Verisk Analytics, Inc. - FORM 10-Q - August 1, 2017

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EX-32.1 - EXHIBIT 32.1 - Verisk Analytics, Inc.vrsk-201763010qxex321.htm
EX-31.2 - EXHIBIT 31.2 - Verisk Analytics, Inc.vrsk-201763010qxex312.htm
EX-31.1 - EXHIBIT 31.1 - Verisk Analytics, Inc.vrsk-201763010qxex311.htm

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     
Commission File Number: 001-34480
___________________________________
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) 469-3000
(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  ☒    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  ☒    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,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
☒
 
Accelerated filer
 
☐
 
 
 
 
 
 
 
Non-accelerated filer
 
☐  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
☐
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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  ☒

As of July 28, 2017, there were 164,555,818 shares outstanding of the registrant's Common Stock, par value $.001.
 


Verisk Analytics, Inc.
Index to Form 10-Q
Table of Contents
 
 
Page Number
 
 
PART I — FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 31.1
 
 
 
Exhibit 31.2
 
 
 
Exhibit 32.1
 


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of June 30, 2017 and December 31, 2016
 
2017
 
2016
 
 
 
 
 
 
 
(In millions, except for
share and per share data)
ASSETS
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
140.7

 
$
135.1

Available-for-sale securities
 
3.6

 
 
3.4

Accounts receivable, net of allowance for doubtful accounts of $4.3 and $3.4,
respectively
 
266.4

 
 
263.9

Prepaid expenses
 
39.2

 
 
28.9

Income taxes receivable
 
52.1

 
 
49.3

Other current assets
 
20.8

 
 
20.3

Total current assets
 
522.8

 
 
500.9

Noncurrent assets:
 
 
 
 
 
Fixed assets, net
 
403.5

 
 
380.3

Intangible assets, net
 
1,052.0

 
 
1,010.8

Goodwill
 
2,733.8

 
 
2,578.1

Deferred income tax assets
 
16.4

 
 
15.6

Other assets
 
170.2

 
 
145.5

Total assets
$
4,898.7

 
$
4,631.2

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
 
Accounts payable and accrued liabilities
$
161.4

 
$
184.0

Short-term debt and current portion of long-term debt
 
126.8

 
 
106.8

Deferred revenues
 
449.0

 
 
330.8

Total current liabilities
 
737.2

 
 
621.6

Noncurrent liabilities:
 
 
 
 
 
Long-term debt
 
2,276.6

 
 
2,280.2

Deferred income taxes, net
 
337.5

 
 
322.2

Other liabilities
 
81.5

 
 
74.8

Total liabilities
 
3,432.8

 
 
3,298.8

Commitments and contingencies
 

 
 

Stockholders’ equity:
 
 
 
 
 
Common stock, $.001 par value; 2,000,000,000 shares authorized; 544,003,038
shares issued and 164,521,185 and 166,915,772 shares outstanding, respectively
 
0.1

 
 
0.1

Additional paid-in capital
 
2,153.8

 
 
2,121.6

Treasury stock, at cost, 379,481,853 and 377,087,266 shares, respectively
 
(3,144.3
)
 
 
(2,891.4
)
Retained earnings
 
2,982.7

 
 
2,752.9

Accumulated other comprehensive losses
 
(526.4
)
 
 
(650.8
)
Total stockholders’ equity
 
1,465.9

 
 
1,332.4

Total liabilities and stockholders’ equity
$
4,898.7

 
$
4,631.2








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

1

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For The Three and Six Months Ended June 30, 2017 and 2016
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except for share and per share data)
Revenues
$
523.2

 
$
498.3

 
$
1,025.8

 
$
991.0

Expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of revenues (exclusive of items shown
separately below)
 
193.7

 
 
178.4

 
 
376.6

 
 
351.7

Selling, general and administrative
 
78.8

 
 
75.6

 
 
154.7

 
 
146.6

Depreciation and amortization of fixed assets
 
31.8

 
 
29.3

 
 
65.6

 
 
61.2

Amortization of intangible assets
 
23.9

 
 
23.8

 
 
46.2

 
 
47.7

Total expenses
 
328.2

 
 
307.1

 
 
643.1

 
 
607.2

Operating income
 
195.0

 
 
191.2

 
 
382.7

 
 
383.8

Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
Investment income and others, net
 
3.4

 
 
0.9

 
 
5.3

 
 
0.9

Interest expense
 
(28.5
)
 
 
(31.5
)
 
 
(56.9
)
 
 
(63.5
)
Total other expense, net
 
(25.1
)
 
 
(30.6
)
 
 
(51.6
)
 
 
(62.6
)
Income from continuing operations before income
taxes
 
169.9

 
 
160.6

 
 
331.1

 
 
321.2

Provision for income taxes
 
(48.9
)
 
 
(53.8
)
 
 
(101.3
)
 
 
(104.7
)
Income from continuing operations
 
121.0

 
 
106.8

 
 
229.8

 
 
216.5

Discontinued operations:
 


 
 


 
 
 
 
 
 
Income from discontinued operations
 
—

 
 
254.7

 
 
—

 
 
256.5

Provision for income taxes from discontinued
operations
 
—

 
 
(99.7
)
 
 
—

 
 
