dollar versus certain foreign currencies in which we transact business, we anticipate that our annual depreciation and amortization expense will increase over the next several years as a result of the amortization of the intangible assets acquired in business combinations and asset acquisitions.

Restructuring charges, asset impairments and other costs associated with exit and disposal activities

During the three months ended September 30, 2012 and 2011, we incurred restructuring charges, asset impairments and other costs associated with exit and disposal activities of $1.5 million and $0.2 million, respectively. The restructuring charges, asset impairments and other costs associated with exit and disposal activities incurred in the three months ended September 30, 2012 consist primarily of employee termination benefits incurred in relation to ongoing restructuring initiatives. The restructuring charges incurred under these restructuring plans are expected to be paid through fiscal year 2013.

The restructuring charges, asset impairments and other costs associated with exit and disposal activities incurred in the three months ended September 30, 2011 consist primarily of charges related to the relocation of our corporate headquarters and global executive team to the Dallas-Fort Worth, Texas metroplex.

We expect to incur additional restructuring charges in future years as we continue to undertake additional efforts to improve efficiencies in our business.

Acquisition and related costs

During the three months ended September 30, 2012 and 2011, we incurred acquisition and related costs of $3.2 million and $1.4 million, respectively. Acquisition and related costs incurred during the three months ended September 30, 2012 and 2011 consist primarily of legal and professional fees incurred in connection with completed and contemplated business combinations of $1.4 million and $0.3 million, respectively, and contingent purchase consideration that is deemed compensatory in nature and other costs associated with completed acquisitions of $1.8 million and $1.2 million, respectively.

We expect to incur additional acquisition and related costs in future years related to compensatory contingent purchase consideration from completed acquisitions and as we continue to pursue potential business combinations and asset acquisitions as part of our plan to grow our business. Refer to Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for the amount of remaining potential charges associated with completed acquisitions.

Interest expense

During the three months ended September 30, 2012, interest expense increased $5.0 million due primarily to interest expense related to the senior unsecured notes issued in April 2012.

Notwithstanding fluctuations in the value of the U.S. dollar versus the Euro, we expect that our annual interest expense will increase in fiscal year 2013 as a result of the interest on the senior unsecured notes issued in April 2012.

Other expense, net

During the three months ended September 30, 2012, other expense, net increased by $0.3 million primarily due to net foreign currency transaction losses on transactions denominated in a currency other than the functional currency of the local company.

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Income tax provision

During the three months ended September 30, 2012 and 2011, we recorded an income tax provision of $1.7 million and $13.3 million, respectively, which resulted in an effective tax rate of 4.5% and 27.8%, respectively. The decrease in the effective tax rate was primarily due to an enacted tax law change that will allow for the realization of tax benefits for certain foreign net operating loss carryforwards, and higher earnings in jurisdictions with lower income tax rates which are indefinitely reinvested. We expect to utilize the net operating losses from fiscal year 2014 through fiscal year 2016. This was partially offset by the impact of the expiration of the look through rule for related controlled foreign corporations and certain discrete tax charges for the quarter.

Our effective tax rate for the three months ended September 30, 2012 is not necessarily indicative of the effective tax rate that may be expected for fiscal year 2013.

Factors that impact our income tax provision include, but are not limited to, the mix of jurisdictional earnings and varying jurisdictional income tax rates, establishment and release of valuation allowances in certain jurisdictions, permanent differences resulting from the book and tax treatment of certain items, and discrete items. Future changes in tax laws or tax rulings may have a significant adverse impact on our effective tax rate. There have been several U.S. domestic and international laws recently enacted that could continue to have a material adverse impact on our tax expense.

Liquidity and Capital Resources

Our principal sources of cash have included cash generated from operations, proceeds from our May 2007 initial public offering and our November 2008 secondary public stock offering, borrowings under our senior secured credit facilities and the proceeds from the issuance of the senior unsecured notes in June 2011 (the “2011 Senior Notes”) and April 2012 (the “2012 Senior Notes” and collectively with the 2011 Senior Notes, the “Senior Notes”). Our principal uses of cash have been, and we expect them to continue to be, for business combinations, debt service, stock repurchases, dividends, capital expenditures and working capital.

The Senior Notes accrue interest at 6.75% per annum, payable semi-annually, and become due and payable in full on June 15, 2018. The Senior Notes include redemption provisions that allow us, at our option, to redeem all or a portion of the aggregate principal amount as follows:

• At any time prior to June 15, 2014, we may redeem up to 35% of the aggregate principal amount of the 2011 and 2012 Senior Notes at a redemption price equal to 106.75% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, through the date of redemption, using the net cash proceeds from the issuance of common stock.

• At any time prior to June 15, 2014, we may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes redeemed plus a premium as of, and accrued and unpaid interest to, the redemption date. The amount of the premium is the greater of (i) 1.0% of the then outstanding principal amount of the notes redeemed or (ii) the excess of (a) the present value at the redemption date of the sum of the redemption price of the notes redeemed at June 15, 2014 plus all required interest payments due on the notes redeemed through June 15, 2014 (excluding accrued but unpaid interest to the redemption date), calculated using a discount rate equal to the yield maturity on the redemption date of U.S. Treasury Securities with a constant maturity most nearly equal to the period from the redemption date to June 15, 2014 plus 50 basis points, over (b) the principal amount of the notes.

• At any time on or after June 15, 2014, we may redeem the Senior Notes at the following redemption prices, plus accrued and unpaid interest, if any, through the date of redemption: (i) if the redemption occurs on or after June 15, 2014 but prior to June 15, 2015, the redemption price is 103.375% of the principal amount of the notes redeemed; (ii) if the redemption occurs on or after June 15, 2015 but prior to June 15, 2016, the redemption price is 101.688% of the principal amount of the notes redeemed; and (iii) if the redemption occurs on or after June 15, 2016, the redemption price is 100.000% of the principal amount of the notes redeemed.

Upon the occurrence of a change of control, we are required to offer to redeem the Senior Notes at a redemption price equal to 101% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, through the redemption date.

The Senior Notes contain certain covenants including, among others, restrictions related to dividends, distributions, repurchases of equity, prepayments of debt or additional indebtedness, investments; liens on assets; mergers with another

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company, dispositions of assets, and transactions with affiliates. We are in compliance with the specified financial covenants of the Senior Notes at September 30, 2012.

In April 2012, we entered into an Amended and Restated First Lien Credit and Guaranty Agreement (the “Amended Credit Facility”), which amended and restated the Amended and Restated First Lien Credit and Guaranty Agreement, dated as of May 16, 2007. The Amended Credit Facility consists of a U.S. term loan facility in an aggregate principal amount of approximately $106.5 million and European term loans in an aggregate principal amount of approximately €142.8 million. The maturity date for all of the term loans is May 16, 2017.

As of September 30, 2012, we had $106.0 million and $182.8 million (€142.1 million) in outstanding loans under the U.S. term loan and European term loan, respectively. Currently, the U.S. term loan bears interest at 1-month LIBOR plus a 3.0% margin (3.3% at September 30, 2012) and the European term loans bear interest at 1-month EURIBOR plus a 3.0% margin (3.1% at September 30, 2012). Interest is payable monthly.

The Amended Credit Facility provides us with the ability to add up to $100.0 million of incremental revolving loans. On July 19, 2012, we established a committed incremental revolving credit facility of $85.0 million with a group of banks. At September 30, 2012, no loans are outstanding under the incremental revolving credit facility.

The Amended Credit Facility contains a leverage ratio, which is applicable only if specified minimum borrowings are outstanding during a quarter. In addition, the Amended Credit Facility contains covenants restricting us from undertaking specified corporate actions, including but not limited to asset dispositions, acquisitions, payment of dividends and other specified payments, changes of control, incurrence of indebtedness, capital expenditures, creation of liens, making loans and investments and transactions with affiliates. We are in compliance with the specified financial covenants of the Amended Credit Facility at September 30, 2012.

