Verisk Analytics, Inc. - FORM 10-Q

Verisk Analytics, Inc. - FORM 10-Q - July 28, 2015

Attached files

Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 - Verisk Analytics, Inc.	vrsk-201563010qxex312.htm
EX-32.1 - EXHIBIT 32.1 - Verisk Analytics, Inc.	vrsk-201563010qxex321.htm
EX-31.1 - EXHIBIT 31.1 - Verisk Analytics, Inc.	vrsk-201563010qxex311.htm
EX-10.2 - EXHIBIT 10.2 - Verisk Analytics, Inc.	vrsk-2015063010qxex102.htm
XML - IDEA: XBRL DOCUMENT - Verisk Analytics, Inc.	R9999.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________



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

For the quarterly period ended June 30, 2015



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

For the transition period from to

Commission File Number: 001-34480

___________________________________

VERISK ANALYTICS, INC.

(Exact name of registrant as specified in its charter)

___________________________________



Delaware		26-2994223
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

545 Washington Boulevard Jersey City, NJ		07310-1686
(Address of principal executive offices)		(Zip Code)

(201) 469-2000

(Registrant’s telephone number, including area code)

___________________________________

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 ý 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 ý No ¨

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

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

As of July 24, 2015, there were 168,486,740 shares outstanding of the registrant's Common Stock, par value $.001.

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Verisk Analytics, Inc.

Index to Form 10-Q

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	Page Number

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Operations	2

Condensed Consolidated Statements of Comprehensive Income	3

Condensed Consolidated Statements of Changes in Stockholders’ Equity	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3. Quantitative and Qualitative Disclosures About Market Risk	37

Item 4. Controls and Procedures	37

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	38

Item 1A. Risk Factors	38

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3. Defaults Upon Senior Securities	39

Item 4. Mine Safety Disclosures	39

Item 5. Other Information	39

Item 6. Exhibits	39

SIGNATURES	40

Exhibit 10.2

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

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Item 1. Financial Statements

VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2015 and December 31, 2014



	2015			2014
	(unaudited)			2014
	(In thousands, except for share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	145,491		$	39,359
Available-for-sale securities		3,725			3,801
Accounts receivable, net of allowance for doubtful accounts of $7,606 and $5,995, respectively		267,379			220,668
Prepaid expenses		37,478			31,496
Deferred income taxes, net		4,770			4,772
Income taxes receivable		65,182			65,512
Other current assets		85,962			18,875
Total current assets		609,987			384,483
Noncurrent assets:
Fixed assets, net		386,093			302,273
Intangible assets, net		1,655,565			406,476
Goodwill		3,057,642			1,207,146
Pension assets		27,026			18,589
Other assets		39,350			26,363
Total assets	$	5,775,663		$	2,345,330

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	246,361		$	180,726
Short-term debt and current portion of long-term debt		1,025,797			336,058
Pension and postretirement benefits, current		1,894			1,894
Fees received in advance		436,001			252,592
Total current liabilities		1,710,053			771,270
Noncurrent liabilities:
Long-term debt		2,293,864			1,100,874
Pension benefits		13,576			13,805
Postretirement benefits		2,302			2,410
Deferred income taxes, net		463,561			202,540
Other liabilities		47,985			43,388
Total liabilities		4,531,341			2,134,287
Commitments and contingencies
Stockholders’ equity:
Common stock, $.001 par value; 1,200,000,000 shares authorized; 544,003,038 shares issued and 168,453,749 and 157,913,227 outstanding, respectively		137			137
Unearned KSOP contributions		(104	)		(161	)
Additional paid-in capital		1,971,270			1,171,196
Treasury stock, at cost, 375,549,289 and 386,089,811 shares, respectively		(2,559,263	)		(2,533,764	)
Retained earnings		1,916,155			1,654,149
Accumulated other comprehensive losses		(83,873	)		(80,514	)
Total stockholders’ equity		1,244,322			211,043
Total liabilities and stockholders’ equity	$	5,775,663		$	2,345,330

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For The Three and Six Months Ended June 30, 2015 and 2014



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
	(In thousands, except for share and per share data)
Revenues	$	497,650		$	423,554		$	957,047		$	833,197
Expenses:
Cost of revenues (exclusive of items shown separately below)		195,196			172,470			379,412			342,143
Selling, general and administrative		91,292			57,074			149,598			114,208
Depreciation and amortization of fixed assets		28,628			20,723			53,070			40,504
Amortization of intangible assets		28,812			14,221			42,953			28,433
Total expenses		343,928			264,488			625,033			525,288
Operating income		153,722			159,066			332,014			307,909
Other income (expense):
Investment income and others, net		(221	)		200			(759	)		209
Gain on derivative instruments		85,187			—			85,187			—
Interest expense		(37,662	)		(17,459	)		(55,924	)		(34,898	)
Total other income (expense), net		47,304			(17,259	)		28,504			(34,689	)
Income before income taxes		201,026			141,807			360,518			273,220
Provision for income taxes		(37,706	)		(53,708	)		(98,512	)		(100,680	)
Income from continuing operations		163,320			88,099			262,006			172,540
Income from discontinued operations, net of tax of $0 and $23,365, for the three and six months ended June 30, 2014, respectively (Note 6)		—			—			—			31,117
Net income	$	163,320		$	88,099		$	262,006		$	203,657
Basic net income per share:
Income from continuing operations	$	0.99		$	0.53		$	1.63		$	1.03
Income from discontinued operations		—			—			—			0.19
Basic net income per share	$	0.99		$	0.53		$	1.63		$	1.22
Diluted net income per share:
Income from continuing operations	$	0.97		$	0.52		$	1.59		$	1.02
Income from discontinued operations		—			—			—			0.18
Diluted net income per share	$	0.97		$	0.52		$	1.59		$	1.20
Weighted average shares outstanding:
Basic		164,141,804			166,343,630			161,114,861			166,662,806
Diluted		167,586,100			169,503,664			164,533,656			169,962,577