(118.6
)
Income from discontinued operations
 
—

 
 
155.0

 
 
—

 
 
137.9

Net income
$
121.0

 
$
261.8

 
$
229.8

 
$
354.4

Basic net income per share:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.73

 
$
0.64

 
$
1.39

 
$
1.29

Income from discontinued operations
 
—

 
 
0.92

 
 
—

 
 
0.81

Basic net income per share
$
0.73

 
$
1.56

 
$
1.39

 
$
2.10

Diluted net income per share:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
0.72

 
$
0.62

 
$
1.36

 
$
1.26

Income from discontinued operations
 
—

 
 
0.91

 
 
—

 
 
0.81

Diluted net income per share
$
0.72

 
$
1.53

 
$
1.36

 
$
2.07

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
 
164,922,237

 
 
168,296,318

 
 
165,682,614

 
 
168,375,034

Diluted
 
168,314,296

 
 
171,218,782

 
 
169,232,579

 
 
171,349,833




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

2

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
For The Three and Six Months Ended June 30, 2017 and 2016
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions)
Net income
$
121.0

 
$
261.8

 
$
229.8

 
$
354.4

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
89.6

 
 
(141.2
)
 
 
122.7

 
 
(216.5
)
Unrealized holding gain on available-for-sale
securities
 
0.1

 
 
0.1

 
 
0.2

 
 
0.2

Pension and postretirement liability adjustment
 
0.8

 
 
0.7

 
 
1.5

 
 
1.2

Total other comprehensive income (loss)
 
90.5

 
 
(140.4
)
 
 
124.4

 
 
(215.1
)
Comprehensive income
$
211.5

 
$
121.4

 
$
354.2

 
$
139.3























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

3

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For The Year Ended December 31, 2016 and The Six Months Ended June 30, 2017
 
Common Stock
Issued
 
Par 
Value
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other Comprehensive
Losses
 
Total
Stockholders’
Equity 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except for share data)
Balance, January 1, 2016
544,003,038

 
$
0.1

 
$
2,023.4

 
$
(2,571.2
)
 
$
2,161.7

 
$
(242.0
)
 
$
1,372.0

Net income
—

 
 
—

 
 
—

 
 
—

 
 
591.2

 
 
—

 
 
591.2

Other comprehensive loss
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
(408.8
)
 
 
(408.8
)
Treasury stock acquired (4,325,548 shares)
—

 
 
—

 
 
—

 
 
(333.3
)
 
 
—

 
 
—

 
 
(333.3
)
KSOP shares earned (181,198 shares reissued from treasury stock)
—

 
 
—

 
 
13.2

 
 
1.3

 
 
—

 
 
—

 
 
14.5

Stock options exercised, including tax benefit of $22.1 (1,409,803
shares reissued from treasury stock)
—

 
 
—

 
 
56.2

 
 
10.2

 
 
—

 
 
—

 
 
66.4

Restricted stock lapsed, including tax benefit of $1.2 (169,365 shares
reissued from treasury stock)
—

 
 
—

 
 
—

 
 
1.2

 
 
—

 
 
—

 
 
1.2

Employee stock purchase plan (29,867 shares reissued from treasury
stock)
—

 
 
—

 
 
2.1

 
 
0.2

 
 
—

 
 
—

 
 
2.3

Stock based compensation
—

 
 
—

 
 
29.9

 
 
—

 
 
—

 
 
—

 
 
29.9

Net share settlement from restricted stock awards (38,250 shares
withheld for tax settlement)
—

 
 
—

 
 
(3.1
)
 
 
—

 
 
—

 
 
—

 
 
(3.1
)
Other stock issuances (26,106 shares reissued from treasury stock)
—

 
 
—

 
 
(0.1
)
 
 
0.2

 
 
—

 
 
—

 
 
0.1

Balance, December 31, 2016
544,003,038

 
 
0.1

 
 
2,121.6

 
 
(2,891.4
)
 
 
2,752.9

 
 
(650.8
)
 
 
1,332.4

Net income
—

 
 
—

 
 
—

 
 
—

 
 
229.8

 
 
—

 
 
229.8

Other comprehensive gain
—

 
 
—

 
 
—

 
 
—

 
 
—

 
 
124.4

 
 
124.4

Treasury stock acquired (3,231,860 shares)
—

 
 
—

 
 
—

 
 
(259.6
)
 
 
—

 
 
—

 
 
(259.6
)
Stock options exercised (670,246 shares reissued from treasury stock)
—

 
 
—

 
 
19.8

 
 
5.4

 
 
—

 
 
—

 
 
25.2

Restricted stock lapse (140,352 shares reissued from treasury stock)
—

 
 
—

 
 
(1.1
)
 
 
1.1

 
 
—

 
 
—

 
 
—

Employee stock purchase plan (15,854 shares reissued from treasury
stock)
—

 
 
—

 
 
1.1

 
 
0.1

 
 
—

 
 
—

 
 
1.2

Stock based compensation
—

 
 
—

 
 
15.4

 
 
—

 
 
—

 
 
—

 
 
15.4

Net share settlement of restricted stock awards (36,067 shares withheld
for tax settlement)
—

 
 
—

 
 
(2.9
)
 
 
—

 
 
—

 
 
—

 
 
