CORELOGIC, INC. (Form: 10-Q, Received: 11/04/2020 06:04:04)

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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 September 30, 2020

☐ 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 001-13585

CORELOGIC, INC.

(Exact name of registrant as specified in its charter)


			Delaware			95-1068610
			(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

40 Pacifica

Irvine

California

92618

(Street Address)

(City)

(State)

(Zip Code)

(949) 214-1000

(Registrant’s telephone number, including area code)

Not Applicable

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol(s)	Name of exchange on which registered
Common Stock, $0.00001 par value	CLGX	New York Stock Exchange
Preferred Stock Purchase Rights	CLGX	New York Stock Exchange

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 every Interactive Data File required to be submitted 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 such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant: is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth 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

☐

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On October 28, 2020 there were 77,778,688 shares of common stock outstanding.

CoreLogic, Inc.

Table of Contents


Part I:	Financial Information	1

Item 1.	Financial Statements (unaudited)

	A. Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	1

	B. Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	2

	C. Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019	3

	D. Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	4

	E. Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2019	7

	F. Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	43

Part II:	Other Information	47

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

Item 6.	Exhibits	50

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements.

CoreLogic, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except par value)	September 30,		December 31,
Assets	2020		2019
Current assets:
Cash and cash equivalents	$	302,329	$	104,162

Accounts receivable (less allowance for credit losses of $9,188 and $6,937 as of September 30, 2020 and December 31, 2019, respectively)	279,492		247,683
Prepaid expenses and other current assets	84,595		53,105
Assets of discontinued operations	207,791		201,986

Total current assets	874,207		606,936
Property and equipment, net	407,228		424,670
Operating lease assets	86,489		65,825
Goodwill, net	2,298,876		2,286,896
Other intangible assets, net	334,363		375,629
Capitalized data and database costs, net	314,399		308,409
Investment in affiliates, net	1,121		16,666
Other assets	76,787		74,250
Total assets	$	4,393,470	$	4,159,281
Liabilities and Equity
Current liabilities:
Accounts payable and other accrued expenses	$	190,997	$	139,511
Accrued salaries and benefits	91,763		83,418
Dividends payable	—		17,374
Contract liabilities, current	401,986		320,634
Liabilities of discontinued operations	50,497		42,708
Current portion of long-term debt	21,382		56,022
Operating lease liabilities, current	16,245		18,058
Total current liabilities	772,870		677,725
Long-term debt, net of current	1,548,785		1,610,538
Contract liabilities, net of current	584,907		563,190
Deferred income tax liabilities	67,171		92,783
Operating lease liabilities, net of current	103,293		85,139

Other liabilities	193,705		178,696
Total liabilities	3,270,731		3,208,071



Stockholders' equity:
Preferred stock, $0.00001 par value; 500 shares authorized, no shares issued or outstanding	—		—
Common stock, $0.00001 par value; 180,000 shares authorized; 79,545 and 78,972 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	1		1
Additional paid-in capital	135,267		111,000
Retained earnings	1,185,904		1,006,992
Accumulated other comprehensive loss	(198,433)		(166,783)
Total stockholders' equity	1,122,739		951,210


Total liabilities and equity	$	4,393,470	$	4,159,281

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

CoreLogic, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2020		2019		2020		2019
Operating revenues	$	436,727	$	375,571	$	1,174,733	$	1,088,032
Cost of services (excluding depreciation and amortization shown below)	154,192		164,715		439,032		486,973
Selling, general and administrative expenses	165,742		106,600		393,247		348,788
Depreciation and amortization	43,610		42,389		130,639		132,767
Impairment loss	—		—		1,228		47,834
Total operating expenses	363,544		313,704		964,146		1,016,362
Operating income	73,183		61,867		210,587		71,670
Interest expense:
Interest income	100		349		611		1,728
Interest expense	17,021		19,852		52,958		59,137
Total interest expense, net	(16,921)		(19,503)		(52,347)		(57,409)
Gain/(loss) on investments and other, net	35,674		227		37,154		(2,116)

Tax indemnification release	—		—		—		(13,394)

Income/(loss) from continuing operations before equity in earnings of affiliates and income taxes	91,936		42,591		195,394		(1,249)
(Benefit)/provision for income taxes	(9,560)		11,530		19,433		(8,976)
Income from continuing operations before equity in earnings of affiliates	101,496		31,061		175,961		7,727
Equity in earnings of affiliates, net of tax	971		607		1,859		498
Net income from continuing operations	102,467		31,668		177,820		8,225
Income/(loss) from discontinued operations, net of tax	10,679		(8,485)		28,149		11,073

Net income	$	113,146	$	23,183	$	205,969	$	19,298

Basic income per share:
Net income from continuing operations	$	1.29	$	0.40	$	2.24	$	0.10
Income/(loss) from discontinued operations, net of tax	0.13		(0.11)		0.35		0.14

Net income	$	1.42	$	0.29	$	2.59	$	0.24
Diluted income per share:
Net income from continuing operations	$	1.26	$	0.39	$	2.19	$	0.10
Income/(loss) from discontinued operations, net of tax	0.13		(0.10)		0.35		0.14

Net income	$	1.39	$	0.29	$	2.54	$	0.24
Weighted-average common shares outstanding:
Basic	79,467		79,761		79,300		80,138
Diluted	81,402		80,914		81,136		81,205

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

CoreLogic, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2020		2019		2020		2019
Net income	$	113,146	$	23,183	$	205,969	$	19,298
Other comprehensive income/(loss)

Market value adjustments on interest rate swaps, net of tax	7,905		(8,121)		(30,475)		(41,415)
Reclassification adjustment for gain on terminated interest rate swap included in net income	—		—		—		(67)
Foreign currency translation adjustments	10,799		(13,529)		(1,211)		(9,007)
Supplemental benefit plans adjustments, net of tax	(76)		(149)		36		(448)
Total other comprehensive income/(loss)	18,628		(21,799)		(31,650)		(50,937)
Comprehensive income/(loss)	$	131,774	$	1,384	$	174,319	$	(31,639)

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

CoreLogic, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Nine Months Ended September 30,

(in thousands)	2020		2019
Cash flows from operating activities:
Net income	$	205,969	$	19,298
Less: Income from discontinued operations, net of tax	28,149		11,073

Net income from continuing operations	177,820		8,225
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	130,639		132,767
Amortization of debt issuance costs	3,710		3,836
Amortization of operating lease assets	11,067		11,675
Impairment loss	1,228		47,834
Provision for bad debt and claim losses	14,020		10,998
Share-based compensation	33,898		26,018

Equity in earnings of affiliates, net of taxes	(1,859)		(498)
Gain on sale of property and equipment	1,360		(3)
Loss on early extinguishment of debt	—		1,453
Deferred income tax	56		(10,642)
Impairment loss on investment in affiliates	—		1,511
Gain on investments and other, net	(37,154)		(847)
Tax indemnification release	—		13,394
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable	(33,159)		(23,218)
Prepaid expenses and other current assets	(2,104)		(7,201)
Accounts payable and other accrued expenses	54,847		(19,894)
Contract liabilities	102,302		19,899

Income taxes	(32,815)		31,239
Dividends received from investments in affiliates	109		—
Other assets and other liabilities	(45,550)		(29,122)
Net cash provided by operating activities - continuing operations	378,415		217,424
Net cash provided by operating activities - discontinued operations	40,687		29,669
Total cash provided by operating activities	$	419,102	$	247,093
Cash flows from investing activities:

Purchases of property and equipment	$	(40,187)	$	(52,807)
Purchases of capitalized data and other intangible assets	(28,717)		(25,845)
Cash paid for acquisitions, net of cash acquired	(12,045)		(13,280)
Purchases of investments	(1,315)		(658)
Cash received from sale of business-lines	—		4,109


Proceeds from sale of property and equipment	—		3
Proceeds from investments and other	48,035		5,591


Net cash used in investing activities - continuing operations	(34,229)		(82,887)
Net cash used in investing activities - discontinued operations	(9,259)		(13,987)
Total cash used in investing activities	$	(43,488)	$	(96,874)
Cash flows from financing activities:
Proceeds from long-term debt	$	—	$	1,770,000
Debt issuance costs	—		(9,621)
Repayment of long-term debt	(102,461)		(1,844,155)

Proceeds from issuance of shares in connection with share-based compensation	8,487		8,391
Payment of tax withholdings related to net share settlements	(9,816)		(9,645)
Shares repurchased and retired	(9,273)		(61,607)

Dividends paid	(61,062)		—
Contingent consideration payments subsequent to acquisitions	—		(600)

Net cash used in financing activities - continuing operations	(174,125)		(147,237)
Net cash used in financing activities - discontinued operations	(6)		(12)
Total cash used in financing activities	$	(174,131)	$	(147,249)
Effect of exchange rate on cash, cash equivalents, and restricted cash	(2,042)		637
Net change in cash, cash equivalents, and restricted cash	199,441		3,607
Cash, cash equivalents, and restricted cash at beginning of period	114,679		94,679
Less: Change in cash, cash equivalents, and restricted cash - discontinued operations	31,422		15,670
Plus: Cash swept from discontinued operations	30,135		17,697
Cash, cash equivalents, and restricted cash at end of period	$	312,833	$	100,313

Supplemental disclosures of cash flow information:
Cash paid for interest	$	48,419	$	53,202
Cash paid for income taxes	$	59,538	$	11,558
Cash refunds from income taxes	$	449	$	16,812
Non-cash investing activities:
Capital expenditures included in accounts payable and other accrued expenses	$	10,695	$	10,322

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

CoreLogic, Inc.

Condensed Consolidated Statement of Stockholders' Equity (Quarter-to-Date)

(Unaudited)



	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
(in thousands)
For the Three Months Ended September 30, 2020
Balance as of June 30, 2020	79,459	$	1	$	120,029	$	1,099,154	$	(217,061)	$	1,002,123
Net income	—	—		—		113,146		—		113,146
Shares issued in connection with share-based compensation	86	—		2,702		—		—		2,702
Payment of tax withholdings related to net share settlements	—	—		(470)		—		—		(470)
Share-based compensation	—	—		12,833		—		—		12,833
Shares repurchased and retired	—	—		—		—		—		—
Dividends on common shares	—	—		173		(26,396)		—		(26,223)
Other comprehensive income	—	—		—		—		18,628		18,628
Balance as of September 30, 2020	79,545	$	1	$	135,267	$	1,185,904	$	(198,433)	$	1,122,739

For the Three Months Ended September 30, 2019
Balance as of June 30, 2019	80,133	$	1	$	146,887	$	971,490	$	(164,886)	$	953,492

Net income	—	—		—		23,183		—		23,183
Shares issued in connection with share-based compensation	86	—		1,832		—		—		1,832
Payment of tax withholdings related to net share settlements	—	—		(378)		—		—		(378)
Share-based compensation	—	—		9,108		—		—		9,108
Shares repurchased and retired	(700)	—		(32,577)		—		—		(32,577)

Other comprehensive loss	—	—		—		—		(21,799)		(21,799)
Balance as of September 30, 2019	79,519	$	1	$	124,872	$	994,673	$	(186,685)	$	932,861

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

CoreLogic, Inc.

Condensed Consolidated Statement of Stockholders' Equity (Year-to-Date)

(Unaudited)



	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
(in thousands)
For the Nine Months Ended September 30, 2020
Balance as of December 31, 2019	78,972	$	1	$	111,000	$	1,006,992	$	(166,783)	$	951,210
Adoption of new accounting standards	—	—		—		16,827		—		16,827
Net income	—	—		—		205,969		—		205,969
Shares issued in connection with share-based compensation	773	—		8,487		—		—		8,487
Payment of tax withholdings related to net share settlements	—	—		(9,816)		—		—		(9,816)
Share-based compensation	—	—		34,671		—		—		34,671
Shares repurchased and retired	(200)	—		(9,273)		—		—		(9,273)
Dividend on common shares	—	—		198		(43,884)		—		(43,686)
Other comprehensive loss	—	—		—		—		(31,650)		(31,650)
Balance as of September 30, 2020	79,545	$	1	$	135,267	$	1,185,904	$	(198,433)	$	1,122,739

For the Nine Months Ended September 30, 2019
Balance as of December 31, 2018	80,092	$	1	$	160,870	$	975,375	$	(135,748)	$	1,000,498

Net income	—	—		—		19,298		—		19,298
Shares issued in connection with share-based compensation	827	—		8,391		—		—		8,391
Payment of tax withholdings related to net share settlements	—	—		(9,645)		—		—		(9,645)
Share-based compensation	—	—		26,863		—		—		26,863
Shares repurchased and retired	(1,400)	—		(61,607)		—		—		(61,607)

Other comprehensive loss	—	—		—		—		(50,937)		(50,937)
Balance as of September 30, 2019	79,519	$	1	$	124,872	$	994,673	$	(186,685)	$	932,861

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

Note 1 – Basis of Condensed Consolidated Financial Statements

CoreLogic, Inc., together with its subsidiaries (collectively “the Company”, “we”, “us” or “our”), is a leading global property information, insight, analytics and data-enabled solutions provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory, and proprietary sources provides detailed coverage of property, mortgages and other encumbrances, property risk and replacement cost, location, hazard risk and related performance information. The markets we serve include real estate and mortgage finance, insurance, capital markets, and the public sector. We deliver value to clients through unique data, analytics, workflow technology, advisory and managed solutions. Clients rely on us to help identify and manage growth opportunities, improve performance, and mitigate risk.

Our condensed consolidated financial information included in this report has been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States ("US") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Actual amounts may differ from these estimated amounts. Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The 2019 year-end condensed consolidated balance sheet was derived from the Company’s audited financial statements for the year ended December 31, 2019. Interim financial information does not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019.

The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of only normal recurring items which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for the full year or for any future periods.

Unsolicited Proposal and Proxy Contest

On June 26, 2020, we received an unsolicited proposal from Senator Investment Group, LP (“Senator”) and Cannae Holdings, Inc. (“Cannae”) to acquire the Company for $65.00 per share in cash, which initial proposal was revised by Senator and Cannae on September 14, 2020 by $1.00 per share to $66.00 per share in cash (the “Unsolicited Proposal”). Our Board of Directors, in consultation with its independent financial and legal advisors, unanimously determined to reject the Unsolicited Proposal. On August 9, 2020, the Board of Directors determined to call a special meeting of stockholders in order to allow our stockholders to consider and vote upon Senator and Cannae's proposal for the removal and replacement of up to nine members of our Board of Directors and to amend certain provisions of our Bylaws (the “Proxy Contest”). The Board of Directors set the special meeting for November 17, 2020, with a record date of September 18, 2020. In connection with the Unsolicited Proposal and Proxy Contest, we have accrued expenses of approximately $36.9 million for the three and nine months ended September 30, 2020.

Divestiture of Non-Core Businesses

In July 2020, we announced our intention to exit our reseller operations focused on mortgage credit and borrower verification and multi-family tenant screening. Although market leaders in their respective business areas, these reseller businesses are not compatible with our long-term strategic imperatives. The divestiture of these operations is expected to improve our revenue growth trends, revenue mix, and significantly enhance profit margins. As a result of this strategic decision, the businesses have been reflected in our consolidated financial statements as discontinued operations for all periods presented. Please refer to Note 14 - Discontinued Operations for further information.

Client Concentration

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 37% and 29% of our operating revenues for the three months ended September 30, 2020 and 2019, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues during these periods. Approximately 35% and 26% of our operating revenues for the nine months ended September 30, 2020 and 2019, respectively, were generated from our top ten clients. None of our clients individually accounted for greater than 10% of our operating revenues during these periods.

Cash, Cash Equivalents, and Restricted Cash

We deem the carrying value of cash, cash equivalents, and restricted cash to be a reasonable estimate of fair value due to the nature of these instruments. Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash flows:


(in thousands)	September 30, 2020		September 30, 2019
Cash and cash equivalents	$	302,329	$	86,695
Restricted cash included in other assets	10,129		11,616
Restricted cash included in prepaid expenses and other current assets	375		2,002
Total cash, cash equivalents, and restricted cash	$	312,833	$	100,313

Operating Revenue Recognition

We derive our operating revenues primarily from US mortgage lenders, servicers, and insurance companies with good creditworthiness. Operating revenue arrangements are written and specify the products or services to be delivered, pricing, and payment terms. Operating revenue is recognized when the distinct good or service (also referred as "performance obligation"), is delivered and control has been transferred to the client. Generally, clients contract with us to provide products and services that are highly interrelated and not separately identifiable. Therefore, the entire contract is accounted for as one performance obligation. At times, some of our contracts have multiple performance obligations where we allocate the total price to each performance obligation based on the estimated relative standalone selling price using observable sales or the cost-plus-margin approach.

For products or services where delivery occurs at a point in time, we recognize operating revenue when the client obtains control of the products upon delivery. When delivery occurs over time, we generally recognize operating revenue ratably over the service period, once initial delivery has occurred. For certain of our products or services, clients may also pay upfront fees, which we defer and recognize as operating revenue over the longer of the contractual term or the expected client relationship period.