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

For The Three and Six Months Ended June 30, 2015 and 2014



	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014
	(In thousands)
Net income	$	163,320		$	88,099	$	262,006		$	203,657
Other comprehensive income, net of tax:
Foreign currency translation adjustment		(4,209	)		253		(4,429	)		760
Unrealized holding gain on available-for-sale securities		7			21		69			37
Pension and postretirement liability adjustment		387			171		1,001			314
Total other comprehensive (loss) income		(3,815	)		445		(3,359	)		1,111
Comprehensive income	$	159,505		$	88,544	$	258,647		$	204,768

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

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VERISK ANALYTICS, INC.

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

For The Year Ended December 31, 2014 and The Six Months Ended June 30, 2015



	Common Stock Issued	Par Value		Unearned KSOP Contributions			Additional Paid-in Capital			Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Losses			Total Stockholders’ Equity
	(In thousands, except for share data)
Balance, December 31, 2013	544,003,038	$	137	$	(306	)	$	1,202,106		$	(1,864,967	)	$	1,254,107	$	(43,488	)	$	547,589
Net income	—		—		—			—			—			400,042		—			400,042
Other comprehensive income	—		—		—			—			—			—		(37,026	)		(37,026	)
Treasury stock acquired (10,802,087 shares)	—		—		—			(100,000	)		(675,446	)		—		—			(775,446	)
KSOP shares earned	—		—		145			15,206			—			—		—			15,351
Stock options exercised, including tax benefit of $15,438 (1,091,746 shares reissued from treasury stock)	—		—		—			34,011			5,781			—		—			39,792
Restricted stock lapsed, including tax benefit of $550 (134,713 shares reissued from treasury stock)	—		—		—			(148	)		698			—		—			550
Employee stock purchase plan (26,953 shares reissued from treasury stock)	—		—		—			1,414			149			—		—			1,563
Stock based compensation	—		—		—			20,011			—			—		—			20,011
Net share settlement from restricted stock awards (27,159 shares withheld for tax settlement)	—		—		—			(1,625	)		—			—		—			(1,625	)
Other stock issuances (3,975 shares reissued from treasury stock)	—		—		—			221			21			—		—			242
Balance, December 31, 2014	544,003,038		137		(161	)		1,171,196			(2,533,764	)		1,654,149		(80,514	)		211,043
Net income	—		—		—			—			—			262,006		—			262,006
Other comprehensive income	—		—		—			—			—			—		(3,359	)		(3,359	)
Treasury stock acquired (809,021 shares)	—		—		—			100,000			(100,000	)		—		—			—
KSOP shares earned	—		—		57			7,912			—			—		—			7,969
Shares issued from equity offering (10,604,000 shares reissued from treasury stock)	—		—		—			651,258			69,590			—		—			720,848
Stock options exercised, including tax benefit of $6,741 (580,926 shares reissued from treasury stock)	—		—		—			21,052			3,829			—		—			24,881
Restricted stock lapsed, including tax benefit of $1,107 (152,373 shares reissued from treasury stock)	—		—		—			2,456			1,000			—		—			3,456
Employee stock purchase plan (11,404 shares reissued from treasury stock)	—		—		—			705			76			—		—			781
Stock based compensation	—		—		—			18,986			—			—		—			18,986
Net share settlement of restricted stock awards (32,882 shares withheld for tax settlement)	—		—		—			(2,350	)		—			—		—			(2,350	)
Other stock issuances (840 shares reissued from treasury stock)	—		—		—			55			6			—		—			61
Balance, June 30, 2015	544,003,038	$	137	$	(104	)	$	1,971,270		$	(2,559,263	)	$	1,916,155	$	(83,873	)	$	1,244,322

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

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VERISK ANALYTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