In order to reduce our exposure to interest rate volatility associated with our USD and Euro denominated term loans under the Amended Credit Facility, in August 2012, we entered into two pay fixed / receive floating interest rate swaps with notional amounts of $80.0 million and €64.5 million, respectively. The maturity date of both swaps is May 16, 2017 which coincides with the maturity of our USD and Euro denominated term loans and bear an interest rate of 0.8225% plus a 3.0% margin for the US dollar denominated swap and 0.7550% plus a 3.0% margin for the Euro denominated swap.

In order to mitigate the variability of the Euro-denominated cash flows associated with two intercompany loans, in April 2012, we entered into two pay fixed Euros / received fixed U.S. dollar cross-currency swaps in the aggregate notional amount of €109.0 million.

Pursuant to agreements entered into prior to the CSG Acquisition, the noncontrolling stockholders of certain of our majority-owned subsidiaries have the right to require us to redeem their shares at the then fair market value. We do not have any indication that the exercise any remaining redemption rights is probable within the next twelve months. Further, we do not believe the occurrence of conditions precedent to the exercise of certain of these redemption rights is probable within the next twelve months. If the stockholders exercised their redemption rights, we believe that we have sufficient liquidity to fund such redemptions.

On October 11, 2012, we acquired the remaining 7% ownership interest in our AUTOonline GmbH In-formationssysteme (“AUTOonline”) majority-owned subsidiary for a cash payment of €10.9 million ($14.1 million).

In December 2010, we acquired a minority ownership interest in Digidentity B.V., a Dutch company that is a leading provider of next-generation E-identification certificates for authentication of online identities. Pursuant to the terms of the acquisition, the majority owners of Digidentity may put their shares to us through fiscal year 2013 if Digidentity achieves certain financial performance targets. The purchase price of the shares is calculated based on a multiple of Digidentity’s actual versus target earnings before interest expense, income tax expense, depreciation and amortization for the twelve-month period ended prior to the exercise date.

In November 2011, our Board of Directors approved a share repurchase program for up to a total of $180 million of our common stock through November 10, 2013. Share repurchases are made from time to time in open market transactions at prevailing market prices or in privately negotiated transactions. The repurchase program does not require us to purchase any specific number or amount of shares, and the timing and amount of such purchases will be determined by management based upon market conditions and other factors. In addition, the program may be amended or terminated at the discretion of our Board of Directors. During three months ended September 30, 2012, we purchased 0.2 million shares for $8.5 million. Through September 30, 2012, we have repurchased 2.4 million shares for $112.0 million under the share repurchase program.

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On September 18, 2012, we paid a quarterly cash dividend with a value of $0.125 per outstanding share of common stock and per outstanding restricted stock unit to our stockholders and restricted stock unit holders of record on September 6, 2012. The aggregate dividend payment for the three months ended September 30, 2012 was $8.7 million. On November 5, 2012, we announced that the Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.125 per outstanding share of common stock and per outstanding restricted stock unit. The Audit Committee also approved a quarterly stock dividend equivalent of $0.125 per outstanding restricted stock unit granted to certain of our executive officers since fiscal year 2011 in lieu of the cash dividend, which dividend equivalent will be paid to the restricted stock unit holders as the restricted stock unit vests. The dividends are payable on December 4, 2012 to stockholders and restricted stock unit holders of record at the close of business on November 19, 2012. Any determination to pay dividends in future periods will be at the discretion of our Board of Directors. The indenture governing the Senior Notes and our amended and restated senior secured credit facility include restrictions on our ability to pay dividends on our common stock.

As of September 30, 2012 and June 30, 2012, we had cash and cash equivalents of $542.9 million and $508.2 million, respectively. At September 30, 2012, our total current and long-term debt obligations were $1.1 billion, consisting of $850.0 million related to the Senior Notes due in June 2018, and $288.8 million related to the Amended Credit Facility due in May 2017.

We believe that our existing cash on hand and cash flow from operations will be sufficient to fund currently anticipated working capital, capital spending and debt service requirements, as well as acquisition and strategic opportunities for at least the next twelve months, including our October 2012 acquisitions of substantially all of the assets of PS Holdings, L.L.C. (“APU”) and Title Technologies, Inc. (“TitleTec”) for cash considerations.

Our management believes that our cash is best utilized by investing in the future growth of our business, either through penetration of new geographic markets or acquisitions and other strategic opportunities, and maximizing stockholder return through the payment of cash dividends and stock repurchases. We regularly review acquisition and other strategic opportunities, which may require additional debt or equity financing. If we raise additional funds by issuing equity securities, further dilution to our then-existing stockholders may result. Additional debt financing may include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any equity or debt financing may contain terms, such as liquidation and other preferences, that are not favorable to us or our stockholders.

The following summarizes our primary sources and uses of cash in the periods presented (in millions):

	Three Months Ended September 30,
	2012			2011			Change
Operating activities	$	68.2		$	50.2		$	18.0
Investing activities	(16.7		)	(16.6		)	(0.1		)
Financing activities	(20.8		)	(9.0		)	(11.8		)

Operating activities. The $18.0 million increase in cash provided by operating activities was primarily the result of the timing of payments on outstanding accounts payable and accrued expenses and a decrease in cash paid for income taxes and interest.

Investing activities. The $0.1 million increase in cash used in investing activities was primarily attributable to an increase in restricted cash of $1.5 million and an increase in capital expenditures, net of proceeds from sales of property and equipment, of $0.4 million, partially offset by a decrease in acquisitions of and investments in businesses, net of cash acquired, of $2.1 million.

Financing activities. The $11.8 million increase in cash used in financing activities was primarily attributable to repurchases of shares of our common stock of $8.5 million, an increase in cash dividends paid to noncontrolling interests of $2.4 million and an increase in cash dividends paid on common shares and participating securities of $1.6 million, partially offset by a decrease in repayments of long-term debt of $0.9 million.

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Off-Balance Sheet Arrangements and Related Party Transactions

As of September 30, 2012, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Certain minority stockholders of our international subsidiaries are also commercial purchasers and users of our software and services. Revenue transactions with all of the individual minority stockholders in the aggregate were less than 10% of our consolidated revenue for the three months ended September 30, 2012 and 2011, respectively, and aggregate accounts receivable from the minority stockholders represent less than 10% of consolidated accounts receivable at September 30, 2012 and June 30, 2012, respectively.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts reported in our consolidated financial statements. On an ongoing basis, we evaluate estimates. We base our estimates on historical experiences and assumptions which we believe to be reasonable under the circumstances. These estimates form the basis for our judgments that affect the amounts reported in the consolidated financial statements. Actual results could differ from our estimates under different assumptions or conditions. Our significant accounting policies, which may be affected by our estimates and assumptions, are more fully described in Note 2 to our audited consolidated financial statements for the year ended June 30, 2012 and our critical accounting policies are more fully described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” each of which are included in our Annual Report on Form 10-K for the year ended June 30, 2012 filed with the SEC on August 29, 2012. There were no significant changes in our critical accounting policies and estimates during the three months ended September 30, 2012.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

We conduct operations in many countries around the world.

Our results of operations are subject to both currency transaction risk and currency translation risk. We incur currency transaction risk when we enter into either a purchase or sale transaction using a currency other than the local functional currency. With respect to currency translation risk, our financial condition and results of operations are measured and recorded in the relevant local functional currency and then translated into U.S. dollars for inclusion in our consolidated financial statements.