Licensing arrangements that provide our clients with the right to access or use our intellectual property are considered functional licenses for which we generally recognize operating revenue based on usage. For arrangements that provide a stand-ready obligation or substantive updates to the intellectual property which the client is contractually or practically required to use, we recognize operating revenue ratably over the contractual term.

Client payment terms are standard with no significant financing components or extended payment terms granted. In limited cases, we allow for client cancellations for which we estimate a reserve at the point-of-sale.

See further discussion in Note 7 - Operating Revenues.

Comprehensive Loss

Comprehensive loss includes all changes in equity except those resulting from investments by stockholders and distributions to stockholders. Specifically, foreign currency translation adjustments, amounts related to supplemental benefit plans, unrealized gains and losses on interest rate swap transactions and investments are recorded in other comprehensive loss. The following table shows the components of accumulated other comprehensive loss, net of taxes, as of September 30, 2020 and December 31, 2019:


(in thousands)	2020		2019
Cumulative foreign currency translation	$	(123,714)	$	(122,503)
Cumulative supplemental benefit plans	(8,881)		(8,917)
Net unrecognized losses on interest rate swaps	(65,838)		(35,296)
Reclassification adjustment for gain on terminated interest rate swap included in net income	—		(67)
Accumulated other comprehensive loss	$	(198,433)	$	(166,783)

Investment in Affiliates, net

Investments in affiliates are accounted for under the equity method of accounting when we are deemed to have significant influence over the affiliate but do not control or have a majority voting interest in the affiliate. Investments are carried at the cost of acquisition, including subsequent impairments, capital contributions and loans from us, plus our equity in undistributed earnings or losses since inception of the investment, less dividends received.

As of September 30, 2020 and December 31, 2019, we had insignificant revenue, expense, accounts receivable, and accounts payable related to our investments in these affiliates.

During the three months ended September 30, 2020, we sold our investment in an equity related investment for $45.8 million in cash which resulted in a gain of $35.1 million and is reflected within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations for the three and nine months ended September 30, 2020.

In January 2020, we completed the acquisition of the remaining 66% of Location, Inc. ("Location") for $11.5 million, subject to certain working capital adjustments. In connection with this transaction, we remeasured our pre-existing 34% investment balance of $5.6 million to fair value based on the purchase price, resulting in a $0.6 million step-up gain which is reflected within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations for the nine months ended September 30, 2020. See Note 12 - Acquisitions for additional information. Prior to the acquisition of the remaining interest, we accounted for Location under the equity method and received dividends of $0.7 million in the first quarter of 2020.

Leases

We determine if an arrangement contains a lease at inception and determine the classification of the lease, as either operating or finance, at commencement.

Operating and finance lease assets and liabilities are recorded based on the present value of future lease payments over the lease term which factors in certain qualifying initial direct costs incurred as well as any lease incentives received. If an implicit rate is not readily determinable, we utilize our incremental borrowing rate and inputs from third-party lenders to determine the appropriate discount rate. Lease expense for operating lease payments are recognized on a straight-line basis over the lease term, which, if applicable, may factor in renewal or termination options. Finance leases incur interest expense using the effective interest method in addition to amortization of the leased asset on a straight-line basis, both over the applicable lease term. Lease terms may factor in options to extend or terminate the lease.

We adhere to the short-term lease recognition exemption for all classes of assets (i.e. facilities and equipment). As a result, leases with an initial term of twelve months or less are not recorded on the balance sheet and are recognized on a straight-line basis over the lease term. In addition, for certain equipment leases, we account for lease and non-lease components, such as services, as a single lease component as permitted.

Dividends

We record cash dividends as reductions to retained earnings upon declaration, with a corresponding increase to current liabilities, based on common shares outstanding on the record date. In addition, as part of our share-based compensation program, the terms of our restricted stock units (“RSUs”) and performance-based restricted stock units (“PBRSUs”) stipulate that holders of these awards are credited with dividend equivalent units on each date that a cash dividend is paid to holders of common stock. These dividend equivalents are subject to the same vesting and performance requirements of the underlying units and therefore are forfeitable (i.e. non-participating). Upon declaration of a dividend, we record dividend equivalents as a reduction to retained earnings, derived from the number of eligible unvested shares, with a corresponding increase to additional paid-in-capital.

In December 2019, we announced that our Board of Directors approved the initiation of a quarterly cash dividend to common stockholders. In connection with this announcement, in December 2019, our Board of Directors initiated and declared a cash dividend of $0.22 per common share. As a result, as of December 31, 2019, we recorded a liability of $17.4 million within accounts payable and other accrued expenses, as well as $0.4 million in dividend equivalents reflected in additional paid-in-capital within our accompanying consolidated balance sheets. The dividend declared was paid in January 2020. In April 2020, our Board of Directors announced a cash dividend to common stockholders of $0.22 per share of common stock which was paid in June 2020 to stockholders of record at the close of business on June 1, 2020.

In July 2020, our Board of Directors announced a 50% increase in our cash dividend and declared a $0.33 per share cash dividend to common stockholders, which was paid in September 2020 to stockholders of record as of September 1, 2020. In October 2020, our Board of Directors declared a cash dividend of $0.33 per share of common stock to be paid in December 2020 to shareholders of record on the close of business December 1, 2020.

Tax Escrow Disbursement Arrangements

We administer tax escrow disbursements as a service to our clients in connection with our tax services business. Funds to be disbursed are deposited and maintained in segregated accounts for the benefit of our clients and totaled $1.4 billion as of both September 30, 2020 and December 31, 2019. Because these deposits are held on behalf of our clients, they are not our funds and, therefore, are not included in the accompanying condensed consolidated balance sheets.

These deposits generally remain in the accounts for a period of two to five business days. We record credits from these activities as a reduction to related administrative expenses, including the cost of bank fees and other administration costs.

Under our contracts with our clients, if we make a payment in error or fail to pay a taxing authority when a payment is due, we could be held liable to our clients for all or part of the financial loss they suffer as a result of our act or omission. We maintained total claim reserves relating to incorrect disposition of assets of $24.8 million and $22.7 million as of September 30, 2020 and December 31, 2019, respectively. Within these amounts are $10.7 million and $9.8 million, respectively, which are short-term and are therefore reflected within accounts payable and other accrued expenses within our accompanying condensed consolidated balance sheets. The remaining reserves are reflected within other liabilities.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform, in connection with the scheduled phase-out of the London interbank offering rate (“LIBOR”) as a reference interest rate. The guidance provides practical expedients and exceptions in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. Entities electing the practical expedients will be allowed, among other topics, to account for reference rate modification of debt and receivables prospectively; to not reassess lease classifications and discount rates in reference rate lease modifications; and ease cash-flow hedge effectiveness testing guidelines for hedges affected by reference rate reform. The guidance is effective through December 2022 with adoption permitted as of any date within the aforementioned time frame from the beginning of the selected interim period on a prospective basis. We adopted the guidance in the first quarter of 2020, which has not had a material effect on our condensed consolidated financial statements.

In December 2019, as part of a simplification initiative, the FASB issued guidance to remove certain exceptions and added further guidance to simplify the accounting for income taxes. The exceptions that were removed relate to recognizing deferred taxes for investments, performing intra-period allocation, and calculating income taxes in interim periods. The guidance reduces the complexity of recognizing deferred taxes for goodwill and allocating taxes to entities of a consolidated group. The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted. We elected to early adopt on January 1, 2020 via the modified retrospective method with a cumulative effect adjustment at the date of initial application, resulting in an increase to retained earnings of $16.8 million. This impact results from the release of a deferred tax liability that had previously been established for the outside basis difference of an equity method investment that later became a subsidiary.

In November 2018, the FASB issued guidance to clarify the definition and interaction of collaborative arrangements with previously issued guidance on revenue recognition. This guidance is effective for fiscal years beginning after December 15, 2019 on a retrospective basis to the date of the initial adoption of the revenue standard. We adopted this guidance in the first quarter of 2020, which has not had a material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued guidance that amends fair value disclosure requirements. The guidance removes disclosure requirements on the transfers between Level 1 and Level 2 of the fair value hierarchy in addition to the disclosure requirements on the policy for timing of transfers between levels and the valuation process for Level 3 fair value measurements. The guidance clarifies the measurement uncertainty disclosure and adds disclosure requirements for Level 3 unrealized gains and losses and significant unobservable inputs used to develop Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2019. Entities were permitted to early adopt any removed or modified disclosures upon issuance and delay adoption of the additional disclosures until the effective date. We early adopted the removal of disclosure provisions of the new guidance in 2018 and adopted the measurement uncertainty disclosure and additional Level 3 disclosures in the current year as required. Adoption of this guidance has not had a material impact on our condensed consolidated financial statements.

In June 2016, the FASB issued guidance for accounting of credit losses affecting the impairment model for most financial assets and certain other instruments. Entities are required to use a forward-looking current expected credit loss model for trade and other receivables, held-to-maturity debt securities, loans, and other instruments, which will generally lead to an earlier recognition of loss allowances. Entities will recognize expected losses on available-for-sale debt securities as allowances rather than a reduction in amortized cost of the security while the measurement process of such loss does not change. Disclosure requirements are expanded regarding an entity’s assumptions, models, and methods of estimations of the allowance. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. In November 2018 and 2019, the FASB issued updates to this standard which, amongst other items, clarified that impairment of receivables arising from operating leases should be accounted for under applicable leasing guidance. We adopted this guidance in the first quarter of 2020, which has not had a material impact on our condensed consolidated financial statements.

Note 2 - Property and Equipment, Net

Property and equipment, net as of September 30, 2020 and December 31, 2019 consists of the following:


(in thousands)	2020		2019
Land	$	7,476	$	7,476
Buildings	6,487		6,487
Furniture and equipment	68,362		74,043
Capitalized software	843,638		819,828
Leasehold improvements	50,334		48,811
Construction in progress	276		3,064
	976,573		959,709
Less accumulated depreciation	(569,345)		(535,039)
Property and equipment, net	$	407,228	$	424,670

Depreciation expense for property and equipment, net, was approximately $21.2 million and $20.4 million for the three months ended September 30, 2020 and 2019, respectively, and $64.2 million and $63.6 million for the nine months ended September 30, 2020 and 2019, respectively.

Impairment losses for property and equipment of $1.2 million and $12.3 million were recorded for the nine months ended September 30, 2020 and 2019, respectively. See Note 6 - Fair Value for further discussion.

Note 3 – Goodwill, Net

A reconciliation of the changes in the carrying amount of goodwill and accumulated impairment losses, by reporting unit, for the nine months ended September 30, 2020 is as follows:


(in thousands)	PIRM		UWS		Consolidated
Balance as of January 1, 2020
Goodwill	$	1,078,225	$	1,216,196	$	2,294,421
Accumulated impairment losses	(600)		(6,925)		(7,525)
Goodwill, net	1,077,625		1,209,271		2,286,896
Measurement period adjustments	—		8		8
Acquisition	12,584		—		12,584

Translation adjustments	(612)		—		(612)

Balance as of September 30, 2020
Goodwill, net	$	1,089,597	$	1,209,279	$	2,298,876

In connection with our intent to exit our reseller businesses, we have reclassified $29.3 million and $79.9 million of goodwill, net, from our Property Intelligence and Risk Managements Solutions (“PIRM”) and Underwriting and Workflow Solutions (“UWS”) segments, respectively, to assets of discontinued operations as of September 30, 2020. See Note 14 - Discontinued Operations. As part of the process of marketing the sale of these businesses, we updated our long-term projections and obtained indicative fair market values from potential participants. The level of indicative values supported the net book value of the businesses being marketed and our remaining reporting units within continuing operations with no impairment.

See Note 12 - Acquisitions for discussion of current year acquisition and measurement period adjustments.

Note 4 – Other Intangible Assets, Net

Other intangible assets, net consists of the following:


	September 30, 2020						December 31, 2019
(in thousands)	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Client lists	$	640,155	$	(364,295)	$	275,860	$	645,770	$	(340,168)	$	305,602
Non-compete agreements	26,755		(20,233)		6,522		26,409		(16,249)		10,160
Tradenames and licenses	126,913		(74,932)		51,981		126,405		(66,538)		59,867

	$	793,823	$	(459,460)	$	334,363	$	798,584	$	(422,955)	$	375,629

Amortization expense for other intangible assets, net was $14.2 million for both the three months ended September 30, 2020 and 2019, and $42.5 million and $45.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Impairment losses of $35.6 million were recorded for the nine months ended September 30, 2019. For the three months ended September 30, 2019, there were no impairments. For the three and nine months ended September 30, 2020, there were no impairments. See Note 6 - Fair Value for further discussion.

Estimated amortization expense for other intangible assets, net is as follows:


(in thousands)
Remainder of 2020	$	14,294
2021	53,770
2022	51,953
2023	43,642
2024	37,303
Thereafter	133,401
	$	334,363

Note 5 – Long-Term Debt

Our long-term debt consists of the following:


		September 30, 2020						December 31, 2019
(in thousands)		Gross		Debt Issuance Costs		Net		Gross		Debt Issuance Costs		Net
Bank debt:
	Term loan facility borrowings due May 2024, weighted-average interest rate of 1.91% as of September 30, 2020	$	1,572,000	$	(12,242)	$	1,559,758	$	1,672,188	$	(14,868)	$	1,657,320
	Revolving line of credit borrowings due May 2024, weighted-average interest rate of 1.91% as of September 30, 2020	—		(5,342)		(5,342)		—		(6,425)		(6,425)


Notes:
	7.55% senior debentures due April 2028	9,531		(24)		9,507		9,524		(26)		9,498
Other debt:
	Various debt instruments with maturities through March 2024	6,244		—		6,244		6,167		—		6,167
Total long-term debt		1,587,775		(17,608)		1,570,167		1,687,879		(21,319)		1,666,560
Less current portion of long-term debt		21,382		—		21,382		56,022		—		56,022
Long-term debt, net of current portion		$	1,566,393	$	(17,608)	$	1,548,785	$	1,631,857	$	(21,319)	$	1,610,538

As of September 30, 2020 and December 31, 2019, we recorded less than $0.1 million and $0.4 million, respectively, of accrued interest expense on our debt-related instruments within accounts payable and other accrued expenses.

Credit Agreement

In May 2019, we amended and restated our credit agreement (the “Credit Agreement”) with Bank of America, N.A., as the administrative agent, and other financial institutions. The Credit Agreement provides for a $1.8 billion 5-year term loan facility (the “Term Facility”), and a $750.0 million 5-year revolving credit facility (the “Revolving Facility”). The Term Facility matures, and the Revolving Facility expires, in May 2024. The Revolving Facility includes a $100.0 million multi-currency revolving sub-facility and a $50.0 million letter of credit sub-facility. The Credit Agreement also provides for the ability to increase the Term Facility and Revolving Facility by up to $300.0 million in the aggregate; however, the lenders are not obligated to do so. As of September 30, 2020, we had a remaining borrowing capacity of $750.0 million under the Revolving Facility and we were in compliance with all financial and restrictive covenants under the Credit Agreement.

Debt Issuance Costs

In connection with the amendment and restatement of the Credit Agreement, in May 2019, we incurred approximately $9.7 million of debt issuance costs of which $9.6 million were initially capitalized within long-term debt, net of current, in the accompanying condensed consolidated balance sheets. In addition, when we amended and restated the Credit Agreement, we wrote-off previously unamortized debt issuance costs of $1.5 million within gain/(loss) on investments and other, net, in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2019, which resulted

in a remaining $14.6 million of previously unamortized costs. We are amortizing these costs over the term of the Credit Agreement. For both the three months ended September 30, 2020 and 2019, $1.2 million was recognized in the accompanying condensed consolidated statements of operations related to the amortization of debt issuance costs. For the nine months ended September 30, 2020 and 2019, $3.7 million and $3.8 million, respectively, were recognized in the accompanying condensed consolidated statements of operations related to the amortization of debt issuance costs.

7.55% Senior Debentures

In April 1998, we issued $100.0 million in aggregate principal amount of 7.55% senior debentures due 2028. The indentures governing these debentures, as amended, contain limited restrictions on us.

Interest Rate Swaps

We have entered into amortizing interest rate swaps (“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month LIBOR. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of September 30, 2020, the Swaps have a combined remaining notional balance of $1.2 billion, a weighted average fixed interest rate of 2.40% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts of approximately $1.2 billion through September 2021, then $1.1 billion and $1.0 billion through August 2022, and $496.8 million and $465.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.59%, 2.77%, and 2.64%, respectively.

We have designated the Swaps as cash flow hedges. The estimated fair values of these cash flow hedges are recorded in prepaid expenses and other current assets or other assets as well as accounts payable and other accrued expenses or other liabilities in the accompanying condensed consolidated balance sheets. As of September 30, 2020, the estimated fair value of these cash flow hedges resulted in a liability of $87.7 million, of which $3.5 million was recorded within accounts payable and other accrued expenses. As of December 31, 2019, the estimated fair value of these cash flow hedges resulted in an asset of $0.6 million which was recorded within prepaid expenses and other current assets, as well as a liability of $47.7 million recorded within other liabilities.