(2.9
)
Other stock issuances (10,821 shares reissued from treasury stock)
—

 
 
—

 
 
(0.1
)
 
 
0.1

 
 
—

 
 
—

 
 
—

Balance, June 30, 2017
544,003,038

 
$
0.1

 
$
2,153.8

 
$
(3,144.3
)
 
$
2,982.7

 
$
(526.4
)
 
$
1,465.9



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

4

VERISK ANALYTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For The Six Months Ended June 30, 2017 and 2016
 
2017
 
2016
 
 
 
 
 
 
 
(In millions)
Cash flows from operating activities:
 
 
 
 
 
Net income
$
229.8

 
$
354.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization of fixed assets
 
65.6

 
 
68.3

Amortization of intangible assets
 
46.2

 
 
53.6

Amortization of debt issuance costs and original issue discount
 
2.1

 
 
2.5

Allowance for doubtful accounts
 
0.8

 
 
1.3

KSOP compensation expense
 
—

 
 
8.2

Stock based compensation
 
15.4

 
 
16.5

Gain on sale of discontinued operations
 
—

 
 
(269.4
)
Realized loss on available-for-sale securities, net
 
—

 
 
0.3

Deferred income taxes
 
(0.1
)
 
 
6.1

Loss on disposal of fixed assets, net
 
—

 
 
0.8

Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
 
 
Accounts receivable
 
6.3

 
 
21.2

Prepaid expenses and other assets
 
(18.2
)
 
 
(6.6
)
Income taxes
 
(3.3
)
 
 
61.7

Accounts payable and accrued liabilities
 
(16.6
)
 
 
(26.4
)
Deferred revenues
 
111.0

 
 
92.6

Other liabilities
 
(9.2
)
 
 
—

Net cash provided by operating activities
 
429.8

 
 
385.1

Cash flows from investing activities:
 
 
 
 
 
Acquisitions, net of cash acquired of $4.0 and $1.0, respectively
 
(109.8
)
 
 
(6.2
)
Proceeds from sale of discontinued operations
 
—

 
 
719.4

Escrow funding associated with acquisition
 
(12.5
)
 
 
—

Capital expenditures
 
(72.5
)
 
 
(62.2
)
Purchases of available-for-sale securities
 
(0.2
)
 
 
(0.1
)
Proceeds from sales and maturities of available-for-sale securities
 
0.3

 
 
0.3

Other investing activities, net
 
—

 
 
(0.6
)
Net cash (used in) provided by investing activities
 
(194.7
)
 
 
650.6

Cash flows from financing activities:
 
 
 
 
 
Proceeds (repayment) of short-term debt, net
 
20.0

 
 
(870.0
)
Payment of debt issuance costs
 
(0.5
)
 
 
—

Repurchases of common stock
 
(266.1
)
 
 
(116.4
)
Proceeds from stock options exercised
 
22.4

 
 
16.3

Net share settlement of restricted stock awards
 
(2.9
)
 
 
(2.9
)
Other financing activities, net
 
(5.7
)
 
 
(3.5
)
Net cash used in financing activities
 
(232.8
)
 
 
(976.5
)
Effect of exchange rate changes
 
3.3

 
 
(1.1
)
Increase in cash and cash equivalents
 
5.6

 
 
58.1

Cash and cash equivalents, beginning of period
 
135.1

 
 
138.3

Cash and cash equivalents, end of period
$
140.7

 
$
196.4

Supplemental disclosures:
 
 
 
 
 
Income taxes paid
$
105.7

 
$
149.6

Interest paid
$
54.7

 
$
62.9

Noncash investing and financing activities:
 
 
 
 
 
Promissory note received for sale of discontinued operations
$
—

 
$
82.9

Equity interest received for sale of discontinued operations
$
—

 
$
8.4

Deferred tax liability established on date of acquisition
$
8.0

 
$
0.3

Capital lease obligations
$
0.5

 
$
0.6

Capital expenditures included in accounts payable and accrued liabilities
$
2.3

 
$
1.6





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

5

VERISK ANALYTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Amounts in millions, 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 predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields.
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 and liabilities, acquisition related liabilities, fair value of stock based compensation for stock options granted, and assets and liabilities for pension and postretirement benefits. Actual results may ultimately differ from those estimates.
The condensed consolidated financial statements as of June 30, 2017 and for the three and six months ended June 30, 2017 and 2016, 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, 2017 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, 2017 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, 2016. 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 May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). The new standard replaces numerous requirements in U.S. GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers. The core principle of the new standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. In July 2015, the FASB approved the deferral of the new standard's effective date by one year. The new standard is effective for annual reporting periods beginning after December 15, 2017. The FASB permits companies to adopt the new standard early, but not before the original effective date of annual reporting periods beginning after December 15, 2016.

6

The Company established a corporate implementation team which engages with cross-functional representatives from all of its business verticals. The Company utilized a bottom-up approach with the assistance of third party specialists to analyze the impact of the standard on the contract portfolio by reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to revenue contracts. In addition, the Company identified, and is in the process of implementing, appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new standard.