Exchange rates between most of the major foreign currencies we use to transact our business and the U.S. dollar have fluctuated significantly over the last few years and we expect that they will continue to fluctuate. The majority of our revenues and costs are denominated in Euros, Pound Sterling, Swiss francs, Canadian dollars and other foreign currencies. The following table provides the average quarterly exchange rates for the Euro and Pound Sterling since the beginning of fiscal year 2012:

Period	Average Euro-to-U.S. Dollar Exchange Rate		Average Pound Sterling-to-U.S. Dollar Exchange Rate
Quarter ended September 30, 2011	$	1.42	$	1.61
Quarter ended December 31, 2011	1.35		1.57
Quarter ended March 31, 2012	1.31		1.57
Quarter ended June 30, 2012	1.28		1.58
Quarter ended September 30, 2012	1.25		1.58

During the three months ended September 30, 2012 as compared to the three months ended September 30, 2011, the U.S. dollar strengthened against most major foreign currencies we use to transact our business. The average U.S. dollar strengthened versus the Euro by 11.6% and the Pound Sterling by 2.0%, which decreased our revenues and expenses for the three months ended September 30, 2012. A hypothetical 5% increase or decrease in the U.S. dollar versus other currencies in which we

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transact our business would have resulted in an increase or decrease, as the case may be, to our revenues of $6.7 million during the three months ended September 30, 2012.

In April 2012, in order to hedge our exposure to variability in the Euro-denominated cash flows associated with two intercompany loans, we entered into two pay fixed Euros / received fixed U.S. dollar cross-currency swaps in the aggregate notional amount of €109.0 million. These cross-currency swaps were designated, at inception, as cash flow hedges of the intercompany loans. Accordingly, any foreign exchange gain or loss recognized in our consolidated statements of income resulting from the periodic re-measurement of the intercompany loans into U.S. dollars is mitigated by an offsetting gain or loss, as the case may be, resulting from the change in the fair value of the swaps.

During the three months ended September 30, 2012 and 2011, we recognized net foreign currency transaction losses (income) in our consolidated statements of income of $0.5 million and $(0.1) million, respectively.

Interest Rate Risk

We are exposed to interest rate risks primarily through variable interest rate borrowings under our amended and restated senior secured credit facility.

In order to reduce our exposure to interest rate volatility associated with our USD and Euro denominated term loans, in August 2012, we entered into two pay fixed / receive floating interest rate swaps with notional amounts of $80.0 million and €64.5 million, respectively. The maturity date of both swaps is May 16, 2017 which coincides with the maturity of our USD and Euro denominated term loans and bear an interest rate of 0.8225% plus a 3.0% margin for the US dollar denominated swap and 0.7550% plus a 3.0% margin for the Euro denominated swap.

Our weighted-average borrowings outstanding under our amended and restated senior secured credit facility during the three months ended September 30, 2012 were $284.5 million, of which approximately $128.0 million is unhedged. The weighted average interest rate on the unhedged portion of our term loans during the three months ended September 30, 2012 was 3.6%. A hypothetical 1% increase or decrease in interest rates on the unhedged portion of our term loans would have resulted in an approximately $0.3 million change to our interest expense for the three months ended September 30, 2012.

ITEM 4. CONTROLS AND PROCEDURES.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures and, based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2012.

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all error or all fraud. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Solera have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Changes in Internal Controls

We did not identify any changes in our internal control over financial reporting that occurred during the first quarter of fiscal year 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, various claims, charges and litigation are asserted or commenced against us, including:

• We have been the subject of allegations that our repair estimating and total loss software and services produced results that favored our insurance company customers, one of which is the subject of pending litigation.

• We are subject to assertions by our customers and strategic partners that we have not complied with the terms of our agreements with them or our agreements with them are not enforceable.

We have and will continue to vigorously defend ourselves against these claims. We believe that final judgments, if any, which may be rendered against us in current litigation, are adequately reserved for, covered by insurance or would not have a material adverse effect on our financial position.

ITEM 1A. RISK FACTORS

In addition to the cautionary statement regarding forward-looking statements included above in this Quarterly Report on Form 10-Q, we also provide the following cautionary discussion of risks and uncertainties relevant to our business. These risks and uncertainties, as well as other factors that we may not be aware of, could cause our actual results to differ materially from expected and historical results and could cause assumptions that underlie our business plans, expectations and statements in this Quarterly Report on Form 10-Q to be inaccurate.

We depend on a limited number of customers for a substantial portion of our revenues, and the loss of, or a significant reduction in volume from, any of these customers would harm our financial results.

We derive a substantial portion of our revenues from sales to large insurance companies and collision repair facilities that have relationships with these insurance companies. During the three months ended September 30, 2012, we derived 18.1% of our revenues from our ten largest insurance company customers. The largest three of these customers accounted for 2.8%, 2.4%, and 2.2%, respectively, of our revenues during the three months ended September 30, 2012. A loss of one or more of these customers would result in a significant decrease in our revenues, including the business generated by collision repair facilities associated with those customers. Furthermore, many of our arrangements with European customers are terminable by them on short notice or at any time. In December 2011, we were notified by a U.S. insurance company customer that it will not renew its contract with us, and we expect this customer to transition to another provider during fiscal year 2013. This contract accounted for approximately 2% of our total revenues during the three months ended September 30, 2012. In addition, disputes with customers may lead to delays in payments to us, terminations of agreements or litigation. Additional terminations or non-renewals of customer contracts or reductions in business from our large customers would harm our business, financial condition and results of operations.

Our industry is highly competitive, and our failure to compete effectively could result in a loss of customers and market share, which could harm our revenues and operating results.

The markets for our automobile insurance claims processing software and services are highly competitive. In the United

States, our principal competitors are CCC Information Services Group Inc. and Mitchell International Inc. In Europe, our principal competitors are EurotaxGlass’s Group, DAT GmbH and GT Motive Einsa Group. We also encounter regional or country-specific competition in the markets for automobile insurance claims processing software and services and our

other products and services. For example Experian® is our principal competitor in the United Kingdom in the vehicle validation market, car.tv is our principal competitor in Germany in the online salvage vehicle disposition market and ChoicePoint is our principal competitor in the United States in the automobile reunderwriting solutions market. If one or more of our competitors develop software or services that are superior to ours or are more effective in marketing their software or services, our market share could decrease, thereby reducing our revenues. In addition, if one or more of our competitors retain

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existing or attract new customers for which we have developed new software or services, we may not realize expected revenues from these new offerings, thereby reducing our profitability.

Some of our current or future competitors may have or develop closer customer relationships, develop stronger brands, have greater access to capital, lower cost structures and/or more attractive system design and operational capabilities than we have. Consolidation within our industry could result in the formation of competitors with substantially greater financial, management or marketing resources than we have, and such competitors could utilize their substantially greater resources and economies of scale in a manner that affects our ability to compete in the relevant market or markets. As a result of consolidation, our competitors may be able to adapt more quickly to new technologies and customer needs, devote greater resources to promoting or selling their products and services, initiate and withstand substantial price competition, expand into new markets, hire away our key employees, change or limit access to key information and systems, take advantage of acquisition or other strategic opportunities more readily and develop and expand their product and service offerings more quickly than we can. In addition, our competitors may form strategic or exclusive relationships with each other and with other companies in attempts to compete more successfully against us. These relationships may increase our competitors’ ability, relative to ours, to address customer needs with their software and service offerings, which may enable them to rapidly increase their market share.

Moreover, many insurance companies have historically entered into agreements with automobile insurance claims processing service providers like us and our competitors whereby the insurance company agrees to use that provider on an exclusive or preferred basis for particular products and services and agrees to require collision repair facilities, independent

assessors and other vendors to use that provider. If our competitors are more successful than we are at negotiating these exclusive or preferential arrangements, we may lose market share even in markets where we retain other competitive advantages.

In addition, our insurance company customers have varying degrees of in-house development capabilities, and one or more of them have expanded and may seek to further expand their capabilities in the areas in which we operate. Many of our customers are larger and have greater financial and other resources than we do and could commit significant resources to product development. Our software and services have been, and may in the future be, replicated by our insurance company customers in-house, which could result in our loss of those customers and their associated repair facilities, independent assessors and other vendors, resulting in decreased revenues and net income.

The time and expense associated with switching from our competitors’ software and services to ours may limit our growth.

The costs for an insurance company to switch providers of claims processing software and services can be significant and the process can sometimes take 12 to 18 months to complete. As a result, potential customers may decide that it is not worth the time and expense to begin using our software and services, even if we offer competitive and economic advantages. If we are unable to convince these customers to switch to our software and services, our ability to increase market share will be limited and could harm our revenues and operating results.