For The Six Months Ended June 30, 2015 and 2014



	2015			2014
	(In thousands)
Cash flows from operating activities:
Net income	$	262,006		$	203,657
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of fixed assets		53,070			41,499
Amortization of intangible assets		42,953			28,544
Amortization of debt issuance costs and original issue discount		10,634			1,322
Allowance for doubtful accounts		456			347
KSOP compensation expense		7,969			7,703
Stock based compensation		19,047			11,057
Gain on derivative instruments		(85,187	)		—
Gain on sale of discontinued operations		—			(65,410	)
Realized gain on available-for-sale securities, net		(14	)		(115	)
Deferred income taxes		(7,390	)		(3,519	)
(Gain) loss on disposal of fixed assets		(3	)		735
Excess tax benefits from exercised stock options and restricted stock awards		(8,419	)		(6,094	)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable		37,981			(12,186	)
Prepaid expenses and other assets		9,747			(13,593	)
Income taxes		11,858			44,808
Accounts payable and accrued liabilities		(27,393	)		(26,674	)
Fees received in advance		38,305			81,666
Pension and postretirement benefits		(7,129	)		(6,064	)
Other liabilities		(2,990	)		(848	)
Net cash provided by operating activities		355,501			286,835
Cash flows from investing activities:
Acquisitions, net of cash acquired of $35,398 and $0, respectively		(2,811,759	)		(4,001	)
Purchase of non-controlling interest in non-public companies		(101	)		(5,000	)
Proceeds from sale of discontinued operations		—			155,000
Escrow funding associated with acquisition		(78,694	)		—
Proceeds from the settlement of derivative instruments		85,187			—
Capital expenditures		(60,092	)		(75,764	)
Purchases of available-for-sale securities		(29	)		(32	)
Proceeds from sales and maturities of available-for-sale securities		230			281
Net cash (used in) provided by investing activities		(2,865,258	)		70,484
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net of original issue discount		1,243,966			—
Proceeds of short-term debt, net		30,000			—
Proceeds from issuance of short-term debt with original maturities greater than three months		830,000			—
Repayment of current portion of long-term debt		(170,000	)		—
Repayment of long-term debt		(50,000	)		—
Payment of debt issuance costs		(23,053	)		—
Repurchases of common stock		—			(122,120	)
Excess tax benefits from exercised stock options and restricted stock awards		8,419			6,094
Proceeds from stock options exercised		18,103			14,923
Proceeds from issuance of stock as part of a public offering		720,848			—
Net share settlement of restricted stock awards		(2,350	)		(1,234	)
Other financing activities, net		(2,569	)		(2,095	)
Net cash provided by (used in) financing activities		2,603,364			(104,432	)
Effect of exchange rate changes		12,525			760
Increase in cash and cash equivalents		106,132			253,647
Cash and cash equivalents, beginning of period		39,359			165,801
Cash and cash equivalents, end of period	$	145,491		$	419,448
Supplemental disclosures:
Taxes paid	$	87,914		$	82,624
Interest paid	$	37,977		$	34,002
Noncash investing and financing activities:
Tenant improvement included in other liabilities	$	448		$	8,859
Capital lease obligations	$	905		$	1,274
Capital expenditures included in accounts payable and accrued liabilities	$	4,658		$	1,247

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

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VERISK ANALYTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

1. Organization:

Verisk Analytics, Inc. and its consolidated subsidiaries (“Verisk” or the “Company”) enable risk-bearing businesses to better understand and manage their risks. The Company provides its customers proprietary data that, combined with analytic methods, create embedded decision support solutions. The Company is one of the largest aggregators and providers of data pertaining to property and casualty (“P&C”) insurance risks in the United States of America (“U.S.”). The Company offers solutions for detecting fraud in the U.S. P&C insurance, financial, healthcare, and global energy industries and sophisticated methods to predict and quantify loss in diverse contexts ranging from natural catastrophes to supply chain to health insurance. The Company provides solutions, including data, statistical models or tailored analytics, all designed to allow clients to make more logical decisions.

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

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

The accompanying unaudited condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the U.S. (“U.S. GAAP”). The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include acquisition purchase price allocations, the fair value of goodwill, the realization of deferred tax assets, fair value of stock based compensation, assets and liabilities for pension and postretirement benefits, and the estimate for the allowance for doubtful accounts. Actual results may ultimately differ from those estimates. The results of operations for the Company's mortgage services business are reported as a discontinued operation for the period presented herein (See Note 6).

On May 19, 2015, the Company acquired Wood Mackenzie Limited (“Wood Mackenzie”) and has incorporated its financial statements into the Company's condensed consolidated financial statements as of that date. The preliminarily estimated fair values of the tangible and intangible assets acquired and liabilities assumed in connection with the purchase of Wood Mackenzie have been recognized in the accompanying condensed consolidated balance sheets at June 30, 2015 based upon their preliminarily estimated fair values on May 19, 2015. The excess of the purchase price over the preliminary fair values of the net tangible and intangible assets was recorded as goodwill. The preliminary fair values recorded were based upon estimates and assumptions used in the Company’s historical valuation methodology. These estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) and may have a significant impact on the consolidated financial statements (See Note 5 for further information).

The condensed consolidated financial statements as of June 30, 2015 and for the three and six months ended June 30, 2015 and 2014, in the opinion of management, include all adjustments, consisting of normal recurring items, to present fairly the Company’s financial position, results of operations and cash flows. The operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year. The condensed consolidated financial statements and related notes for the three and six months ended June 30, 2015 have been prepared on the same basis as and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2014. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules of the Securities and Exchange Commission (“SEC”). The Company believes the disclosures made are adequate to keep the information presented from being misleading.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU No. 2015-03"). The amendments in this update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. ASU No. 2015-03 is effective for fiscal years beginning after December 15,

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2015, and interim periods within those fiscal years. Early adoption is permitted. The Company has elected not to early adopt and will conform with ASU No. 2015-03 in the condensed consolidated financial statements in future periods.

In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement ("ASU No. 2015-05"). This guidance is intended to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement, primarily to determine whether the arrangement includes a sale or license of software. ASU No. 2015-05 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. The Company has elected not to early adopt. The adoption of ASU No. 2015-05 is not expected to have a material impact on the Company's condensed consolidated financial statements.