The Company is in the process of evaluating the impact of adopting the new standard on its condensed consolidated financial statements. An identified impact of adopting ASU 2014-09 relates to the deferral of commissions on revenue contracts, which previously were expensed as incurred but under the new standard will generally be capitalized and amortized over the period of contract performance, and policy changes related to the recognition of revenue to better align the Company's practices with the new standard. The Company is also closely reviewing its licensing revenue stream to determine whether the nature of a promise in granting a license is to provide a right to access the Company’s intellectual property, which is satisfied over time and for which revenue is recognized over time, or to provide a right to use the Company’s intellectual property, which is satisfied at a point in time and for which revenue is recognized at a point in time.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU No. 2016-09”). The objective of this update is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted the guidance prospectively for the income statement impact of income taxes and has retrospectively applied the guidance to the condensed consolidated statements of cash flows for the impact of excess tax benefits on January 1, 2017 in accordance with ASU No. 2016-09. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in the condensed consolidated statements of cash flows, since such cash flows have historically been presented in financing activities. The treatment of forfeitures has not changed as the Company is electing to continue the current process of estimating the number of forfeitures. Accordingly, excess tax benefits from exercised stock options in 2017 were recorded as income tax benefit in the condensed consolidated statements of operations and presented as an operating activity on the condensed consolidated statements of cash flows for the six months ended June 30, 2017. There was no cumulative-effect adjustment required to retained earnings under the prospective method as of the beginning of the year because all tax benefits had been previously recognized when the tax deductions related to stock compensation were utilized to reduce tax payable. The Company did not record any deferred tax assets or tax liabilities as the result of the adoption of ASU 2016-09.

In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting ("ASU 2017-09"), that clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under the guidance within this update, a company will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change:
• The award’s fair value (or calculated value or intrinsic value, if those measurement methods are used)
• The award’s vesting conditions
• The award’s classification as an equity or liability instrument.

ASU No.2017-09 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The amendments in this update should be applied prospectively to an award modified on or after the effective date. The Company will evaluate the impact of ASU No. 2017-09 for future award changes subsequent to the effective date.

7

3. 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, accounts receivable, securities accounted for under ASC 323-10-25, accounts payable and accrued liabilities, 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:
 
Quoted Prices
in Active Markets
for Identical
Assets (Level 1)
June 30, 2017
 
 
Registered investment companies (1)
$
3.6

December 31, 2016
 
 
Registered investment companies (1)
$
3.4

______________________
(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 subordinated promissory note receivable and long-term debt at fair value. The carrying value of the subordinated promissory note receivable represents amortized cost and has been included in "Other assets" in the accompanying condensed consolidated balance sheets. The carrying value of the long-term debt represents amortized cost less unamortized discount and debt issuance costs. The Company assesses the fair value of these financial instruments based on an estimate of interest rates available to the Company for financial instruments with similar features, the Company’s current credit rating and spreads applicable to the Company. The following table summarizes the carrying value and estimated fair value of these financial instruments as of June 30, 2017 and December 31, 2016, respectively: 
 
 
 
2017
 
2016
 
Fair Value Hierarchy
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
Financial instruments not carried at fair value:
 
 
 
 
 
 
 
 
 
 
 
 
 
Subordinated promissory note receivable
Level 2
 
$
94.2

 
$
89.2

 
$
84.1

 
$
76.8

Long-term debt excluding capitalized
leases
Level 2
 
$
2,278.9

 
$
2,454.1

 
$
2,277.3

 
$
2,402.6

4. Acquisitions:
2017 Acquisitions
On January 21, 2017, the Company acquired 100 percent of the stock of Arium Limited ("Arium") for a net cash purchase price of $1.9 million. Arium specializes in liability risk modeling and decision support. Arium has become part of the insurance vertical within the Decision Analytics segment, and enables the Company to provide its customers with additional