Our operating results may be subject to volatility as a result of exposure to foreign currency exchange risks.

We derive most of our revenues, and incur most of our costs, including a portion of our debt service costs, in currencies other than the U.S. dollar, mainly the Euro. In our historical financial statements, we translate our local currency financial results into U.S. dollars based on average exchange rates prevailing during a reporting period for our consolidated statement of income and certain components of stockholders’ equity or the exchange rate at the end of that period for the consolidated balance sheet. These translations resulted in a net foreign currency translation adjustment of $16.3 million and $(34.8) million for the three months ended September 30, 2012 and 2011, respectively. Ongoing global economic conditions have impacted currency exchange rates.

Exchange rates between most of the major foreign currencies we use to transact our business and the U.S. dollar have fluctuated significantly over the last few years and we expect that they will continue to fluctuate. The majority of our revenues and costs are denominated in Euros, Pound Sterling, Swiss francs, Canadian dollars and other foreign currencies. The following table provides the average quarterly exchange rates for the Euro and Pound Sterling since the beginning of fiscal year 2012:

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Period	Average Euro-to-U.S. Dollar Exchange Rate		Average Pound Sterling-to-U.S. Dollar Exchange Rate
Quarter ended September 30, 2011	$	1.42	$	1.61
Quarter ended December 31, 2011	1.35		1.57
Quarter ended March 31, 2012	1.31		1.57
Quarter ended June 30, 2012	1.28		1.58
Quarter ended September 30, 2012	1.25		1.58

During the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, the U.S. dollar strengthened against most major foreign currencies we use to transact our business. The average U.S. dollar strengthened versus the Euro by 11.6% and the Pound Sterling by 2.0%, which decreased our revenues and expenses for the three months ended September 30, 2012. A hypothetical 5% increase or decrease in the U.S. dollar versus other currencies in which we transact our business would have resulted in an increase or decrease, as the case may be, to our revenues of $6.7 million during the three months ended September 30, 2012.

In April 2012, in order to hedge our exposure to variability in the Euro-denominated cash flows associated with two intercompany loans, we entered into two pay fixed Euros / received fixed U.S. dollar cross-currency swaps in the aggregate notional amount of €109.0 million. These cross-currency swaps were designated, at inception, as cash flow hedges of the intercompany loans. Accordingly, any foreign exchange gain or loss recognized in our consolidated statements of income resulting from the periodic re-measurement of the intercompany loans into U.S. dollars is mitigated by an offsetting gain or loss, as the case may be, resulting from the change in the fair value of the swaps.

During the three months ended September 30, 2012 and 2011, we recognized net foreign currency transaction losses in our consolidated statements of income of $0.5 million and $(0.1) million, respectively.

Further fluctuations in exchange rates against the U.S. dollar could decrease our revenues and associated profits and, therefore, harm our future operating results.

Current uncertainty in global economic conditions makes it particularly difficult to predict product demand, utilization and other related matters and makes it more likely that our actual results could differ materially from expectations.

Our operations and performance depend on worldwide economic conditions, which have deteriorated significantly in many countries where our products and services are sold, and may remain depressed for the foreseeable future. These conditions make it difficult for our customers and potential customers to accurately forecast and plan future business activities, and could cause our customers and potential customers to slow, reduce or refrain from spending on our products. In addition, external factors that affect our business have been and may continue to be impacted by the global economic slowdown. Examples include:

• Number of Insurance Claims Made: In fiscal year 2012, the number of insurance claims made increased slightly versus fiscal year 2011. However, in several of our large western European markets, the number of insurance claims for vehicle damage submitted by owners to their insurance carriers declined slightly. The number of insurance claims made can be influenced by factors such as unemployment levels, the number of miles driven, rising gasoline prices, the number of uninsured drivers, rising insurance premiums and insured drivers opting for lower coverage or higher deductible levels, among other things. Fewer claims made can reduce the transaction-based fees that we generate.

• Sales of New and Used Vehicles: According to industry sources, new vehicle sales in Advanced Markets fell in 2008, 2009, 2010 and 2011. Sales in these markets are projected to grow at a 0.9% compound annual growth rate through 2020. Sales in Evolving and Emerging Markets continued to grow through the period from 2008 through 2011 and are projected to grow at a 5.7% compound annual growth rate through 2020. Fewer new light vehicle sales can result in fewer insured vehicles on the road and fewer automobile accidents, which can reduce the transaction-based fees that we generate.

• Used Vehicle Retail and Wholesale Values: Declines in retail and wholesale used vehicle values can impact vehicle owner and insurance carrier decisions about which damaged vehicles should be repaired and which should be declared a total loss. The lower the retail and wholesale used vehicle values, the more likely it is that a greater percentage of automobiles are declared a total loss versus a partial loss. The fewer number of vehicles that owners

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and insurance carriers decide to repair can reduce the transaction-based fees that we generate for partial-loss estimates, but may have a beneficial impact on the transaction-based fees that we generate for total-loss estimates.

• Automobile Usage—Number of Miles Driven: Several factors can influence miles driven, including gasoline prices and economic conditions. Through August of calendar year 2012, miles driven in the United States increased by 0.9% compared to the same period in the prior year. For calendar year 2011, cumulative miles driven in the United States declined compared to the same period in the prior year. In calendar year 2010, the number of miles driven in the United States increased compared to calendar years 2009 and 2008. Higher miles driven can result in a greater number of automobile accidents, which can increase the transaction-based fees that we generate.

Many of our markets around the world continue to experience or have recently experienced volatility. Accordingly, we cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, worldwide or in particular economic markets. These and other economic factors could have a material adverse effect on demand for or utilization of our products and on our financial condition and operating results.

We may engage in acquisitions, joint ventures, dispositions or similar transactions that could disrupt our operations, cause us to incur substantial expenses, result in dilution to our stockholders and harm our business or results of operations.

Our growth is dependent upon market growth and our ability to enhance our existing products and introduce new products on a timely basis. We have addressed and will continue to address the need to introduce new products both through internal development and through acquisitions of other companies and technologies that would complement or extend our business or enhance our technological capability. In fiscal year 2012, we acquired three businesses, substantially all of the assets of another business and a majority of the outstanding shares of a fifth business. In fiscal year 2013 to date, we have acquired two businesses and substantially all of the assets of another business.

Our ability to realize the anticipated benefits of our acquisitions will depend, to a varying extent, on our ability to continue to expand the acquired business' products and services and integrate them with our products and services. Our management will be required to devote significant attention and resources to these efforts, which may disrupt our core business, the acquired business or both and, if executed ineffectively, could preclude realization of the full benefits we expect. Failure to realize the anticipated benefits of our acquisitions could cause an interruption of, or a loss of momentum in, the operations of the acquired business. In addition, the efforts required to realize the benefits of our acquisitions may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and the diversion of management’s attention, and may cause our stock price to decline. The risks associated with our acquisitions and future acquisitions include:

• adverse effects on existing customer or supplier relationships, such as cancellation of orders or the loss of key customers or suppliers;

• difficulties in integrating or retaining key employees of the acquired company;

• difficulties in integrating the operations of the acquired company, such as information technology resources, and financial and operational data;

• entering geographic or product markets in which we have no or limited prior experience;

• difficulties in assimilating product lines or integrating technologies of the acquired company into our products;

• disruptions to our operations;

• diversion of our management’s attention;

• potential incompatibility of business cultures;

• potential dilution to existing stockholders if we issue shares of common stock or other securities as consideration in an acquisition or if we issue any such securities to finance acquisitions;

• prohibitions against completing acquisitions as a result of regulatory restrictions or disruptions in connection with regulatory investigations of completed acquisitions;

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• limitations on the use of net operating losses or tax benefits;

• negative market perception, which could negatively affect our stock price;

• the assumption of debt and other liabilities, both known and unknown; and

• additional expenses associated with the amortization of intangible assets or impairment charges related to purchased intangibles and goodwill, or write-offs, if any, recorded as a result of the acquisition.