Unrealized gains of $7.9 million (net of $2.6 million in deferred taxes) and unrealized losses of $8.1 million (net of $2.7 million in deferred taxes) for the three months ended September 30, 2020 and 2019, respectively, were recognized in other comprehensive loss related to the Swaps. Unrealized losses of $30.5 million (net of $10.1 million in deferred taxes) and $41.4 million (net of $13.8 million in deferred taxes) for the nine months ended September 30, 2020 and 2019, respectively, were recognized in other comprehensive loss related to the Swaps.

As a result of our Swap activity, for the three months ended September 30, 2020 and 2019, included within interest expense, on a pre-tax basis, we recognized interest expense of $7.1 million and interest income of $0.7 million, respectively. For the nine months ended September 30, 2020 and 2019, included within interest expense, on a pre-tax basis, we recognized interest expense of $14.3 million and interest income of $4.0 million, respectively. Estimated net losses included in accumulated other comprehensive loss related to the Swaps as of September 30, 2020, that will be reclassified into earnings as interest expense over the next 12 months, utilizing September 30, 2020 LIBOR, is estimated to be $16.0 million, on a pre-tax basis.

Note 6 – Fair Value

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable.

The market approach is applied for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value balances are classified based on the observability of those inputs.

A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize observable inputs in active markets for similar assets and liabilities, or, quoted prices in markets that are not active.

In estimating fair value, we used the following methods and assumptions:

Cash and Cash Equivalents

For cash and cash equivalents, the carrying value is a reasonable estimate of fair value due to the short-term nature of the instruments.

Restricted Cash

Restricted cash is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust. We deem the carrying value to be a reasonable estimate of fair value due to the nature of these instruments.

Other Investments

Other investments are currently comprised of a minority equity investment in a foreign enterprise which we measure at cost and adjust to fair value on a quarterly basis when there are observable price changes in orderly transactions for the identical, or similar, investments. Changes in fair value are recorded within gain/(loss) on investments and other, net, in our condensed consolidated statements of operations.

Contingent Consideration

The fair value of our contingent consideration was estimated using the Monte-Carlo simulation model, which relies on significant assumptions and estimates including discount rates and future market conditions, among others.

Long-Term Debt

The fair value of debt was estimated based on the current rates available to us for similar debt of the same remaining maturities and consideration of our default and credit risk.

Swaps

The fair values of the Swaps were estimated based on market-value quotes received from the counterparties to the agreements.

The fair values of our financial instruments as of September 30, 2020 are presented in the following table:


(in thousands)	Fair Value Measurements Using
As of September 30, 2020	Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and cash equivalents	$	302,329	$	—	$	—	$	302,329
Restricted cash	8,719		1,785		—		10,504
Other investments	—		3,279		—		3,279
Total	$	311,048	$	5,064	$	—	$	316,112

Financial Liabilities:

Total debt	$	—	$	1,590,260	$	—	$	1,590,260
Total	$	—	$	1,590,260	$	—	$	1,590,260

Derivatives:

Liability for Swaps	$	—	$	87,725	$	—	$	87,725

As of December 31, 2019
Financial Assets:
Cash and cash equivalents	$	104,162	$	—	$	—	$	104,162
Restricted cash	9,791		726		—		10,517
Other investments	—		1,898		—		1,898
Total	$	113,953	$	2,624	$	—	$	116,577

Financial Liabilities:

Total debt	$	—	$	1,690,731	$	—	$	1,690,731
Total	$	—	$	1,690,731	$	—	$	1,690,731

Derivatives:
Asset for Swaps	$	—	$	572	$	—	$	572
Liability for Swaps	$	—	$	47,691	$	—	$	47,691

For the nine months ended September 30, 2020, we recorded non-cash impairment charges of $1.2 million in property and equipment, net, related to capitalized software within our UWS segment. For the nine months ended September 30, 2019, we recorded non-cash impairment charges of $35.6 million in other intangible assets, net, as well as $12.3 million in property and equipment, net. For both the three months ended September 30, 2020, and 2019, there were no impairments. Both impairments are due to ongoing business transformation activities of our appraisal management company within our UWS segment. The impairments within other intangible assets, net include $32.3 million for client lists and $3.3 million for licenses. The impairments within property and equipment, net relate to capitalized software. All impairments were derived using an undiscounted cash flow methodology.

In connection with the 2019 acquisition of National Tax Search, LLC (“NTS”), we entered into a contingent consideration agreement for up to $7.5 million in cash based upon certain revenue targets in fiscal years 2020 and 2021. This contingent consideration has been assessed with no fair value as of September 30, 2020 using the Monte-Carlo simulation model.

Due to observable price changes in an inactive market, in the first half of 2019, we recorded a combined unfavorable fair value adjustment of $6.6 million to a minority equity investment, which was recorded within gain/(loss) on investments and other, net in our condensed consolidated statement of operations for the nine months ended September 30, 2019. No adjustments were necessary for the three and nine months ended September 30, 2020.

In connection with certain acquisitions in 2017 related to our discontinued operations, we entered into contingent consideration agreements for up to $17.5 million in cash by 2022 upon the achievement of certain revenue targets ending in fiscal year 2021. This contingent payment was originally recorded at a fair value of $4.4 million using the Monte-Carlo simulation model. The contingent payments are remeasured at fair value quarterly, and changes are recorded within income/(loss) from discontinued operations, net of tax, in our condensed consolidated statements of operations. During the three months ended September 30, 2020 we decreased the fair value of our contingent consideration by $1.2 million and recorded the gain in our condensed consolidated statements of operations. During the three months ended September 30, 2019, there were no adjustments to our contingent consideration. During the nine months ended September 30, 2020 and 2019, we decreased the fair value of our contingent consideration by $3.8 million and $0.2 million, respectively, and recorded the gain in our condensed consolidated statements of operations.

Note 7 – Operating Revenues

Operating revenues by solution type consist of the following:


(in thousands)	PIRM		UWS		Corporate and Eliminations		Consolidated
For the Three Months Ended September 30, 2020
Property insights	$	126,325	$	—	$	—	$	126,325
Insurance and spatial solutions	49,923		—		—		49,923
Flood data solutions	—		34,351		—		34,351
Valuation solutions	—		58,434		—		58,434

Property tax solutions	—		166,858		—		166,858
Other	—		3,699		(2,863)		836
Total operating revenue	$	176,248	$	263,342	$	(2,863)	$	436,727

For the Three Months Ended September 30, 2019
Property insights	$	120,340	$	—	$	—	$	120,340
Insurance and spatial solutions	48,739		—		—		48,739
Flood data solutions	—		22,983		—		22,983
Valuation solutions	—		77,426		—		77,426

Property tax solutions	—		103,671		—		103,671
Other	—		5,058		(2,646)		2,412
Total operating revenue	$	169,079	$	209,138	$	(2,646)	$	375,571

For the Nine Months Ended September 30, 2020
Property insights	$	359,175	$	—	$	—	$	359,175
Insurance and spatial solutions	145,204		—		—		145,204
Flood data services	—		91,931		—		91,931
Valuation solutions	—		182,637		—		182,637

Property tax solutions	—		394,799		—		394,799
Other	—		11,088		(10,101)		987
Total operating revenue	$	504,379	$	680,455	$	(10,101)	$	1,174,733

For the Nine Months Ended September 30, 2019
Property insights	$	359,278	$	—	$	—	$	359,278
Insurance and spatial solutions	142,576		—		—		142,576
Flood data services	—		61,572		—		61,572
Valuation solutions	—		230,891		—		230,891

Property tax solutions	—		282,724		—		282,724
Other	—		17,988		(6,997)		10,991
Total operating revenue	$	501,854	$	593,175	$	(6,997)	$	1,088,032

Property Insights

Our property insights solutions combine our patented predictive analytics with our proprietary and contributed data to enable our clients to improve customer acquisition and retention, detect and prevent fraud, improve mortgage transaction cycle time and cost efficiency, identify real estate trends and neighborhood characteristics, track market performance, and increase market share. Our data is comprised of real estate information, incorporating crime, site inspection, neighborhood, document images, and other information from proprietary sources. We also offer verification of applicant income, identity and employment services. We typically license data in one of two forms: bulk data licensing and transactional licensing. Operating revenue for bulk data licensing contracts that provide a stand-ready obligation or include substantive updates to the intellectual property is recognized ratably over the contractual term; otherwise, operating revenue is recognized upon delivery. For transactional licensing, we recognize operating revenue based on usage.

Insurance and Spatial Solutions

Our insurance and spatial solutions provide originators and property and casualty insurers the ability to more effectively locate, assess and manage property-level assets and risks through location-based data and analytics. We also provide cloud-based property claims workflow technology for property and casualty insurers. The licensed intellectual property data is generally provided to our clients on a subscription or usage basis. For subscription contracts, operating revenue is recognized ratably over the contractual term once initial delivery has occurred. For contracts to provide a license to data which is delivered via report or data file, operating revenue is recognized when the client obtains control of the products, which is upon delivery.

Property Tax Solutions

Our property tax solutions are built from aggregated property tax information from over 20,000 taxing authorities. We use this information to advise mortgage lenders and servicers of the property tax payment status of loans in their portfolio and to monitor that status over the life of the loans. If a mortgage lender or servicer requires tax payments to be impounded on behalf of its borrowers, we can also facilitate the transfer of these funds to the taxing authorities and provide the lender or servicer with payment confirmation. Property tax processing revenues are primarily comprised of periodic loan fees and life-of-loan fees. For periodic fee arrangements, we generate monthly fees at a contracted rate for as long as we service the loan. For life-of-loan fee arrangements, we charge a one-time fee when the loan is set-up in our tax servicing system. Life-of-loan fees are deferred and recognized ratably over the expected service period of 10 years and adjusted for early loan cancellation. Revenue recognition rates of loan portfolios are regularly analyzed and adjusted monthly to reflect current trends.

Valuation Solutions

Our valuation solutions represent property valuation-related data driven services and analytics combined with collateral valuation workflow technologies which assist our clients in assessing risk of loss using both traditional and alternative forms of property valuation, driving process efficiencies as well as ensuring compliance with lender and governmental regulations. We provide collateral information technology and solutions that automate property appraisal ordering, tracking, documentation and review for lender compliance with government regulations. Revenue for the property appraisal service is recognized when the appraisal service is performed and delivered to the client. In addition, to the extent that we provide continuous access to the hosted software platform, we recognize operating revenue over the term of the arrangement.

Flood Data Solutions

Our flood data solutions provide flood zone determinations primarily to mortgage lenders in accordance with US Federal legislation passed in 1994, which requires that most lenders obtain a determination of the current flood zone status at the time each loan is originated and obtain applicable updates during the life of the loan if contracted to do so. We also provide flood zone determinations to insurance companies. We generally recognize operating revenue upon delivery of the initial determination. If contracted for life of loan monitoring, we recognize operating revenue over the estimated service period, as adjusted for early loan cancellation.

Contract Costs

Incremental costs to obtain or fulfill client contracts are recognized as an asset. As of September 30, 2020, we had $13.0 million of current deferred contract costs which are presented in prepaid expenses and other current assets, as well as $23.4 million of long-term deferred contract costs which are presented in other assets in our condensed consolidated balance sheet. As of December 31, 2019, we had $9.8 million of current deferred contract costs which are presented in prepaid expenses and other current assets as well as $23.1 million of long-term deferred contract costs which are presented in other assets in our

consolidated balance sheet. Our deferred contract costs primarily include certain set-up and acquisition costs related to property tax solutions, which amortize ratably over an expected 10-year life, adjusted for early loan cancellations. For the three months ended September 30, 2020 and 2019, we recorded amortization associated with deferred contract costs of $5.6 million and $3.4 million, respectively, and $13.9 million and $9.8 million, respectively, for the nine months ended September 30, 2020 and 2019.

Contract Liabilities

We record a contract liability when amounts are invoiced, which is generally prior to the satisfaction of the performance obligation. For property tax solutions, we invoice upfront fees to clients for services to be performed over time. For property insights and insurance and spatial solutions we invoice quarterly and annually, commencing upon execution of the contracts or at the beginning of the license term, as applicable.

As of September 30, 2020, we had $986.9 million in contract liabilities compared to $883.8 million as of December 31, 2019. The overall change of $103.1 million in contract liability balances is primarily due to $632.4 million of new deferred billings in the current year, partially offset by $530.2 million of operating revenue recognized, of which $292.8 million related to contracts previously deferred, and other increases of $0.9 million.

Remaining Performance Obligations

The majority of our arrangements are between one and three years with a significant portion being one year or less. For the remaining population of non-cancellable and fixed arrangements greater than one year, as of September 30, 2020 we had $1.2 billion of remaining performance obligations. We expect to recognize approximately 11% percent of this remaining revenue backlog in 2020, 31% in 2021, 21% in 2022 and 37% thereafter. See further discussion of performance obligations in Note 1 - Basis for Condensed Consolidated Financial Statements.

Note 8 – Share-Based Compensation

We currently issue equity awards under the CoreLogic, Inc. 2018 Performance Incentive Plan (the “Plan”), which was approved by our stockholders at our Annual Meeting held in May 2018. The Plan includes the ability to grant share-based instruments such as RSUs, PBRSUs, and stock options. Prior to the approval of the Plan, we issued share-based awards under the CoreLogic, Inc. 2011 Performance Incentive Plan, as amended, which was preceded by the CoreLogic, Inc. 2006 Incentive Plan. The Plan provides for up to 15,139,084 shares of the Company's common stock to be available for award grants.

We have primarily utilized RSUs and PBRSUs as our share-based compensation instruments for employees and directors. The fair value of any share-based compensation instrument grant is based on the market value of our common stock on the date of grant and is recognized as compensation expense over its vesting period.

Restricted Stock Units

For the nine months ended September 30, 2020 and 2019, we awarded 777,139 and 640,339 RSUs, respectively, with an estimated grant-date fair value of $28.8 million and $23.5 million, respectively. The RSU awards will vest ratably over 3 years. RSU activity for the nine months ended September 30, 2020 is as follows:


	Number of Shares	Weighted-Average Grant-Date Fair Value
(in thousands, except weighted-average fair value prices)
Unvested RSUs outstanding at December 31, 2019	1,032	$	39.84
RSUs granted	777	$	37.10
RSUs vested	(524)	$	40.51
RSUs forfeited	(47)	$	36.53
Unvested RSUs outstanding at September 30, 2020	1,238	$	37.98

As of September 30, 2020, there was $29.7 million of total unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted-average period of 1.7 years. The fair value of RSU awards is based on the market value of our common stock on the date of grant.

Performance-Based Restricted Stock Units

For the nine months ended September 30, 2020 and 2019, we awarded 321,014 and 203,464 PBRSUs, respectively, with an estimated grant-date fair value of $13.0 million and $7.5 million, respectively. These awards are generally subject to service-based, performance-based, and market-based vesting conditions.

The service and performance period for the 2020 PBRSU grants is from January 2020 to December 2022 and the performance metric is adjusted earnings per share, subject to modification based on relative total stockholder return, a market-based vesting condition. The performance and service period for the 2019 PBRSUs is from January 2019 to December 2021 and the performance metric is adjusted earnings per share, subject to modification based on relative total stockholder return, a market-based vesting condition.

The fair value of PBRSU awards are based on the market value of our common stock on the date of grant. For PBRSUs with market-based vesting conditions, we also use the Monte-Carlo simulation with the following weighted-average assumptions:


	For the Nine Months Ended September 30,
	2020		2019
Expected dividend yield (1)	—	%	—	%
Risk-free interest rate (2)	0.60	%	2.44	%
Expected volatility (3)	32.53	%	28.24	%
Average total stockholder return (3)	(21.47)	%	17.15	%

(1) Since PBRSU participants are credited with dividend equivalent shares when dividends are paid, 0.00% was used in the Monte-Carlo simulation which is mathematically equivalent to paying dividend equivalents upon vesting. Please see Note 1 - Basis for Condensed Consolidated Financial Statements for further information regarding dividends. (2) The risk-free interest rate for the periods within the contractual term of the PBRSUs is based on the US Treasury yield curve in effect at the time of the grant. (3) The expected volatility and average total stockholder return are measures of the amount by which a stock price has fluctuated or is expected to fluctuate based primarily on our and our peers' historical data.

Additionally, within our outstanding unvested PBRSUs shown in the table below, there are prior year grants which do not include market-based conditions, but instead have adjusted EBITDA margin or organic revenue growth rate as the performance metric.