8

modeling solutions and analytics for the casualty market. The preliminary purchase price allocation of the acquisition is presented as part of "Others" in the table below.
On February 16, 2017, the Company acquired 100 percent of the stock of Healix International Holdings Limited (“Healix”), a software analytics provider in automated medical risk assessment for the travel insurance industry, for a net cash purchase price of $52.4 million, of which $7.5 million represents indemnity escrows. Healix is within the Company's Risk Assessment segment. The acquisition further expands the Company's offerings for the global insurance industry, providing solutions that are embedded with customer workflows and can help underwrite medical coverage for travelers with greater speed, accuracy, and efficiency. The preliminary purchase price allocation of the acquisition is presented in the table below.
On February 24, 2017, the Company acquired 100 percent of the stock of Emergent Network Intelligence Limited (“ENI”), a developer in insurance claims efficiency and fraud detection solutions based in the United Kingdom ("U.K"), for a net cash purchase price of $6.1 million, of which $0.5 million represents indemnity escrows. With the acquisition of ENI within the Decision Analytics segment, the Company's customers in the U.K. can take advantage of technologically advanced tools that allow them to improve motor vehicle claims workflow and reduce their costs and exposure to fraud. The preliminary purchase price allocation of the acquisition is presented as part of "Others" in the table below.
On March 31, 2017, the Company acquired 100 percent of the stock of Fintellix Solutions Private Limited ("Fintellix"), a Bangalore-based data solutions company specializing in the development of data management platforms and regulatory reporting solutions for financial institutions, for a net cash purchase price of $16.9 million, of which $1.8 million represents indemnity escrows. Fintellix has become part of the financial services vertical within the Decision Analytics segment. The acquisition of Fintellix positions the Company to expand the data hosting and regulatory platforms and better address the increasingly complex needs of its customers. The preliminary purchase price allocation of the acquisition is presented in the table below.
On May 19, 2017, the Company acquired 100 percent of the stock of MAKE Consulting A/S ("MAKE"), a research and advisory business specializing in wind power, for a net cash purchase price of $16.9 million, of which $2.6 million represents indemnity escrows. MAKE has become part of the energy and specialized markets vertical within the Decision Analytics segment. MAKE enhances the Company's offering to existing customers and forms a market analysis and advisory consortium on renewables and the transformation of the global electricity industry. With detailed coverage of power market fundamentals, solar, wind, energy storage, and grid edge technologies, the energy and specialized markets vertical is positioned to bring customers market analysis and insight on the evolution of the energy landscape and provide a comprehensive platform for the future. The preliminary purchase price allocation of the acquisition is presented as part "Others" in the table below.
During the three months ended June 30, 2017, the Company acquired the net assets of Blue Skies Consulting, LLC, ControlCam, LLC, Krawietz Aerial Photography, LLC, Richard Crouse & Associates, Inc., Rocky Mountain Aerial Surveys, Inc., Skyview Aerial Photo, Inc., and Valley Air Photos, LLC (collectively referred to as "Aerial Imagery acquisitions"), a group of similar but related companies, which gives the Company broad geographic coverage of the United States for aerial image capture purposes. The Aerial Imagery acquisitions provide multi-spectral aerial photographic services with expertise in offering digital photogrammetric and remote sensing data for mapping and surveying applications. The purchase consideration consists of an aggregate net cash purchase price of $28.1 million and a holdback of $3.0 million. Within the Company's Decision Analytics segment, the Aerial Imagery acquisitions enable the Company to enhance and maintain its database of images with the required frequency, resolution, and coverage across the U.S. to support the Company's objective as the leading provider of loss quantification data, analytics, and decision-support solutions to the insurance industry, the photogrammetry, surveying and mapping and other related markets. The preliminary purchase price allocation of the acquisition is presented as part of "Others" in the table below.

9

The preliminary purchase price allocations of the 2017 acquisitions resulted in the following:

Healix

Fintellix
 
Others
 
Total
Cash and cash equivalents
$
0.9


$
1.1


$
2.0

 
$
4.0

Accounts receivable

0.9



2.1



3.0

 

6.0

Current assets

—



0.9



0.7

 

1.6

Fixed assets

—



—



12.0

 

12.0

Intangible assets

21.1



7.1



14.2

 

42.4

Goodwill

35.2



11.0



31.2

 

77.4

Other assets

7.5



2.0



3.3

 

12.8

Total assets acquired

65.6



24.2



66.4

 

156.2

Current liabilities

1.1



1.3



1.4

 

3.8

Deferred revenues

0.1



0.8



1.7

 

2.6

Deferred income taxes, net

3.6



2.3



2.1

 

8.0

Other liabilities

7.5



1.8



6.2

 

15.5

Total liabilities assumed

12.3



6.2



11.4

 

29.9

Net assets acquired

53.3



18.0



55.0

 

126.3

Cash acquired

(0.9
)


(1.1
)


(2.0
)
 

(4.0
)
Net cash purchase price
$
52.4


$
16.9


$
53.0

 
$
122.3

The preliminary amounts assigned to intangible assets by type for the acquisitions are summarized in the table below:


Weighted Average Useful Life

Total
Technology-related

7 years

$
10.7

Marketing-related

5 years


2.9

Customer-related

10 years


28.8

Total intangible assets



$
42.4

The preliminary allocations of the purchase price of the 2016 and 2017 acquisitions less than a year are subject to revisions as additional information is obtained about the facts and circumstances that existed as of each acquisition date. The revisions may have a significant impact on the condensed 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 operating leases, income and non-income taxes, deferred revenues, the valuation of intangible assets acquired, and residual goodwill. The preliminary amounts assigned to intangible assets by type for these acquisitions were based upon the Company's valuation model and historical experiences with entities with similar business characteristics.
For the three and six months ended June 30, 2017, the Company incurred transaction costs related to these acquisitions of $1.4 million and $2.7 million, respectively, included within "Selling, general and administrative" expenses in the accompanying condensed consolidated statements of operations. There were no transaction costs incurred for the three and six months ended June 30, 2016. The goodwill associated with the stock purchases of Arium, Healix, ENI, Fintellix, and MAKE is not deductible for tax purposes.

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, as well as a portion of the contingent payments. At June 30, 2017 and December 31, 2016, the current portion of the escrows amounted to $8.6 million and $4.1 million, and the noncurrent portion of the escrows amounted to $11.0 million and $6.3 million, respectively. The current and noncurrent portions of the escrows have been included in “Other current assets” and "Other assets" in the accompanying condensed consolidated balance sheets, respectively.

10

5. Discontinued Operations:

On June 1, 2016, the Company sold 100 percent of the stock of its healthcare business, Verisk Health ("Verisk Health"), in exchange for a purchase price that consisted of $714.6 million of cash consideration after a working capital adjustment of $5.4 million, a subordinated promissory note with a face value of $100.0 million and an eight year maturity (the "Note"), and other contingent consideration (collectively, the "Sale"). Results of operations for the healthcare business are reported as a discontinued operation for the three and six months ended June 30, 2016.