Many of these factors will be outside of our control, and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy.

We were notified by the Federal Trade Commission (“FTC”) that it has commenced a formal investigation of a recently completed, non-material acquisition to determine whether the transaction violates U.S. antitrust law. The transaction may be subject to various remedies, including divestiture of the acquired business. Moreover, the investigation and/or its outcome could expose us to negative publicity, which might adversely affect our brands, reputation and/or customer preference for our products. In addition, our merger and acquisition activities in the same or similar markets as the subject business are subject to antitrust and competition laws, which laws could impact our ability to pursue strategic transactions in these markets.

We participate in joint ventures in some countries, and we may participate in future joint ventures. Our partners in these ventures may have interests and goals that are inconsistent with or different from ours, which could result in the joint venture taking actions that negatively impact our growth in the local market and consequently harm our business or financial condition. If we are unable to find suitable partners or if suitable partners are unwilling to enter into joint ventures with us, our growth into new geographic markets may slow, which would harm our results of operations.

Additionally, we may finance future acquisitions and/or joint ventures with cash from operations, additional indebtedness and/or the issuance of additional securities, any of which may impair the operation of our business or present additional risks, such as reduced liquidity or increased interest expense. For example, we financed the purchase price for the Explore acquisition with a private offering of $450.0 million aggregate principal amount of senior unsecured notes, which resulted in a decrease of our ratio of earnings to fixed charges and adversely affected the leverage measures in our senior secured credit facility. We may also seek to restructure our business in the future by disposing of certain of our assets, which may harm our future operating results, divert significant managerial attention from our operations and/or require us to accept non-cash consideration, the market value of which may fluctuate.

Failure to implement our acquisition strategy, including successfully integrating acquired businesses, could have an adverse effect on our business, financial condition and results of operations.

Our operating results may vary widely from period to period due to the sales cycle, seasonal fluctuations and other factors.

Our contracts with insurance companies generally require time-consuming authorization procedures by the customer, which can result in additional delays between when we incur development costs and when we begin generating revenues from those software or service offerings. In addition, we incur significant operating expenses while we are researching and designing new software and related services, and we typically do not receive corresponding payments in those same periods. As a result, the number of new software and service offerings that we are able to implement, successfully or otherwise, can cause significant variations in our cash flow from operations, and we may experience a decrease in our net income as we incur the expenses necessary to develop and design new software and services. Accordingly, our quarterly and annual revenues and operating results may fluctuate significantly from period to period.

Our business is subject to seasonal and other fluctuations. In particular, we have historically experienced higher revenues during the second quarter and third quarter versus the first quarter and fourth quarter during each fiscal year. This seasonality is caused primarily by more days of inclement weather during the second quarter and third quarter in most of our markets, which contributes to a greater number of vehicle accidents and damage during these periods. In addition, our business is subject to fluctuations caused by other factors, including the occurrence of extraordinary weather events and the timing of certain public holidays. For example, the Easter holiday occurs during the third quarter in certain fiscal years and occurs during the fourth quarter in other fiscal years, resulting in a change in the number of business days during the quarter in which the holiday occurs.

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We anticipate that our revenues will continue to be subject to seasonality and therefore our financial results will vary from period to period. However, actual results from operations may or may not follow these normal seasonal patterns in a given year leading to performance that is not in alignment with expectations.

We also may experience variations in our earnings due to other factors beyond our control, such as:

• the introduction of new software or services by our competitors;

• customer acceptance of new software or services;

• the volume of usage of our offerings by existing customers;

• variations of vehicle accident rates due to factors such as changes in fuel prices, number of miles driven or new vehicle purchases and their impact on vehicle usage;

• competitive conditions, or changes in competitive conditions, in our industry generally;

• prolonged system failures during which time customers cannot submit or process transactions; or

• prolonged interruptions in our access to third-party data incorporated in our software and services.

We may also incur significant or unanticipated expenses when contracts expire, are terminated or are not renewed. Any of these events could harm our financial condition and results of operations and cause our stock price to decline.

Our industry is subject to rapid technological changes, and if we fail to keep pace with these changes, our market share and revenues will decline.

Our industry is characterized by rapidly changing technology, evolving industry standards and frequent introductions of, and enhancements to, existing software and services, all with an underlying pressure to reduce cost. Industry changes could render our offerings less attractive or obsolete, and we may be unable to make the necessary adjustments to our offerings at a competitive cost, or at all. We also incur substantial expenses in researching, developing, designing, purchasing, licensing and marketing new software and services. The development or adaptation of these new technologies may result in unanticipated expenditures and capital costs that would not be recovered in the event that our new software or services are unsuccessful. The research, development, production and marketing of new software and services are also subject to changing market requirements, access to and rights to use third-party data, the satisfaction of applicable regulatory requirements and customers’ approval procedures and other factors, each of which could prevent us from successfully marketing any new software and services or responding to competing technologies. The success of new software in our industry also often depends on the ability to be first to market, and our failure to be first to market with any particular software project could limit our ability to recover the development expenses associated with that project. If we cannot develop or acquire new technologies, software and services or any of our existing software or services are rendered obsolete, our revenues and income could decline and we may lose market share to our competitors, which would impact our future operations and financial results.

Changes in or violations by us or our customers of applicable government regulations could reduce demand for or limit our ability to provide our software and services in those jurisdictions.

Our insurance company customers are subject to extensive government regulations, mainly at the state level in the United States and at the country level in our non-U.S. markets. Some of these regulations relate directly to our software and services, including regulations governing the use of total loss and estimating software. If our insurance company customers fail to comply with new or existing insurance regulations, including those applicable to our software and services, they could lose their certifications to provide insurance and/or reduce their usage of our software and services, either of which would reduce our revenues. Also, we are subject to direct regulation in some markets, and our failure to comply with these regulations could significantly reduce our revenues or subject us to government sanctions. In addition, future regulations could force us to implement costly changes to our software and/or databases or have the effect of prohibiting or rendering less valuable one or more of our offerings. Moreover, some states in the United States have changed and are contemplating changes to their regulations to permit insurance companies to use book valuations or public source valuations for total loss calculations, making our total loss software potentially less valuable to insurance companies in those states. Some states have adopted total loss regulations that, among other things, require insurers use a methodology deemed acceptable to the respective government agency.

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We submit our methodology to such agencies, and if they do not approve our methodology, we will not be able to perform total loss valuations in their respective states. Other states are considering legislation that would limit the data that our software can provide to our insurance company customers. In the event that demand for or our ability to provide our software and services decreases in particular jurisdictions due to regulatory changes, our revenues and margins may decrease.

There is momentum to create a U.S. federal government oversight mechanism for the insurance industry. There is also legislation under consideration by the U.S. legislature relating to the vehicle repair industry. Federal regulatory oversight of or legislation relating to the insurance industry in the United States could result in a broader impact on our business versus similar oversight or legislation at the U.S. state level.

Regulatory developments could negatively impact our business.

We acquire and distribute personal, public and non-public information, store it in our some of our databases and provide it in various forms to certain of our customers in accordance with applicable law and contracts. We are subject to government regulation and, from time to time, companies in similar lines of business to us are subject to adverse publicity concerning the use of such data. We provide many types of data and services that are subject to regulation under the Fair Credit Reporting Act, Gramm-Leach-Bliley Act, Driver’s Privacy Protection Act, Health Insurance Portability and Accountability Act, the European Union’s Data Protection Directive and, to a lesser extent, various other international, federal, state and local laws and regulations. These laws and regulations are designed to protect the privacy of the public and to prevent the misuse of personal information. Our suppliers that provide us with protected and regulated data face similar regulatory requirements and, consequently, they may cease to be able to provide data to us or may substantially increase the fees they charge us for this data which may make it financially burdensome or impossible for us to acquire data that is necessary to offer our certain of our products and services. Additionally, many consumer advocates, privacy advocates, and government regulators believe that the existing laws and regulations do not adequately protect privacy of personal information. They have become increasingly concerned with the use of personal information, particularly social security numbers, department of motor vehicle data and dates of birth. As a result, they are lobbying for further restrictions on the dissemination or commercial use of personal information to the public and private sectors. The following legal and regulatory developments also could have a material adverse affect on our business, financial position, results of operations or cash flows:

• amendment, enactment, or interpretation of laws and regulations which restrict the access, use and distribution of personal information and limit 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 services;

• failure of our services to comply with current or amended laws and regulations; and

• failure of our services to adapt to changes in the regulatory environment in an operational effective, efficient, cost-effective manner.

