Solera 10Q 2014 Q3 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, 2013



¨	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 1, 2013 was 68,859,326.

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TABLE OF CONTENTS




		Page
PART I	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2013 and June 30, 2013	3
	Condensed Consolidated Statements of Income for the three month periods ended September 30, 2013 and 2012	4
	Condensed Consolidated Statements of Comprehensive Income for the three month periods ended September 30, 2013 and 2012	5
	Condensed Consolidated Statements of Cash Flows for the three month periods ended September 30, 2013 and 2012	6
	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures.	41

PART II	OTHER INFORMATION	41

Item 1.	Legal Proceedings	41

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 6.	Exhibits	58

	Signatures	59

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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, 2013			June 30, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	1,069,231		$	464,239
Accounts receivable, net of allowance for doubtful accounts of $4,388 and $3,005 at September 30, 2013 and June 30, 2013, respectively	141,942			140,395
Other receivables	17,558			18,014
Other current assets	30,909			28,296
Deferred income tax assets	13,027			7,108
Total current assets	1,272,667			658,052
Property and equipment, net	63,776			61,739
Goodwill	1,129,216			1,099,221
Intangible assets, net	346,145			352,589
Other noncurrent assets	19,272			23,633
Noncurrent deferred income tax assets	75,202			62,307
Total assets	$	2,906,278		$	2,257,541
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,139		$	28,068
Accrued expenses and other current liabilities	196,627			174,081
Income taxes payable	24,784			7,628
Deferred income tax liabilities	2,612			3,925
Current portion of long-term debt	—			2,924
Total current liabilities	250,162			216,626
Long-term debt	1,708,239			1,144,462
Other noncurrent liabilities	54,523			42,634
Noncurrent deferred income tax liabilities	22,510			20,843
Total liabilities	2,035,434			1,424,565
Redeemable noncontrolling interests	88,004			84,737
Stockholders’ equity:
Solera Holdings, Inc. stockholders’ equity:
Common shares, $0.01 par value: 150,000 shares authorized; 68,786 and 68,764 issued and outstanding as of September 30, 2013 and June 30, 2013, respectively	613,664			602,613
Retained earnings	174,930			177,335
Accumulated other comprehensive loss	(16,059		)	(43,147		)
Total Solera Holdings, Inc. stockholders’ equity	772,535			736,801
Noncontrolling interests	10,305			11,438
Total stockholders’ equity	782,840			748,239
Total liabilities and stockholders’ equity	$	2,906,278		$	2,257,541

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,
	2013		2012
Revenues	$	218,028	$	195,719
Cost of revenues:
Operating expenses	49,751		42,340
Systems development and programming costs	19,572		17,857
Total cost of revenues (excluding depreciation and amortization)	69,323		60,197
Selling, general and administrative expenses	65,107		50,909
Depreciation and amortization	25,103		24,195
Restructuring charges, asset impairments, and other costs associated with exit and disposal activities	391		1,454
Acquisition and related costs	11,195		3,158
Interest expense	26,929		17,300
Other expense, net	715		398
	198,763		157,611
Income before provision for income taxes	19,265		38,108
Income tax provision	2,696		1,697
Net income	16,569		36,411
Less: Net income attributable to noncontrolling interests	2,878		2,770
Net income attributable to Solera Holdings, Inc.	$	13,691	$	33,641
Net income attributable to Solera Holdings, Inc. per common share:
Basic	$	0.20	$	0.49
Diluted	$	0.20	$	0.48
Dividends paid per share	$	0.17	$	0.125
Weighted-average shares used in the calculation of net income attributable to Solera Holdings, Inc. per common share:
Basic	68,793		68,890
Diluted	69,182		69,094

See accompanying notes to condensed consolidated financial statements.

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SOLERA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)



	Three Months Ended September 30,
	2013			2012
Net income	$	16,569		$	36,411
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	32,843			18,721
Unrealized losses on derivative financial instruments, net of tax	(2,261		)	(44		)
Total other comprehensive income	30,582			18,677
Total comprehensive income	47,151			55,088
Comprehensive income attributable to noncontrolling interests	6,372			5,172
Comprehensive income attributable to Solera Holdings, Inc.	$	40,779		$	49,916

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,
	2013			2012
Cash flows from operating activities:
Net income	$	16,569		$	36,411
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	25,103			24,195
Provision for doubtful accounts	1,929			563
Stock-based compensation	10,386			4,024
Deferred income taxes	(2,681		)	(8,580		)
Change in fair value of derivative financial instruments	(5,615		)	3,492
Other	764			19
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Increase in accounts receivable	2,249			(3,254		)
(Decrease) increase in other assets	(10,989		)	6,643
Decrease in accounts payable	(2,367		)	(530		)
Increase in accrued expenses and other liabilities	48,646			5,236
Net cash provided by operating activities	83,994			68,219
Cash flows from investing activities:
Capital expenditures	(7,594		)	(8,839		)
Acquisitions and capitalization of intangible assets	(2,559		)	(713		)
Acquisitions of businesses, net of cash acquired and proceeds from sale of business	(9,932		)	(6,623		)
Decrease (increase) in restricted cash	47			(553		)
Net cash used in investing activities	(20,038		)	(16,728		)
Cash flows from financing activities:
Proceeds from debt issuance, net of payments of debt issuance costs	846,040			(554		)
Payment of contingent purchase consideration	(470		)	(125		)
Principal payments on financed asset acquisitions	(73		)	(305		)
Repayments of long-term debt	(289,309		)	(715		)
Cash dividends paid on common shares and participating securities	(11,800		)	(8,682		)
Cash dividends paid to noncontrolling interests	(2,535		)	(2,360		)
Repurchases of common stock	(5,136		)	(8,511		)
Proceeds from stock purchase plan and exercise of stock options	607			489
Net cash provided by (used in) financing activities	537,324			(20,763		)
Effect of foreign currency exchange rate changes on cash and cash equivalents	3,712			3,936
Net change in cash and cash equivalents	604,992			34,664
Cash and cash equivalents, beginning of period	464,239			508,246
Cash and cash equivalents, end of period	$	1,069,231		$	542,910
Supplemental cash flow information:
Cash paid for interest	$	207		$	2,799
Cash paid for income taxes	$	7,542		$	5,301
Supplemental disclosure of non-cash investing and financing activities:
Capital assets financed	$	858		$	258

See accompanying notes to condensed consolidated financial statements.

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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 and decision support industries. 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 65 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, 2013, included in our Annual Report on Form 10-K filed with the SEC on August 23, 2013. Our operating results for the three month period ended September 30, 2013 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 certain of our subsidiaries located in Belgium, France, Portugal, Spain and 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 February 2013, the Financial Accounting Standards Board ("FASB") issued ASU Topic No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires entities to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to

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be reclassified in their entirety from accumulated other comprehensive income to net income in the same reporting period, an entity is required to cross-reference other disclosures required that provide additional detail about those amounts. We adopted ASU Topic No. 2013-02 in the first quarter of our fiscal year 2014. Please refer to Note 7 for disclosure of reclassifications out of accumulated other comprehensive income (loss).

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. We adopted ASU Topic No. 2012-02 in the first quarter of our fiscal year 2014. The adoption of ASU Topic No. 2012-02 did not impact our financial condition, results of operations or cash flows.

New Accounting Pronouncements Not Yet Adopted

In July 2013, the FASB issued ASU Topic No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which requires an entity to present certain unrecognized tax benefits as reductions to deferred tax assets rather than as liabilities in balance sheets when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The ASU does not affect the recognition or measurement of uncertain tax positions under ASC 740. ASU Topic No. 2013-11 is effective for our fiscal year 2015, although early adoption is permitted.


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

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 receive 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.