PBRSU activity for the nine months ended September 30, 2020 is as follows:


	Number of Shares	Weighted-Average Grant-Date Fair Value
(in thousands, except weighted-average fair value prices)
Unvested PBRSUs outstanding at December 31, 2019	636	$	42.62
PBRSUs granted	321	$	40.64
PBRSUs vested	(184)	$	39.50
PBRSUs forfeited	(29)	$	44.77
Unvested PBRSUs outstanding at September 30, 2020	744	$	42.58

As of September 30, 2020, there was $20.1 million of total unrecognized compensation cost related to unvested PBRSUs that is expected to be recognized over a weighted-average period of 1.7 years.

Stock Options

Prior to 2015, we issued stock options as incentive compensation for certain employees. Option activity for the nine months ended September 30, 2020 is as follows:


(in thousands, except weighted-average price)	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding at December 31, 2019	479	$	19.59
Options exercised	(82)	$	18.34
Options outstanding at September 30, 2020	397	$	19.84	1.9	$	19,024

As of September 30, 2020, there was no unrecognized compensation cost related to unvested stock options.

The intrinsic value of options exercised was $2.9 million and $1.4 million for the nine months ended September 30, 2020 and 2019, respectively. This intrinsic value represents the difference between the fair market value of our common stock on the date of exercise and the exercise price of each option.

Employee Stock Purchase Plan

The employee stock purchase plan allows eligible employees to purchase our common stock at 85.0% of the lesser of the closing price on the first day or the last day of each quarter. Our employee stock purchase plan was approved by our stockholders at our 2012 annual meeting of stockholders and the first offering period commenced in October 2012. We recognize an expense for the amount equal to the estimated fair value of the discount during each offering period.

The following table sets forth the share-based compensation expense recognized for the three and nine months ended September 30, 2020 and 2019:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
(in thousands)	2020		2019		2020		2019
RSUs	$	6,378	$	4,521	$	17,446	$	17,063
PBRSUs	5,468		3,893		14,264		7,390
Stock options	—		—		—		—
Employee stock purchase plan	700		392		2,188		1,565
	$	12,546	$	8,806	$	33,898	$	26,018

The table above includes $1.1 million and $0.5 million of share-based compensation expense within cost of services in the accompanying condensed consolidated statements of operations for the three months ended September 30, 2020 and 2019, respectively, and $2.2 million and $1.7 million for the nine months ended September 30, 2020 and 2019, respectively. Additionally, we recognized $0.3 million of share-based compensation expense for both the three months ended September 30, 2020 and 2019, and $0.8 million for both the nine months ended September 30, 2020 and 2019, reported within income/(loss) from discontinued operations.

Note 9 – Litigation and Regulatory Contingencies

We have been named in various lawsuits and we are from time to time subject to audit or investigation by governmental agencies arising in the ordinary course of business.

With respect to matters where we determine that a loss is both probable and reasonably estimable, we record a liability representing our best estimate of the financial exposure based on known facts. For matters where a settlement has been reached, we record the expected amount of such settlements. With respect to audits, investigations or lawsuits that are ongoing, although their final dispositions are not yet determinable, we do not believe that the ultimate resolution of such matters, either individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flows. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates. We record expenses for legal fees as incurred. As of September 30, 2020 our accrual for litigation and regulatory contingencies was immaterial.

Fair Credit Reporting Act Class Actions

In July 2017, Rental Property Solutions, LLC (“RPS”) was named as a defendant in Claudinne Feliciano, et. al., v. CoreLogic SafeRent, LLC, a putative class action lawsuit in the US District Court for the Southern District of New York. The named plaintiff alleges that RPS prepared a background screening report about her that contained a record of a New York Housing Court action without noting that the action had previously been dismissed. On this basis, she seeks damages under the Fair Credit Reporting Act and the New York Fair Credit Reporting Act on behalf of herself and a class of similarly situated consumers with respect to reports issued during the period of July 2015 to the present. In July 2019, the District Court issued an order certifying a class of approximately 2,000 consumers. In June 2020, we reached an agreement to resolve the case. The settlement has been preliminarily approved by the District Court, and a final approval hearing is scheduled for February 23, 2021. The settlement amount was recorded during the quarter ended June 30, 2020.

In May 2020, Rental Property Solutions, LLC (“RPS”) was named as a defendant in Terry Brown v. CoreLogic Rental Property Solutions, LLC, a putative class action lawsuit filed in the US District Court for the Eastern District of Virginia. The named plaintiff alleges that RPS prepared a background screening report about him that included a sex offender record that did not relate to him. He seeks damages under the Fair Credit Reporting Act on behalf of himself and a class of similarly situated consumers, as well as a subclass of consumers for whom misattributed sex offender records were removed following a dispute. The Company intends to vigorously defend itself in the litigation.

In June 2020, CoreLogic Credco, LLC (“Credco”) was named as a defendant in Marco Fernandez v. CoreLogic Credco, LLC, a putative class action lawsuit filed in California Superior Court in San Diego County. The named plaintiff alleges that Credco provided a lender with a consumer report about him that erroneously indicated he is on the Office of Foreign Asset Control’s list of Specially Designated Nationals and Blocked Persons (“OFAC List”). He further alleges that Credco failed to provide him with a copy of the OFAC List designation upon request, failed to notify him of what entities had received such a notification in the past, and failed to respond to his effort to dispute the item. He seeks to represent three classes and four subclasses based upon these allegations, and asserts seven claims under the Fair Credit Reporting Act, the California Credit Reporting Agencies Act, and California’s Unfair Competition law. The Company has removed the case to the US District Court for the Southern District of California, and intends to vigorously defend itself in the litigation.

Separation

Following the separation of the financial services businesses of our predecessor company, The First American Corporation (“FAC”) on June 1, 2010 (the “Separation”), we are responsible for a portion of First American Financial Corporation's ("FAFC") contingent and other corporate liabilities. In the Separation and Distribution Agreement we entered into in connection with the Separation, we agreed with FAFC to share equally in the cost of resolution of a small number of corporate-level lawsuits, including certain consolidated securities litigation matters from which we have since been dropped. There were no liabilities incurred in connection with the consolidated securities matters. Responsibility to manage each case has been assigned to either FAFC or us, with the managing party required to update the other party regularly and consult with each other prior to certain important decisions, such as settlement. The managing party will also have primary responsibility for determining the ultimate total liability, if any, related to the applicable case. We will record our share of any such liability when the responsible party determines a reserve is necessary. As of September 30, 2020, no reserves were considered necessary.

In addition, the Separation and Distribution Agreement provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of FAC's financial services business with FAFC, and financial responsibility for the obligations and liabilities of FAC's information solutions business with us. Specifically, each party will, and will cause its subsidiaries and affiliates to, indemnify, defend and hold harmless the other party, its respective affiliates and subsidiaries and each of its respective officers, directors, employees and agents for any losses arising out of or otherwise in connection with the liabilities each such party assumed or retained pursuant to the Separation.

Note 10 – Income Taxes

The effective income tax rate for income taxes as a percentage of income from continuing operations before equity in earnings of affiliates and income taxes was a benefit of 10.4% and and provision of 27.1% for the three months ended September 30, 2020 and 2019, respectively, and a provision of 10.0% and a benefit of 718.7% for the nine months ended September 30, 2020 and 2019, respectively.

During the quarter ended September 30, 2020, the Internal Revenue Service ("IRS") concluded their examination of our 2010 to 2012 income tax returns resulting in the recognition of a discrete tax benefit of approximately $24 million, inclusive of anticipated interest and state taxes.

For the three months ended September 30, 2020, when compared to the same period for 2019, the change in the effective income tax rate was primarily due to the benefit recorded in relation to the settlement of the IRS examination in 2020. For the nine months ended September 30, 2020, when compared to the same period for 2019, the change in the effective income tax rate was primarily due to the benefit recorded in relation to the settlement of the IRS examination in 2020 as compared to a smaller nonrecurring benefit recorded in 2019 related to the reversal of state tax reserves.

We are currently under examination for the year 2016 by the IRS, our primary taxing authority, and for other years by various other taxing authorities. It is reasonably possible the amount of the unrecognized benefits could be significantly impacted which would have an impact on net income.

Note 11 – Earnings Per Share

The following is a reconciliation of net income per share:


	For the Three Months Ended September 30,				For the Nine Months Ended Sep 30,
	2020		2019		2020		2019
(in thousands, except per share amounts)
Numerator for basic and diluted net income per share:
Net income from continuing operations	$	102,467	$	31,668	$	177,820	$	8,225
Income/(loss) from discontinued operations, net of tax	10,679		(8,485)		28,149		11,073

Net income	$	113,146	$	23,183	$	205,969	$	19,298
Denominator:
Weighted-average shares for basic income/(loss) per share	79,467		79,761		79,300		80,138
Dilutive effect of stock options and RSUs	1,935		1,153		1,836		1,067
Weighted-average shares for diluted income/(loss) per share	81,402		80,914		81,136		81,205
Income/(loss) per share
Basic:
Net income from continuing operations	$	1.29	$	0.40	$	2.24	$	0.10
Income/(loss) from discontinued operations, net of tax	0.13		(0.11)		0.35		0.14

Net income	$	1.42	$	0.29	$	2.59	$	0.24
Diluted:
Net income from continuing operations	$	1.26	$	0.39	$	2.19	$	0.10
Income/(loss) from discontinued operations, net of tax	0.13		(0.10)		0.35		0.14

Net income	$	1.39	$	0.29	$	2.54	$	0.24

The dilutive effect of share-based compensation awards has been calculated using the treasury-stock method. For both the three and nine months ended September 30, 2020 and 2019 an aggregate of less than 0.1 million of RSUs and PBRSUs were excluded from the weighted-average diluted common shares outstanding due to their anti-dilutive effect.

Note 12 – Acquisitions

In January 2020, we acquired the remaining 66% of Location for $11.5 million, subject to certain working capital adjustments. Location is a leading provider of geographic location indicators for crime and non-weather related events connected to underwriting risk assessment. This acquisition further progresses our long-term strategic plan by adding scale to our insurance and spatial businesses. Location is included as a component of our PIRM segment. The purchase price was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis, which included significant unobservable inputs. We have preliminarily recorded proprietary technology of $6.0 million with an estimated useful life of 10 years, client lists of $0.3 million with an estimated useful life of 5 years, trademarks of $0.8 million with an estimated useful life of 8 years, non-compete agreements of $0.4 million with an estimated useful life of 5 years, and goodwill of $12.6 million. For the nine months ended September 30, 2020, goodwill increased by $0.3 million as a result of a change in the purchase price allocation for certain working capital adjustments. In connection with this acquisition, we remeasured our then-existing 34% investment ownership in Location which resulted in a $0.6 million step-up gain that we recorded within gain/(loss) on investments and other, net, in our condensed consolidated statement of operations for the nine months ended September 30, 2020.

In August 2019, we completed the acquisition of NTS for $15.0 million, subject to certain working capital adjustments, and up to $7.5 million to be paid in cash by 2022, contingent upon the achievement of certain revenue targets in fiscal years 2020 and 2021 (see Note 6 - Fair Value for further details). NTS is a leading provider of commercial property tax payment services and specializes in identifying potential collateral loss related to unpaid property tax, homeowners association fees, and inaccurate flood zone determinations. The NTS acquisition increases our commercial property information offerings and is expected to drive future growth in the US. NTS is included as a component of our UWS segment. The purchase price was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis, which included significant unobservable inputs. We recorded client lists of $5.0 million with an estimated useful life of 10 years, proprietary technology of $3.3 million with an estimated useful life of 7 years, trademarks of $1.0 million with an estimated useful life of 7 years, non-compete agreements of $0.3 million with an estimated useful life of 5 years, contract liabilities of $2.5 million, and goodwill of $5.5 million, all of which is deductible for tax purposes. For the nine months ended September 30, 2020, goodwill increased by less than $0.1 million as a result of a change in the purchase price allocation for certain working capital adjustments.

These business combinations did not have a material impact on our condensed consolidated statements of operations.

There was $0.1 million of acquisition-related costs within selling, general and administrative expenses on our condensed consolidated statements of operations for both the three months ended September 30, 2020 and 2019, and $0.1 million and $0.3 million of these costs for the nine months ended September 30, 2020 and 2019, respectively.

Note 13 – Segment Information

We have organized into two reportable segments: PIRM and UWS.

Property Intelligence & Risk Management Solutions. Our PIRM segment combines property information, mortgage information, and consumer information to deliver unique housing market and property-level insights, predictive analytics and risk management capabilities. We have also developed proprietary technology and software platforms to access, automate, and track this information and assist our clients with decision-making and compliance tools in the real estate industry, and insurance industry. We deliver this information directly to our clients in a standard format over the web, through hosted software platforms, or in bulk data form. Our PIRM solutions include property insights and insurance and spatial solutions in North America, Western Europe, and Asia Pacific. The segment's primary clients are commercial banks, mortgage lenders and brokers, investment banks, fixed-income investors, real estate agents, MLS companies, property and casualty insurance companies, title insurance companies, government agencies, and government-sponsored enterprises.

The operating results of our PIRM segment included intercompany revenues of $2.3 million and $1.9 million for the three months ended September 30, 2020 and 2019, respectively, and $8.2 million and $4.4 million for the nine months ended September 30, 2020 and 2019, respectively. The segment also included intercompany expenses of $0.6 million and $0.8 million for the three months ended September 30, 2020 and 2019, respectively, and $1.9 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively.

Underwriting & Workflow Solutions. Our UWS segment combines property and mortgage to provide comprehensive mortgage origination and monitoring solutions, including, underwriting-related solutions, and data-enabled valuations and appraisals. We have also developed proprietary technology and software platforms to access, automate, and track this information, and assist our clients with vetting and onboarding prospects, meeting compliance regulations and understanding, evaluating, and monitoring property values. Our UWS solutions include property tax solutions, valuation solutions, and flood data solutions in North America. The segment’s primary clients are large, national mortgage lenders and servicers, but we also serve regional mortgage lenders and brokers, credit unions, commercial banks, fixed-income investors, government agencies, and property and casualty insurance companies.

The operating results of our UWS segment included intercompany revenues of $0.6 million and $0.8 million for the three months ended September 30, 2020 and 2019, respectively, and $1.9 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively. The segment also included intercompany expenses of $0.9 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $2.7 million and $3.5 million for the nine months ended September 30, 2020 and 2019, respectively.

We also separately report on our corporate and eliminations. Corporate consists primarily of corporate personnel and other expenses associated with our corporate functions and facilities, investment gains and losses, equity in earnings/(losses) of affiliates, net of tax, and interest expense. The results of our Corporate segment included intercompany expenses of $1.5 million and $5.6 million for the three and nine months ended September 30, 2020, respectively, and $0.9 million for both the three and nine months ended September 30, 2019.

Selected financial information by reportable segment related to our continuing operations is as follows:


(in thousands)	Operating Revenues		Depreciation and Amortization		Operating Income/(Loss)		Equity in Earnings/(Losses) of Affiliates, Net of Tax		Net Income/(Loss) From Continuing Operations		Capital Expenditures

For the Three Months Ended September 30, 2020
PIRM	$	176,248	$	23,474	$	22,670	$	1,013	$	58,325	$	16,957
UWS	263,342		12,017		124,699		—		124,834		2,366
Corporate	—		8,119		(74,186)		(42)		(80,692)		5,768
Eliminations	(2,863)		—		—		—		—		—
Consolidated (excluding discontinued operations)	$	436,727	$	43,610	$	73,183	$	971	$	102,467	$	25,091

For the Three Months Ended September 30, 2019
PIRM	$	169,079	$	23,061	$	18,375	$	762	$	19,366	$	10,706
UWS	209,138		11,800		70,831		(4)		70,642		1,942
Corporate	—		7,528		(27,339)		(151)		(58,340)		13,766
Eliminations	(2,646)		—		—		—		—		—
Consolidated (excluding discontinued operations)	$	375,571	$	42,389	$	61,867	$	607	$	31,668	$	26,414

For the Nine Months Ended September 30, 2020
PIRM	$	504,379	$	69,833	$	65,249	$	2,483	$	102,451	$	42,813
UWS	680,455		36,091		281,567		—		281,717		5,891
Corporate	—		24,715		(136,229)		(624)		(206,348)		20,200
Eliminations	(10,101)		—		—		—		—		—
Consolidated (excluding discontinued operations)	$	1,174,733	$	130,639	$	210,587	$	1,859	$	177,820	$	68,904

For the Nine Months Ended September 30, 2019
PIRM	$	501,854	$	72,135	$	44,110	$	720	$	38,382	$	36,767
UWS	593,175		39,391		121,946		(12)		121,745		8,472
Corporate	—		21,241		(94,386)		(210)		(151,902)		33,413
Eliminations	(6,997)		—		—		—		—		—
Consolidated (excluding discontinued operations)	$	1,088,032	$	132,767	$	71,670	$	498	$	8,225	$	78,652


(in thousands)
Assets	September 30, 2020		December 31, 2019
PIRM	$	1,851,655	$	1,932,643
UWS	2,019,299		2,008,233
Corporate	6,185,679		5,950,472
Eliminations	(5,870,954)		(5,934,053)
Consolidated (excluding discontinued operations)	$	4,185,679	$	3,957,295

Note 14 – Discontinued Operations

In July 2020, we announced our intentions to pursue the sale of our reseller businesses as these are lower-margin businesses that are highly influenced by vendor pricing. These businesses are comprised of our Credit Solutions and Rental Property Solutions operations. We expect to sell these businesses to unrelated third parties within one year of the quarter ended September 30, 2020. These reseller business were included within the PIRM and UWS segments.