We require a significant amount of cash to service our indebtedness, which reduces the cash available to finance our organic growth, make strategic acquisitions and enter into alliances and joint ventures; our Amended Credit Facility contains restrictive covenants that limit our ability to engage in certain activities.

We have a significant amount of indebtedness. As of September 30, 2012, our indebtedness, including current maturities, was $1.1 billion, of which $288.8 million matures in May 2017 and $850.0 million matures in June 2018.

During the three months ended September 30, 2012, our aggregate interest expense was $17.3 million and cash paid for interest was $2.8 million. As a result of our issuance of $400.0 million of additional senior unsecured notes in April 2012, our interest expense and cash interest expense will increase significantly in fiscal year 2013 as compared to fiscal year 2012.

Our indebtedness could:

• make us more vulnerable to unfavorable economic conditions and reduce our revenues;

• make it more difficult to obtain additional financing in the future for working capital, capital expenditures or other general corporate purposes;

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• require us to dedicate or reserve a large portion of our cash flow from operations for making payments on our indebtedness which would prevent us from using it for other purposes including software development;

• make us susceptible to fluctuations in market interest rates that affect the cost of our borrowings to the extent that our variable rate debt is not covered by interest rate derivative agreements; and

• make it more difficult to pursue strategic acquisitions, joint ventures, alliances and collaborations.

Our ability to service our indebtedness will depend on our future performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors. Some of these factors are beyond our control. If we cannot generate sufficient cash flow from operations to service our indebtedness and to meet our other obligations and commitments, we may be required to refinance our debt, to dispose of assets or to repatriate foreign earnings to obtain funds for such purpose. We cannot assure you that debt refinancings or asset dispositions could be completed on a timely basis or on satisfactory terms, if at all, or would be permitted by the terms of our debt instruments. If we were to repatriate foreign earnings, we would incur incremental U.S. federal and state income taxes. 

In June 2011 and again in April 2012, we completed private offerings of $450.0 million and $400.0 million, respectively, aggregate principal amount of senior unsecured notes. The senior unsecured notes, in addition to our Amended Credit Facility contain covenants that restrict our and our subsidiaries’ ability to make certain distributions with respect to our capital stock, prepay other debt, encumber our assets, incur additional indebtedness, make capital expenditures above specified levels, engage in business combinations, redeem shares in our operating subsidiaries held by noncontrolling owners or undertake various other corporate activities. These covenants may also require us also to maintain certain specified financial ratios, including those relating to total leverage and interest coverage.

Our failure to comply with any of these covenants could result in the acceleration of our outstanding indebtedness under the Amended Credit Facility. If acceleration occurs, we would not be able to repay our debt and it is unlikely that we would be able to borrow sufficient additional funds to refinance our debt. Even if new financing is made available to us, it may not be available on acceptable or reasonable terms. An acceleration of our indebtedness would impair our ability to operate as a going concern.

Pursuant to agreements entered into prior to the CSG Acquisition, the noncontrolling stockholders of certain of our majority-owned subsidiaries have the right to require us to redeem their shares at the then fair market value. For financial statement reporting purposes, the estimated fair market value of these redeemable noncontrolling interests was $75.8 million at September 30, 2012.

We are active in over 60 countries, where we are subject to country-specific risks that could adversely impact our business and results of operations.

During the three months ended September 30, 2012, we generated approximately 68% of our revenues outside the U.S. and we expect revenues from non-U.S. markets to continue to represent a majority of our total revenues. Business and operations in individual countries are subject to changes in local government regulations and policies, including those related to tariffs and trade barriers, investments, taxation, currency exchange controls and repatriation of earnings. Our results are also subject to the difficulties of coordinating our activities across over 60 different countries. Furthermore, our business strategy includes expansion of our operations into new and developing markets, which will require even greater international coordination, expose us to additional local government regulations and involve markets in which we do not have experience or established operations. In addition, our operations in each country are vulnerable to changes in socio-economic conditions and monetary and fiscal policies, intellectual property protection disputes, the settlement of legal disputes through foreign legal systems, the collection of receivables through foreign legal systems, exposure to possible expropriation or other governmental actions, unsettled political conditions, possible terrorist attacks and pandemic disease. These and other factors may harm our operations in those countries and therefore our business and results of operations.

We have a large amount of goodwill and other intangible assets as a result of acquisitions. Our earnings will be harmed if we suffer an impairment of our goodwill or other intangible assets.

We have a large amount of goodwill and other intangible assets and are required to perform an annual, or in certain situations a more frequent, assessment for possible impairment for accounting purposes. At September 30, 2012, we had goodwill and other intangible assets of $1.3 billion, or approximately 61% of our total assets. If we do not achieve our planned operating results or other factors impair these assets, we may be required to incur a non-cash impairment charge. Any impairment charges in the future will adversely affect our results of operations.

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We may incur significant restructuring and severance charges in future periods, which would harm our operating results and cash position or increase debt.

We incurred restructuring charges of $1.5 million and $0.2 million during the three months ended September 30, 2012 and September 30, 2011, respectively. These charges consist primarily of termination benefits paid or to be paid to employees. As of September 30, 2012, our remaining restructuring and severance obligations associated with these restructuring initiatives were $6.8 million.

We regularly evaluate our existing operations and capacity, and we expect to incur additional restructuring charges as a result of future personnel reductions, related restructuring, and productivity and technology enhancements, which could exceed the levels of our historical charges. In addition, we may incur certain unforeseen costs as existing or future restructuring activities are implemented. Any of these potential charges could harm our operating results and significantly reduce our cash position.

Our software and services rely on information generated by third parties and any interruption of our access to such information could materially harm our operating results.

We believe that our success depends significantly on our ability to provide our customers access to data from many different sources. For example, a substantial portion of the data used in our repair estimating software is derived from parts and repair data provided by, among others, original equipment manufacturers, or OEMs, aftermarket parts suppliers, data aggregators, automobile dealerships, government organizations and vehicle repair facilities. We obtain much of our data about vehicle parts and components and collision repair labor and costs through license agreements with OEMs, automobile dealers, and other providers; and we obtain much of our data in our vehicle validation database and motor violation database from government organizations. EurotaxGlass’s Group, one of our primary competitors in Europe, provides us with valuation and paint data for use in our European markets pursuant to a similar arrangement, and Mitchell International, one of our primary competitors in the United States, provides us with vehicle glass data for use in our U.S. markets pursuant to a similar arrangement. In some cases, the data included in our products and services is licensed from sole-source suppliers. Many of the license agreements through which we obtain data are for terms of one year and may be terminated without cost to the provider on short notice.

If one or more of our licenses are terminated or if we are unable to renew one or more of these licenses on favorable terms or at all, we may be unable to access the information (in the case of information licensed from sole-service suppliers) or unable to access alternative data sources that would provide comparable information without incurring substantial additional costs. Some OEM sources have indicated to us that they intend to materially increase the licensing costs for their data. While we do not believe that our access to many of the individual sources of data is material to our operations, prolonged industry-wide price increases or reductions in data availability could make receiving certain data more difficult and could result in significant cost increases, which would materially harm our operating results.

System failures, delays and other problems could harm our reputation and business, cause us to lose customers and expose us to customer liability.