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,
	2013			2012
Basic net income attributable to Solera Holdings, Inc. per common share:
Net income attributable to Solera Holdings, Inc.	$	13,691		$	33,641
Less: Dividends paid and undistributed earnings allocated to participating securities	(98		)	(154		)
Net income attributable to common shares – basic	$	13,593		$	33,487
Weighted-average number of common shares used to compute basic net income attributable to Solera Holdings, Inc. per common share	68,793			68,890
Basic net income attributable to Solera Holdings, Inc. per common share	$	0.20		$	0.49
Diluted net income attributable to Solera Holdings, Inc. per common share:
Net income attributable to Solera Holdings, Inc.	$	13,691		$	33,641
Less: Dividends paid and undistributed earnings allocated to participating securities	(98		)	(154		)
Net income attributable to common shares – diluted	$	13,593		$	33,487

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Weighted-average number of common shares used to compute basic net income attributable to Solera Holdings, Inc. per common share	68,793		68,890
Dilutive effect of options to purchase common stock, restricted stock units and performance share units	389		204
Weighted-average number of common shares used to compute diluted net income attributable to Solera Holdings, Inc. per common share	69,182		69,094
Diluted net income attributable to Solera Holdings, Inc. per common share	$	0.20	$	0.48

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,
	2013	2012
Antidilutive options to purchase common stock and restricted stock units	58	313


3.	Business Combinations

During the three months ended September 30, 2013, we acquired two businesses for approximately $13.6 million in cash paid at closing and additional future cash payments of up to $15.5 million contingent upon the achievement of certain financial performance, product-related, integration and other objectives. The acquisitions completed during the three months ended September 30, 2013 were immaterial both individually and in the aggregate.

During the three months ended September 30, 2012, we acquired one business for approximately $7.3 million in cash paid at closing and additional future cash payments of up to $5.0 million contingent upon the achievement of certain financial performance, product-related, integration and other objectives. The acquisition completed during the three months ended September 30, 2012 was immaterial.

At September 30, 2013, the maximum aggregate amount of remaining contingent cash payments associated with our business combinations is $96.2 million which is payable through fiscal year 2016.

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4.	Goodwill and Intangible Assets

Intangible assets consist of the following (in thousands):



	September 30, 2013							June 30, 2013
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, net		Gross Carrying Amount		Accumulated Amortization			Intangible Assets, net
Amortized intangible assets:
Internally developed software	$	40,935	$	(18,049	)	$	22,886	$	37,881	$	(16,384	)	$	21,497
Purchased customer relationships	360,157		(191,169		)	168,988		352,408		(180,412		)	171,996
Purchased trade names and trademarks	36,707		(27,690		)	9,017		35,947		(26,015		)	9,932
Purchased software and database technology	454,253		(343,129		)	111,124		441,060		(324,480		)	116,580
Other	5,966		(5,643		)	323		5,776		(5,381		)	395
	$	898,018	$	(585,680	)	$	312,338	$	873,072	$	(552,672	)	$	320,400
Intangible assets not subject to amortization:
Purchased trade names and trademarks with indefinite lives	33,807		—			33,807		32,189		—			32,189
	$	931,825	$	(585,680	)	$	346,145	$	905,261	$	(552,672	)	$	352,589

The following table summarizes the activity in goodwill for the three months ended September 30, 2013 (in thousands):



	Balance at Beginning of Period		Current year Acquisitions		Other		Foreign Currency Translation Effect		Balance at End of Period
EMEA	$	577,042	$	4,140	$	—	$	22,883	$	604,065
Americas	522,179		2,398		202		372		525,151
Total	$	1,099,221	$	6,538	$	202	$	23,255	$	1,129,216

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5.	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, 2013	68,764		$	602,613		$	177,335		$	(43,147	)	$	736,801		$	11,438		$	748,239		$	84,737
Net income	—		—			13,691			—			13,691			1,180			14,871			1,697
Other comprehensive income	—		—			—			27,088			27,088			222			27,310			3,273
Stock-based compensation	—		10,386			—			—			10,386			—			10,386			—
Purchases of Solera Holdings, Inc. common shares(1)	(100	)	(840		)	(4,296		)	—			(5,136		)	—			(5,136		)	—
Issuance of common shares under stock award plans, net	122		(198		)	—			—			(198		)	—			(198		)	—
Dividends paid on common stock and participating securities	—		—			(11,800		)	—			(11,800		)	—			(11,800		)	—
Dividends paid to noncontrolling owners	—		—			—			—			—			(2,535		)	(2,535		)	—
Revaluation of noncontrolling interests	—		1,703			—			—			1,703			—			1,703			(1,703		)
Balance at September 30, 2013	68,786		$	613,664		$	174,930		$	(16,059	)	$	772,535		$	10,305		$	782,840		$	88,004


(1)	Please refer to Note 6 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.

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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, 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


(1)	Please refer to Note 6 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.


6.	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, 2013, we purchased 0.1 million shares for $5.1 million. Through September 30, 2013, we have repurchased approximately 2.9 million shares for $136.6 million under the share repurchase program.


7.	Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss) during the three months ended September 30, 2013 (in thousands):



	Foreign Currency Translation Adjustment			Unrealized Losses on Derivative Financial Instruments			Change in Funded Status of Defined Benefit Pension Plans			Accumulated Other Comprehensive Loss
Balance at June 30, 2013	$	(27,978	)	$	(3,754	)	$	(11,415	)	$	(43,147	)
Other comprehensive income (loss) before reclassifications, net of tax	29,347			(7,874		)	—			21,473
Amounts reclassified from accumulated other comprehensive income (loss)	—			5,615			—			5,615
Balance at September 30, 2013	$	1,369		$	(6,013	)	$	(11,415	)	$	(16,059	)

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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, 2013:
Cash and cash equivalents	$	1,069,231	$	1,069,231	$	—	$	—
Restricted cash (1)	1,717		1,717		—		—
Derivative financial instruments classified as liabilities (2)	14,754		—		14,754		—
Accrued contingent purchase consideration (2)	22,891		—		—		22,891
Redeemable noncontrolling interests	88,004		—		—		88,004
Fair value at June 30, 2013:
Cash and cash equivalents	$	464,239	$	464,239	$	—	$	—
Restricted cash (1)	1,797		1,797		—		—
Derivative financial instruments classified as assets (3)	632		—		632		—
Derivative financial instruments classified as liabilities (2)	4,286		—		4,286		—
Accrued contingent purchase consideration (2)	23,334		—		—		23,334
Redeemable noncontrolling interests	84,737		—		—		84,737


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


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


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

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 industry standard valuation techniques that utilize market-based observable inputs 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 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. Contingent future cash payments related to business combinations that are not deemed to be compensatory are accrued at fair value as of the acquisition date. We re-assess the fair value measurement at each reporting date. Fair value is determined by estimating the present value of potential future cash payments that would be earned upon achievement by the acquired business of certain financial performance, product-related, integration and other objectives. Our estimate of fair value considers a range of possible cash payment scenarios using information available as of the reporting date, including the recent financial performance of the acquired businesses (Level 3 inputs).

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The following table summarizes the activity in accrued contingent purchase consideration which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) (in thousands):



	Three Months Ended September 30,
	2013			2012
Balance at beginning of period	$	23,334		$	4,941
Payments	(470		)	(125		)
Effect of foreign exchange	27			—
Balance at end of period	$	22,891		$	4,816

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.

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, 2013 using the income approach ranged between 13.7% and 15.5%, with a weighted average discount rate of 13.9%, 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, 2013 using the income approach ranged between 1.0% and 4.0%, with a weighted average long-term growth rate of 3.7%.

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,
	2013			2012
Balance at beginning of period	$	84,737		$	74,118
Net income attributable to redeemable noncontrolling interests	1,697			1,467
Change in fair value	(1,703		)	(1,530		)
Effect of foreign exchange	3,273			1,725
Balance at end of period	$	88,004		$	75,780

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, 2013.

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. Based on the original issue price of the senior

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unsecured notes that we issued in July 2013, we believe that the fair value of our senior unsecured notes approximates its carrying value at September 30, 2013.


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 July 2013, as a result of the repayment of the terms loans under the Amended Credit Facility, we terminated the two pay fixed / receive fixed interest rate swaps that were outstanding at June 30, 2013.

In September 2013, in order to hedge our exposure to variability in the Euro-denominated cash flows associated with two intercompany loans, we entered into two pay floating Euros / received floating U.S. dollar cross-currency swaps in the aggregate notional amount of €141.1 million. We pay Euro floating coupon payments at 6-month EURIBOR plus 35 basis points and receive U.S. dollar floating coupon payments at 6-month LIBOR on the notional amount. The maturity date of the swaps is June 15, 2018. These cross-currency swaps were not designated as hedges at inception. We recognize the change in the fair value of the swaps in other (income) expense, net in our consolidated statements of income.

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, accrued expenses and other current liabilities, and other noncurrent liabilities in the accompanying condensed consolidated balance sheets (in thousands):



	September 30, 2013		June 30, 2013
Derivative financial instruments classified as assets
U.S. dollar interest rate swaps	$	—	$	632

Derivative financial instruments classified as liabilities
Fixed rate cross-currency swaps	$	9,635	$	4,102
Floating rate cross-currency swaps	5,119		—
Euro interest rate swaps	—		184
	14,754		4,286

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, 2013 and September 30, 2012 (in thousands).