For both the three and nine months ended September 30, 2020, we recorded $0.6 million in costs directly related to the sale of these reseller businesses. Each of these businesses is reflected in our accompanying condensed consolidated financial statements as discontinued operations.

In September 2014, we completed the sale of our collateral solutions and field services businesses, which were included in the former reporting segment Asset Management and Processing Solutions ("AMPS"). In connection with the sale of our Employer and Litigation Services businesses (“ELI”) in December 2010, we retained certain liabilities and, in September 2016, a jury returned an unfavorable verdict against this discontinued operating unit, which we appealed. In August 2019, the verdict was upheld on appeal. We were unable to secure further review of the appellate decision and paid $23.0 million to satisfy the judgement in December 2019.

In October 2020, we consummated the sale of a component of the reseller operations for $9.0 million.

Summarized below are certain assets and liabilities classified as discontinued operations as of September 30, 2020 and December 31, 2019:


(in thousands)
As of September 30, 2020	PIRM		UWS		AMPS		ELI		Total
Cash and cash equivalents	$	941	$	1,369	$	—	$	—	$	2,310
Accounts receivable	4,304		39,689		—		—		43,993

Property and equipment, net	5,257		22,960		—		—		28,217
Goodwill, net	29,269		79,931		—		—		109,200
Capitalized data and database costs, net	16,643		941		—		—		17,584
Other assets	537		5,682		268		—		6,487
Total assets	$	56,951	$	150,572	$	268	$	—	$	207,791

Accounts payable and accrued expenses	$	2,460	$	24,590	$	240	$	—	$	27,290
Accrued salaries and benefits	487		3,073		—		—		3,560
Deferred income tax liabilities	8,206		9,637		—		393		18,236
Other liabilities	389		1,022		—		—		1,411
Total liabilities	$	11,542	$	38,322	$	240	$	393	$	50,497

As of December 31, 2019
Cash and cash equivalents	$	711	$	313	$	—	$	—	$	1,024
Accounts receivable	3,538		30,171		—		—		33,709
Income tax receivable	—		—		—		6,166		6,166
Property and equipment, net	4,831		21,520		—		—		26,351
Goodwill, net	29,269		79,931		—		—		109,200
Capitalized data and database costs, net	17,781		888		—		—		18,669
Other assets	598		5,981		268		20		6,867
Total assets	$	56,728	$	138,804	$	268	$	6,186	$	201,986

Accounts payable and accrued expenses	$	987	$	15,881	$	240	$	22	$	17,130
Accrued salaries and benefits	785		2,395		—		—		3,180
Deferred income tax liabilities	8,206		9,637		—		393		18,236
Other liabilities	456		3,706		—		—		4,162
Total liabilities	$	10,434	$	31,619	$	240	$	415	$	42,708

Summarized below are the components of our income/(loss) from discontinued operations, net of tax for the three and nine months ended September 30, 2020 and 2019:


(in thousands)
For the Three Months September 30, 2020	PIRM		UWS		AMPS		ELI		Total
Operating revenues	$	9,904	$	93,262	$	—	$	—	$	103,166
Cost of services (exclusive of depreciation and amortization)	4,711		75,732		—		—		80,443
Selling, general and administrative expenses	2,989		4,539		—		(1)		7,527
Depreciation and amortization	1,204		957		—		—		2,161
Gain on investments and other, net	—		(1,194)		—		—		(1,194)
Income from discontinued operations before income taxes	1,000		13,228		—		1		14,229
Provision for income taxes	250		3,300		—		—		3,550
Income from discontinued operations, net of tax	$	750	$	9,928	$	—	$	1	$	10,679

For the Three Months September 30, 2019
Operating revenues	$	11,066	$	72,317	$	—	$	—	$	83,383
Cost of services (exclusive of depreciation and amortization)	5,112		58,359		—		—		63,471
Selling, general and administrative expenses	2,763		1,913		5		23,129		27,810
Depreciation and amortization	1,953		1,375		—		—		3,328
Impairment Loss	(1)		78		—		—		77
Loss on investments and other, net	—		3		—		—		3
Income/(loss) from discontinued operations before income taxes	1,239		10,589		(5)		(23,129)		(11,306)
Provision/(benefit) for income taxes	309		2,642		(1)		(5,771)		(2,821)
Income/(loss) from discontinued operations, net of tax	$	930	$	7,947	$	(4)	$	(17,358)	$	(8,485)


(in thousands)
For the Nine Months Ended September 30, 2020	PIRM		UWS		AMPS		ELI		Total
Operating revenues	$	28,452	$	258,058	$	—	$	—	$	286,510
Cost of services (exclusive of depreciation and amortization)	14,054		211,604		—		—		225,658
Selling, general and administrative expenses	9,674		8,816		1		(19)		18,472
Depreciation and amortization	4,906		3,770		—		—		8,676
(Gain)/loss on investments and other, net	—		(3,803)		—		—		(3,803)
Income from discontinued operations before income taxes	(182)		37,671		(1)		19		37,507
Provision for income taxes	(45)		9,398		—		5		9,358
Income from discontinued operations, net of tax	$	(137)	$	28,273	$	(1)	$	14	$	28,149

For the Nine Months Ended September 30, 2019
Operating revenues	$	35,348	$	212,822	$	—	$	—	$	248,170
Cost of services (exclusive of depreciation and amortization)	16,009		171,475		—		—		187,484
Selling, general and administrative expenses	8,139		5,373		6		23,252		36,770
Depreciation and amortization	5,791		3,484		—		—		9,275
Impairment Loss	—		78		—		—		78
Gain on investments and other, net	—		(191)		—		—		(191)
Income/(loss) from discontinued operations before income taxes	5,409		32,603		(6)		(23,252)		14,754
Provision/(benefit) for income taxes	1,350		8,133		(1)		(5,801)		3,681
Income/(loss) from discontinued operations, net of tax	$	4,059	$	24,470	$	(5)	$	(17,451)	$	11,073

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and certain information incorporated herein by reference contain forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report, other than statements that are purely historical, are forward-looking statements. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “should,” “would,” “could,” “may,” and similar expressions also identify forward-looking statements. The forward-looking statements include, without limitation, statements regarding our future operations, financial condition and prospects, operating results, revenues and earnings liquidity, our estimated income tax rate, unrecognized tax positions, amortization expenses, impact of recent accounting pronouncements, our cost management program, our acquisition strategy and our growth plans, expectations regarding our recent acquisitions, share repurchases, the level of aggregate US mortgage originations, the reasonableness of the carrying value related to specific financial assets and liabilities, the near and long-term consequences of the unsolicited proposal from Senator Investment Group, L.P. ( “Senator”) and Cannae Holdings, Inc. (“Cannae”) to acquire the Company for $66.00 per share in cash (the “Unsolicited Proposal”), and the outcome and consequences of certain proposals, including the removal and replacement of up to nine members of our Board of Directors, that Senator and Cannae have requested be presented to our stockholders and that will be voted upon at a special meeting of stockholders on November 17, 2020 (the “Proxy Contest”).

Our expectations, beliefs, objectives, intentions and strategies regarding future results are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by our forward-looking statements. These risks and uncertainties include, but are not limited to:

•the potential impact of, and any potential developments related to, the Unsolicited Proposal and the Proxy Contest;

•the impact of our adoption of a shareholder rights plan;

•the potential impact that the COVID-19 pandemic, or the perception of its effects, may have on our business;

•compromises in the security or stability of our data and systems, including from cyber-based attacks, the unauthorized transmission of confidential information or systems interruptions;

•changes in prices at which we are able to repurchase our shares and limitations on our ability to repurchase our shares;

•limitations on access to, or increase in prices for, data from external sources, including government and public record sources;

•interruptions which could impair the delivery of our products and services;

•changes in applicable government legislation, regulations and the level of regulatory scrutiny affecting our clients or us, including with respect to consumer financial services and the use of public records and consumer data;

•difficult or uncertain conditions in the mortgage and consumer lending industries and the economy generally;

•reliance on our top ten clients for a significant portion of our revenue and profit;

•intense competition in the market against third parties and the in-house capabilities of our clients;

•risks related to the outsourcing of services and international operations;

•our ability to realize the anticipated benefits of certain acquisitions and the timing thereof;

•our ability to operate in international markets;

•our ability to protect proprietary technology rights and avoid infringement of others’ proprietary technology rights;

•the level of our indebtedness, our ability to service our indebtedness and the restrictions in our various debt agreements;

•our ability to attract and retain qualified management; and

•the remaining tax sharing arrangements and other obligations associated with the spin-off of First American Financial Corporation (“FAFC”).

We urge you to carefully consider risks and uncertainties and review the additional disclosures we make concerning risks and uncertainties that may materially affect the outcome of our forward-looking statements and our future business and operating results, including those made in Item 1A of Part II of this Quarterly Report on Form 10-Q, Item 1A of Part II of our Quarterly Reports on Forms 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, as such risk factors may be amended, supplemented, or superseded from time to time by other reports we file with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Quarterly Report on Form 10-Q.

Business Overview

We are a leading global property information, analytics and data-enabled software platforms and services provider operating in North America, Western Europe and Asia Pacific. Our combined data from public, contributory and proprietary sources provides detailed coverage of property, mortgages, other encumbrances, property risk and replacement cost, location, hazard risk and related performance information. We have more than one million users who rely on our data and predictive decision analytics to reduce risk, enhance transparency and improve the performance of their businesses.

We offer our clients a comprehensive national database covering real property and mortgage information, judgments and liens, building and replacement costs, parcel and geospatial data, and tax information, among other data types. Our structured property-specific data consisting of over 150 million parcel records covers 99% of the United States ("US"), includes both residential and commercial real estate data and is enriched by over 1 billion historical sales, mortgage, and pre-foreclosure transactions. Our consortium data covers loan level mortgage performance, appraisal, as well as mortgage application data and is in excess of 300 million records. We are also the industry's first parcel-based geocoder and have developed a proprietary spatial database covering more than 150 million parcel polygons across the US. We believe the quality of the data we offer is distinguished by our broad range of data sources and our experience in aggregating, organizing, normalizing, processing, and delivering data to our clients.

With our data as a foundation, we have built strong analytics capabilities and a variety of value-added business services to meet our clients’ needs for property tax processing, property valuation, hazard risk, property risk and replacement cost, flood plain location determination, other geospatial data analytics, and related services.

Reportable Segments

We have organized into the following two reportable segments:

Our Property Intelligence & Risk Management (“PIRM”) segment combines property information, mortgage information, and consumer information to deliver unique housing market and property-level insights, predictive analytics and risk management capabilities. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with decision-making and compliance tools in the real estate industry and insurance industry. We deliver this information directly to our clients in a standard format over the web, through hosted software platforms or in bulk data form. Our solutions include property insights as well as insurance and spatial solutions in North America, Western Europe and Asia Pacific.

Our Underwriting & Workflow Solutions (“UWS”) segment combines property information and mortgage information to provide comprehensive mortgage origination and monitoring solutions, including underwriting-related solutions and data-enabled valuations and appraisals. We have also developed proprietary technology and software platforms to access, automate or track this information and assist our clients with vetting and on-boarding prospects, meeting compliance regulations and understanding, diagnosing and monitoring property values. Our solutions include property tax solutions, valuation solutions, and flood services in North America.

Results of Operations

Overview of Business Environment and Company Developments

COVID-19

The global coronavirus ("COVID-19") pandemic and the mitigation efforts by governments to attempt to control its spread have adversely impacted the global economy, leading to disruptions and volatility in the global financial markets. Most states and many countries have issued policies intended to stop or slow the further spread of the disease. Our first priority remains ensuring the safety and health of our employees, clients, and others with whom we partner in conducting our business. We have deployed risk mitigation activities, safety practices, and business continuity strategies so that we can continue offering our clients consistent service offerings while continuing to protect our employees.

The volume of US mortgage loan originations serves as a key market driver for more than half of our business. We believe the volume and related volatility of real estate and mortgage transactions is primarily affected by real estate prices, the availability of funds for mortgage loans, mortgage interest rates, housing supply, employment levels, actions by the Federal Reserve, and the overall state of the US economy. Mortgage interest rates are extremely low by historical standards, and are resulting in higher demand for refinance activity, while the purchase market has been adversely impacted by reduced construction and sales of new and existing homes, and more recently, the COVID-19 pandemic and resulting economic instability. For the three and nine months ended September 30, 2020, our continuing operations experienced unfavorable business and revenue impacts of approximately $4.3 million and $16.1 million, respectively, related to the COVID-19 pandemic, exclusive of the increased mortgage refinance volumes. We have also incurred COVID-19 related expenses of $0.6 million and $2.3 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, the impact we have experienced as a result of the COVID-19 pandemic has not had a significant impact on our financial condition, cash flows, control environment, or any related disclosures.

We will continue to monitor our business trends, financial condition, and liquidity, and are taking steps to manage our operating cash flows, by prioritizing our investments, and evaluating our capital needs and activities. Our liquidity as of September 30, 2020 consisted primarily of $302.3 million of cash and cash equivalents, and $750.0 million of unused committed capacity under our revolving credit facility, and we are in compliance with all financial covenants.

Business Environment

We believe mortgage origination unit volumes increased by approximately 35% to 40% in the third quarter of 2020 relative to the same period in 2019, primarily due to higher mortgage refinance volumes resulting from lower interest rates. For 2020, we expect total mortgage unit volumes to increase by approximately 35% relative to 2019 levels, with historically low interest rates benefiting refinance volumes and increasing purchase activity. Further, we anticipate that short-term rates will remain near zero for the foreseeable future and we expect mortgage rates will also remain at near historically low levels. Given this favorable rate environment and the significant population of existing loans that are in the money and meet broad-based eligibility criteria for refinance, we expect refinance volumes to remain at elevated levels through the foreseeable future.

We generate the majority of our operating revenues from clients with operations in the US residential real estate, mortgage origination, and mortgage servicing markets. Approximately 37% and 29% of our operating revenues for the three months ended September 30, 2020 and 2019, respectively, were generated from our top ten clients, who consist of the largest US mortgage originators and servicers. None of our clients individually accounted for greater than 10% of our operating revenues for the three months ended September 30, 2020 or 2019. Approximately 35% and 26% of our operating revenues for the nine months ended September 30, 2020 and 2019, respectively, were generated from our top ten clients. None of our clients individually accounted for greater than 10% of our operating revenues during the nine months ended September 30, 2020 or 2019.

While the majority of our revenues are generated in the US, foreign exchange translation impacted our financial results from our international operating revenues favorably by $1.4 million and unfavorably by $3.0 million for the three and nine months ended September 30, 2020, respectively.

Capital Return

In July 2020, our Board of Directors authorized the repurchase up to $1.0 billion of outstanding shares of our common stock. The authorization has no expiration date and supersedes our previous share repurchase authorization. We expect to repurchase approximately $1 billion worth of outstanding shares by the end of 2022, inclusive of at least $500.0 million of shares in 2020.

In July 2020, our Board of Directors announced a 50% increase to the quarterly cash dividend, declaring a cash dividend of $0.33 per share of common stock which was paid in September 2020 to stockholders of record as of the close of business on September 1, 2020. In October 2020, our Board of Directors declared a cash dividend of $0.33 per share of common stock to be paid in December 2020 to shareholders of record on the close of business December 1, 2020.

Acquisitions

In January 2020, we acquired the remaining 66% of Location, Inc. ("Location") for $11.5 million, subject to certain working capital adjustments. Location is included as a component of our PIRM segment. See Note 12 - Acquisitions for further discussion.

Technology Transformation

In September 2018, we announced the adoption of the Google Cloud Platform (“GCP”) as a foundational element of our ongoing technology transformation program to further expand infrastructure capabilities and drive efficiencies. We successfully completed the initial transformation phase, and will continue transitioning our technology over the foreseeable future on an opportunistic basis. The transition to GCP allows us to leverage the capabilities of the cloud platform to achieve best-in-class system performance and reliability and to facilitate the deployment of unique business insights fueled by gold-standard data, information, and analytics. Additionally, we expect to realize cost efficiencies and enhanced security as we continue the transition.

Divestiture of Non-Core Businesses & Transformations

In July 2020, we announced our intention to exit our reseller operations focused on mortgage credit and borrower verification and multi-family tenant screening. Although market leaders in their respective business areas, these reseller businesses are not compatible with our long-term strategic imperatives. The divestiture of these operations is expected to improve the Company’s revenue growth trends, revenue mix, and significantly enhance profit margins. As a result of this strategic decision, the businesses have been reflected in our consolidated financial statements as discontinued operations for all periods presented. For the three and nine months ended September 30, 2020, these businesses generated revenues of $103.2 million and $286.5 million, respectively, and operating income of $14.2 million and $37.5 million, respectively. Please refer to Note 14 - Discontinued Operations for further information.