Our success depends on our ability to provide accurate, consistent and reliable services and information to our customers on a timely basis. Our operations could be interrupted by any damage to or failure of:

• our computer software or hardware or our customers’ or third-party service providers’ computer software or hardware;

• our networks, our customers’ networks or our third-party service providers’ networks; and

• our connections to and outsourced service arrangements with third parties, such as Acxiom, which hosts data and applications for us and our customers.

Our systems and operations are also vulnerable to damage or interruption from:

• power loss or other telecommunications failures;

• earthquakes, fires, floods, hurricanes and other natural disasters;

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• computer viruses or software defects;

• physical or electronic break-ins, sabotage, intentional acts of vandalism and similar events; and

• errors by our employees or third-party service providers.

As part of our ongoing process improvements efforts, we have and will continue to migrate product and system platforms to next generation platforms and we may increase data and applications that we host ourselves, and the risks noted above will be exacerbated by these efforts. Because many of our services play a mission-critical role for our customers, any damage to or failure of the infrastructure we rely on (even if temporary), including those of our customers and vendors, could disrupt our ability to deliver information to and provide services for our customers in a timely manner, which could harm our reputation and result in the loss of current and/or potential customers or reduced business from current customers. In addition, we generally indemnify our customers to a limited extent for damages they sustain related to the unavailability of, or errors in, the software and services we provide; therefore, a significant interruption of, or errors in, our software and services could expose us to significant customer liability.

Fraudulent data access and other security breaches may negatively impact our business and harm our reputation.

Security breaches in our facilities, computer networks, and databases may cause harm to our business and reputation and result in a loss of customers and data suppliers. Our systems may be vulnerable to physical break-ins, computer viruses, attacks by hackers and similar disruptive problems. If users gain improper access to our databases, they may be able to steal, publish, delete or modify confidential third-party information that is stored or transmitted on our networks.

In addition, customers’ misuse of our information services could cause harm to our business and reputation and result in loss of customers. Any such misappropriation and/or misuse of our information could result in us, among other things, being in breach of certain data protection and related legislation.

A security or privacy breach may affect us in the following ways:

• 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.

We may detect incidents in which consumer data has been fraudulently or improperly acquired. The number of potentially affected consumers identified by any future incidents is obviously unknown. Any such incident could materially and adversely affect our business, reputation, financial condition, operating results and cash flows.

Privacy concerns could require us to exclude data from our software and services, which may reduce the value of our offerings to our customers, damage our reputation and deter current and potential users from using our software and services.

In the United States, European Union and other jurisdictions, there are significant restrictions on the use of personal and consumer data. Our violations of these laws could harm our business. In addition, these restrictions may place limits on the information that we can collect from and provide to our customers. Furthermore, concerns about our collection, use or sharing of automobile insurance claims information, moving violation information or other privacy-related matters, even if unfounded, could damage our reputation and operating results.

We depend on a limited number of key personnel who would be difficult to replace. If we lose the services of these individuals, or are unable to attract new talent, our business will be adversely affected.

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We depend upon the ability and experience of our key personnel, who have substantial experience with our operations, the rapidly changing automobile insurance claims processing industry and the markets in which we offer our software and services. The loss of the services of one or more of our senior executives or key employees, particularly our Chairman of the Board, Chief Executive Officer and President, Tony Aquila, could harm our business and operations.

Our success depends on our ability to continue to attract, manage and retain other qualified management, sales and technical personnel as we grow. We may not be able to continue to attract or retain such personnel in the future.

We may require additional capital in the future, which may not be available on favorable terms, or at all.

Our future capital requirements depend on many factors, including our ability to develop and market new software and services and to generate revenues at levels sufficient to cover ongoing expenses or possible acquisition or similar transactions. If we need to raise additional capital, equity or debt financing may not be available at all or may be available only on terms that are not favorable to us. In the case of equity financings, dilution to our stockholders could result, and in any case such securities may have rights, preferences and privileges that are senior to our outstanding common stock. In the case of debt financings, we may have to grant additional security interests in our assets to lenders and agree to restrictive business and operating covenants. If we cannot obtain adequate capital on favorable terms or at all, we may be unable to support future growth or operating requirements and, accordingly, our business, financial condition and results of operations could be harmed.

Our business depends on our brands, and if we are not able to maintain and enhance our brands, our business and operating results could be harmed.

We believe that the brand identity we have developed and acquired has significantly contributed to the success of our business. We also believe that maintaining and enhancing our brands, such as Audatex, ABZ, Hollander, Informex, Sidexa, HPI, AUTOonline, Market Scan, IMS and Explore, are critical to the expansion of our software and services to new customers in both existing and new markets. Maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain our brands or if we incur excessive expenses in this effort, our business, operating results and financial condition will be harmed. We anticipate that, as our markets become increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology innovator, to continue to provide high quality software and services and protect and defend our brand names and trademarks, which we may not do successfully. To date, we have not engaged in extensive direct brand promotion activities, and we may not successfully implement brand enhancement efforts in the future.

Third parties may claim that we are infringing upon their intellectual property rights, and we could be prevented from selling our software or suffer significant litigation expense even if these claims have no merit.

Our competitive position is driven in part by our intellectual property and other proprietary rights. Third parties, however, may claim that our software, products or technology, including claims data or other data, which we obtain from other parties, are infringing or otherwise violating their intellectual property rights. We may also develop software, products or technology, unaware of pending patent applications of others, which software products or technology may infringe a third party patent once that patent is issued. Any claims of intellectual property infringement or other violation, even claims without merit, could be costly and time-consuming to defend and could divert our management and key personnel from operating our business. In addition, if any third party has a meritorious or successful claim that we are infringing or violating its intellectual property rights, we may be forced to change our software or enter into licensing arrangements with third parties, which may be costly or impractical. These claims may also require us to stop selling our software and/or services as currently designed, which could harm our competitive position. We also may be subject to significant damages or injunctions that prevent the further development and sale of certain of our software or services and may result in a material loss in revenue. Currently, one of our trademarks is subject to a nullification proceeding in front of the Brazil trademark authority.

We may be unable to protect our intellectual property and property rights, either without incurring significant costs or at all, which would harm our business.

We rely on a combination of trade secrets, copyrights, know-how, trademarks, patents, license agreements and contractual provisions, as well as internal procedures, to establish and protect our intellectual property rights. The steps we have taken and will take to protect our intellectual property rights may not deter infringement, duplication, misappropriation or violation of our intellectual property by third parties. In addition, any of the intellectual property we own or license from third parties may be challenged, invalidated, circumvented or rendered unenforceable, or may not be of sufficient scope or strength to provide us

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with any meaningful information. Furthermore, because of the differences in foreign patent, trademark and other laws concerning proprietary rights, our software and other intellectual property rights may not receive the same degree of protection in foreign countries as they would in the U.S., if at all. We may be unable to protect our rights in trade secrets and unpatented proprietary technology in these countries. We may also be unable to prevent the unauthorized disclosure or use of our technical knowledge, trade secrets or other proprietary information by consultants, vendors, former employees or current employees, despite the existence of nondisclosure and confidentiality agreements, intellectual property assignments and other contractual restrictions. It is also possible that others will independently develop the technology that is the same or similar to ours. If our trade secrets and other proprietary information become known or we are unable to maintain the proprietary nature of our intellectual property, we may not receive any return on the resources expended to create the intellectual property or generate any competitive advantage based on it.

We rely on our brands to distinguish our products and services from the products and services of our competitors, and have registered or applied to register trademarks covering many of these brands. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products and services, which could result in loss of brand recognition, and could require us to devote resources advertising and marketing new brands.

Third parties, including competitors, may infringe our intellectual property right and we may not have adequate resources to enforce our intellectual property rights. Pursuing infringers of our intellectual property could result in significant monetary costs and diversion of management resources, and any failure to pursue or successfully litigate claims against infringers or otherwise enforce our intellectual property rights could result in competitors using our technology and offering similar products and services, potentially resulting in loss of our competitive advantage and decreased revenues.