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, 2013
Fixed rate cross-currency swaps	$	5,508		Interest Expense	$	(151	)	N/A	$	—
				Other (Income) Expense, net	(5,581		)	N/A	—
U.S. dollar interest rate swaps	—			Interest Expense	(3		)	Interest Expense	548
Euro interest rate swaps	—			Interest Expense	(3		)	Interest Expense	(364		)
Total	$	5,508			$	(5,738	)		$	184

Three Months Ended September 30, 2012
Fixed rate cross-currency swaps	$	(1,830	)	Interest Expense	$	(24	)	N/A	$	—
				Other (Income) 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.

During the three months ended September 30, 2013, we recognized a loss on the floating rate cross-currency swaps not designated as hedging instruments of $5.1 million, which is included in other (income) expense, net in the consolidated statements of income.

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10.	Long-Term Debt

Long-term debt consists of the following (in thousands):



	September 30, 2013		June 30, 2013
Senior unsecured notes due June 2018 (1)	$	858,239	$	858,683
Senior unsecured notes due June 2021	850,000		—
Senior secured domestic term loan due May 2017	—		105,171
Senior secured European term loan due May 2017	—		183,532
Total debt	1,708,239		1,147,386
Less: Current portion	—		2,924
Long-term portion	$	1,708,239	$	1,144,462


(1)	Includes unamortized premium of $8.2 million and $8.7 million as of September 30, 2013 and June 30, 2013, respectively. In addition, as described further in Note 16, we will redeem the senior unsecured notes due June 2018 in November 2013.

In July 2013, we issued senior unsecured notes due 2021 in the aggregate principal amount of $850 million (the “2021 Senior Notes”), resulting in net proceeds of $846.0 million. The 2021 Senior Notes accrue interest at 6.000% per annum, payable semi-annually, and become due and payable on June 15, 2021. We used $289.5 million of the net proceeds from the issuance of the 2021 Senior Notes to repay in full all of the outstanding term loans under our Amended and Restated First Lien Credit and Guaranty Agreement (the “Amended Credit Facility”), including accrued unpaid interest through the repayment date. We intend to use the remainder of the net proceeds for working capital and other general corporate purposes, including strategic initiatives such as future acquisitions, joint ventures, investments or other business development opportunities.

The 2021 Senior Notes include redemption provisions that allow us, at our option, to redeem all or a portion of the aggregate principal amount of the 2021 Senior Notes as follows:


•	At any time prior to June 15, 2016, we may redeem up to 35% of the aggregate principal amount of the 2021 Senior Notes at a redemption price equal to 106.000% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, through the date of redemption.

•

At any time prior to June 15, 2017, we may redeem the 2021 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 and accrued and unpaid interest to the redemption date. The premium at the applicable redemption date is the greater of: (1) 1.0% of the then outstanding principal amount of the notes; or (2) the excess of: (a) the present value at such redemption date of the sum of the redemption price of the notes at June 15, 2017 plus all required interest payments due on the notes through June 15, 2017 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the then outstanding principal amount of the notes.

•

At any time on or after June 15, 2017, we may redeem the 2021 Senior Notes, in whole or in part, 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, 2017 but prior to June 15, 2018, the redemption price is 103.000% of the principal amount of the notes; (ii) if the redemption occurs on or after June 15, 2018 but prior to June 15, 2019, the redemption price is 101.500% of the principal amount of the notes; and (iii) if the redemption occurs on or after June 15, 2019, the redemption price is 100.000% of the principal amount of the notes.

Upon the occurrence of a change of control, we are required to offer to redeem the 2021 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 costs associated with the issuance of the 2021 Senior Notes of $4.0 million were deferred and are included in other noncurrent assets in the consolidated balance sheet. We are amortizing these debt issuance costs to interest expense over the term of the 2021 Senior Notes using the effective interest method.

The 2018 Senior Notes and the 2021 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;

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mergers with another company, dispositions of assets, and transactions with affiliates. We are in compliance with the specified financial covenants of the 2018 Senior Notes and the 2021 Senior Notes at September 30, 2013.

Upon repayment of the outstanding term loans, the Amended Credit Facility was terminated. In connection with the termination of the Amended Credit Facility, we wrote-off the remaining unamortized debt issuance costs related to the term loans of $3.1 million, which is included in other (income) expense, net in our consolidated statement of income for the three months ended September 30, 2013.


11.	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, 2013:



	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value per Share
Nonvested at June 30, 2013	891		$	49.91
Granted	42		$	51.10
Vested	(157	)	$	44.52
Forfeited	(91	)	$	43.66
Nonvested at September 30, 2013	685		$	52.05

Each performance share unit represents the right to receive one share of our common stock based on our total stockholder return (“TSR”) and/or the achievement of certain financial performance targets during applicable performance periods. The number of shares reflected in the table above assumes the target number of performance share units will be earned.

The following table summarizes stock option activity during the three months ended September 30, 2013:



	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, 2013	4,483		$	49.40
Granted	113		$	51.26
Exercised	(12	)	$	28.40
Canceled	(7	)	$	49.19
Outstanding at September 30, 2013	4,577		$	49.50	4.9	$	28,671
Exercisable at September 30, 2013	1,455		$	39.53	4.3	$	20,645

Of the stock options outstanding at September 30, 2013, approximately 2.6 million are vested or expected to vest.

Cash received from the exercise of stock options was $0.3 million during the three months ended September 30, 2013. The intrinsic value of stock options exercised during the three months ended September 30, 2013 and 2012 totaled $0.3 million and $0.4 million, respectively.

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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, 2013	1.7	%	4.7	27	%	1.3	%	$	11.27
Three Months Ended September 30, 2012	0.6	%	4.6	33	%	1.2	%	$	10.54

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 term of stock options as the average of the contractual term and the vesting period. We determined the expected volatility based on our historical stock price volatility over the expected term. The dividend yield is based on our quarterly dividend of $0.17 and $0.125 per share declared during the three months ended September 30, 2013 and 2012, respectively.

The weighted average grant date fair value of restricted stock units and performance share units granted during the three months ended September 30, 2013 and 2012, excluding performance share units that are earned based on our relative TSR, was $51.10 and $39.50, 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 stock options and 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. Based on the Monte-Carlo simulation model, the grant date fair value of stock options and performance share units that are earned based on our relative TSR granted during the three months ended September 30, 2012 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 $10.4 million and $4.0 million for the three months ended September 30, 2013 and 2012, respectively. At September 30, 2013, the estimated total remaining unamortized share-based compensation expense, net of forfeitures, was $69.3 million, which we expect to recognize over a weighted-average period of 3.1 years.


12.	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 (in thousands):



	Three Months Ended September 30,
	2013			2012
Service cost — benefits earned during the period	$	1,016		$	975
Interest cost on projected benefits	844			807
Expected return on plan assets	(630		)	(608		)
Amortization of gain	199			100
Net pension expense	$	1,429		$	1,274

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13.	Other (Income) Expense, Net

Other (income) expense, net consists of the following (in thousands):



	Three Months Ended September 30,
	2013			2012
Investment income	$	(171	)	$	(120	)
Foreign exchange losses	1,102			3,976
Gains on derivative instruments designated as hedges	(5,615		)	(3,492		)
Losses on derivative instruments not designated as hedges	5,107			—
Gain on asset sales	(2,799		)	—
Loss on debt extinguishment (1)	3,145			—
Other (income) expense	(54		)	34
Other expense, net	$	715		$	398


(1)	Represents the write-off of unamortized debt issuance costs associated with the repayment of the outstanding term loans under the Amended Credit Facility in July 2013 (Note 10).

14. Provision For Income Taxes

We recorded an income tax provision of $2.7 million and $1.7 million for the three months ended September 30, 2013 and 2012, 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, 2013 differed from our recorded income tax provision primarily due to earnings in jurisdictions with lower income tax rates which are indefinitely reinvested, partially offset by an increase in U.S. permanent disallowed expenses.

Gross unrecognized tax benefits as of September 30, 2013 and June 30, 2013 were $12.8 million and $12.5 million, respectively. No significant interest and penalties have been accrued during the three months ended September 30, 2013.

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.

As of each reporting date, our management considers new evidence, both positive and negative, that could impact management’s view with regards to future realization of deferred tax assets. As of September 30, 2013, management believes it is more-likely-than-not that all of our U.S. deferred tax assets will be realized. All available evidence was considered, including our U.S. cumulative income position over the 12 quarters ended September 30, 2013. However, as a result of the issuance of the 2021 Senior Notes, and the costs associated with the redemption of the 2018 Senior Notes, our U.S. taxable income may decrease in the future which could result in U.S cumulative losses over a 12 quarter period and reduce the weight given to subjective evidence such as projections for growth.