The Note has a stated interest rate of 9.0% per annum, increasing to 11.0% per annum at the earlier of specified refinancings or acquisitions, or the fourth anniversary of the closing of the Sale. Interest shall accrue from the closing date and on each anniversary of the Sale until the Note is paid in full on the unpaid principal amount of the Note outstanding at the interest rate in effect (computed on the basis of a 360-day year of twelve 30-day months). On each anniversary of the Sale, accrued interest shall be paid in kind by adding the amount of such accrued interest to the outstanding principal amount of the Note. The issuer of the Note may, at its option at any time prior to the maturity date, prepay any, or all, of the principal amount of the Note, plus accrued but unpaid interest as of the elected prepayment date, without any premium or penalty. There is a mandatory prepayment of the Note as a result of (i) the proceeds of a specified dividend recapitalization received by the issuer, (ii) the consummation of a change of control of the issuer, or (iii) the sale, transfer or other disposition by the parent of the issuer of more than 10.0% of the capital stock of the issuer. As of June 30, 2017, the Company had a receivable of $94.2 million outstanding under the Note. The carrying value of the Note represents amortized cost. The fair value of the Note is based on management estimates with the assistance of valuations performed by third party specialists, discounted cash flow analysis based on current market conditions and assumptions that the Note would be paid in full at maturity, including accrued interest, with no prepayment election. Refer to Note 3 Fair Value Measurements for further discussion.

The Company also received a 10.0% non-participating interest in the issuer's stock, the exercise value of which will be contingent on the parent of the issuer realizing a specified rate of return on its investment. As of June 30, 2017, the Company had an equity investment of $8.4 million related to such interest accounted for in accordance with ASC 323-10-25, The Equity Method of Accounting for Investments in Common Stock ("ASC 323-10-25"). The value of the equity investment has been included in “Other assets” in the accompanying condensed consolidated balance sheets.

The following table summarizes the results from the discontinued operation for the three and six months ended June 30:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017

2016
 
2017

2016
Revenues from discontinued operations
$
—

 
$
43.2

 
$
—


$
112.3

Expenses:
 


 
 

 
 
 
 
 
 
Cost of revenues (exclusive of items shown
separately below)
 
—

 
 
31.4

 
 
—

 
 
75.9

Selling, general and administrative
 
—

 
 
26.4

 
 
—

 
 
36.6

Depreciation and amortization of fixed assets
 
—

 
 
0.1

 
 
—

 
 
7.0

Amortization of intangible assets
 
—

 
 
—

 
 
—

 
 
5.9

Total expenses
 
—

 
 
57.9

 
 
—

 
 
125.4

Operating loss
 
—

 
 
(14.7
)
 
 
—

 
 
(13.1
)
Other income:
 


 
 

 
 
 
 
 
 
Gain on sale
 
—

 
 
269.3

 
 
—

 
 
269.3

Investment income and others, net
 
—

 
 
0.1

 
 
—

 
 
0.3

Total other income
 
—

 
 
269.4

 
 
—

 
 
269.6

Income from discontinued operations before
income taxes
 
—

 

254.7

 

—



256.5

Provision for income taxes (included tax on gain
of $118.0)
 
—

 
 
(99.7
)
 

—



(118.6
)
Income from discontinued operations, net of
tax
$
—

 
$
155.0

 
$
—


$
137.9



11

Net cash provided by operating activities and net cash used in investing activities from the discontinued operation for the six months ended June 30 are presented below:
 
2017

2016
Net cash provided by operating activities
$
—


$
21.4

Net cash used in investing activities
$
—


$
(10.6
)

The Company also entered into a transitional service agreement ("TSA") with the buyer of Verisk Health. Under the TSA, the Company provided various services for terms generally up to 12 months from the acquisition date and received a level of cost reimbursement from the buyer.
6. Goodwill and Intangible Assets:
The following is a summary of the change in goodwill from December 31, 2016 through June 30, 2017, both in total and as allocated to the Company’s operating segments:
 
Risk
Assessment
 
Decision
Analytics
 
Total
Goodwill at December 31, 2016 (1)
$
71.3

 
$
2,506.8

 
$
2,578.1

Current year acquisitions
 
35.2

 
 
42.2

 
 
77.4

Purchase accounting reclassification
 
(1.6
)
 
 
0.4

 
 
(1.2
)
Foreign currency translation
 
1.8

 
 
77.7

 
 
79.5

Goodwill at June 30, 2017 (1)
$
106.7

 
$
2,627.1

 
$
2,733.8

______________________
(1)
These balances are net of accumulated impairment charges of $3.2 million that occurred prior to December 31, 2016.
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 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, 2017, 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, 2017
 
 
 
 
 
 
 
 
 
 
Technology-based
7 years
 
$
327.6

 
$
(208.5
)
 
$
119.1

Marketing-related
17 years
 
 
238.7

 
 
(54.6
)
 
 
184.1

Contract-based
6 years
 
 
5.0

 
 
(5.0
)
 
 
—

Customer-related
14 years
 
 
526.6

 
 
(149.3
)
 