3. Investments:

Available-for-sale securities consisted of the following:



	Adjusted Cost		Gross Unrealized Loss			Fair Value
June 30, 2015
Registered investment companies	$	3,858	$	(133	)	$	3,725
December 31, 2014
Registered investment companies	$	4,045	$	(244	)	$	3,801

In addition to the available-for-sale securities above, the Company has equity investments in non-public companies in which the Company acquired non-controlling interests and for which no readily determinable market value exists. These securities were accounted for under the cost method in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock. At June 30, 2015 and December 31, 2014, the carrying value of such securities was $8,588 and $8,487, respectively, and has been included in “Other assets” in the accompanying condensed consolidated balance sheets.

4. Fair Value Measurements:

Certain assets and liabilities of the Company are reported at fair value in the accompanying condensed consolidated balance sheets. To increase consistency and comparability of assets and liabilities recorded at fair value, ASC 820-10, Fair Value Measurements (“ASC 820-10”), established a three-level fair value hierarchy to prioritize the inputs to valuation techniques used to measure fair value. ASC 820-10 requires disclosures detailing the extent to which companies measure assets and liabilities at fair value, the methods and assumptions used to measure fair value and the effect of fair value measurements on earnings. In accordance with ASC 820-10, the Company applied the following fair value hierarchy:



Level 1 -		Assets or liabilities for which the identical item is traded on an active exchange, such as publicly-traded instruments.

Level 2 -		Assets and liabilities valued based on observable market data for similar instruments.

Level 3 -		Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments valued based on the best available data, some of which are internally-developed, and considers risk premiums that market participants would require.

The fair values of cash and cash equivalents (other than money-market funds which are recorded on a reported net asset value basis disclosed below), accounts receivable, accounts payable and accrued liabilities, fees received in advance, and short-term debt approximate their carrying amounts because of the short-term nature of these instruments.

The following table summarizes fair value measurements by level for cash equivalents and registered investment companies that were measured at fair value on a recurring basis:

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	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
June 30, 2015
Registered investment companies (1)	$	3,725	$	3,725	$	—
December 31, 2014
Cash equivalents - money-market funds	$	3,707	$	—	$	3,707
Registered investment companies (1)	$	3,801	$	3,801	$	—

______________________

(1) Registered investment companies are classified as available-for-sale securities and are valued using quoted prices in active markets multiplied by the number of shares owned.

The Company has not elected to carry its long-term debt at fair value. The carrying value of the long-term debt represents amortized cost. The Company assesses the fair value of its long-term debt based on quoted market prices if available, and if not, an estimate of interest rates available to the Company for debt with similar features, the Company’s current credit rating and spreads applicable to the Company. The fair value of the long-term debt would be a Level 2 liability if the long-term debt was measured at fair value on the condensed consolidated balance sheets. The following table summarizes the carrying value and estimated fair value of the long-term debt as of June 30, 2015 and December 31, 2014, respectively:



	2015				2014
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial instrument not carried at fair value:
Long-term debt excluding capitalized leases	$	2,290,241	$	2,326,220	$	1,265,848	$	1,371,213

5. Acquisitions:

2015 Acquisition

On May 19, 2015, the Company acquired 100 percent of the stock of Wood Mackenzie for a net cash purchase price of $2,889,629, including $78,694 of an indemnity escrow, which the Company financed through a combination of debt and equity offerings, borrowings under the Company's new credit facility, and cash on hand. Due to the fact that a portion of the purchase price was funded in pounds sterling and the remainder in U.S. dollars, the Company entered into a foreign currency hedging instrument to purchase pounds sterling. The Company recorded a gain within "Gain on derivative instruments" in the accompanying consolidated statements of operations and received proceeds on the hedge of $85,187. These proceeds were utilized to partially fund the acquisition of Wood Mackenzie. Wood Mackenzie is a global provider of data analytics and commercial intelligence for the energy, chemicals, metals and mining verticals. This acquisition advances the Company’s strategy to expand internationally and positions the Company in the global energy market. Wood Mackenzie is included in the energy and specialized markets vertical, formerly named the specialized markets vertical, of the Decision Analytics segment.

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The preliminary purchase price allocation of the Wood Mackenzie acquisition resulted in the following:



	Wood Mackenzie
Cash and cash equivalents	$	35,398
Accounts receivable		83,143
Current assets		85,652
Fixed assets		66,886
Intangible assets		1,294,944
Goodwill and other		1,857,097
Other assets		2,007
Total assets acquired		3,425,127
Current liabilities		(91,551	)
Fees received in advance		(142,457	)
Deferred income taxes, net		(258,976	)
Other liabilities		(7,116	)
Total liabilities assumed		(500,100	)
Net assets acquired		2,925,027
Cash acquired		(35,398	)
Net cash purchase price	$	2,889,629

The preliminary allocations of the purchase price above are subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The revisions may have a significant impact on the consolidated financial statements. The allocations of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date. The primary areas of the purchase price allocation that are not yet finalized relate to fixed assets and operating leases, income and non-income taxes, fees received in advance, the valuation of intangible assets acquired, and residual goodwill. The preliminary amounts assigned to intangible assets by type for the Wood Mackenzie acquisition were based upon the Company's valuation model and historical experiences with entities with similar business characteristics. The preliminary amounts are summarized in the table below:



	Weighted Average Useful Life	Total
Technology and database-related	8 years	$	454,736
Marketing-related	5 years		125,932
Contract-related	6 years		11,544
Customer-related	13 years		702,732
Total intangible assets		$	1,294,944

The goodwill associated with the stock purchase of Wood Mackenzie is not deductible for tax purposes. For the six months ended June 30, 2015, the Company incurred transaction costs related to this acquisition of $26,617 included within "Selling, general and administrative" expenses and $13,336 within "Interest Expense" in the accompanying consolidated statements of operations.

Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Wood Mackenzie occurred at the beginning of 2014. The pro forma information for the six months ended June 30, 2015 and 2014 presented below is based on estimates and assumptions, which the Company believes to be reasonable but not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had this acquisition been completed at the beginning of 2014. The unaudited pro forma information includes intangible asset amortization charges and incremental borrowing costs as a result of the acquisition, net of related tax, estimated using the Company’s effective tax rate for continuing operations for the periods presented.

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	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2015		2014		2015		2014
	(unaudited)
Pro forma revenues	$	546,612	$	517,000	$	1,096,761	$	1,017,824
Pro forma income from continuing operations	$	139,132	$	90,523	$	243,054	$	181,573
Pro forma basic income from continuing operations per share	$	0.85	$	0.54	$	1.51	$	1.09
Pro forma diluted income from continuing operations per share	$	0.83	$	0.53	$	1.48	$	1.07

Acquisition Escrows

Pursuant to the related acquisition agreements, the Company has funded various escrow accounts to satisfy pre-acquisition indemnity and tax claims arising subsequent to the acquisition date. At June 30, 2015 and December 31, 2014, the escrows amounted to $79,028 and $5,583, respectively and have been included in “Other current assets” in the accompanying condensed consolidated balance sheets, respectively.

6. Discontinued Operations:

On March 11, 2014, the Company sold 100 percent of the stock of the Company’s mortgage services business, Interthinx, which was a guarantor subsidiary under the then existing credit facility, in exchange for a purchase price of $151,170 after a working capital adjustment of $3,830. Upon completion of the sale, Interthinx ceased being a guarantor under the then existing credit facility. The Company recognized income from discontinued operations, net of tax, of $29,177 in 2014 upon the finalization of the provision for income taxes. Results of operations for the mortgage services business are reported as a discontinued operation for the three and six months ended June 30, 2014.

The mortgage services business met the criteria for reporting as a discontinued operation and has been segregated from continuing operations. The following table summarizes the results from the discontinued operation for the three and six months ended June 30, 2014:



	Three months ended June 30, 2014		Six months ended June 30, 2014
Revenues from discontinued operations	$	—	$	11,512
Income from discontinued operations before income taxes (including gain on sale of $65,410)	$	—	$	54,482
Provision for income taxes (including tax on gain on sale of $27,067)		—		(23,365	)
Income from discontinued operations, net of tax	$	—	$	31,117

7. Goodwill and Intangible Assets:

The following is a summary of the change in goodwill from December 31, 2014 through June 30, 2015, both in total and as allocated to the Company’s operating segments:



	Risk Assessment		Decision Analytics			Total
Goodwill at December 31, 2014 (1)	$	55,555	$	1,151,591		$	1,207,146
Current year acquisition		—		1,857,097			1,857,097
Foreign currency translation		—		(6,601	)		(6,601	)
Goodwill at June 30, 2015 (1)	$	55,555	$	3,002,087		$	3,057,642

______________________


(1)	These balances are net of accumulated impairment charges of $3,244 that occurred prior to December 31, 2013.

Goodwill and intangible assets with indefinite lives are subject to impairment testing annually as of June 30, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. Goodwill impairment testing compares the carrying value of each reporting unit to its fair value. If the fair value of the reporting unit exceeds the carrying value of the net assets, including goodwill assigned to that reporting unit, goodwill is not impaired. If the carrying value of the reporting

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unit’s net assets including goodwill exceeds the fair value of the reporting unit, then the Company will determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss is recorded for the difference between the carrying amount and the implied fair value of goodwill. The Company completed the required annual impairment test as of June 30, 2015, and concluded that there was no impairment of goodwill.

The Company’s intangible assets and related accumulated amortization consisted of the following:



	Weighted Average Useful Life	Cost		Accumulated Amortization			Net
June 30, 2015
Technology-based	8 years	$	753,813	$	(210,035	)	$	543,778
Marketing-related	5 years		197,171		(60,791	)		136,380
Contract-based	6 years		18,075		(6,782	)		11,293
Customer-related	13 years		1,099,605		(135,491	)		964,114
Total intangible assets		$	2,068,664	$	(413,099	)	$	1,655,565
December 31, 2014
Technology-based	8 years	$	299,705	$	(195,698	)	$	104,007
Marketing-related	5 years		71,504		(54,745	)		16,759
Contract-based	6 years		6,555		(6,555	)		—
Customer-related	13 years		399,011		(113,301	)		285,710
Total intangible assets		$	776,775	$	(370,299	)	$	406,476

Amortization expense related to intangible assets for the three months ended June 30, 2015 and 2014 was $28,812 and $14,221, respectively. Amortization expense related to intangible assets for the six months ended June 30, 2015 and 2014 was $42,953 and $28,433, respectively. Estimated amortization expense for the remainder of 2015 and the years through 2020 and thereafter for intangible assets subject to amortization is as follows:



Year	Amount
2015	$	101,242
2016		188,266
2017		187,362
2018		186,617
2019		185,156
2020 and thereafter		806,922
	$	1,655,565

8. Income Taxes:

The Company’s effective tax rate for the three and six months ended June 30, 2015 was 18.76% and 27.33%, respectively, compared to the effective tax rate for the three and six months ended June 30, 2014 of 37.87% and 36.85%, respectively. The effective tax rate for the three and six months ended June 30, 2015 is lower than the June 30, 2014 effective tax rate primarily due to tax benefits related to the Wood Mackenzie acquisition. The difference between statutory tax rates and the Company’s effective tax rate is primarily attributable to state taxes, tax benefits related to the Wood Mackenzie acquisition, and nondeductible share appreciation from the ISO 401(k) Savings and Employee Stock Ownership Plan (“KSOP”).