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15.	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.



(in thousands)	EMEA		Americas		Corporate			Total
Three Months Ended September 30, 2013
Revenues	$	121,963	$	96,065	$	—		$	218,028
Income before provision for income taxes	47,760		23,842		(52,337		)	19,265
Significant items included in income before provision for income taxes:
Depreciation and amortization	10,786		14,206		111			25,103
Interest expense	14		—		26,915			26,929
Capital expenditures	4,317		3,277		—			7,594
Total assets as of September 30, 2013	1,357,054		846,660		702,564			2,906,278
Total assets as of June 30, 2013	1,275,982		855,821		125,738			2,257,541
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

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, 2013	67,117	71,512	26,871	23,966	28,562	218,028
Three Months Ended September 30, 2012	62,592	62,047	23,871	20,018	27,191	195,719

* Excludes the United Kingdom and Germany.


16.	Subsequent Events

Quarterly Dividend

On November 6, 2013, we announced that the Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.17 per share of outstanding common stock and per outstanding restricted stock unit. The Audit Committee of our Board of Directors also approved a quarterly stock dividend equivalent of $0.17 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 3, 2013 to stockholders and restricted stock unit holders of record at the close of business on November 20, 2013.

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Senior Notes Issuance

On November 5, 2013, we issued additional 2021 Senior Notes in the aggregate principal amount of $510.0 million (the “Additional 2021 Senior Notes”) and issued senior unsecured notes due 2023 in the aggregate principal amount of $340.0 million (the “2023 Senior Notes”). The Additional 2021 Senior Notes, which were issued under the indenture governing the outstanding 2021 Senior Notes that were issued on July 2, 2013, were issued at an original issue price of 101.75% plus accrued interest from July 2, 2013.

The 2023 Senior Notes accrue interest at 6.125% per annum, payable semi-annually, and become due and payable on November 1, 2023. The 2023 Senior Notes include redemption provisions that allow us, at our option, to redeem all or a portion of the aggregate principal amount of the 2023 Senior Notes as follows:


•	At any time prior to November 1, 2016, we may redeem up to 35% of the aggregate principal amount of the 2023 Senior Notes at a redemption price equal to 106.125% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, through the date of redemption.

•

At any time prior to November 1, 2018, we may redeem the 2023 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 and accrued and unpaid interest to the redemption date. The premium at the applicable redemption date is the greater of: (1) 1.0% of the then outstanding principal amount of the notes; or (2) the excess of: (a) the present value at such redemption date of the sum of the redemption price of the notes at November 1, 2018 plus all required interest payments due on the notes through November 1, 2018 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the then outstanding principal amount of the notes.

•

At any time on or after November 1, 2018, we may redeem the 2023 Senior Notes, in whole or in part, 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 November 1, 2018 but prior to November 1, 2019, the redemption price is 103.063% of the principal amount of the notes; (ii) if the redemption occurs on or after November 1, 2019 but prior to November 1, 2020, the redemption price is 102.042% of the principal amount of the notes; (iii) if the redemption occurs on or after November 1, 2020 but prior to November 1, 2021, the redemption price is 101.021% of the principal amount of the notes; and (iv) if the redemption occurs on or after November 1, 2021, the redemption price is 100.000% of the principal amount of the notes.

Upon the occurrence of a change of control, we are required to offer to redeem the 2023 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.

We will use the net proceeds from the issuance of the Additional 2021 Senior Notes and the 2023 Senior Notes of approximately $855.4 million, together with existing cash on hand, to redeem the outstanding senior unsecured notes due June 2018 (the “2018 Senior Notes”) in the aggregate principal amount of $850.0 million. Accordingly, on October 17, 2013, we issued a conditional notice of redemption to the holders of the 2018 Senior Notes informing them of our intention to redeem all of the outstanding $850.0 million aggregate principal amount of 2018 Senior Notes on or about November 18, 2013. The redemption price for the 2018 Senior Notes will be approximately $932.7 million, consisting of (i) the unpaid principal amount of the 2018 Senior Notes of $850.0 million, (ii) accrued unpaid interest through the redemption date of approximately $24.4 million, and (iii) a redemption premium of approximately $58.5 million. The redemption premium of approximately $58.5 million, as well as the remaining unamortized debt issuance costs related to the 2018 Senior Notes, net of the unamortized premium, of approximately $1.5 million, will be charged against earnings at the redemption date.

On November 5, 2013 and in contemplation of the redemption of the 2018 Senior Notes, we (i) deposited the redemption price into an account maintained by the trustee of the 2018 Senior Notes and (ii) satisfied and discharged all of our obligations under the indenture governing the 2018 Senior Notes

Share Repurchase Program

On October 17, 2013, we announced that our Board of Directors approved a new $200 million common share repurchase program effective through November 10, 2015. Shares of common stock may be purchased, from time to time, through an accelerated stock purchase agreement, on the open market or in privately negotiated transactions. We expect to fund the repurchases through cash on hand and future cash flow from operations. The new share repurchase program replaces our share repurchase program originally approved by our Board of Directors in November 2011 (Note 6).

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Acquisition of Service Repair Solutions, Inc.

On October 3, 2013, we entered into an agreement with an entity majority owned by certain investment funds affiliated with Welsh, Carson, Anderson & Stowe (“WCAS”), pursuant to which we will acquire at least a 50% equity ownership interest in a newly-formed parent company of Service Repair Solutions, Inc. (“SRS”) for approximately $289 million in cash (the “SRS Acquisition”). The consummation of the SRS Acquisition is subject to customary closing conditions, including Hart-Scott-Rodino clearance, and is expected to be completed in the second quarter of fiscal year 2014.

We will have the right to acquire the remaining outstanding equity interests of SRS (the "Call Right") at a price, subject to certain adjustments, equal to the greater of (a) a specified multiple of WCAS’s cost basis of such equity interests, and (b) a per share equity value based on a specified multiple of SRS’s trailing twelve month EBITDA, as defined in the agreement (the “TTM EBITDA”).

WCAS will have the right to require that we purchase their equity interests in SRS up to four times per year, subject to an annual cap of $250 million and a $25 million per exercise minimum (the “WCAS Annual Put Right”) at a price based on the TTM EBITDA. In addition, WCAS will have additional rights to require that we purchase either half or all (depending on the triggering event) of their equity interests of SRS at a price, subject to certain adjustments, equal to a specified multiple of WCAS’s cost basis of such equity interests (the “WCAS Special Put Right”). The triggering events for the WCAS Special Put Right include, among others, a drop in the corporate credit rating of Solera below certain specified levels or if SRS is required to become a guarantor of any of the indebtedness of Solera or its subsidiaries (other than SRS) or at any time beginning on August 1, 2018 and ending on the earlier of (x) December 31, 2018 and (y) the consummation of any WCAS Annual Put Right after August 1, 2018.

Upon closing of our acquisition of SRS, we will have control of SRS as defined by accounting principles generally accepted in the United States and therefore will consolidate its assets, liabilities, and financial results from the closing date.

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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; our ability to grow in all types of markets and the benefits of products and services of companies or assets we have acquired.

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, 2013 filed with the SEC on August 23, 2013. 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, 2013 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 and decision support industries. 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 120,000 customers and are active in over 65 countries across six continents with approximately 2,800 employees. Our customers include more than 4,000 automobile insurance companies, 60,500 collision repair facilities, 12,500 independent assessors and 43,000 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.

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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,
	2013				2012
EMEA	$	122.0	56.0	%	$	110.1	56.3	%
Americas	96.0		44.0		85.6		43.7
Total	$	218.0	100.0	%	$	195.7	100.0	%

For the three months ended September 30, 2013, the United States, the United Kingdom and Germany were the only countries that individually represented more than 10% of our 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 primarily 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 primarily 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 primarily 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 the CSG Acquisition and our acquisition of 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. Acquisition and related costs also include the legal and other professional fees associated with the Federal Trade Commission's investigation of our acquisition of Actual Systems and the divestiture of Actual Systems' U.S. and Canadian businesses.