Currently, we believe that one or more of our customers in our EMEA segment may be infringing our intellectual property by making and distributing unauthorized copies of our software. We have also filed a trademark revocation application with the European Union trademark authority seeking revocation of a registered trademark held by a company in the United Kingdom that is similar to one of the trademarks we use. Enforcement of our intellectual property rights may be difficult and may require considerable resources.

Our lawsuit against Mitchell International, Inc. for patent infringement will be costly to litigate, could be decided adversely to us, and could adversely affect our intellectual property rights, distract our management and technical staff, and cause our stock price to decline.

On February 6, 2012, we filed a lawsuit against Mitchell International, Inc. (“Mitchell”) in the United States District Court for the District of Delaware for infringement of one of our U.S. patents. We expect that our lawsuit, if we cannot resolve it before trial, could require several years to litigate, and at this stage we cannot predict the duration or cost of such litigation. We also expect that our lawsuit, even if it is determined in our favor or settled by us on favorable terms, will be costly to litigate, and that the cost of such litigation could have an adverse financial impact on our operating results. The litigation could also distract our management team and technical personnel from our other business operations, to the detriment of our business results. It is possible that we might not prevail in our lawsuit against Mitchell, in which case our costs of litigation would not be recovered, and we could effectively lose some of our patent rights. It is also possible that Mitchell might respond to our lawsuit by asserting counterclaims against us. Delays in the litigation, and any or all of these potential adverse results, could cause a substantial decline in our stock price.

Current or future litigation could have a material adverse impact on us.

We have been and continue to be involved in legal proceedings, claims and other litigation that arise in the ordinary course of business. For example, we have been involved in disputes with collision repair facilities, acting individually and as a group in some situations that claim that we have colluded with our insurance company customers to depress the repair time estimates generated by our repair estimating software. We have also been involved in litigation alleging that we have colluded with our insurance company customers to cause the estimates of vehicle fair market value generated by our total loss estimation software to be unfairly low. Furthermore, we are also subject to assertions by our customers and strategic partners that we have not complied with the terms of our agreements with them or that the agreements are not enforceable against them, some of which are the subject of pending litigation and any of which could in the future lead to arbitration or litigation. While we do not expect the outcome of any such pending or threatened litigation to have a material adverse effect on our financial position, litigation is unpredictable and excessive verdicts, both in the form of monetary damages and injunction, could occur. In the future, we could incur judgments or enter into settlements of claims that could harm our financial position and results of operations.

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We are subject to periodic changes in the amount of our income tax provision (benefit) and these changes could adversely affect our operating results; we may not be able to utilize all of our tax benefits before they expire.

Our effective tax rate could be adversely affected by our mix of earnings in countries with high versus low tax rates; by changes in the valuation of our deferred tax assets and liabilities; by a change in our assertion that our foreign earnings are indefinitely reinvested; by the outcomes of examinations, audits or disputes by or with relevant tax authorities; or by changes in tax laws and regulations. There have been several U.S. domestic and international laws recently enacted that could continue to have a material adverse impact on our tax expense.

Significant judgment is required to determine the recognition and measurement attributes prescribed in ASC Topic No. 740-10, Income Taxes. In addition, ASC Topic No. 740-10 applies to all income tax positions, including the potential recovery of previously paid taxes, which if settled unfavorably could adversely impact our provision for income taxes or additional paid-in capital.

We began paying dividends in fiscal year 2010 and we may not be able to pay dividends on our common stock and restricted stock units in the future; as a result, your only opportunity to achieve a return on your investment may be if the price of our common stock appreciates.

We began paying quarterly cash dividends to holders of our outstanding of common stock and restricted stock units in the quarter ended September 30, 2009. On November 5, 2012, we announced that the Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.125 per outstanding share of common stock and per outstanding restricted stock unit. The Audit Committee also approved a quarterly stock dividend equivalent of $0.125 per outstanding restricted stock unit granted to certain of our executive officers since fiscal year 2011 in lieu of the cash dividend, which dividend equivalent will be paid to the restricted stock unit holders as the restricted stock unit vests. The dividends are payable on December 4, 2012 to stockholders and restricted stock unit holders of record at the close of business on November 19, 2012. Any determination to pay dividends in future periods will be at the discretion of our Board of Directors. Our ability to pay dividends to holders of our common stock and restricted stock units in future periods may be limited by restrictive covenants under our Amended Credit Facility and the indenture for the senior unsecured notes. As a result, your only opportunity to achieve a return on your investment in us could be if the market price of our common stock appreciates and you sell your shares at a profit. We cannot assure you that the market price for our common stock will ever exceed the price that you pay.

Requirements associated with being a public company increase our costs significantly, as well as divert significant company resources and management attention.

Prior to our initial public offering in May 2007, we were not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or the other rules and regulations of the SEC or any securities exchange relating to public companies. We continue to work with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. In addition, we are taking steps to address new U.S. federal legislation relating to corporate governance matters and are monitoring other proposed and recently-enacted U.S. federal and state legislation relating to corporate governance and other regulatory matters and how the legislation could affect our obligations as a public company.

The expenses that are required as a result of being a public company are and will likely continue to be material. Compliance with the various reporting and other requirements applicable to public companies also require considerable time and attention of management. In addition, any changes we make may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

Our certificate of incorporation and by-laws contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.

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Some provisions of our certificate of incorporation and by-laws may have the effect of delaying, discouraging or preventing a merger or acquisition that our stockholders may consider favorable, including transactions in which stockholders may receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors. These provisions include:

• authorization of the issuance of “blank check” preferred stock without the need for action by stockholders;

• the removal of directors only by the affirmative vote of the holders of two-thirds of the shares of our capital stock entitled to vote;

• any vacancy on the board of directors, however occurring, including a vacancy resulting from an enlargement of the board, may only be filled by vote of the directors then in office;

• inability of stockholders to call special meetings of stockholders and limited ability of stockholders to take action by written consent; and

• advance notice requirements for board nominations and proposing matters to be acted on by stockholders at stockholder meetings.

We are monitoring proposed U.S. federal and state legislation relating to stockholder rights and related regulatory matters and how the legislation could affect, among other things, the nomination and election of directors and our charter documents.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In November 2011, our Board of Directors approved a share repurchase program for up to a total of $180 million of our common stock through November 10, 2013. Share repurchases are made from time to time in open market transactions at prevailing market prices or in privately negotiated transactions. The repurchase program does not require us to purchase any specific number or amount of shares, and the timing and amount of such purchases will be determined by management based upon market conditions and other factors. In addition, the program may be amended or terminated at the discretion of our Board of Directors. The following table provides the amount of shares repurchased during each month to date (in thousands, except per share amounts):

	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be  Purchased Under the Plans or Programs (in thousands)
November 2011	347	$	47.03	347	$	163,659
December 2011	557	$	46.33	557	$	137,855
February 2012	600	$	49.31	600	$	108,226
March 2012	98	$	47.00	98	$	103,634
May 2012	600	$	45.20	600	$	76,504
September 2012	200	$	42.54	200	$	67,993
Total	2,402	$	46.60	2,402	$	67,993

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ITEM 6. EXHIBITS.

Exhibit No.	Description
10.1	Executive Employment Agreement between the Company and Renato Giger, effective September 4, 2012.
10.2	Executive Employment Agreement between the Company and Abilio Gonzalez, effective September 4, 2012.
10.3	Executive Employment Agreement between the Company and Jason Brady, effective September 4, 2012.
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Tony Aquila, Chief Executive Officer.
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Renato Giger, Chief Financial Officer and Treasurer.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

* These exhibits are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such exhibits will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we incorporate them by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SOLERA HOLDINGS, INC.

/S/    TONY AQUILA

Tony Aquila

Chief Executive Officer and President

(Principal Executive Officer)

/S/    RENATO GIGER

Renato Giger

Chief Financial Officer

(Principal Financial Officer)

November 6, 2012

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