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9. Debt:

The following table presents short-term and long-term debt by issuance as of June 30, 2015 and December 31, 2014:



	Issuance Date	Maturity Date	2015		2014
Short-term debt and current portion of long-term debt:
Syndicated revolving credit facility	Various	Various	$	1,020,000	$	160,000
Prudential shelf notes:
5.84% Series H shelf notes	10/26/2007	10/26/2015		—		17,500
6.28% Series I shelf notes	4/29/2008	4/29/2015		—		85,000
New York Life shelf notes:
5.87% Series A shelf notes	10/26/2007	10/26/2015		—		17,500
6.35% Series B shelf notes	4/29/2008	4/29/2015		—		50,000
Capital lease obligations	Various	Various		5,797		6,058
Short-term debt and current portion of long-term debt				1,025,797		336,058
Long-term debt:
Senior notes:
4.000% senior notes, less unamortized discount of $4,773 and $0, respectively	5/15/2015	6/15/2025		895,227		—
5.500% senior notes, less unamortized discount of $1,195 and $0, respectively	5/15/2015	6/15/2045		348,805		—
4.125% senior notes, less unamortized discount of $1,998 and $2,137, respectively	9/12/2012	9/12/2022		348,002		347,863
4.875% senior notes, less unamortized discount of $1,191 and $1,361, respectively	12/8/2011	1/15/2019		248,809		248,639
5.800% senior notes, less unamortized discount of $602 and $654, respectively	4/6/2011	5/1/2021		449,398		449,346
Prudential shelf notes:
6.85% Series J shelf notes	6/15/2009	6/15/2016		—		50,000
Capital lease obligations	Various	Various		3,623		5,026
Long-term debt				2,293,864		1,100,874
Total debt			$	3,319,661	$	1,436,932

On May 15, 2015, the Company completed an issuance of senior notes in the aggregate principal amount of $900,000 and $350,000 due on June 15, 2025 and June 15, 2045, respectively, that accrue interest at a rate of 4.000% and 5.500%, respectively. Interest is payable semi-annually on both series of senior notes on June 15th and December 15th of each year, beginning on December 15, 2015. The senior notes were issued at a discount of $4,833 and $1,201, respectively, and the Company incurred debt issuance costs on the senior notes of $7,023 and $3,941, respectively. The discount and debt issuance costs were recorded in "Long-term debt" and "Other assets," respectively, in the accompanying condensed consolidated balance sheets and these costs will be amortized to "Interest expense" in the accompanying condensed consolidated statements of operations over the life of the respective senior note. The net proceeds from the issuance of these notes was utilized to partially fund the acquisition of Wood Mackenzie. The indenture governing the senior notes restricts the Company's ability to, among other things, create certain liens, enter into sales/leaseback transactions and consolidate with, sell, lease, convey or otherwise transfer all or substantially all of the Company's assets, or merge with or into, any other person or entity. As of June 30, 2015 and December 31, 2014, the Company had senior notes with an aggregate principal amount of $2,300,000 and $1,050,000 outstanding, respectively, and was in compliance with their debt covenants.

On April 22, 2015, the Company signed an agreement to enter into a $1,750,000 committed senior unsecured Syndicated Revolving Credit Facility (the "new Credit Facility") with Bank of America N.A., JP Morgan Chase, N.A., Sun Trust Bank, Wells Fargo Bank N.A., Citizens Bank, N.A., Morgan Stanley Senior Funding, Inc., HSBC Bank USA, N.A., Royal Bank of Canada, BNP Paribas, TD Bank, N.A., The Northern Trust Company, and Capital One N.A. The new Credit Facility became effective on May 15, 2015. The new Credit Facility has a single borrower, Verisk Analytics, Inc,. and there are no guarantor subsidiaries of the debt. In accordance with the indenture governing our senior notes, the guarantor subsidiaries of the senior notes were automatically released as they were no longer guarantor subsidiaries under the new Credit Facility. Due to the fact that there are

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no longer any guarantor subsidiaries of the registered senior notes, the disclosure containing the Condensed Consolidated Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries is no longer required.

The Company utilized borrowings of $930,000 from the new Credit Facility to partially fund the purchase of Wood Mackenzie. The new Credit Facility may also be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program (the "Repurchase Program").