Interest expense

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

Other (income) expense, net

Other (income) expense, net consists of foreign exchange gains and losses on notes receivable and notes payable to affiliates, changes in the fair value of derivative instruments, losses on debt extinguishment, investment 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 six 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, 2013 and 2012, we generated approximately 67% and 68%, respectively, of our revenues and incurred a majority of our costs, in currencies other than the U.S. dollar, primarily the

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Euro. 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 and the exchange rate at the end of that period for the consolidated balance sheet. These translations resulted in foreign currency translation adjustments of $29.3 million and $16.3 million for the three months ended September 30, 2013 and 2012, respectively, which are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction (income) losses recognized in our consolidated statements of income were $(4.5) million and $0.5 million during the three months ended September 30, 2013 and 2012, 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 2014. 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 2013:



Period	Average Euro-to-U.S. Dollar Exchange Rate		Average Pound Sterling-to-U.S. Dollar Exchange Rate
Quarter ended September 30, 2012	$	1.25	$	1.58
Quarter ended December 31, 2012	1.30		1.61
Quarter ended March 31, 2013	1.32		1.55
Quarter ended June 30, 2013	1.31		1.54
Quarter ended September 30, 2013	1.32		1.55

During the three months ended September 30, 2013 as compared to the three months ended September 30, 2012, the movement of the U.S. dollar against most major foreign currencies we use to transact our business was mixed. Relative to the Euro, the average U.S. dollar weakened by 5.9%, which increased our revenues and expenses for the three months ended September 30, 2013 relating to the Euro markets in which we transact business. In contrast, the average U.S. dollar strengthened versus the Pound Sterling by 1.9%, which decreased our revenues and expenses for the three months ended September 30, 2013 relating to the United Kingdom. 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 $7.3 million during the three months ended September 30, 2013.

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 2013, the number of insurance claims made increased slightly versus fiscal year 2012. 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, global new vehicle sales grew in 2011 and 2012. In markets where automobile insurance is generally government-mandated and claims processing is automated (“advanced markets”) sales are projected to grow at a 0.4% compound annual growth rate through 2020. In other markets, sales are projected to grow at a 5.8% 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 industry sources, 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 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.

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•

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. According to industry sources, miles driven in the United States remained flat from January through May of calendar year 2013 compared to the same period in prior year. Fewer miles driven can result in fewer automobile accidents, which can reduce 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 $10.4 million and $4.0 million for the three months ended September 30, 2013 and 2012, respectively. We expect to recognize additional pre-tax, non-cash share-based compensation charges related to share-based awards outstanding at September 30, 2013, the estimated total remaining unamortized share-based compensation expense, net of forfeitures, was $69.3 million, which we expect to recognize over a weighted-average period of 3.1 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.

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Results of Operations

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

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,
	2013	2012	Change
	$	$	$		%
Revenues	218,028	195,719	22,309		11.4
Cost of revenues:
Operating expenses	49,751	42,340	7,411		17.5
Systems development and programming costs	19,572	17,857	1,715		9.6
Total cost of revenues (excluding depreciation and amortization)	69,323	60,197	9,126		15.2
Selling, general & administrative expenses	65,107	50,909	14,198		27.9
Depreciation and amortization	25,103	24,195	908		3.8
Restructuring charges, asset impairments and other costs associated with exit and disposal activities	391	1,454	(1,063	)	(73.1	)
Acquisition and related costs	11,195	3,158	8,037		254.5
Interest expense	26,929	17,300	9,629		55.7
Other expense, net	715	398	317		79.6
	198,763	157,611	41,152		26.1
Income before provision for income taxes	19,265	38,108	(18,843	)	(49.4	)
Income tax provision	2,696	1,697	999		58.9
Net income	16,569	36,411	(19,842	)	(54.5	)
Less: Net income attributable to noncontrolling interests	2,878	2,770	108		3.9
Net income attributable to Solera Holdings, Inc.	13,691	33,641	(19,950	)	(59.3	)

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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,
	2013		2012
Revenues	100.0	%	100.0	%
Cost of revenues:
Operating expenses	22.8		21.6
Systems development and programming costs	9.0		9.1
Total cost of revenues (excluding depreciation and amortization)	31.8		30.8
Selling, general & administrative expenses	29.9		26.0
Depreciation and amortization	11.5		12.4
Restructuring charges, asset impairments and other costs associated with exit and disposal activities	0.2		0.7
Acquisition and related costs	5.1		1.6
Interest expense	12.4		8.8
Other expense, net	0.3		0.2
	91.2		80.5
Income before provision for income taxes	8.8		19.5
Income tax provision	1.2		0.9
Net income	7.6		18.6
Less: Net income attributable to noncontrolling interests	1.3		1.4
Net income attributable to Solera Holdings, Inc.	6.3	%	17.2	%

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Revenues

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, revenues increased $22.3 million, or 11.4%. After adjusting for changes in foreign currency exchange rates, revenues increased $20.5 million, or 10.5%, during the three months ended September 30, 2013 due to revenue growth in both our EMEA and Americas segments.

Our EMEA revenues increased $11.9 million, or 10.8%, to $122.0 million. After adjusting for changes in foreign currency exchange rates, EMEA revenues increased $8.5 million, or 7.7%, during the three months ended September 30, 2013 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, and incremental revenue contributions from recently-acquired businesses.

Our Americas revenues increased $10.4 million, or 12.2%, to 96.0 million. After adjusting for changes in foreign currency exchange rates, Americas revenues increased $12.0 million, or 14.0%, during the three months ended September 30, 2013 resulting from incremental revenue contributions from recently-acquired businesses, revenue growth in our AudaExplore re-underwriting 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 new and existing customers in Latin America and Canada, offset by a decline in revenue in our AudaExplore claims-related business due to the non-renewal of a customer agreement with a top U.S. insurance company, as previously announced in December 2011, that completed its transition to a new provider in December 2012.

We expect AudaExplore to continue to expand its Explore re-underwriting offerings into additional U.S. states, and we expect AudaExplore's revenues to increase in connection with this expansion.

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,
	2013				2012
Insurance companies	$	94.8	43.5	%	$	88.7	45.3	%
Collision repair facilities	68.9		31.6		64.4		32.9
Independent assessors	19.8		9.1		17.6		9.0
Automotive recyclers, salvage and others	34.5		15.8		25.0		12.8
Total	$	218.0	100.0	%	$	195.7	100.0	%

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



	Three Months Ended September 30, 2013
(dollars in millions)	Revenue Growth		Percentage Change
Insurance companies	$	6.1	6.9	%
Collision repair facilities	4.5		7.1
Independent assessors	2.2		12.8
Automotive recyclers, salvage and others	9.5		37.3
Total	$	22.3	11.4	%

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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, 2013
(dollars in millions)	Revenue Growth		Percentage Change
Insurance companies	$	5.8	6.6	%
Collision repair facilities	3.6		5.7
Independent assessors	1.5		8.7
Automotive recyclers, salvage and others	9.6		37.8
Total	$	20.5	10.5	%

The increase in revenues from automotive recyclers, salvage and others during the three months ended September 30, 2013 is primarily due to revenue contributions from recently-acquired businesses.

Operating expenses

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, operating expenses increased $7.4 million, or 17.5%. After adjusting for changes in foreign currency exchange rates, operating expenses increased $7.0 million, or 16.6%, during the three months ended September 30, 2013 primarily due to an increase in operating expenses in our Americas and EMEA segments.

Our EMEA operating expenses increased $3.0 million, or 14.9%. After adjusting for changes in foreign currency exchange rates, EMEA operating expenses increased $2.4 million, or 11.9%, during the three months ended September 30, 2013 primarily due to incremental operating expenses contributions from recently-acquired businesses, mainly personnel related expenses.

Our Americas operating expenses increased $4.4 million or 20.2%. After adjusting for changes in foreign currency exchange rates, Americas operating expenses increased $4.6 million, or 21.2%, during the three months ended September 30, 2013 primarily due to incremental operating expenses contributions from recently-acquired businesses, mainly personnel related expenses and purchased data costs, and an increase in the costs of data purchased from state departments of motor vehicles consistent with the revenue growth in our AudaExplore re-underwriting business.

We expect AudaExplore's operating expenses, primarily relating to costs for data utilized in Explore's re-underwriting offerings, to increase in absolute dollars as AudaExplore expands its offerings into additional U.S. states.

Systems development and programming costs

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, systems development and programming costs (“SD&P”) increased $1.7 million, or 9.6%. After adjusting for changes in foreign currency exchange rates, SD&P increased $1.4 million, or 7.7%, during the three months ended September 30, 2013 primarily due to an increase in SD&P expenses in our Americas segment.