In December 2018, we announced our intent to exit a loan origination software unit and its remaining legacy default management related platforms, as well as accelerate an appraisal management company ("AMC") transformation program. We believe these actions have expanded our overall profit margins and provide for enhanced long-term organic growth trends. In September 2019, we divested our default management related platforms and received proceeds of $3.8 million. The AMC transformation concluded in December 2019. Operating revenues attributable to the aforementioned business exits and AMC transformation were $17.0 million and $65.6 million for three and nine months ended September 30, 2019, respectively.

Unsolicited Proposal and Proxy Contest

On June 26, 2020, we received the Unsolicited Proposal from Senator and Cannae to acquire the Company for $65.00 per share in cash, which initial proposal was revised by Senator and Cannae on September 14, 2020 by $1.00 per share to $66.00 per share in cash. Our Board of Directors, in consultation with its independent financial and legal advisors, unanimously determined to reject the Unsolicited Proposal, as it significantly undervalues the Company, raises serious regulatory concerns and is not in the best interests of the Company and its stockholders. On July 14, 2020, we received written notification from the Federal Trade Commission (the “FTC”) that the FTC is conducting an investigation (the “FTC Investigation”) of the proposed acquisition of the Company by Senator and Cannae and requesting that we produce information in connection with that investigation. On August 7, 2020, we received a Civil Investigative Demand from the FTC in connection with the FTC Investigation into Senator and Cannae, requesting that the Company produce additional information in connection with that investigation.

On July 29, 2020, in connection with the Unsolicited Proposal, Senator and Cannae issued a press release announcing their initiation of the Proxy Contest. Although our Board of Directors opposes the actions being pursued by Senator and Cannae because they believe these proposals are not in the best interests of the Company’s stockholders, on August 9, 2020, the Board of Directors determined to call a special meeting to provide stockholders the opportunity to vote and express their views. The Board of Directors set the special meeting for November 17, 2020, with a record date of September 18, 2020.

On October 28, 2020, we issued a press release confirming that we are engaging with third parties that have indicated interest in a potential acquisition of the Company at a value at or above $80 per share. On November 3, 2020, we issued a press release announcing that our Board of Directors is conducting a thorough strategic review (the “Strategic Review”) to maximize shareholder value.

The outcome of the Unsolicited Proposal, the Proxy Contest, the FTC Investigation, the Strategic Review and related circumstances are uncertain. These events have required us, and will continue to require us, to incur significant legal and advisory fees and expenses, and require significant time and attention by management and our Board of Directors. For a further discussion of risks, uncertainties and other factors relating to the Unsolicited Proposal, the Proxy Contest, the FTC Investigation and the Strategic Review that could impact our business and operating results, see the section entitled “Risk Factors” in Item 1A of Part I of this Quarterly Report on Form 10-Q as well as in Item 1A of Part II in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. The Company can offer no assurance that it will enter into any transaction with respect to a potential acquisition of the Company in the future or, if entered into, what the terms of any such transaction would be.

In connection with the Unsolicited Proposal and Proxy Contest, we accrued expenses of $36.9 million for the three and nine months ended September 30, 2020.

Unless otherwise indicated, the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q relate solely to the discussion of our continuing operations.

Consolidated Results of Operations

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

Operating Revenues

Our consolidated operating revenues were $436.7 million for the three months ended September 30, 2020, an increase of $61.2 million, or 16.3% when compared to the comparable period in 2019, and consisted of the following:


(in thousands, except percentages)	2020		2019		$ Change		% Change
PIRM	$	176,248	$	169,079	$	7,169	4.2	%
UWS	263,342		209,138		54,204		25.9
Corporate and eliminations	(2,863)		(2,646)		(217)		8.2
Operating revenues	$	436,727	$	375,571	$	61,156	16.3	%

Our PIRM segment operating revenues increased by $7.2 million, or 4.2%, for the three months ended September 30, 2020, when compared to 2019. Excluding acquisition activity of $1.0 million, operating revenues increased $6.2 million primarily due to our property insights and insurance solutions business gaining market-share of approximately $6.4 million and increased market volumes & pricing and favorable foreign exchange impacting property insights by an additional $2.7 million and $1.4 million, respectively. These gains were partially offset COVID-19 impacts totaling $4.3 million across our solution groups.

Our UWS segment revenues increased by $54.2 million, or 25.9%, for the three months ended September 30, 2020, when compared to 2019. Excluding acquisition activity of $1.2 million, operating revenues increased $53.0 million due to higher property tax solutions revenues of $62.0 million, and higher flood data solutions revenues of $11.4 million primarily related to increased volumes, market share gains, and pricing. These increases were partially offset by lower valuation solutions revenue of $19.0 million due to the impacts of our AMC transformation program, and lower other revenues of $1.4 million. Operating revenues attributable to the aforementioned business exits and AMC transformation were $17.0 million for the quarter ended September 30, 2019. Refer to "Business Exits & Transformation" discussion above for further details. Additionally, the UWS segment did not experience significant adverse impacts related to COVID-19 during the current period.

Our corporate and eliminations were comprised of intercompany revenue eliminations between our operating segments.

Cost of Services (excluding depreciation and amortization)

Our consolidated cost of services was $154.2 million for the three months ended September 30, 2020, a decrease of $10.5 million, or 6.4%, when compared to 2019. Excluding acquisition activity of $1.4 million, the decrease of $11.9 million was primarily due to favorable product mix.

Selling, General and Administrative Expenses

Our consolidated selling, general and administrative expenses were $165.7 million for the three months ended September 30, 2020, an increase of $59.1 million, or 55.5%, when compared to 2019. Excluding acquisition activity of $1.1 million, the increase of $58.0 million was primarily due to higher costs as a result of the Unsolicited Proposal and the Proxy Contest of $36.9 million, higher other external services costs of $13.9 million, and $11.5 million in compensation, primarily due to higher variable compensation costs relating to operating performance, partially offset by lower travel costs of $3.1 million and lower other expenses of $1.2 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $43.6 million for the three months ended September 30, 2020, an increase of $1.2 million, or 2.9%, when compared to 2019. Excluding acquisition activity of $0.3 million, the increase of $0.9 million was primarily due to the addition of completed software projects and increased licenses in the current period.

Operating Income

Our consolidated operating income was $73.2 million for the three months ended September 30, 2020, an increase of $11.3 million, or 18.3%, when compared to 2019, and consisted of the following:


(in thousands, except percentages)	2020		2019		$ Change		% Change
PIRM	$	22,670	$	18,375	$	4,295	23.4	%
UWS	124,699		70,831		53,868		76.1
Corporate and eliminations	(74,186)		(27,339)		(46,847)		171.4
Operating income	$	73,183	$	61,867	$	11,316	18.3	%

Our PIRM segment operating income increased by $4.3 million, or 23.4%, for the three months ended September 30, 2020 when compared to 2019. Acquisitions lowered operating income by $0.3 million primarily due to investments in data and technology capabilities and the amortization of acquisition-related intangible assets. Excluding acquisition activity, operating income increased by $4.6 million and margins increased by 220 basis points, primarily due to higher revenues and the impact of our ongoing operational efficiency programs.

Our UWS segment operating income increased by $53.9 million, or 76.1%, for the three months ended September 30, 2020 when compared to 2019. Acquisitions lowered operating income by $0.4 million primarily due to investments in data and technology capabilities and the amortization of acquisition-related intangible assets. Excluding acquisition activity, operating income increased by $54.3 million and margins increased by 1,380 basis points, primarily driven by higher revenues, favorable product mix, and the impact of our ongoing operational efficiency programs.

Corporate and eliminations had an unfavorable variance of $46.8 million, or 171.4%, for the three months ended September 30, 2020 when compared to 2019, primarily due to higher costs associated with the Unsolicited Proposal and the Proxy Contest and higher variable compensation costs relating to operating performance.

Total Interest Expense, net

Our consolidated total interest expense, net was $16.9 million for the three months ended September 30, 2020, a decrease of $2.6 million, or 13.2%, when compared to 2019. The decrease was primarily due to lower interest rates as well as lower average outstanding principal balances.

Gain/(Loss) on Investments and Other, net

Our consolidated gain on investments and other, net was $35.7 million for the three months ended September 30, 2020, a favorable variance of $35.4 million, when compared to 2019. The variance is primarily due to a $35.1 million gain from the sale of an equity method investment and higher gains of $1.7 million related to supplemental benefit plans, offset by a loss of $1.4 million related to the impairment of an equity method investment.

Provision/(Benefit) for Income Taxes

Our consolidated provision/(benefit) for income taxes from continuing operations before equity in earnings of affiliates and income taxes was a benefit of $9.6 million and a provision of $11.5 million for the three months ended September 30, 2020 and 2019, respectively. The effective tax rate was a benefit of 10.4% and a provision of 27.1% for the three months ended September 30, 2020 and 2019, respectively. The change in the effective income tax rate was primarily due to a $24 million discrete tax benefit recorded in relation to the settlement of an IRS examination in 2020.

Equity in Earnings of Affiliates, net of tax

Our consolidated equity in earnings of affiliates, net of tax was $1.0 million for the three months ended September 30, 2020, a favorable variance of $0.4 million when compared to 2019. We have equity interests in various affiliates which had higher earnings in the current period compared to the prior year period.

Income/(loss) from Discontinued Operations, Net of Tax

Our consolidated income/(loss) from discontinued operations, net of tax was $10.7 million for the three months ended September 30, 2020, a favorable variance of $19.2 million when compared to 2019. The increase is primarily due to higher gains from our reseller businesses related to increased market volumes and a prior year loss principally related to the impact of an appellate court decision in August 2019 for which we recorded a liability of $21.7 million as of September 30, 2019. See Note 14 - Discontinued Operations for further information.

Consolidated Results of Operations

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Operating Revenues

Our consolidated operating revenues were $1.2 billion for the nine months ended September 30, 2020, an increase of $86.7 million, or 8.0%, when compared to 2019, and consisted of the following:


(in thousands, except percentages)	2020		2019		$ Change		% Change
PIRM	$	504,379	$	501,854	$	2,525	0.5	%
UWS	680,455		593,175		87,280		14.7
Corporate and eliminations	(10,101)		(6,997)		(3,104)		44.4
Operating revenues	$	1,174,733	$	1,088,032	$	86,701	8.0	%

Our PIRM segment revenues increased by $2.5 million, or 0.5%, for the nine months ended September 30, 2020, when compared to 2019. Excluding acquisition activity of $2.4 million, the increase of $0.1 million primarily due higher revenues of $14.9 million from property insights and insurance and spatial solutions due to increased market volumes, market-share gains and pricing. The increase was offset by the impact of COVID-19 totaling $11.8 million across our solution groups. Additionally, included within our property insights revenues is unfavorable foreign exchange of $3.0 million.

Our UWS segment revenues increased by $87.3 million, or 14.7%, for the nine months ended September 30, 2020, when compared to 2019. Excluding acquisition activity of $4.5 million, the increase of $82.8 million was primarily due to higher property tax solutions revenues of $107.6 million, and higher flood data solutions revenues of $30.4 million primarily related to increased market volumes, market-share gains, and pricing. These increases were partially offset by lower valuation solutions revenue of $48.3 million due to the impacts of our AMC transformation program and lower other revenues of $6.9 million. Operating revenues attributable to the aforementioned business exits and AMC transformation were $65.6 million for the nine months ended September 30, 2019. Additionally, the UWS segment revenues reflected a total adverse impact of $4.3 million related to COVID-19.

Our corporate and eliminations were comprised of intercompany revenue eliminations between our operating segments.

Cost of Services (excluding depreciation and amortization)

Our consolidated cost of services was $439.0 million for the nine months ended September 30, 2020, a decrease of $47.9 million, or 9.8%, when compared to 2019. Excluding acquisition activity of $4.7 million, the decrease of $52.6 million was primarily due to favorable product mix.

Selling, General and Administrative Expenses

Our consolidated selling, general and administrative expenses were $393.2 million for the nine months ended September 30, 2020, an increase of $44.5 million, or 12.8%, when compared to 2019. Excluding acquisition activity of $2.9 million, the increase of $41.6 million was primarily due to higher costs as a result of the Unsolicited Proposal and the Proxy Contest of $36.9 million and higher other external services costs of $13.6 million, partially offset by lower travel costs of $7.3 million and lower compensation costs of $1.6 million.

Depreciation and Amortization

Our consolidated depreciation and amortization expense was $130.6 million for the nine months ended September 30, 2020, a decrease of $2.1 million, or 1.6%, when compared to 2019. Excluding acquisition activity of $1.4 million, the decrease of $3.5 million is primarily due to assets that were fully impaired during the prior year.

Impairment Loss

Our consolidated impairment loss was $1.2 million for the nine months ended September 30, 2020, a decrease of $46.6 million, or 97.4%, when compared to 2019, primarily due to prior year write-offs of clients lists of $32.3 million, software of $12.3 million, and licenses of $3.3 million related to the transformation of our AMC business, offset by current year impairment charges related to software.

Operating Income

Our consolidated operating income was $210.6 million for the nine months ended September 30, 2020, an increase of $138.9 million, or 193.8%, when compared to 2019, and consisted of the following:


(in thousands, except percentages)	2020		2019		$ Change		% Change
PIRM	$	65,249	$	44,110	$	21,139	47.9	%
UWS	281,567		121,946		159,621		130.9
Corporate and eliminations	(136,229)		(94,386)		(41,843)		44.3
Operating income	$	210,587	$	71,670	$	138,917	193.8	%

Our PIRM segment operating income increased by $21.1 million, or 47.9%, for the nine months ended September 30, 2020, when compared to 2019. Acquisitions lowered operating income by $0.9 million primarily due to investments in data and technology capabilities and the amortization of acquisition-related intangible assets. Excluding acquisition activity, operating income increased by $22.0 million and margins increased by 440 basis points primarily due to higher revenue, favorable product mix and the impact of our ongoing operational efficiency programs.

Our UWS segment operating income increased by $159.6 million, or 130.9%, for the nine months ended September 30, 2020, when compared to 2019. Acquisitions lowered operating income by $1.3 million primarily due to investments in data and technology capabilities and the amortization of acquisition-related intangible assets. Excluding acquisition activity, operating income increased by $160.9 million and margins increased by 2,130 basis points, primarily impacted by lower impairment loss, higher revenues, improved product mix, and the impact of our ongoing operational efficiency programs.

Corporate and eliminations had an unfavorable variance of $41.8 million, or 44.3%, for the nine months ended September 30, 2020, primarily due to higher costs associated with the Unsolicited Proposal and Proxy Contest.

Total Interest Expense, net

Our consolidated total interest expense, net, was $52.3 million for the nine months ended September 30, 2020, a decrease of $5.1 million, or 8.8%, when compared to 2019. The decrease was primarily due to lower interest rates as well as lower average outstanding principal balances.

Gain/(Loss) on Investments and Other, net

Our consolidated gain on investments and other, net, was $37.2 million for the nine months ended September 30, 2020, a favorable variance of $39.3 million, when compared to 2019. The variance is due to a gain of $35.1 million from the sale of an equity method investment, a prior year loss of $6.6 million related to revaluation of an equity investment, a prior year loss of $1.5 million from unamortized debt issuance cost write-offs due to financing activities, and other gains of $0.6 million; partially offset by higher losses of $3.1 million related to supplemental benefit plans and a loss of $1.4 million related to the impairment of an equity method investment.

Tax Indemnification Release

In the prior year, we recorded a $13.4 million loss related to the release of a tax indemnification receivable due to the expiration of the statutes of limitations in our principal state jurisdictions. Associated state tax reserves of $15.3 million were also released and recognized, in the prior year, as income tax benefit through the provision for income taxes.

Provision/(Benefit) for Income Taxes

Our consolidated provision/(benefit) for income taxes from continuing operations before equity in earnings of affiliates and income taxes was a provision of $19.4 million and a benefit of $9.0 million for the nine months ended September 30, 2020 and 2019, respectively. The effective tax rate was a provision of 10.0% and a benefit of 718.7% for the nine months ended September 30, 2020 and 2019, respectively. The change in the effective income tax rate was primarily due to the benefit recorded in relation to the settlement of an IRS examination in 2020 as compared to a smaller nonrecurring benefit recorded in 2019 related to the reversal of state tax reserves.

Equity in Earnings of Affiliates, net of tax

Our consolidated equity in earnings of affiliates, net of tax was $1.9 for the nine months ended September 30, 2020, a favorable variance of $1.4 when compared to 2019. We have equity interests in various affiliates which had higher earnings in the current period compared to prior year.