The new Credit Facility has replaced the previously existing $990,000 Syndicated Revolving Credit Facility (the "old Credit Facility"). The new Credit Facility contains certain financial and other covenants that, among other things, impose certain restrictions on indebtedness, liens, investments, and capital expenditures. These covenants also place restrictions on mergers, asset sales, sale/leaseback transactions, payments between the Company and its subsidiaries, and certain transactions with affiliates. The financial covenants require that, at the end of any fiscal quarter, the Company have a consolidated interest coverage ratio of at least 3.0 to 1.0 and that it maintains, during any period of four fiscal quarters, a consolidated funded debt leverage ratio of 3.75 to 1.0, which ratio steps down to 3.5 to 1.0 at the end of the fourth fiscal quarter ending after the consummation of the acquisition of Wood Mackenzie. The Company was in compliance with all debt covenants under the new Credit Facility as of June 30, 2015. Interest on borrowings under the new Credit Facility is payable at an interest rate of LIBOR plus 1.125% to 1.625%, depending upon the consolidated funded debt leverage ratio. A commitment fee on any unused balance is payable periodically and will range from 12.5 to 25 basis points based upon the consolidated funded debt leverage ratio. As of June 30, 2015 and December 31, 2014, the Company had outstanding borrowings under the new Credit Facility and old Credit Facility of $1,020,000 and $160,000, respectively. On July 22, 2015, the Company repaid $30,000 of its revolver borrowings that were outstanding as of June 30, 2015. On July 24, 2015, the Company entered into the First Amendment to the new Credit Facility which modified the definitions of Consolidated EBIT and Consolidated EBITDA to permit the adding back of certain non-recurring expenses related to the acquisition of Wood Mackenzie.

As of June 30, 2015, the Company no longer has any outstanding private placement debt. On April 29, 2015, the Company repaid $85,000 and $50,000 of private placement debt with Prudential Capital Group and New York Life, respectively, that came due utilizing $55,000 from cash from on hand and $80,000 from borrowings under the Credit Facility. On May 14, 2015, the Company prepaid the remaining private placement debt with New York Life of $17,500, which had been due on October 26, 2015, and $17,500 and $50,000 of remaining private placement debt with Prudential, which was due on October 26, 2015, and June 15, 2016, respectively. To prepay this debt, the Company utilized $25,000 of cash on hand and borrowings from its Credit Facility of $60,000. The make-whole costs for the prepayment of this debt was $4,786 and was recorded to "Interest expense" in the accompanying condensed consolidated statements of operations during the six months ended June 30, 2015.

On March 10, 2015, in connection with the Company's agreement to acquire Wood Mackenzie, the Company entered into a commitment letter for a $2,300,000 364-day bridge financing arrangement with Bank of America N.A. and Morgan Stanley Bank N.A. acting as joint lead arrangers. This financing arrangement was only to be utilized in the event the Company did not carry out the debt and equity offerings relating to its acquisition of Wood Mackenzie by a certain date, and was terminated upon the closing of the acquisition. See Note 5. The Company paid fees associated with this financing arrangement of $9,100. Due to the completion of the debt and equity offerings, this arrangement was terminated and the full $9,100 of fees were recorded to "Interest expense" in the accompanying condensed consolidated statements of operations during the six months ended June 30, 2015.

10. Stockholders’ Equity:

The Company has 1,200,000,000 shares of authorized common stock. The common shares have rights to any dividend declared by the board of directors, subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all twelve members of the board of directors.

The Company has 80,000,000 shares of authorized preferred stock, par value $0.001 per share. The preferred shares have preferential rights over the common shares with respect to dividends and net distribution upon liquidation. The Company did not issue any preferred shares as of June 30, 2015.

Equity Offering

The Company completed an equity offering of its common stock on May 12, 2015 in order to finance the acquisition of Wood Mackenzie. The Company received total proceeds of $721,867, net of underwriting discount of $20,413, from the offering of 10,604,000 treasury shares at a net public offering price of $68.075 per share. In conjunction with the offering, the Company incurred $1,019 of costs related to the issuance of the common stock. The proceeds from the offering, net of underwriting discount and related issuance costs, was recorded as a decrease to treasury shares at the weighted average price of the Company's treasury

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shares, with the remainder of the net proceeds recorded as an increase to additional paid in capital in the accompanying condensed consolidated balance sheets and condensed consolidated statements of changes in stockholders' equity.

Share Repurchase Program

Since the introduction of the Repurchase Program as a feature of the Company's capital management strategies in 2010, the Company has authorized repurchases of up to $2,000,000 of its common stock and has repurchased shares with an aggregate value of $1,810,193. The Company did not repurchase any shares during the six months ended June 30, 2015. As of June 30, 2015, the Company had $189,807 available to repurchase shares. The Company has no obligation to repurchase stock under this program and intends to use this authorization as a means of offsetting dilution from the issuance of shares under the KSOP, the Verisk 2013 Equity Incentive Plan (the “2013 Incentive Plan”), the Verisk 2009 Equity Incentive Plan (the “2009 Incentive Plan”), and the ISO 1996 Incentive Plan (the “1996 Incentive Plan”), while providing flexibility to repurchase additional shares if warranted. This authorization has no expiration date and may be increased, reduced, suspended, or terminated at any time. Shares that are repurchased under the Repurchase Program will be recorded as treasury stock and will be available for future issuance.

In December 2014, the Company entered into an accelerated share repurchase program ("ASR") to repurchase shares of its common stock for an aggregate purchase price of $500,000. Upon payment of the aggregate purchase price in December 2014, the Company received an initial delivery of 6,372,472 shares of the Company's common stock. Upon final settlement of the ASR agreement in June 2015, the Company received an additional 809,021 shares of the Company's common stock.

Treasury Stock

As of June 30, 2015, the Company’s treasury stock consisted of 375,549,289 shares of common stock. During the six months ended June 30, 2015, the Company reissued 11,349,543 shares of common stock from the treasury shares at a weighted average price of $6.56 per share.