 
377.3

Database-related
20 years
 
 
416.0

 
 
(44.5
)
 
 
371.5

Total intangible assets
 
 
$
1,513.9

 
$
(461.9
)
 
$
1,052.0

December 31, 2016
 
 
 
 
 
 
 
 
 
 
Technology-based
7 years
 
$
310.9

 
$
(196.6
)
 
$
114.3

Marketing-related
17 years
 
 
227.5

 
 
(47.5
)
 
 
180.0

Contract-based
6 years
 
 
5.0

 
 
(5.0
)
 
 
—

Customer-related
14 years
 
 
483.1

 
 
(128.5
)
 
 
354.6

Database-related
20 years
 
 
393.9

 
 
(32.0
)
 
 
361.9

Total intangible assets
 
 
$
1,420.4

 
$
(409.6
)
 
$
1,010.8


12

Amortization expense related to intangible assets for the three months ended June 30, 2017 and 2016 was $23.9 million and $23.8 million, respectively. Amortization expense related to intangible assets for the six months ended June 30, 2017 and 2016 was $46.2 million and $47.7 million, respectively. Estimated amortization expense for the remainder of 2017 and the years through 2022 and thereafter for intangible assets subject to amortization is as follows:
Year
Amount
2017
$
48.6

2018
 
96.9

2019
 
95.6

2020
 
93.7

2021
 
83.3

2022 and thereafter
 
633.9

 
$
1,052.0

7. Income Taxes:
The Company’s effective tax rate for the three and six months ended June 30, 2017 was 28.80% and 30.59%, respectively, compared to the effective tax rate for the three and six months ended June 30, 2016 of 33.49% and 32.59%. The effective tax rate for the three and six months ended June 30, 2017 is lower than the June 30, 2016 effective tax rate primarily due to the tax rate benefit of adopting ASU No. 2016-09. The difference between statutory tax rates and the Company’s effective tax rate is primarily attributable to income earned in foreign jurisdictions with tax rates lower than the U.S. rate, offset by additional state and local income taxes.


13

8. Debt:
The following table presents short-term and long-term debt by issuance as of June 30, 2017 and December 31, 2016: 
 
Issuance
Date
 
Maturity
Date
 
2017
 
2016
Short-term debt and current portion of long-term debt:
 
 
 
 
 
 
 
 
 
Syndicated revolving credit facility
Various
 
Various
 
$
120.0

 
$
100.0

Capital lease obligations
Various
 
Various
 
 
6.8

 
 
6.8

Short-term debt and current portion of long-term
debt
 
 
 
 
 
126.8

 
 
106.8

Long-term debt:
 
 
 
 
 
 
 
 
 
Senior notes:
 
 
 
 
 
 
 
 
 
4.000% senior notes, less unamortized discount
and debt issuance costs of $9.8 and $10.4,
respectively
5/15/2015

6/15/2025
 
 
890.2

 
 
889.6

5.500% senior notes, less unamortized discount
and debt issuance costs of $5.0 and $5.0,
respectively
5/15/2015

6/15/2045
 
 
345.0

 
 
345.0

4.125% senior notes, less unamortized discount
and debt issuance costs of $3.2 and $3.5,
respectively
9/12/2012
 
9/12/2022
 
 
346.8

 
 
346.5

4.875% senior notes, less unamortized discount
and debt issuance costs of $1.0 and $1.4,
respectively
12/8/2011
 
1/15/2019
 
 
249.0

 
 
248.6

5.800% senior notes, less unamortized discount
and debt issuance costs of $2.1 and $2.4,
respectively
4/6/2011

5/1/2021
 
 
447.9

 
 
447.6

Capital lease obligations
Various
 
Various
 
 
1.9

 
 
7.1

Syndicated revolving credit facility debt issuance
costs
Various

Various
 
 
(4.2
)
 
 
(4.2
)
Long-term debt
 
 
 
 
 
2,276.6

 
 
2,280.2

Total debt
 
 
 
 
$
2,403.4

 
$
2,387.0

As of June 30, 2017 and December 31, 2016, the Company had senior notes with an aggregate principal amount of $2,300.0 million outstanding and was in compliance with their financial debt covenants.
As of June 30, 2017, the Company had a borrowing capacity of $1,500.0 million under the committed senior unsecured Syndicated Revolving Credit Facility (the "Credit Facility") with Bank of America N.A., JP Morgan Chase, N.A., and a syndicate of banks. The Credit Facility may be used for general corporate purposes, including working capital needs and capital expenditures, acquisitions and the share repurchase program (the "Repurchase Program"). The Company was in compliance with all financial debt covenants under the Credit Facility as of June 30, 2017. As of June 30, 2017 and December 31, 2016, the Company had outstanding borrowings under the Credit Facility of $120.0 million and $100.0 million, respectively. On May 18, 2017, the Company entered into the third amendment to the Credit Facility, which, among other things, extended the maturity date one year to May 15, 2022.
9. Stockholders’ Equity:
The Company has 2,000,000,000 shares of authorized common stock. The common shares have rights to any dividend declared by the board of directors (the "Board"), subject to any preferential or other rights of any outstanding preferred stock, and voting rights to elect all thirteen members of the Board.
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, 2017.