Our EMEA SD&P increased $0.1 million, or 0.9%. After adjusting for changes in foreign currency exchange rates, EMEA SD&P decreased $0.3 million, or 2.6%, during the three months ended September 30, 2013 primarily due to a decrease in external programming costs resulting from ongoing expense reduction initiatives.

Our Americas SD&P increased $1.6 million, or 23.1%. After adjusting for changes in foreign currency exchange rates, Americas SD&P increased $1.7 million, or 23.6%, during the three months ended September 30, 2013 primarily due to incremental SD&P contributions from recently-acquired businesses, mainly personnel related expenses, and an increase in personnel related expenses resulting from increased investment in new product development at AudaExplore.

Selling, general and administrative expenses

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, selling, general and administrative expenses (“SG&A”) increased $14.2 million, or 27.9%. After adjusting for changes in foreign currency exchange rates, SG&A increased $13.9 million, or 27.4%, primarily due to a $6.4 million

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increase in stock-based compensation expense, incremental SG&A contributions from recently-acquired businesses of $2.3 million, a $1.7 million increase in professional fees, a $1.4 million increase in personnel related expenses in our EMEA and Americas segments due to continued growth in our business and a $2.1 million increase in bad debt expense and other administrative expenses.

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.

Depreciation and amortization

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, depreciation and amortization increased by $0.9 million, or 3.8%. After adjusting for changes in foreign currency exchange rates, depreciation and amortization increased $0.7 million, or 2.9% for the three months ended September 30, 2013 primarily due to the additional intangibles amortization expense associated with recently-acquired businesses, partially offset by the continued decrease in amortization expense related to the intangible assets acquired in the CSG Acquisition and the acquisition of Explore 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

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013 and 2012, we incurred restructuring charges, asset impairments and other costs associated with exit and disposal activities of $0.4 million and $1.5 million, respectively.

The restructuring charges, asset impairments and other costs associated with exit and disposal activities incurred during the three months ended September 30, 2013 and 2012, respectively, consist primarily of employee termination benefits related to ongoing restructuring initiatives. The remaining unpaid restructuring charges incurred under these restructuring plans are expected to be paid in fiscal year 2014.

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

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. We incurred acquisition and related costs of $11.2 million and $3.2 million, during the three months ended September 30, 2013 and 2012, respectively.

Acquisition and related costs incurred during the three months ended September 30, 2013 and 2012 consist primarily of legal and professional fees incurred in connection with completed and contemplated business combinations of $2.6 million and $1.4 million, respectively, and contingent purchase consideration that is deemed compensatory in nature and other costs associated with completed acquisitions of $8.6 million and $1.8 million, respectively.

We expect to incur additional acquisition and related costs in future years as we continue to pursue potential business combinations and asset acquisitions as part of our plan to grow our business.

Interest expense

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, interest expense increased $9.6 million due to interest expense related to the 2021 Senior Notes issued in July 2013.

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We expect that our annual interest expense will increase in fiscal year 2014 as a result of the interest on the 2021 Senior Notes issued in July 2013, and the Additional 2021 Senior Notes issued and the 2023 Senior Notes issued on November 5, 2013.

Other (income) expense, net

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013, other expense, net increased $0.3 million due primarily to a $3.1 million loss on debt extinguishment and a $3.0 million decrease in net gains on derivative instruments, partially offset by a $2.9 million decrease in net foreign currency transaction losses on transactions denominated in a currency other than the functional currency of the local company, a $2.8 million gain from asset sales and a $0.1 million increase in investment income.

Income tax provision

Three Months Ended September 30, 2013 vs. Three Months Ended September 30, 2012. During the three months ended September 30, 2013 and 2012, we recorded an income tax provision of $2.7 million and $1.7 million, respectively, which resulted in an effective tax rate of 14.0% and 4.5%, respectively. The increase in the effective tax rate is primarily due to the tax benefit recognized during the three months ended September 30, 2012 associated with the release of the $11.5 million valuation allowance on our Netherlands deferred tax assets resulting from a tax law change.

Our effective tax rate for the three months ended September 30, 2013 is not necessarily indicative of the effective tax rate that may be expected for fiscal year 2014.

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.

As of September 30, 2013, management believes it is more-likely-than-not that all of our U.S. net deferred tax assets will be realized. However, we may not be able to generate sufficient future taxable income to fully realize our deferred tax assets. If we are unable to generate sufficient taxable income prior to the expiration of our foreign tax credits such that the credits expire unused, we will not be able to fully realize the recorded amount of the net deferred tax asset. Our projections of future taxable income required to fully realize the recorded amount of the net deferred tax asset reflect numerous assumptions about our operating business and investments, and are subject to change as conditions change to our business, investments, or the general economic environment. Adverse changes could result in the need to record a deferred tax asset valuation allowance resulting in a charge to results of operations and a decrease to total stockholders’ equity.

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 2018 Senior Notes and the 2021 Senior Notes. Our principal uses of cash have been, and we expect them to continue to be, for business combinations, debt service, dividends, stock repurchases, capital expenditures and working capital.

In July 2013, we issued the 2021 Senior Notes in the aggregate principal amount of $850 million, resulting in net proceeds of $846.0 million. The 2021 Senior Notes accrue interest at 6.000% per annum, payable semi-annually, and become due and payable on June 15, 2021. We used $289.5 million of the net proceeds from the issuance of the 2021 Senior Notes to repay in full all of the outstanding term loans under our Amended and Restated First Lien Credit and Guaranty Agreement (the “Amended Credit Facility”), including accrued unpaid interest through the repayment date. Upon repayment of the outstanding term loans, the Amended Credit Facility was terminated. In addition, as a result of the repayment of the terms loans under the Amended Credit Facility, we terminated the two pay fixed / receive fixed interest rate swaps that were outstanding at June 30, 2013.

We intend to use the remainder of the net proceeds for working capital and other general corporate purposes, including strategic initiatives such as future acquisitions, joint ventures, investments or other business development opportunities.

The 2021 Senior Notes include redemption provisions that allow us, at our option, to redeem all or a portion of the aggregate principal amount of the 2021 Senior Notes as follows:

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•	At any time prior to June 15, 2016, we may redeem up to 35% of the aggregate principal amount of the 2021 Senior Notes at a redemption price equal to 106.000% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, through the date of redemption.

•

The 2021 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 company, dispositions of assets, and transactions with affiliates. We are in compliance with the specified financial covenants of the 2021 Senior Notes at September 30, 2013.

On November 5, 2013, we issued the Additional 2021 Senior Notes in the aggregate principal amount of $510.0 million and issued the 2023 Senior Notes in the aggregate principal amount of $340.0 million. The Additional 2021 Senior Notes, which were issued under the indenture governing the outstanding 2021 Senior Notes that were issued on July 2, 2013, were issued at an original issue price of 101.75% plus accrued interest from July 2, 2013.


•	At any time prior to November 1, 2016, we may redeem up to 35% of the aggregate principal amount of the 2023 Senior Notes at a redemption price equal to 106.125% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any, through the date of redemption.

•

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(iv) if the redemption occurs on or after November 1, 2021, the redemption price is 100.000% of the principal amount of the notes.

We intend to use the net proceeds from the issuance of the Additional 2021 Senior Notes and the 2023 Senior Notes of approximately $855.4 million, together with existing cash on hand, to redeem the outstanding 2018 Senior Notes in the aggregate principal amount of $850.0 million. Accordingly, on October 17, 2013, we issued a conditional notice of redemption to the holders of the 2018 Senior Notes informing them of our intention to redeem all of the outstanding $850.0 of 2018 Senior Notes on or about November 18, 2013. The redemption price for the 2018 Senior Notes will be approximately $932.7 million, consisting of (i) the unpaid principal amount of the 2018 Senior Notes of $850.0 million, (ii) accrued unpaid interest through the redemption date of approximately $24.4 million, and (iii) a redemption premium of approximately $58.5 million.

On October 3, 2013, we entered into an agreement with an entity majority owned by certain investment funds affiliated with WCAS, pursuant to which we will acquire at least a 50% equity ownership interest in a newly-formed parent company of SRS for approximately $289 million in cash. The consummation of the SRS Acquisition is subject to customary closing conditions, including Hart-Scott-Rodino clearance, and is expected to be completed in the second quarter of fiscal year 2014.

We will have the right to acquire the remaining outstanding equity interests of SRS at a price, subject to certain adjustments, equal to the greater of (a) a specified multiple of WCAS’s cost basis of such equity interests, and (b) a per share equity value based on a specified multiple of SRS’s TTM EBITDA.