Income/(loss) from Discontinued Operations, Net of Tax

Our consolidated income/(loss) from discontinued operations, net of tax was $28.1 million for the nine months ended September 30, 2020, a favorable variance of $17.1 million when compared to 2019. The is primarily due to higher gains from our reseller businesses related to increased market volumes and a prior year loss principally related to the impact of an appellate court decision in August 2019 pertaining to a discontinued operating unit, for which we recorded a liability of $21.7 million as of September 30, 2019. See Note 14 - Discontinued Operations for further information.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer have concluded that, as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b).

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended September 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Liquidity and Capital Resources

Cash and cash equivalents as of September 30, 2020 totaled $302.3 million, an increase of $198.2 million from December 31, 2019. As of September 30, 2020, our cash balances held in foreign jurisdictions totaled $61.0 million and are primarily related to our international operations. We plan to maintain significant cash balances outside of the US for the foreseeable future.

Restricted cash of $10.5 million as of both September 30, 2020 and December 31, 2019 is comprised of deposits that are pledged for various letters of credit/bank guarantees secured by us, escrow accounts due to acquisitions and divestitures, as well as short-term investments within our deferred compensation plan trust.

Cash Flow

Operating Activities. Cash provided by operating activities reflects net income adjusted for certain non-cash items and changes in operating assets and liabilities. Total cash provided by operating activities was approximately $419.1 million and $247.1 million for the nine months ended September 30, 2020 and 2019, respectively. Cash used in discontinued operating activities was $40.7 million and $29.7 million for the nine months ended September 30, 2020 and 2019, respectively. The increase in cash provided by continuing and discontinued operations were primarily due to higher net income as adjusted for non-cash activities and favorable changes in working capital items.

Investing Activities. Total cash used in investing activities was approximately $43.5 million and $96.9 million during the nine months ended September 30, 2020 and 2019, respectively. Cash used in discontinued operating activities was $9.3 million and $14.0 million for the nine months ended September 30, 2020 and 2019, respectively, which decrease was driven by lower investments in technology and innovation. The decrease in cash used in continuing operations was primarily related higher proceeds from the sale of investments and other of $42.4 million, lower investments in technology and innovation of $9.7 million, and lower net cash paid for acquisitions of $1.2 million, partially offset by lower cash received from a prior year sale of a business line of $4.1 million.

Financing Activities. Total cash used in financing activities was approximately $174.1 million for the nine months ended September 30, 2020, which was primarily comprised of dividends paid of $61.1 million, net outflows from share-based compensation-related transactions of $1.3 million, share repurchases of $9.3 million, and repayments of long-term debt of $102.5 million. Total cash used in financing activities was approximately $147.2 million for the nine months ended September 30, 2019, which was primarily comprised of net repayment of long-term debt of $83.8 million, share repurchases of $61.6 million, net outflows from share-based compensation-related transactions of $1.3 million, and contingent consideration payments of $0.6 million.

Financing and Financing Capacity

We had total debt outstanding of $1.5 billion and $1.6 billion as of September 30, 2020 and December 31, 2019, respectively. Our significant debt instruments and borrowing capacity are described below.

Credit Agreement

The Credit Agreement provides for a $1.8 billion term loan facility (the “Term Facility”), and a $750.0 million revolving credit facility (the “Revolving Facility”). The Term Facility matures and the Revolving Facility expires in May 2024. As of September 30, 2020, we had borrowing capacity under the Revolving Facility of $750.0 million and were in compliance with the financial and restrictive covenants of the Credit Agreement. See Note 5 - Long-Term Debt for further discussion.

Interest Rate Swaps

We have entered into amortizing interest rate swaps (“Swaps”) in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The floating rates in our Swaps are based on the one-month London interbank offering rate. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt.

As of September 30, 2020, the Swaps have a combined remaining notional balance of $1.2 billion, a weighted average fixed interest rate of 2.40% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease based on our expectations of the level of variable rate debt to be in effect in future periods. Currently, we have scheduled notional amounts approximately $1.2 billion through September 2021, then $1.1 billion and $1.0 billion through August 2022, and $496.8 million and $465.0 million through December 2025. Approximate weighted average fixed interest rates for the aforementioned time periods are 2.59%, 2.77%, and 2.64%, respectively.

Liquidity and Capital Strategy

We expect that cash flow from operations and current cash balances, together with available borrowings under our Revolving Facility, will be sufficient to meet operating requirements through the next twelve months. Cash available from operations, however, could be affected by any general economic downturn, such as financial impacts related to COVID-19, or any decline or adverse changes in our business such as a loss of clients, challenges collecting payments from clients, competitive pressures, or other significant change in our business environment.

We strive to pursue a balanced approach to capital allocation and initiated a regular dividend in December 2019. We will also continue to evaluate the repurchase of shares, management of outstanding debt, and the pursuit of strategic acquisitions and investments on an opportunistic basis.

In July 2020, our Board of Directors canceled all prior repurchase authorizations and established a new share repurchase authorization of up to $1.0 billion. During the nine months ended September 30, 2020, we repurchased 0.2 million shares of our common stock for $9.3 million. The Company expects to fully utilize such repurchase authorization by the end of 2022, inclusive of $500.0 million of shares by the end of 2020. Purchases may be made from time to time in the open market at prevailing market prices or in privately negotiated transactions, and may be made according to a plan adopted pursuant to Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended. See Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds - Purchases of Equity Securities by the Issuer and Affiliated Purchasers for further discussion.

For the nine months ended September 30, 2020, we paid cash dividends of $61.1 million. In July 2020, our Board of Directors announced a 50% increase to the quarterly cash dividend, declaring a cash dividend of $0.33 per share of common stock which was paid in September 2020. We expect to make regular quarterly dividend payments for the foreseeable future. The timing, declaration, and payment of future dividends, however, falls within the discretion of our Board of Directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital requirements of our businesses, restrictions imposed by applicable law, and any other factors our Board of Directors deems relevant from time to time.

Availability of Additional Capital

Our access to additional capital fluctuates as market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Based on current market conditions and our financial condition (including our ability to satisfy the conditions contained in our debt instruments that are required to be satisfied to permit us to incur additional indebtedness), we believe that we have the ability to effectively access these liquidity sources for new borrowings. However, continued general economic instability, such as financial impacts resulting from COVID-19 which has caused, and may continue to cause, disruptions in the financial markets or a weakening of our financial condition, including a significant decrease in our profitability, or cash flows, or a material increase in our leverage, could adversely affect our ability to access these markets on acceptable terms or at all and/or increase our cost of borrowings.

Critical Accounting Policies and Estimates

For additional information with respect to our critical accounting policies, which are those that could have the most significant effect on our reported results and require subjective or complex judgments by management, see Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2019. Management believes there have been no material changes to this information.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our primary exposure to market risk relates to interest-rate risk associated with certain financial instruments. We monitor our risk associated with fluctuations in interest rates and currently use derivative financial instruments to hedge some of these risks.

As of September 30, 2020, we had approximately $1.5 billion in gross, long-term debt outstanding, predominately all of which was variable-interest-rate debt. An increase in interest rates could increase the costs of our variable-interest-rate debt obligations. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.

To manage our interest rate risk we have entered into Swaps in order to convert a portion of our interest rate exposure on the Term Facility floating rate borrowings from variable to fixed. Under the Swaps, we agree to exchange floating rate for fixed rate interest payments periodically over the life of the agreement. The notional balances, terms and maturities of our Swaps are designed to have the effect of fixing the rate of interest on at least 50% of the principal balance of our senior term debt. As of September 30, 2020, the combined remaining notional balance of the Swaps was $1.2 billion, with a weighted average fixed interest rate of 2.40% (rates range from 0.66% to 2.98%), and scheduled terminations through December 2025. Notional balances under our Swaps are scheduled to increase and decrease over their contract lengths based on our expectations of the level of variable rate debt to be in effect in future periods. After giving effect to the Swaps, a hypothetical 1% increase or decrease in interest rates would result in an approximately $0.9 million change to interest expense on our existing indebtedness as of September 30, 2020, on a quarterly basis.

Although we are subject to foreign currency exchange rate risk as a result of our operations in certain foreign countries, the foreign exchange exposure related to these operations, in the aggregate, is not material to our financial condition or results of operations.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our legal proceedings, see Note 9 – Litigation and Regulatory Contingencies of our condensed consolidated financial statements, which is incorporated by reference in response to this item.

Item 1A. Risk Factors.

We have described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, the primary risks related to our business, and we may periodically update those risks for material developments. Those risks are not the only ones we face, but do represent those risks that we believe are material to us. Our business is also subject to the risks that affect many other companies, such as general economic conditions, geopolitical events and employment relations. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. Please read the cautionary notice regarding forward-looking statements under the heading “Management's Discussion and Analysis of Financial Condition and Results of Operations.” You should carefully consider the risks and uncertainties our business faces. We are including two supplemental risk factors below, which disclosures should be read in conjunction with the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

The Unsolicited Proposal and Proxy Contest being pursued by Senator and Cannae could cause us to incur substantial costs, divert management’s attention and resources and be disruptive to, and have an adverse effect on, our business.

On June 26, 2020, we received the Unsolicited Proposal from Senator and Cannae to acquire all of the outstanding shares of the Company’s common stock for $65.00 per share in cash, which initial proposal was revised by Senator and Cannae on September 14, 2020 by $1.00 per share to $66.00 per share in cash. Our Board of Directors carefully reviewed the Unsolicited Proposal and unanimously concluded, in consultation with its independent financial and legal advisors, to reject the Unsolicited Proposal, as it significantly undervalues the Company, raises serious regulatory concerns and is not in the best interests of the Company and its stockholders. On July 14, 2020, we received written notification from the FTC that the FTC is conducting an investigation of the proposed acquisition of the Company by Senator and Cannae, and on August 7, 2020, the Company received a Civil Investigative Demand and subpoena from the FTC in connection with the FTC’s investigation into Senator and Cannae, requiring that the Company produce information in connection with that investigation.

On July 29, 2020, in connection with the Unsolicited Proposal, Senator and Cannae issued a press release, and subsequently filed a Schedule 13D/A with the SEC, announcing their initiation of a process to call a special meeting of stockholders in order to, among other things, remove nine current members of our Board of Directors and nominate nine new directors to serve on our Board of Directors. Although our Board of Directors opposes the actions being pursued by Senator and Cannae because they believe these proposals are not in the best interests of the Company’s stockholders, on August 9, 2020, the Board of Directors determined to call a special meeting to provide stockholders the opportunity to vote and express their views. For more information, see above under Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Overview of Business Environment and Company Developments - Unsolicited Proposal and Proxy Contest.

On October 28, 2020, we issued a press release confirming that we are engaging with third parties that have indicated interest in a potential acquisition of the Company at a value at or above $80 per share. On November 3, 2020, we issued a press release announcing that our Board of Directors is conducting the Strategic Review to maximize shareholder value.

The events surrounding the Unsolicited Proposal and related circumstances, including the pending Proxy Contest being pursued by Senator and Cannae and the Strategic Review, have required, and are likely to continue to require, significant time and attention of management and our Board of Directors and our incurrence of significant legal and advisory fees and expenses. Actions taken by Senator and Cannae or other third parties as a result of the Unsolicited Proposal and the Proxy Contest could disrupt our business, divert the time and attention of management and our employees away from our business operations, cause us to incur substantial additional expense, create perceived uncertainties among current and potential customers, clients, suppliers, employees and other constituencies as to our future direction as a consequence thereof that may result in lost sales or other business arrangements and the loss of potential business opportunities, and make it more difficult to attract and retain qualified personnel and business partners. Actions that our Board of Directors has taken, and may take in the future, in response to any offer or other related actions by Senator and Cannae, including the Unsolicited Proposal and the Proxy Contest, or any other offer or proposal, may result in litigation against us, which could also be a significant distraction for our management and employees and may require us to incur significant costs or otherwise result in an adverse effect on the Company.

If Senator and Cannae's nominees were to be appointed to the Board of Directors at the special meeting of stockholders to be held on November 17, 2020, it may adversely affect our ability to effectively and timely implement our business strategy to create additional value for our stockholders and, while there is no assurance that any transaction will occur, may facilitate an acquisition of the Company by Senator and Cannae, or otherwise, at a price and on terms comparable to the Unsolicited Proposal, which our Board of Directors has determined significantly undervalues the Company, raises serious regulatory concerns and is not in the best interests of the Company‘s stockholders. Furthermore, if Senator and Cannae are successful in replacing at least a majority of the members of our Board of Directors, a change in control of the Board of Directors may be deemed to have occurred under certain of our contracts and agreements, and trigger change in control provisions under employment and change in control agreements with our named executive officers, our equity compensation and deferred compensation plans, and our revolving credit facility and indentures (although the Board of Directors has approved the nomination of Senator and Cannae’s nine director nominees solely for purposes of the revolving credit facility and as a result, the Company believes the nomination for appointment of such nominees will not trigger the change in control provision under the revolving credit facility or indentures). These change in control provisions may cause us to incur significant additional expense and/or tax liabilities.

As a result of numerous factors including those identified above, the future trading price of our common stock could be subject to price fluctuations based on uncertainty associated with the Unsolicited Proposal, the outcome of the proxy contest and other temporary or speculative market perceptions.

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

Unregistered Sales of Equity Securities

During the quarter ended September 30, 2020, we did not issue any shares of our common stock in any transaction that was not registered under the Securities Act of 1933, as amended.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

In July 2020, our Board of Directors canceled all prior repurchase authorizations and established a new share repurchase authorization of up to $1.0 billion. As of September 30, 2020, we had $1.0 billion in value of shares of common stock (inclusive of commissions and fees) available to be repurchased under the repurchase authorization. The stock repurchase authorization has no expiration date and repurchases may be made from time to time in the open market, in privately negotiated transactions or pursuant to a Rule 10b5-1 plan.

Under our Credit Agreement, our stock repurchase capacity is restricted to $150.0 million per fiscal year, with the ability to undertake an additional amount of repurchases in such fiscal year provided that, on a pro forma basis after giving effect to the stock repurchase, our total leverage ratio does not exceed 3.5 to 1.0. While we are currently prioritizing capital return to our stockholders through stock repurchases, we continue to pursue a balanced approach to capital allocation and will consider the repurchase of shares of our common stock, the retirement of outstanding debt and the pursuit of strategic acquisitions on an opportunistic basis.

We did not repurchase any shares of our common stock during the quarter ended September 30, 2020.

Item 6. Exhibits.


Exhibit Number						Description

3.1						Amended and Restated Certificate of Incorporation of CoreLogic, Inc., dated May 28, 2010 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on June 1, 2010)

3.2						Amended and Restated Bylaws of CoreLogic, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K as filed with the SEC on July 7, 2020)

3.3						Certificate of Designation, Preferences, and Rights of Series A Junior Participating Preferred Stock of CoreLogic, Inc., dated July 7, 2020 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K as filed with the SEC on July 7, 2020)

4.1						Rights Agreement dated as of July 6, 2020, by and between the Company and Equiniti Trust Company, as rights agent, which includes as Exhibit B the Form of Rights Certificate (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K as filed with the SEC on July 7, 2020)

10.1						Employment Agreement, dated October 28 , 2020, between the Company and Patrick L. Doddü

10.2						Form of Notice of Restricted Stock Unit Grant and Form of Restricted Stock Unit Award Agreement (NEO) under the CoreLogic, Inc. 2018 Performance Incentive Planü

10.3						Form of Notice of Performance-Based Restricted Stock Unit Grant and Form of Performance-Based Restricted Stock Unit Award Agreement (NEO) under the CoreLogic, Inc. 2018 Performance Incentive Planü

10.4						F orm of Change in Control Agreementü

10.5						Form of Change in Control Letter Amendmentü

10.6						Amendment to Executive Supplemental Benefit Plan and Management Supplemental Benefit Plan , effective as of September 3, 2020ü

31.1						Certification by Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 ü

31.2						Certification by Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 ü

32.1						Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 **

32.2						Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 **

101						The following unaudited consolidated financial statements for the quarter ended September 30, 2020 included in this quarterly report on Form 10-Q formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders' Equity, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tagsü

104						Cover Page Interactive Data File (formatted in Inline XBRL and included in the interactive data files submitted as Exhibit 101)ü


ü						Filed herewith.
**						Furnished herewith.