Earnings Per Share (“EPS”)

Basic EPS is computed by dividing income from continuing operations, income from discontinued operations and net income, respectively, by the weighted average number of common shares outstanding during the period. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding, using the treasury stock method, if the dilutive potential common shares, including stock options, nonvested restricted stock, and nonvested restricted stock units, had been issued.

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The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations for the three and six months ended June 30, 2015 and 2014:



	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Numerator used in basic and diluted EPS:
Income from continuing operations	$	163,320	$	88,099	$	262,006	$	172,540
Income from discontinued operations, net of tax of $0 and $23,365, for the three and six months ended June 30, 2014, respectively (Note 6)		—		—		—		31,117
Net income	$	163,320	$	88,099	$	262,006	$	203,657
Denominator:
Weighted average number of common shares used in basic EPS		164,141,804		166,343,630		161,114,861		166,662,806
Effect of dilutive shares:
Potential common shares issuable from stock options and stock awards		3,444,296		3,160,034		3,418,795		3,299,771
Weighted average number of common shares and dilutive potential common shares used in diluted EPS		167,586,100		169,503,664		164,533,656		169,962,577

The potential shares of common stock that were excluded from diluted EPS were 1,784,103 and 2,105,653 for the three months ended June 30, 2015 and 2014 and 892,981 and 1,433,751 for the six months ended June 30, 2015 and 2014, respectively, because the effect of including these potential shares was anti-dilutive.

Accumulated Other Comprehensive Losses

The following is a summary of accumulated other comprehensive losses as of June 30, 2015 and December 31, 2014:



	2015			2014
Foreign currency translation adjustment	$	(7,515	)	$	(3,086	)
Unrealized holding losses on available-for-sale securities, net of tax		(41	)		(110	)
Pension and postretirement adjustment, net of tax		(76,317	)		(77,318	)
Accumulated other comprehensive losses	$	(83,873	)	$	(80,514	)

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The before tax and after tax amounts of other comprehensive income for the three and six months ended June 30, 2015 and 2014 are summarized below:



	Before Tax			Tax Benefit (Expense)			After Tax
For the Three Months Ended June 30, 2015
Foreign currency translation adjustment	$	(4,209	)	$	—		$	(4,209	)
Unrealized holding loss on available-for-sale securities before reclassifications		(8	)		3			(5	)
Amount reclassified from accumulated other comprehensive losses (1)		19			(7	)		12
Unrealized holding gain on available-for-sale securities		11			(4	)		7
Pension and postretirement adjustment before reclassifications		1,460			(623	)		837
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (2)		(730	)		280			(450	)
Pension and postretirement adjustment		730			(343	)		387
Total other comprehensive loss	$	(3,468	)	$	(347	)	$	(3,815	)
For the Three Months Ended June 30, 2014
Foreign currency translation adjustment	$	253		$	—		$	253
Unrealized holding loss on available-for-sale securities before reclassifications		(94	)		37			(57	)
Amount reclassified from accumulated other comprehensive losses (1)		126			(48	)		78
Unrealized holding gain on available-for-sale securities		32			(11	)		21
Pension and postretirement adjustment before reclassifications		510			(183	)		327
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (2)		(255	)		99			(156	)
Pension and postretirement adjustment		255			(84	)		171
Total other comprehensive income	$	540		$	(95	)	$	445

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		Before Tax			Tax Benefit (Expense)			After Tax
For the Six Months Ended June 30, 2015
Foreign currency translation adjustment	$	(4,429	)	$	—		$	(4,429	)
Unrealized holding gain on available-for-sale securities before reclassifications		97			(37	)		60
Amount reclassified from accumulated other comprehensive losses (1)		14			(5	)		9
Unrealized holding gain on available-for-sale securities		111			(42	)		69
Pension and postretirement adjustment before reclassifications		3,288			(1,274	)		2,014
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (2)		(1,644	)		631			(1,013	)
Pension and postretirement adjustment		1,644			(643	)		1,001
Total other comprehensive loss	$	(2,674	)	$	(685	)	$	(3,359	)
For the Six Months Ended June 30, 2014
Foreign currency translation adjustment	$	760		$	—		$	760
Unrealized holding loss on available-for-sale securities before reclassifications		(55	)		21			(34	)
Amount reclassified from accumulated other comprehensive losses (1)		115			(44	)		71
Unrealized holding gain on available-for-sale securities		60			(23	)		37
Pension and postretirement adjustment before reclassifications		1,094			(444	)		650
Amortization of net actuarial loss and prior service benefit reclassified from accumulated other comprehensive losses (2)		(547	)		211			(336	)
Pension and postretirement adjustment		547			(233	)		314
Total other comprehensive income	$	1,367		$	(256	)	$	1,111

____________________


(1)	This accumulated other comprehensive loss component, before tax, is included under “Investment income and others, net” in the accompanying condensed consolidated statements of operations.


(2)	These accumulated other comprehensive loss components, before tax, are included under “Cost of revenues” and “Selling, general and administrative” in the accompanying condensed consolidated statements of operations. These components are also included in the computation of net periodic (benefit) cost (see Note 12 Pension and Postretirement Benefits for additional details).

11. Equity Compensation Plans:

All of the Company’s outstanding stock options and restricted stock are covered under the 2013 Incentive Plan, 2009 Incentive Plan or the 1996 Incentive Plan. Awards under the 2013 Incentive Plan may include one or more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share based awards, and (vii) cash. Employees, directors a

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