In April 2012, in order to mitigate the variability of 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.

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 of 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 exercise their redemption rights, we believe that we have sufficient liquidity to fund such redemptions.

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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, 2013, we purchased 0.1 million shares for $5.1 million. Through September 30, 2013, we have repurchased 2.9 million shares for $136.6 million under the share repurchase program.

On September 17, 2013, we paid a quarterly cash dividend with a value of $0.17 per outstanding share of common stock and per outstanding restricted stock unit to our stockholders and restricted stock unit holders of record on September 5, 2013. The aggregate dividend payment for the three months ended September 30, 2013 was $11.8 million. On November 6, 2013, we announced that the Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.17 per outstanding share of common stock and per outstanding restricted stock unit. The Audit Committee of our Board of Directors also approved a quarterly stock dividend equivalent of $0.17 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 3, 2013 to stockholders and restricted stock unit holders of record at the close of business on November 20, 2013. Any determination to pay dividends in future periods will be at the discretion of our Board of Directors. The indenture governing our senior unsecured notes include restrictions on our ability to pay dividends on our common stock.

As of September 30, 2013 we had cash and cash equivalents of $1.1 billion. At September 30, 2013, our total current and long-term debt obligations were $1.7 billion, consisting of $850.0 million related to the 2018 Senior Notes and $850.0 million related to the 2021 Senior Notes. After giving effect to the issuance of the Additional 2021 Senior Notes and the 2023 Senior Notes, as well as the contemplated redemption of the 2018 Senior Notes, our indebtedness, including current maturities, will be $1.7 billion, of which $1.36 billion matures in June 2021 and $340.0 million matures in November 2023.

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.

Our management believes that our cash is best utilized by investing in the future growth of our business, either through acquisitions or penetration of new geographic markets 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,
	2013			2012			Change
Operating activities	$	84.0		$	68.2		$	15.8
Investing activities	(20.0		)	(16.7		)	(3.3		)
Financing activities	537.3			(20.8		)	558.1

Operating activities. The $15.8 million increase in cash provided by operating activities was primarily attributable to changes in working capital.

Investing activities. The $3.3 million increase in cash used in investing activities was primarily attributable to an increase in acquisitions of businesses, net of cash acquired and proceeds from sale of business, of $3.3 million, due to the acquisition of two businesses during fiscal year 2014 to date.

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Financing activities. The $558.1 million increase in cash provided by financing activities was primarily attributable to the proceeds from the issuance of the 2021 Senior Notes in July 2013, net of the repayment of the outstanding term loans under the Amended Credit Facility, of $556.7 million.

Off-Balance Sheet Arrangements and Related Party Transactions

As of September 30, 2013, 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, 2013 and 2012, respectively, and aggregate accounts receivable from the minority stockholders represent less than 10% of consolidated accounts receivable at September 30, 2013 and June 30, 2013, respectively.

On February 12, 2013, we entered into a Facilities Use Agreement with Aquila Guest Ranch, LLC (“AGR"), an entity owned by the family of our Chief Executive Officer, Tony Aquila, pursuant to which we shall pay AGR a fixed annual fee of $140,000 in exchange for our use during calendar year 2013 of certain guest ranch facilities in Wyoming. Additional details regarding the Facilities Use Agreement and the terms thereof may be found in our Current Report on Form 8-K filed with the United States Securities and Exchange Commission on February 25, 2013.

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, 2013 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, 2013 filed with the SEC on August 23, 2013. There have been no significant changes in our critical accounting policies and estimates during the three months ended September 30, 2013.

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

We conduct operations in many countries around the world. As a result, 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 2013:



Period	Average Euro-to-U.S. Dollar Exchange Rate		Average Pound Sterling-to-U.S. Dollar Exchange Rate
Quarter ended September 30, 2012	$	1.25	$	1.58
Quarter ended December 31, 2012	1.30		1.61
Quarter ended March 31, 2013	1.32		1.55
Quarter ended June 30, 2013	1.31		1.54
Quarter ended September 30, 2013	1.32		1.55

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. 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.

During the three months ended September 30, 2013 and 2012, we recognized net foreign currency transaction (income) losses in our consolidated statements of income of $(4.5) million and $0.5 million, respectively.

Interest Rate Risk

Our outstanding long-term debt as of September 30, 2013 consists entirely of senior unsecured notes that bear interest at a fixed interest rate. Accordingly, we are not subject to interest rate risk.

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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, 2013.

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.

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 2014, 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.

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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, 2013, we derived 17.7% of our revenues from our ten largest insurance company customers. The largest three of these customers accounted for 2.9%, 2.7%, and 2.5%, respectively, of our revenues during the three months ended September 30, 2013. 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 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. Mitchell International recently consummated a strategic relationship with GT Motive Einsa Group, including an equity investment. 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 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, , have or develop additional solutions we do not have that our customers may desire, 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, such as the equity interest in GT Motive purchased by Mitchell International, 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.

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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 $29.3 million and $16.3 million for the three months ended September 30, 2013 and 2012, respectively, which are recorded as a component of accumulated other comprehensive income (loss) in the stockholders' equity. 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 2013:



Period	Average Euro-to-U.S. Dollar Exchange Rate		Average Pound Sterling-to-U.S. Dollar Exchange Rate
Quarter ended September 30, 2012	$	1.25	$	1.58
Quarter ended December 31, 2012	1.30		1.61
Quarter ended March 31, 2013	1.32		1.55
Quarter ended June 30, 2013	1.31		1.54
Quarter ended September 30, 2013	1.32		1.55

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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, 2013 and 2012, we recognized net foreign currency transaction losses in our consolidated statements of income of $(4.5) million and $0.5 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 2013, the number of insurance claims made increased slightly versus fiscal year 2012. 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, global new vehicle sales grew in 2011 and 2012. In markets where automobile insurance is generally government-mandated and claims processing is automated (“advanced markets”), sales are projected to grow at a 0.4% compound annual growth rate through 2020. In other markets, sales are projected to grow at a 5.8% 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 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. According to industry sources, miles driven in the United States remained flat from January through May of calendar year 2013 compared to the same period in prior year. For calendar year 2012, cumulative miles driven in the United States increased by 0.6% 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. Fewer miles driven can result in fewer automobile accidents, which can reduce 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.

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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 2013, 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 2014 to date, we have acquired two businesses. In addition, we have signed a definitive agreement to acquire SRS that we expect to complete in our second quarter of fiscal year 2014.

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 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;


•	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.

Our merger and acquisition activities are subject to antitrust and competition laws, which laws could impact our ability to pursue strategic transactions. If we were found to violate antitrust and competition laws, we would be subject to various

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remedies, including divestiture of the acquired businesses. For example, we recently announced that the U.S. Federal Trade Commission (the "FTC") closed its investigation into our acquisition of Actual Systems. Pursuant to the termination of the investigation, and without admitting any violation of the law, we agreed to enter into a consent order with the FTC relating to the salvage yard management system business and effected a voluntary divestiture of the United States and Canadian businesses of Actual Systems in August 2013 to a purchaser group substantially composed of the former shareholders of Actual Systems.

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. 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.

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;

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•	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 business, financial condition and results of operations.

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.

We are currently making, and anticipate making additional, strategic decisions and investments to leverage and expand our product and service offerings, including offerings in addition to the automotive sector.

We have invested, and expect to continue to invest, significant management attention and financial resources to develop, integrate and implement new business strategies, products, services, features, applications, and functionality. Such endeavors may involve significant risks and uncertainties, including distraction of management from current core operations, insufficient revenues to offset liabilities assumed and expenses associated with these new investments, inadequate return of capital on our investments, and unanticipated issues or problems that arise during our implementation of such strategies and offerings. Because these new endeavors are inherently risky, our business strategies and product and service offerings may not be successful and may adversely affect our business, financial condition and results of operations.

Some of our strategies and offerings may be consumer-based and/or outside of the automotive sector. We have limited historical experience directly serving consumers or customers outside of the automotive sector and our products and services may not be accepted or widely utilized by such consumers or customers. These offerings may also subject us to new or additional laws and regulations (including those relating to consumer protection) and may lead to increased legal and regulatory compliance, risk and liability.

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

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regulations that, among other things, require insurers use a methodology deemed acceptable to the respective government agency.

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, the United Kingdom's Financial Services and Markets Act 2000 Order 2001, 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 senior unsecured notes contains restrictive covenants that limit our ability to engage in certain activities.