SIGNATURES

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


		CoreLogic, Inc.
		(Registrant)

		By: /s/ Frank D. Martell
		Frank D. Martell
		President and Chief Executive Officer
		(Principal Executive Officer)

		By: /s/ James L. Balas
		James L. Balas
		Chief Financial Officer
		(Principal Financial Officer)

		By: /s/ John K. Stumpf
		John K. Stumpf
		Controller
		(Principal Accounting Officer)
Date:	November 3, 2020


			5.1			Termination by the Company. The Executive’s employment with the Company, and the Period of Employment, may be terminated at any time by the Company: (i) with Cause (as such term is defined in Section 5.5), or (ii) without Cause, or (iii) in the event of the Executive’s death, or (iv) in the event that the Board determines in good faith that the Executive has a Disability (as such term is defined in Section 5.5).
			5.2			Termination by the Executive. The Executive’s employment with the Company, and the Period of Employment, may be terminated by the Executive with no less than thirty (30) days advance written notice to the Company (such notice to be delivered in accordance with Section 18).
			5.3			Benefits upon Termination. If the Executive’s employment by the Company is terminated during the Period of Employment for any reason by the Company or by the Executive, or upon or following the expiration of the Period of Employment (in any case, the date that the Executive’s employment by the Company terminates is referred to as the “Severance Date”), the Company shall have no further obligation to make or provide to the Executive, and the Executive shall have no further right to receive or obtain from the Company, any payments or benefits except as follows:


	5.6.	Notice of Termination. Any termination of the Executive’s employment under this Agreement shall be communicated by written notice of termination from the terminating party to the other party. This notice of termination must be delivered in accordance with Section 18 and must indicate the specific provision(s) of this Agreement relied upon in effecting the termination.
	5.7	Limitation on Benefits; Company Clawback Policy. Notwithstanding anything else in this Agreement to the contrary, benefits and payments under this Section 5 are subject to Section 7 of the Change in Control Agreement. Any Incentive Bonus paid, as well as any other compensation provided, to Executive will be subject, to the extent applicable in accordance with its terms, to the Company’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law.
6.	Protective Covenants. For purposes of clarity, the provisions of this Section 6 are in addition to, not in lieu of, any obligations set forth in the Confidentiality Agreement.


		if to the Executive, to the address most recently on file in the payroll records of the Company.
19.	Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.
20.	Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he has read and understands this Agreement, is entering into it freely and voluntarily, and has been advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.
21.	Section 409A.


			“COMPANY”

			CORELOGIC, INC.

			By:
						[Name]
						[Title]


Lapse Date			Portion of Shares as to Which Period of Restriction Lapses
Date of Grant + 1 year			1/3
Date of Grant + 2 years			1/3
Date of Grant + 3 years			1/3


			1.1			Retention. The Company does hereby hire, engage and employ the Executive for the Period of Employment (as such term is defined in Section 2) on the terms and conditions expressly set forth in this Agreement. The Executive does hereby accept and agree to such hiring, engagement and employment, on the terms and conditions expressly set forth in this Agreement.
			1.2			Duties. During the Period of Employment, the Executive shall serve the Company as its Chief Operating and Growth Officer and shall have such other duties and responsibilities as the Chief Executive Officer of the Company (the “CEO”) shall determine from time to time. The Executive shall be subject to the corporate policies of the Company as they are in effect from time to time throughout the Period of Employment (including, without limitation, the Company’s Code of Conduct, as it may change from time to time). During the Period of Employment, the Executive shall report solely to the CEO.
			1.3			No Other Employment; Minimum Time Commitment. During the Period of Employment, the Executive shall (i) devote substantially all of the Executive’s business time, energy and skill to the performance of the Executive’s duties for the Company, (ii) perform such duties in a faithful, effective and efficient manner to the best of his abilities, and (iii) hold no other employment. The Executive’s service on the boards of directors (or similar body) of other business entities is subject to the approval of the CEO or the Company’s Board of Directors (the “Board”). The Company shall have the right to require the Executive to resign from any board or similar body (including, without limitation, any association, corporate, civic or charitable board or similar body) which he may then serve if the Board reasonably determines that the Executive’s service on such board or body interferes with the effective discharge of the Executive’s duties and responsibilities to the Company or that any business related to such service is then in competition with any business of the Company or any of its affiliates, successors or assigns.


	1.4	No Breach of Contract. The Executive hereby represents to the Company and agrees that: (i) the execution and delivery of this Agreement by the Executive and the Company and the performance by the Executive of the Executive’s duties hereunder do not and shall not constitute a breach of, conflict with, or otherwise contravene or cause a default under, the terms of any other agreement or policy to which the Executive is a party or otherwise bound or any judgment, order or decree to which the Executive is subject; (ii) the Executive will not enter into any new agreement that would or reasonably could contravene or cause a default by the Executive under this Agreement; (iii) the Executive has no information (including, without limitation, confidential information and trade secrets) relating to any other Person (as such term is defined in Section 5.5) which would prevent, or be violated by, the Executive entering into this Agreement or carrying out his duties hereunder; (iv) the Executive is not bound by any employment, consulting, non-compete, confidentiality, trade secret or similar agreement (other than this Agreement and the Confidentiality Agreement) with any other Person; (v) to the extent the Executive has any confidential or similar information that he is not free to disclose to the Company, he will not disclose such information to the extent such disclosure would violate applicable law or any other agreement or policy to which the Executive is a party or by which the Executive is otherwise bound; and (vi) the Executive understands the Company will rely upon the accuracy and truth of the representations and warranties of the Executive set forth herein and the Executive consents to such reliance.
	1.5	Location. The Executive’s principal place of employment shall be the Company’s principal executive office as it may be located from time to time. The Executive agrees that he will be regularly present at that office. The Executive acknowledges that he will be required to travel from time to time in the course of performing his duties for the Company.
	1.6	Confidentiality Agreement. In connection with entering into this Agreement, the Executive has executed and delivered to the Company a Confidential Information and Inventions Agreement (as it may be amended from time to time and together with any similar successor agreement, the “Confidentiality Agreement”). The Executive agrees to abide by the Confidentiality Agreement.
2.	Period of Employment. The “Period of Employment” shall commence on the Effective Date and shall end at the close of business on December 31, 2021 (the “Termination Date”); provided, however, that this Agreement shall be automatically renewed, and the Period of Employment shall be automatically extended for one (1) additional year on the Termination Date and each anniversary of the Termination Date thereafter, unless either party gives written notice at least sixty (60) days prior to the expiration of the Period of Employment (including any renewal thereof) of such party’s desire to terminate the Period of Employment (such notice to be delivered in accordance with Section 18). The term “Period of Employment” shall include any extension thereof pursuant to the preceding sentence. Provision of notice that the Period of Employment shall not be extended or further extended, as the case may be, shall not constitute a breach of this Agreement and shall not give rise to an obligation to pay severance benefits pursuant to Section 5.3(b). Notwithstanding the foregoing, the Period of Employment is subject to earlier termination as provided below in this Agreement.


			3.1			Base Salary. The Executive’s base salary (the “Base Salary”) shall be paid in accordance with the Company’s regular payroll practices in effect from time to time, but not less frequently than in monthly installments. The Executive’s initial Base Salary shall be at an annualized rate of Six Hundred Fifty Thousand Dollars ($650,000). The Company will review the Executive’s Base Salary at least annually and may increase the Executive’s Base Salary from the rate then in effect based on such review.


			3.2			Annual Performance Bonus. For each fiscal year of the Company that ends during the Period of Employment, the Executive shall be eligible to receive an annual incentive bonus (“Incentive Bonus”) in an amount to be determined by the Company’s Compensation Committee in its sole discretion, based on the performance objectives established for that particular period and subject to the terms and conditions of any applicable bonus plan. Subject to the Compensation Committee’s discretion to determine the final bonus amount each year, the Executive’s target annual incentive bonus amount is One Hundred Percent (100%) of the Executive’s Base Salary, with a range of 0 to 200%. Incentive Bonus awards at target performance are determined annually based on Company performance targets and market data for similarly situated executives at peer companies. Notwithstanding the foregoing, the Executive’s Incentive Bonus with respect to the Company’s 2020 fiscal year shall not be less than Five Hundred Thousand Dollars ($500,000).
			3.3			Long Term Incentives. The Executive shall also be eligible to receive long-term incentive awards annually in an amount to be determined by the Company’s Compensation Committee in its sole discretion (“LTI Awards”). Subject to the Compensation Committee’s discretion to determine the annual LTI Award each year, the Executive’s target annual LTI Award is Two Hundred Fifty Percent (250%) of the Executive’s Base Salary. LTI Awards at target performance are determined annually based on Company performance goals and market data for similarly situated executives at peer companies, in the form of a mix of equity vehicles, including but not limited to Performance Based Restricted Stock Units (“PBRSUs”) and Time-Vested Restricted Stock Units (“RSUs”).


			4.1			Retirement, Welfare and Fringe Benefits. During the Period of Employment, the Executive shall be entitled to participate in all employee pension and welfare benefit plans and programs, and fringe benefit plans and programs, made available by the Company to the Company’s employees generally, in accordance with the eligibility and participation provisions of such plans and as such plans or programs may be in effect from time to time.
			4.2			Reimbursement of Business Expenses. The Executive is authorized to incur reasonable expenses in carrying out the Executive’s duties for the Company under this Agreement and shall be entitled to reimbursement for all reasonable business expenses the Executive incurs during the Period of Employment in connection with carrying out the Executive’s duties for the Company, subject to the Company’s expense reimbursement policies and any pre-approval policies in effect from time to time. The Executive agrees to promptly submit and document any reimbursable expenses in accordance with the Company’s expense reimbursement policies to facilitate the timely reimbursement of such expenses.
			4.3			Paid Time Off. During the Period of Employment, the Executive will be covered by the Company’s Executive Paid Time Off Policy as in effect from time to time.
			4.4			Relocation Expenses. In connection with the Executive’s relocation from Switzerland to a location in reasonable proximity to the Company’s principal executive office, the Executive will be entitled to receive reimbursement for his reasonable expenses related to his relocation, including the Executive’s temporary living expenses, house hunting, travel and other related expenses incurred by the Executive and his family in connection with the relocation, up to a maximum aggregate total amount of Five Hundred Thousand Dollars ($500,000). Such relocation expenses shall be paid in accordance with a relocation agreement to be entered into by the Company and the Executive.


			6.1			Cooperation. Following the Executive’s last day of employment by the Company, the Executive shall reasonably cooperate with the Company and its subsidiaries in connection with: (a) any internal or governmental investigation or administrative, regulatory, arbitral or judicial proceeding involving the Company and any subsidiaries with respect to matters relating to the Executive’s employment with or service as a member of the Board or the board of directors of any subsidiary (collectively, “Litigation”); or (b) any audit of the financial statements of the Company or any subsidiary with respect to the period of time when the Executive was employed by the Company or any subsidiary (“Audit”). The Executive acknowledges that such cooperation may include, but shall not be limited to, the Executive making himself available to the Company or any subsidiary (or their respective attorneys or auditors) upon reasonable notice for: (i) interviews, factual investigations, and providing declarations or affidavits that provide truthful information in connection with any Litigation or Audit; (ii) appearing at the request of the Company or any subsidiary to give testimony without requiring service of a subpoena or other legal process; (iii) volunteering to the Company or any subsidiary pertinent information related to any Litigation or Audit; (iv) providing information and legal representations to the auditors of the Company or any subsidiary, in a form and within a time frame requested by the Board, with respect to the Company’s or any subsidiary’s opening balance sheet valuation of intangibles and financial statements for the period in which the Executive was employed by the Company or any subsidiary; and (v) turning over to the Company or any subsidiary any documents relevant to any Litigation or Audit that are or may come into the Executive’s possession. The Company shall reimburse the Executive for reasonable travel expenses incurred in connection with providing the services under this Section 6.1, including lodging and meals, upon the Executive’s submission of receipts.


	6.2	Further Condition of Any Severance. The Executive agrees that if the Executive were to become employed by, or substantially involved in, the business of a competitor of the Company or any of its subsidiaries during the twelve (12) month period following the Severance Date, it would be very difficult for the Executive not to rely on or use the Company’s and its subsidiaries’ trade secrets and confidential information. Accordingly, the Company shall have no obligation to pay any Severance Benefit (or any further Severance Benefit, as the case may be, and in each case that may otherwise be or become due) in the event that, during the Period of Employment or at any time in the twelve (12) months after the Severance Date, the Executive, directly or indirectly through any other Person engages in, enters the employ of, renders any services to, has any ownership interest in, or participates in the financing, operation, management or control of, any Competing Business. The Executive agrees that he will not hold any such position or engage in any such activity during the Period of Employment. Compliance with this Section 6.2 is a condition precedent to any Severance Benefit that might otherwise be or become due. For avoidance of doubt, the Company shall not be entitled to monetary damages or injunctive relief in the event of any breach by the Executive of this Section 6.2 following the Severance Date. For purposes of this Agreement, the phrase “directly or indirectly through any other Person engage in” shall include, without limitation, any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, member, partner, joint venturer or otherwise, and shall include any direct or indirect participation in such enterprise as an employee, consultant, director, officer, licensor of technology or otherwise. For purposes of this Agreement, “Competing Business” means a Person anywhere in the continental United States and elsewhere in the world where the Company and its subsidiaries engage in business, or reasonably anticipate engaging in business, on the Severance Date (the “Restricted Area”) that at any time during the Period of Employment has competed, or at any time during the twelve (12) month period following the Severance Date competes, with the Company or any of its subsidiaries in any business engaged in by the Company or any of its subsidiaries (or which any of them had plans to in the future engage in, which plans were known by or reasonably should have been known by the Executive) as of the Severance Date. Nothing herein shall prohibit the Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation which is publicly traded, so long as the Executive has no active participation in the business of such corporation.
7.	Withholding Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes as may be required to be withheld pursuant to any applicable law or regulation.
8.	Successors and Assigns.


9.			Number and Gender; Examples. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates.
10.			Section Headings. The section headings of, and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.
11.			Governing Law. This Agreement will be governed by and construed in accordance with the laws of the state of California, without giving effect to any choice of law or conflicting provision or rule (whether of the state of California or any other jurisdiction) that would cause the laws of any jurisdiction other than the state of California to be applied. In furtherance of the foregoing, the internal law of the state of California will control the interpretation and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply.
12.			Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable under any present or future law, and if the rights and obligations of any party under this Agreement will not be materially and adversely affected thereby, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction, and to this end the provisions of this Agreement are declared to be severable; furthermore, in lieu of such invalid or unenforceable provision there will be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. Notwithstanding the foregoing, if such provision could be more narrowly drawn (as to geographic scope, period of duration or otherwise) so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.
13.			Entire Agreement. This Agreement, together with the attached exhibit, the Confidentiality Agreement and the Change in Control Agreement (together, the “Integrated Document”), embodies the entire agreement of the parties hereto respecting the matters within its scope. The Integrated Document supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof. Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged into the Integrated Document, and to the extent inconsistent with the Integrated Document, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof, except as expressly set forth in the Integrated Document.
14.			Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.


15.			Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16.			Arbitration. Except as provided in Section 6.2 and Section 17, the Executive and the Company agree that any controversy arising out of or relating to this Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other controversy arising out of the Executive’s employment, including, but not limited to, any state or federal statutory claims, shall be submitted to arbitration in Orange County, California, before a sole arbitrator (the “Arbitrator”) selected from the American Arbitration Association, as the exclusive forum for the resolution of such dispute; provided, however, that provisional injunctive relief may, but need not, be sought by either party to this Agreement in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the Arbitrator. Final resolution of any dispute through arbitration may include any remedy or relief which the Arbitrator deems just and equitable, including any and all remedies provided by applicable state or federal statutes. At the conclusion of the arbitration, the Arbitrator shall issue a written decision that sets forth the essential findings and conclusions upon which the Arbitrator's award or decision is based. Any award or relief granted by the Arbitrator hereunder shall be final and binding on the parties hereto and may be enforced by any court of competent jurisdiction. The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with this Agreement or the Executive’s employment.
17.			Remedies. Each of the parties to this Agreement and any such person or entity granted rights hereunder whether or not such person or entity is a signatory hereto shall be entitled to enforce its rights under this Agreement specifically to recover damages and costs for any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each party may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance, injunctive relief and/or other appropriate equitable relief (without posting any bond or deposit) in order to enforce or prevent any violations of the provisions of this Agreement. Each party shall be responsible for paying its own attorneys’ fees, costs and other expenses pertaining to any such legal proceeding and enforcement regardless of whether an award or finding or any judgment or verdict thereon is entered against either party.
18.			Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, transmitted via telecopier, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated or at such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder and received when delivered personally, when received if transmitted via telecopier, five days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service.


Adjusted EPS for Performance Year or Full 3- Year Performance Period			Percentage of Units Corresponding to that Year or Period to be Credited (before Relative TSR Modifier)
Less Than Threshold			0%
Threshold			50%
Target			100%
Maximum or greater			200%


Performance Year			Percentage of Target Performance-Based RSUs Potentially Credited (before Relative TSR Modifier)
2020			30%
2021			50%
2022			20%
Cumulative			100%


Adjusted EPS Performance by Performance Year or Performance Period	Percentage of Units Credited (before Relative TSR Modifier)	Relative TSR Modifier Treatment
Greater than 110% of Target performance	Greater than 150% of Target award (capped at 200%)	Decrease percentage of units credited to 150% of Target award if Relative TSR is less than the 55th percentile
100% of Target performance to 110% of Target performance	100% of Target award to 150% of Target award	No modifier
Threshold performance to 100% of Target performance	50% of Target award to 100% of Target award	No modifier
Less than Threshold performance	0% of Target award	Increase percentage of units credited to 50% of Target award if Relative TSR is greater than median