14

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 $2,800.0 million of its common stock and has repurchased shares with an aggregate value of $2,423.6 million. The Company repurchased 3,231,860 shares of common stock with an aggregate value of $259.6 million during the six months ended June 30, 2017. As of June 30, 2017, the Company had $376.4 million 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.

Treasury Stock

As of June 30, 2017, the Company’s treasury stock consisted of 379,481,853 shares of common stock. During the six months ended June 30, 2017, the Company reissued 837,273 shares of common stock from the treasury shares at a weighted average price of $8.04 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 awards, and nonvested restricted stock units, had been issued.
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, 2017 and 2016:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Numerator used in basic and diluted EPS:
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
$
121.0

 
$
106.8

 
$
229.8

 
$
216.5

Income from discontinued operations (Note 5)
 
—

 
 
155.0

 
 
—

 
 
137.9

Net income
$
121.0

 
$
261.8

 
$
229.8

 
$
354.4

Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares used
in basic EPS
 
164,922,237

 
 
168,296,318

 
 
165,682,614

 
 
168,375,034

Effect of dilutive shares:
 
 
 
 

 
 
 
 
 

Potential common shares issuable from stock
options and stock awards
 
3,392,059

 
 
2,922,464

 
 
3,549,965

 
 
2,974,799

Weighted average number of common shares
and dilutive potential common shares used
in diluted EPS
 
168,314,296

 
 
171,218,782

 
 
169,232,579

 
 
171,349,833

The potential shares of common stock that were excluded from diluted EPS were 2,722,518 and 2,757,489 for the three months ended June 30, 2017 and 2016, and 2,002,341 and 2,215,987 for the six months ended June 30, 2017 and 2016, respectively, because the effect of including these potential shares was anti-dilutive.

15

Accumulated Other Comprehensive Losses
The following is a summary of accumulated other comprehensive losses as of June 30, 2017 and December 31, 2016:
 
2017

2016
Foreign currency translation adjustment
$
(438.7
)
 
$
(561.4
)
Unrealized holding gains on available-for-sale securities, net of tax
 
0.5

 
 
0.3

Pension and postretirement adjustment, net of tax
 
(88.2
)
 
 
(89.7
)
Accumulated other comprehensive losses
$
(526.4
)
 
$
(650.8
)

The before tax and after tax amounts of other comprehensive income for the three and six months ended June 30, 2017 and 2016 are summarized below:

Before Tax

Tax (Expense) Benefit

After Tax
For the Three Months Ended June 30, 2017








Foreign currency translation adjustment
$
89.6


$
—


$
89.6

Unrealized holding gain on available-for-sale securities before
reclassifications

0.1



—



0.1

Amount reclassified from accumulated other comprehensive losses
(1)

—



—



—

Unrealized holding gain on available-for-sale securities

0.1



—



0.1

Pension and postretirement adjustment before reclassifications

2.7



(1.1
)


1.6

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses (2)

(1.3
)


0.5



(0.8
)
Pension and postretirement adjustment

1.4



(0.6
)


0.8

Total other comprehensive gain
$
91.1


$
(0.6
)

$
90.5

For the Three Months Ended June 30, 2016








Foreign currency translation adjustment
$
(141.2
)

$
—


$
(141.2
)
Unrealized holding loss on available-for-sale securities before
reclassifications

(0.3
)


0.1



(0.2
)
Amount reclassified from accumulated other comprehensive losses
(1)

0.5



(0.2
)


0.3

Unrealized holding gain on available-for-sale securities

0.2



(0.1
)


0.1

Pension and postretirement adjustment before reclassifications

1.8



(0.5
)


1.3

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses (2)

(0.9
)


0.3



(0.6
)
Pension and postretirement adjustment

0.9



(0.2
)


0.7

Total other comprehensive loss
$
(140.1
)

$
(0.3
)

$
(140.4
)


16


Before Tax
 
Tax (Expense) Benefit
 
After Tax
For the Six Months Ended June 30, 2017
 


 


 

Foreign currency translation adjustment
$
122.7


$
—


$
122.7

Unrealized holding gain on available-for-sale securities before
reclassifications
 
0.3


 
(0.1
)

 
0.2

Amount reclassified from accumulated other comprehensive losses
(1)
 
—


 
—


 
—

Unrealized holding gain on available-for-sale securities
 
0.3


 
(0.1
)

 
0.2

Pension and postretirement adjustment before reclassifications
 
5.0


 
(2.0
)

 
3.0

Amortization of net actuarial loss and prior service benefit
reclassified from accumulated other comprehensive losses (2)
 
(2.5
)

 
1.0


 
(1.5
)
Pension and postretirement adjustment
 
2.5


 
(1.0
)

 
1.5

Total other comprehensive gain
$
125.5


$
(1.1
)

$
124.4

For the Six Months Ended June 30, 2016
 


 


 

Foreign currency translation adjustment
$
(216.5
)

$
—


$
(216.5
)
Unrealized holding gain on available-for-sale securities before
reclassifications
 
—


 
—


 
—

Amount reclassified from accumulated other comprehensive losses
(1)
 
0.3


 
(0.1
)

 
0.2

Unrealized holding gain on available-for-sale securities
 
0.3


 
(0.1
)

 
0.2

Pension and postretirement adjustment before reclassifications
 
3.5


 
(1.2