We have a significant amount of indebtedness. As of September 30, 2013, our indebtedness, including current maturities, was $1.7 billion, of which $850.0 million matures in June 2018 and $850.0 million matures in June 2021. After giving effect to the issuance of the Additional 2021 Senior Notes and the 2023 Senior Notes, as well as the contemplated redemption of the 2018 Senior Notes, our indebtedness, including current maturities, will be $1.7 billion, of which $1.36 billion matures in June 2021 and $340.0 million matures in November 2023.

During the three months ended September 30, 2013, our aggregate interest expense was $26.9 million and cash paid for interest was $0.2 million. As a result of our issuance of the 2021 Senior Notes in July 2013 and after giving effect to the issuance of the Additional Senior Notes and the 2023 Senior Notes, as well as the contemplated redemption of the 2018 Senior Notes, our interest expense and cash interest expense will increase significantly in fiscal year 2014 as compared to fiscal year 2013.

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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;


•	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.

The indenture for our senior unsecured notes 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.

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 $88.0 million at September 30, 2013.

We are active in over 65 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, 2013, we generated approximately 67% 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 more than 65 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, financial condition 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, 2013, we had goodwill and other intangible assets of $1.5 billion, or approximately 51% of our total assets. If we do not achieve our planned

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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.

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 $0.4 million and $1.5 million during the three months ended September 30, 2013 and 2012, respectively. These charges consist primarily of termination benefits paid or to be paid to employees. As of September 30, 2013, our remaining restructuring and severance obligations associated with these restructuring initiatives were $0.2 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. 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.

Mitchell International, one of our primary competitors in the United States, has historically provided us with vehicle glass data for use in our U.S. markets pursuant to a vehicle data license agreement. Mitchell International filed a complaint against us with the California Superior Court alleging that we have breached the license agreement. Our discussions with Mitchell International continue regarding a resolution of the dispute relating to this agreement. We continue to investigate Mitchell International's claim that we have breached the agreement, and we cannot be certain about the outcome of these discussions or our continued access to the data.

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.

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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;


•	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.

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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.

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.

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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 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 United States, 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 to advertising and marketing new brands.

Third parties, including competitors, may infringe our intellectual property rights 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 the 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 harm our business, financial condition and results of operations.

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

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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 condition and results of operations.

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.

Our ability to utilize certain U.S. tax deferred tax assets is dependent upon generating sufficient taxable income before the expiration of the carryforward period. As a result of the issuance of the Additional 2021 Senior Notes, and the costs associated with the redemption of the 2018 Senior Notes, we expect our U.S. taxable income to decrease in the future which may result in a decrease in the amount of U.S. deferred tax assets considered realizable.

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 6, 2013, we announced that the Audit Committee of our Board of Directors approved the payment of a quarterly cash dividend of $0.17 per outstanding share of common stock and per outstanding restricted stock unit. The Audit Committee of our Board of Directors also approved a quarterly stock dividend equivalent of $0.17 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 3, 2013 to stockholders and restricted stock unit holders of record at the close of business on November 20, 2013. 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 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.

We may not complete the SRS Acquisition or, if it is completed, we may not realize all of the expected benefits from the SRS Acquisition.

The consummation of the SRS Acquisition is subject to customary closing conditions, including the expiration or early termination of the waiting period under the HSR Act, the parties’ representations and warranties as set forth in the recapitalization agreement continuing to be true and correct as of the closing date, giving effect to customary material adverse effect clauses, and the parties having complied with all of its covenants under the recapitalization agreement. We believe that the SRS Acquisition will provide us with a number of benefits, including opportunities to enhance our existing products and provide us with technologies that would complement or extend our business or enhance our technological capability. Our ability to realize the anticipated benefits of the SRS Acquisition will depend, to a large extent, on our ability to continue to expand SRS’s 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 the business of either or both of the companies and, if executed ineffectively, could preclude realization of the full benefits we expect. Failure to realize the anticipated benefits of this investment could cause an interruption of, or a loss of momentum in, the operations of SRS. In addition, the efforts

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required to realize the benefits of this investment 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.

Our ability to control the operations of SRS following the completion of the SRS Acquisition will be limited by the rights of our joint venture partners.

Following the completion of the SRS Acquisition, we will own 50% of the outstanding equity interests of the parent entity of SRS and SRS will initially be operated as a joint venture. As a result, our ability to operate and otherwise fully integrate the operations of SRS with our operations will be limited by the terms of our agreements with our joint venture partner, WCAS. For example, pursuant to the stockholders agreement, each of the joint venture parties will agree to vote its respective equity interest to cause the board of directors to be composed of three representatives of Solera, three representatives of WCAS and one independent director mutually selected by the joint venture parties. As a result, our representatives will not be able to control the decisions of the board of directors of SRS. In addition, the consent of WCAS will be required in order for SRS to take certain corporate actions, including amending the certificate of incorporation and other governing documents, adopting strategic plans and operating budgets, incurrence of indebtedness or liens, acquisitions or other significant corporate actions, affiliate transactions, equity or debt issuances, declaration of dividends, and adoption of equity incentive plans. The operations of SRS could be disrupted or otherwise adversely affected to the extent we become involved in disputes with our joint venture partner regarding development or operations of SRS, such as how to best deploy assets or which business opportunities to pursue. Potential conflicts of interest could also arise if we enter into any new commercial arrangements with SRS in the future.

We will consolidate the financial results of SRS into our own in accordance with GAAP as a result of having effective management control of SRS following the completion of the SRS Acquisition. This will cause the total assets and liabilities on our balance sheet to appear larger than they would otherwise and our statement of income to reflect larger revenues and expenses than would be the case absent such consolidation. In addition, SRS will not be entitled to dividend or otherwise distribute to us our proportionate share of its earnings that will be otherwise reflected in our consolidated statement of income without the consent of WCAS. The board of directors of SRS, in the exercise their fiduciary duties to all of the stockholders of SRS, may take actions that may not always be in our best interests and such actions could lead to outcomes that have a material negative impact on the operations or financial condition of SRS. Upon consolidation, this would impact our results of operations and financial condition, thereby possibly impacting our ability to obtain needed financing for our operations, or our ability to do so on favorable terms.

We have agreed to purchase additional equity interests of SRS’s parent company from WCAS under certain circumstances, and the payments for such additional purchases could be substantial.

We will pay approximately $289 million in connection with our initial investment in SRS. We have agreed, pursuant to the terms of the stockholders agreement, to purchase additional equity interests of SRS from WCAS at its election under certain circumstances. Under the stockholders agreement, WCAS will have the right to require us to purchase its equity interests at up to four times per year, subject to an annual cap of $250 million and a $25 million per exercise minimum, subject to certain adjustments. In addition, at certain times and upon certain triggering events, WCAS will have additional rights to require us to purchase either half or all (depending on the triggering event) of its equity interests of SRS, pursuant to an agreed upon valuation methodology. The triggering events for the WCAS Special Put Rights will include, among others, a drop in our corporate credit rating of 3 notches or more by Moody’s or 2 notches or more by S&P, or if SRS is required to become a guarantor of any of our indebtedness or the indebtedness of our subsidiaries or at any time beginning on August 1, 2018 and ending on the earlier of (x) December 31, 2018 and (y) the consummation of any WCAS Annual Put Rights after August 1, 2018. The estimated aggregate payments in the event that we exercise our Call Right or that WCAS exercises all of its WCAS Annual Put Rights or WCAS Special Put Rights, or any combination thereof, such that we acquire all of the outstanding equity interests of SRS range from approximately $569 million to approximately $850 million.

The ability of WCAS to require us to purchase its equity interests is outside of our control and, as a result, we may be required to purchase such equity interests at a time in which we would otherwise want to use such funds for another purpose, including funding capital expenditures or other strategic initiatives. In addition, we may not have sufficient cash or available borrowings to finance such purchase obligation and would to otherwise need to seek third-party financing to fund such purchases. We expect to be required to reflect the purchase price of WCAS’s equity interests pursuant to its WCAS Annual Put Rights or WCAS Special Put Rights in our consolidated balance sheet.

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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 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.

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.

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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
November 2012	50	$	49.35	50	$	65,524
February 2013	100	$	55.98	100	$	59,925
May 2013	200	$	56.82	200	$	48,556
August 2013	11	$	51.68	11	$	47,981
September 2013	89	$	51.29	89	$	43,421
Total	2,852	$	47.86	2,852	$	43,421

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ITEM 6.	EXHIBITS.



Exhibit No.		Description
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 12, 2013

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Good

Solera (SLH) Inactive 10-Q2014 Q3 Quarterly report

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